A bank cannot issue a notice to the defaulter until the account of the borrower becomes a non-performing asset, which takes 90 days. To enable recovery of funds lent Banks need to invoke SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests) Act. This again has a notice period of 60 days.
Defaulting payments is every loan borrower’s nightmare. With interest rates being hiked several times in a row, those who have taken a home loan with floating rates are sometimes at a loss to cope with the steep hikes in their EMIs. Their monthly budgets get hit and sometimes defaults do happen given the circumstances of an unexpected interest rate scenario.
When you are faced with such a situation, do not hesitate to talk with your lender for a mutually favourable solution. You could also visit a credit counseling centre to seek financial advice on how best to cope with the situation. A Crisil report suggests that bad loans are likely to increase to 4% in the next couple of years.
If everything fails you may have to give up the keys to the lending institution, which can be very hard on you. Nevertheless you need to be prepared for a worst case scenario too. You need to safeguard your rights under such circumstances and the purpose of this article is let you know precisely that. These rights provide you the maximum opportunity to help you repay.
One of the first rules dictated by the RBI is that a lender has to provide proper notice before claiming the property for which the loan has been defaulted. There is a structured process in place that allows provision to repay at several points in the process and procedure for sale. Also there is are very strict guidelines that recovery agents need to follow.
A bank cannot issue a notice to the defaulter until the account of the borrower becomes a non-performing asset, which takes 90 days. To enable recovery of funds lent Banks need to invoke SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests) Act. This again has a notice period of 60 days.
Now even after this time period, if the repayment has not been received, the bank can declare a sale but has to provide a notice period of a further 30 days to declare a sale.
There are other aspects like publishing a notice of the sale in two popular dailies indicating the reserve price. The sales has to be a private treaty sale based on mutually agreed conditions by both the lender and the borrower.
An objection can be raised by the borrower if he feels the property is valued below par and if an auction is conducted, an independent valuation expert needs to declare the valuation. The borrower also has the right to sell the house to repay the loan but this has to be done with the bank’s consent. Surplus funds from the sale have to be given to the borrower. A law suit can be filed against the bank if the money is not given to the borrower within a particular period of time, having said that if the sale did not provide enough funds to settle the loan, the bank can file a suit against the borrower.
Be aware of your rights, every step of the way. Even if you are very safe from any defaults, you should still make an effort to be prepared.