Bank NPA recovery process and borrower’s rights!
Couldn’t pay loan EMIs or Do you have any NPA loan, Learn about your rights during bank recovery. Improve Credit Score. Bank loan recovery process.
Bank Recovery Process: There are always circumstances in which a borrower skips installments of loan availed from bank or other institutions. Some of the cases may be (death of the borrower, financial crises due to pandemic or any other reason etc.). Those loans become NPA (Non Performing Assets) and lenders start recovery process to recover the amount granted as loan along with penalties and interest. In this article we will see about the Bank NPA recovery process and borrower rights during recovery process.
There are always chances to get the loan revived and start the same loan normally with the same lender. This improves ruined credit history and chances to get another loan if required.
Read about Everything about Agriculture Loans in India and Government schemes
Some opportunities which can be explored during bank NPA recovery process are –
- Extension of repayment tenure which reduces the EMI amount
- A moratorium wherein he will not have to pay the EMI for a few months
- Organize your finances and restructure the loan before resetting the loan terms and conditions.
- The lender can waive a certain amount of loan if the borrower is in no position to repay the loan in the near future as well
- In case of the unfortunate demise of the principal borrower, the loan agreement is generally transferred to the legal heirs or the co-applicant. Certain lenders also offer insurance policies against the same and can be explored by borrowers.
Also a borrower has options to repay the full and final amount if they want loan closure / loan settlement.
Rights of borrower while Bank NPA recovery is in process
In any of the above defined cases, the borrower can directly contact the lender or can go through the judicial system if there is any lacuna from the lender’s end. Every bank or institution has a policy to recover the loan or settle the amount. Different lenders have different policies of settlement or regularizing the loan account which has become NPA. Borrowers can explore the policies on the bank’s website or can get it through the Indian RTI Act.
In case the loan is defaulted by the borrower without any bad circumstances or not repaying the loan willingly, there are several ways through which banks can recover the loan. You can see this in detail below.
Read How to get an Education loan in India?
RBI guidelines for loan recovery ensure that the process is beneficial to the lender while also respecting the borrower’s legal rights and obligations.
There are two main ways of loan recovery –
- Non-judicial route
- Judicial processes
Non Judicial route –
- The lender may sell the asset given as collateral to recover the loan amount. (However, bank will refund or credit the excess amount to borrower / asset owner account after deducting loan dues ).
- By engaging loan recovery agents
- Settlement through Lok Adalats: Where banks or borrower can not follow judicial process, Lok Adalats gives opportunity to settle the loan.
Know Is It Mandatory to opt for loan Insurance Schemes
Judicial processes –
- lender can file a case in civil court against the borrower
- Lenders can approach Debt Recovery Tribunal for loans above Rs. 20 Lakhs.
Borrower’s Rights during Bank NPA recovery Process
- Right to Sufficient Notice
- Right to Fair Value
- Right to be Heard
- Right to Claim the Balance
- Right to be Treated Politely
- Borrowers must be notified first regarding the details of the recovery agency
- Banks are not allowed to forward the respective case to a recovery agency until the said complaint has been solved/disposed of.
- The bank must also ensure to address borrowers’ grievances regarding the recovery process appropriately.
- Every lender has to follow the “Fair Practice Code” formulated by RBI.
Learn 15 Tips and Tricks to save income Tax
To conclude Banks and other lenders can generally predict when a borrower is on the verge of defaulting based on their financial behavior as well as a credit score. The process followed by each lender will vary but generally, it involves trying to change certain conditions to help the borrower repay the loan such as increasing repayment terms. If this does not work then lenders may seize assets. Lenders may enlist loan recovery agents in case of secured loans. Further, If neither of these works, the lender may write off the loan or declare the borrower/company as a Non-Performing Asset or NPA.
Also Read about,
Important link –
Read Category-wise posts
Banking | Bank Account | Bank Deposit Schemes | Loans | Bank Cards | Credit Cards | Debit Cards | Search IFSC & MCLR Code | Insurance | Bank Jobs and Exams | Stock Market | GST | EMI Calculator
