New Delhi: Bad days never come with prior notice. Given the current market slowdown, if you ever face job loss or business failure then you may not be able to serve your home loan for a month or two. But it does not mean that you will lose your house and the lending bank will sell it to recover its dues immediately. If borrowers default in servicing their home loan, they don’t lose all their rights on their house against which the loan is sanctioned. Lenders have to follow a set of procedures to recover their dues. The borrower should know what his rights are in case of loan default.
A loan-account is classified as non-performing asset (NPA) if the borrower fails to pay EMI for three months in a row. In case a loan account becomes NPA, the bank has to first issue a 60-day notice to the borrower. If the borrower fails to repay the loan within the notice period, the bank can go for sale of the asset. The bank has to serve another 30-day public notice mentioning details of the sale before disposing of the property.
Fair valuation of assets
Before selling the assets, the lender has to issue a notice specifying the fair value of the asset, along with the reserve price, date and the time of auction. Fair value of the asset is calculated by the valuer of the bank. If the borrower thinks that value of the asset fixed by the bank is low or the asset is undervalued, he can contest the current auction. In this case, the buyer has the right to look for a new buyer and introduce him to the lender.
Right over balance sale proceeds
In case the lender auctions your property to recover its dues, you have right over the balance sale proceeds once the bank’s dues are cleared. The borrower needs to monitor the process of auction and ensure that he gets the remaining amount as it belongs to him.
No forceful recovery
In case of a loan default, lenders engage recovery agents to force borrowers to repay their dues. But the agent has to follow certain rules which have been agreed upon by all the banks. They can contact the defaulter either at a place of his choice, residence or at his workplace. The agency can visit defaulter between 7 am to 7 pm. Also, they can’t violate norms of decency and civil behaviour during these visits. In case the agents attempt to intimidate or humiliate the borrowers or their family members, the latter can raise the matter with the lenders and finally, the banking ombudsman offices.