When people are in a bind and need money, they turn to loans for assistance. Many banks and businesses offer loans with interest. What will happen if a borrower defaults on a personal loan or home loan because they are unable to make their EMI payments? You must believe that if you do this, the lending institution or bank will hassle you. It's not like that, though. According to experts, if the loan is not repaid, the bank cannot use force or threats. Let's go into more detail.
Banks cannot threaten or coerce the customer
Banks cannot threaten or force an individual in case the loan is not repaid. However, the bank can take the services of Recovery Agents for this purpose. But even these agents cannot cross their limits. If a customer is not paying the bank money, then third party agents can definitely be found from them. But never can they threaten or force the customer. They do not have this right by law. Read more: Axis Bank faces non-compliance penalty, fines this much after Max Life
.
Banks cannot recover loans without notice
A valid process has to be followed by the banks to recover their loan. In case of secured loan, banks have the right to confiscate the pledged asset by law. However, this action cannot be done without giving prior notice.
The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act empowers borrowers to forfeit the pledged asset. Let us know what rights people have got in such a case.
Customer can complain to the bank
The agent cannot go to the customer’s house at any time. The agent can visit the customer’s house only between the time frame of 7 am to 7 pm. If the agent misbehaves at home, the customer can launch a complaint to the respective bank and if the bank does not respond to that, the customer can approach the Banking Ombudsman banking Ombudsman. Read more: DA hike, Productivity-Linked Bonus leads to rise in sales during festive season
Legal rights:
- A creditor's account is classified as a non-performing asset (NPA) when a customer does not pay instalments to the bank for 90 days. In such a case, the lender has to issue 60 days notice to the defaulter.
- If the bank declares you a defaulter, it does not mean that your rights are taken away or you become a criminal. Banks have to give you loan repayment time before taking possession of your property to recover your dues by following a prescribed procedure.
- To get the fair value of the asset before the sale of the asset, the bank/financial institution has to issue a notice stating the fair value of the asset. It also needs to mention the reserve price, date and time of the auction.
- Even if the asset is taken over, the auction process should be monitored. The creditor is entitled to get the additional amount left after recovery of the loan. If you apply for this in the bank, then the bank will have to return it.
