Lucknow, Aug 6 (KNN) An Uttar Pradesh manufacturing company has initiated legal proceedings against a leading private sector bank, highlighting growing concerns about procedural irregularities in the banking sector that disproportionately affect small and medium enterprises.

Chakradhar Chemicals Private Limited, a Muzaffarnagar-based manufacturer and exporter of zinc sulphate, has filed a criminal defamation complaint against HDFC Bank following what the company describes as an unjustified denial of a top-up home loan application.

The company, which has been operational since 1990 and employs approximately 100 people, maintains it has consistently met all financial obligations and holds a strong reputation in both domestic and international markets.

The dispute centres around a loan application process that began in April 2024, when HDFC Limited approached the company’s Managing Director, Neeraj Kedia, offering a top-up facility on an existing home loan.

After completing all required formalities and paying processing fees in May 2024, the application was unexpectedly terminated in June 2024.

The bank cited an alleged outstanding debit balance of Rs 603.28 in a current account that had been officially closed in September 2010 with zero balance by mutual consent between both parties.

The company contends that despite multiple attempts to seek clarification, neither HDFC Bank nor HDFC Limited could provide adequate documentation or explanation for the claim.

Internal bank communications also allegedly referenced an overdraft facility that never existed on the account in question.

Industry experts note that MSMEs often face disproportionate challenges when banking procedures contain errors or inconsistencies, with limited recourse available to smaller businesses compared to larger corporate entities.

Anil Bhardwaj, Secretary General, Federation of Indian Micro and Small & Medium Enterprises (FISME), reflecting on the matter, stated, “The impact of such procedural lapses extends beyond immediate loan denials. Credit reporting agencies typically record such incidents, potentially affecting the company’s credit score and future borrowing capacity.”

He emphasised, “For MSMEs, which rely heavily on timely access to credit for operations and growth, such setbacks can have cascading effects on business operations, employee welfare, and market competitiveness.”

(BS)