The banks have to issue three advance notices to the defaulter of the car loan specifying that his/ her car will be ceased by the bank, if the defaulter failed to respond to any notices, after receiving the court order for the same. A Supreme Court judgement in 2007 said vehicles can be re-possessed by banks only with a court order.
It has been reported that, most loan defaults have been in the two wheeler segment.
The draft guidelines for re-possession were discussed and finalised in a recent meeting of bankers with the Cabinet secretary, senior RBI officials and secretaries from other ministries and departments including finance and commerce. After which they came to a common consensus that loan applications need to be carefully scrutinized before the loan application is passed.
When defaults started to add up, the private banks felt to repossess the vehicle was the last resort, for which the Supreme court had to intervene, ruling that vehicles cannot be impounded except through the legal channel.
As a prudent borrower, try not defaulting on your loan, so as to avoid yourself getting into nasty situations where you might even loose your precious asset.