Can Banks Recover One Person’s Loan From a Joint Account? Know What the Court Said

Orissa High Court says pension money can’t be used to repay another person’s loan.

What happens if someone else’s loan gets deducted from your shared bank account? It happened. An elderly man, a retired railway employee, lost ₹5 lakh from a joint savings account he held with his wife. No prior warning. Just vanished. The bank claimed it was for her loan.

This incident led to a court case. And in October 2025, the Orissa High Court said clearly,  banks cannot recover one person’s loan from a joint account without proving ownership of funds or giving notice. The money in question was his monthly pension, protected under Section 60(1)(g) of the Civil Procedure Code, 1908. So the court stopped the bank right there.

Public banks, as per the Parliament report (2025), have been reducing bad loans steadily. Gross NPAs went down from 7.28% in 2021–22 to 2.58% in 2024–25. That looks good on paper. But such aggressive moves to recover money, especially like this, have their problems.

What Do the Laws Say? (CPC, SARFAESI, and Recovery Rules

There are three laws that often come up here. The Recovery of Debts Act (1993), the SARFAESI Act (2002), and the Code of Civil Procedure (1908).

Now, banks can recover unpaid loans, but they must follow a process. If a joint account is involved, they can’t touch the money unless both holders agree to be part of the loan or the funds belong to the borrower. Pension is exempt too.
 

Laws aren’t vague here. Banks are expected to be cautious. Joint accounts don't mean joint responsibility, unless clearly stated in writing.

Joint Account Liability For Personal Bank Loan: Was This Ever Handled Before?

Yes. There was a case in 2016, in the Madras High Court. That time, the court allowed a bank to recover dues from the borrower’s savings account. But the key point, it was a single account, not shared. And the person had signed everything.

See the comparison. Makes the situation easier to understand.
 

So it depends on the account and the agreement. That’s how courts see it anyway.

Are Banks Pushing the Limits on Recoveries? 

The Finance Ministry report (2024) showed banks recovered more in the last few years. Written-off loan recoveries went from 21.37% in 2021–22 to 46.64% in 2024–25. Good improvement. But in trying to recover fast, a few rules got ignored.
 

Rules exist for a reason. Recovering money isn’t wrong. But it has to be done properly.

Conclusions 

Many people today use joint accounts. Spouses. Parents and children. Sometimes even siblings. Platforms like LoansJagat have processed over ₹2,000 crore in loan disbursals. Joint accounts are common there too.

That’s why the ruling is a big deal. It puts limits on bank rights over joint accounts for unpaid loans. Just because two names are on a passbook doesn’t mean both are responsible for the loan.This court order might change how banks treat recovery. No shortcuts. No guesswork. And maybe that’s for the better.
 

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LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.