If it's kept as security then they can
What all assets can a bank cease in case of default on secured loan
1) My wife's proprietorship firm, my wife in her personal capacity, my father, my mother, and I, the five of us, took a loan against property from an NBFC in Delhi amounting to Rs 1.6 crore 2) For this loan, we gave a flat in Delhi as security, the owner of which is my mother. The market value of this flat is Rs 2.5 crore. 3) The primary borrower is my wife, others are co-borrowers, and the EMI is deducted from the bank account of my wife's firm. 4) We cannot pay the EMI for more than a six months now and my mother is refusing to sell her flat (that was kept as security) to settle the debt 5) The bank can easily recover 100% of the outstanding amount of Rs 1.4 crore by selling the flat that was kept as security for Rs 2 crore. 6) I am afraid about my other assets. The other assets I have are: a) I have proprietorship firm of my own b) I also own a different house of lower value in Delhi c) My wife owns another house of low value in a different state. 7) Will the NBFC go after the other houses we have and will it freeze the bank accounts of the other firms that we have before selling the flat that was kept as security. Or will it sell the property that was kept as security, recover all the amount, and give us a clean chit. Please help.
Asked 4 years ago in Civil Law
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8 Answers
As the loan is secured by mortgage of your mother's flat, the NBFC will, in all probability, proceed to sell it first. If the proceeds cover its dues entirely, the NBFC may release all the debtors. If there be any shortfall, the NBFC may resort to further recovery action. It is advisable for you to negotiate with the NBFC for a one-time settlement in terms of RBI's guidelines.
Once outstanding is cleared by auction of secured asset, bank cannot proceed against any other properties of borrowers. There is not possibility of seizing any other account or selling any other property.
As per the RBI, the bank should give proper time and offers for the settlement of loan amount., on the ground of health and sudden loss in the business.
- The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act is a powerful instrument in the hands of the banks and financial institutions (FIs) as secured creditors.
- Further if the account does not reflect credits into the account, 90 days preceding the date of balance sheet of the firm. Temporary deficiencies like late/ non-submission of stock statements or balance outstanding exceeding the drawing power, non-renewal of limits should not get categorized as NPA.
- And further , if the borrower does not pay three instalments continuously after 90 days but up to 12 months the account becomes sub-standard and NPA, and further Section 13 (2) empowers the Bank/ FI to serve a notice to the borrower for taking possession of the assets held as security for the money lent by it.
- But there is precursor to this action: the Bank/FI shall serve notice to the borrower to discharge his full liabilities within 60 days from the date of notice that should also detail out the legal consequences and penal provisions.
- Hence by the two directions under the Act, the borrower should be getting at least 17 months’ time before the Bank could proceed against the defaulter.
- Hence for the recovery of the loan amount , the bank shall proceed to sell the property which is secured with the bank , and further in case the full outstanding amount not recovered after selling the secured property , then the bank can recover the same from the guarantor accounts .
- Since the said secured property worth more than the loan amount then bank has not right to touch other property.
Bank will seek to auction the flat given as security to recover its dues
if bank is unable to recover dues from the flat then it can seek to attach your other property to recover its dues
Dear Client,
Firstly, according to the RBI Guidelines, financial institutions, including banks, shall be providing a suitable time to the borrower for the repayment of a loan.
Secondly, initially, the financial institutions tend to sell off the securitized asset in order to recover the debts. However, if they fail to recover the debts through the flat, they may tend to attach any other suitable property which would help them recover such debt.
The bank accounts may be frozen if such EMI does not get paid as soon as possible.
It is advisable to write a request application to such financial institution for an extension of time before-hand, considering such delay.
Thank you.
The NBFC ought to invoke its security clause. The other properties which is not the subject matter of their charge is not within their scope and require specific order from Court to sell and obtain its sale proceeds.
Firstly the property given as collateral security cannot be sold by your mother or anyone.
The bank will take possession of the security i.e., the property and bring it for auction sale, if that amount is not sufficient to cover the outstanding loan with interest, then the court may look for other collateral securities given by other co-applicants.
