Banks step up loan recovery by auctioning mortgaged property
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HYDERABAD, JUNE 4: Think twice before defaulting on your home/property loan. You might simply lose your asset.
Unlike earlier, banks are now increasingly resorting to the use of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi) 2002 to recover their dues.
MORTGAGING PROPERTY
The Act empowers banks and financial institutions to auction mortgaged residential/commercial property when borrowers fail to repay their loans.
The Act, which was enacted when the economy (including banking) was booming, has been rarely used to recover smaller dues; it can be applied to any loans/dues over Rs 1 lakh.
But now one can find many possession notices in banks/newspaper even for dues as low as Rs 1.5-2 lakh.
“This is because of the worrisome increase in the non-performing assets and the Reserve Bank of India's constant goading to keep NPAs under manageable limit,” a top official of Canara Bank said. According to Mr B. A. Prabhakar, Chairman and Managing Director, Andhra Bank, the Sarfaesi Act has proved to be a “very effective instrument” for recovery.
