Bank Rules: If the borrower is unable to repay the loan, the bank recovers the amount by auctioning the property. If such a situation arises, know about your rights regarding the auction of the property.
House is the biggest investment in life for everyone. Everyone invests a lot of money to build their dream home. Raising so much money at once is a bit difficult. That’s why every person takes a loan from the bank to build or buy a house. While taking a home loan, you have to pledge a property as a guarantee.
If the borrower does not repay the loan due to any reason, then the bank recovers the loan amount by auctioning that house or property. There is a complete process of confiscating the property. If such a situation comes in life, then it is important that you know about your rights (Bank Rules) regarding the auction of the property.
When and why does the bank seize the property?
The loan taken from the bank for home or any other property has to be repaid on time. If you do not pay the installment of home loan or any other loan, the bank recovers its amount by confiscating your property. However, it is not that if the loan installment is not deposited, the bank will immediately take possession of your house and auction it. In case of non-repayment of the loan, the bank gives many opportunities to the borrower. Just auction is the last option. But even then, if the property gets auctioned due to any reason, then also the person taking the loan has many options.
If a person does not pay the EMI of the loan continuously for 2 months, then the bank sends a reminder to him, that is, reminds him about this. Even after this, when the third installment is not deposited, a legal notice is sent to the customer. Still, if the EMI is not paid, the bank declares the property as NPA and the borrower is declared a defaulter.
Auction rules
However, it is not that your property will be auctioned after being declared NPA. Because it also has 3 categories – Substandard Assets, Doubtful Assets and Loss Assets. In case of non-payment of EMI, first the loan account remains in the category of Substandard Assets account for 1 year, after that it becomes Doubtful Assets and when there is no hope of loan recovery, then it is considered as ‘Loss Assets’. Remember the property is auctioned only after it becomes a loss asset. Bank issues public notice for auction.
Some rights are available during the auction
Before the sale of the asset, the bank or the financial institution from where you have taken the loan 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. If the borrower feels that the price of the asset has been kept low, then he can challenge this auction.
If you are not able to stop the auction of the asset, then keep an eye on the auction process as you have the right to get the additional amount left after the recovery of the loan. The bank has to return that remaining amount to the creditor.
