Loan default is one of the worst nightmares of borrower in India. In the banking world, it is consonant to committing a serious offence and the borrowers are subjected to experiences which might go from hoarse phone calls by recovery agents to regular harassment.
The best way to deal with it is to contact your bank ask for some extension from the lending bank ( read the post http://finance.oriyaonline.com/default_on_personal_loans_things_to_do.html ). However if you keep on avoiding the bank and default on your payment, the debt will keep on mounting to appoint where it will become too difficult to handle it. Immediate corrective actions are thus needed to be taken the moment, you realize that you are beginning to default on your loan payment.
Not too far back in the past, recovery agents employed by the banks used to show extreme high handedness in handling the customers in debt. However things are different today and the Reserve Bank of India today has enforced certain rulers in the interest of the borrowers who have defaulted on the repayment of bank loans. It is needed that all borrowers of laon should be aware about their rights to inure themselves against highhandedness of bank’s recovery agents.
RBI Guidelines for Protecting the Borrowers are
1. The recovery agents will not indulge in any physical threat or intimidation to recover loans from the borrower. The banks will be responsible in any such violation.
2. The recovery agents cannot call borrowers at odd times.
3. The banks will be responsible for any undue mental harassment from the service providers.
Indian Banks Association (IBA) , the association of bankers in India has also formulated a code, known as 'Model Code' of conduct for the banks to deal with recovery of loans. Most of the rules mentioned in the “Code of Conduct” reiterate the point maintained by the RBI.
As a borrower, you need to have knowledge about all these rights. It is however essential that upon defaulting on your payment,, you first take your lender bank into confidence. All the banks will provide you with options to sort your way out.
However even after discussing this with your bank, if you are still being harassed by the recovery agents, you can file a complaint to the bank about this. The bank is liable to redress this complaint within in period of 30 days. If this does not sort out in the stipulated period of a month, then you can escalate the problem to the banking Ombudsman.
Stipulated time after which the bank takes any action on his defaults?
In case you have not repaid your dues, the bank will call you immediately asking for the payment. However there is a general guideline to which the bank adhere before they start taking action against loan defaulters.
For example, banks will take action in 3-4 months in the case of a home loan, and 1 month in case of a car loan. In the case of a personal loan, this could be even sooner. Banks generally give you some leeway in cases where the collateral is liquid (which can be easily converted to cash) and marketable (which will not go down in value significantly).
However, as mentioned before, it is vital that you speak with your bank on this. Because as long as you are not communicating your bank about your plight, the debt will keep on increasing and the banks would be bound to take an action against you.