The company did not give a letter of guarantee for the loan. The End of service benefits will not cover the loan amount. The bank offered the loan against the Resident permit. If the loan was insured and the bank will get the money back from the insurance company, why should the person be penalised? This now opens a can of worms as people will tend to take loans knowing fully well that the insurance company will cover them if they lose their job. Why would a bank give a loan away so easily? If it has the only guarantee that the defaulter will go to Jail,,,they still have no way of recovering the loan! Infact the guy going to jail has a roof over his head and food.

I am still trying to get my head around this.

Any more info will be welcome.