ATM :: Five rights loan defaulters should know they have

By Preeti Kulkarni | 18 Apr, 2016 | Times of India


If you have defaulted on a loan, the rules do not give the lenders a complete walkover. Here’s what you should bear in mind if you find yourself in such a situation.

1.Right to ample notice

A default does not strip you of your rights. Banks have to follow process and give you time to repay dues before repossessing your assets to realise the arrears. Typically, banks initiate such proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (Sarfaesi) Act. If the borrower’s account is classified as a non-performing asset, where repayment is overdue by 90 days, the lender has to first issue a 60-day notice.

“If the borrower fails to repay within the notice period, the bank can go ahead with sale of assets. However, in order to sell, the bank has to serve another 30-day public notice mentioning the details of the sale,” says banking and management consultant VN Kulkarni.

2.Right to ensure fair value

The lender starts the process of auctioning your property to recover dues if you fail to clear what you owe or respond during the 60-day notice period. However, before doing so, they will have to issue another notice specifying the fair value of the secured asset as assessed by the banks’ valuers, along with details like reserve price, date and time of auction.

“The borrower can object if the property is undervalued. He can justify his objection by conveying any better offer that he may have so that the bank can make a decision,” says Kulkarni. In other words, you can look for prospective buyers on your own and introduce them to the lender if you think that the property can yield a better price.

3.Realise balance proceeds

Do not write off your asset mentally the moment it is repossessed. Keep track of the auction process. Lenders are required to refund any balance after recovering the dues, which s a real possibility given that property prices can shoot up beyond the owed amount After recovering the dues and expenses of conducting the auction, the bank has to re und the remaining amount to the borrower as the money belongs to him,” says Kulkarni

4.Right to be heard

During the notice period, you can make your representation to the authorised officer and put forth your objections to the repossession notice. “The officer has to reply within seven days, giving valid reasons if he rejects the representation and objections raised by the borrower,” says Kulkarni.

5.Right to humane treatment

Following adverse reports about the conduct of recovery agents, RBI had pulled up banks over the issue. Banks too decided to voluntarily commit to certain best practices as par of their code of commitment to customers.

For one, agents can contact borrowers a place chosen by the latter. In case they have not specified a place, the agents can visit either the borrower’s residence or place of work. They are required to respect the privacy of borrowers, and ensure civil behavior. They can only call between 7 am and 7 pm. Agents cannot resort to harassment or intimidation, nor can they humiliate the borrowers or their family members.

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