Unable to repay loan? Here are rights you have as a defaulter

A call from the lender or the visit of a recovery agent is every borrower’s worst nightmare. Already reeling under financial stress, the individual has to face the humiliation heaped on him by the lender’s agents. However, even if a borrower defaults, he does not surrender his rights to the asset or to fair treatment. Lenders have to follow the due process while initiating proceedings to recover their dues. Here are your rights as a borrower.

Privacy of borrower

Lenders sometimes engage recovery agents to coerce borrowers to repay their loans. The borrower’s privacy is to be respected. These agents can contact the borrower at a place specified by him. If not specified, they can contact him either at his home or workplace.

They can visit him between 7 am and 7 pm or at any time specified by him. A recovery agent cannot discuss the details of the case with any other person, unless the borrower has given permission to do so.

Decorum and decent behaviour

The agents cannot cross the line that banks have agreed upon as part of their code of commitment to customers. They cannot violate norms of decency and civil behaviour during these visits. If an agent intimidates or humiliates the borrower or his family, the latter can fi le a complaint.

Must get adequate notice

In case of secured loans, the underlying mortgaged assets can be repossessed by the lenders under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (Sarfaesi) Act. However, the lender must give adequate notice to the borrower. A loan is classified as a non-performing asset (NPA) if the repayment is 90 days overdue. In such cases, the lender has to first issue a 60-day notice to the defaulter. 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 details of the sale.

Assets must be fairly valued

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. The asset value is arrived at by the valuers of the bank. If the borrower feels the asset is being undervalued, he can contest the auction. He can also get a buyer who is willing to buy the asset from the lender at the fair price.

Receive balance proceeds

Even if the mortgaged asset is repossessed by the lender and auctioned off, the entire amount realised from the auction does not belong to the lender. The lender can recover its dues and the excess amount has to be refunded to the borrower. This money legitimately belongs to the borrower and must be given to him without delay.