Loan Recovery: Lakhs of people could not repay the installment of home loan, personal loan or vehicle loan due to loss of job, hard earned money in treatment and other financial problems during the Corona period. Meanwhile, the government has announced the formation of a bad bank to recover the bad loans. This bad bank will take over the distressed assets of Indian banks and save the banks from loss through auction or recovery of that loan. However, there is a rumor going on social media that the bad bank belongs to the common man. Home Loan, Personal Loan Or will also recover the loan on the vehicle (Auto Loan). Property can also be confiscated in case of non-recovery. These rumors have been refuted by economic experts.
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Ram Shriram, founder and financial affairs expert of fintech company Mahagram, says that it is not that the branches of the bad bank will be opened all over the country nor its employees will be appointed all over the country. The name may be a bank, but it will be a company which will help the banks to recover their dues. They will not work like normal banks.
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If someone is unable to repay the home, vehicle or personal loan, then the borrower’s bank will work on it in its own way. The bad bank will not undertake to confiscate the property for recovery of such loan. Nor will it go from house to house for recovery. SBI, ICICI Bank, Punjab National Bank (PNB), HDFC Bank, Axis Bank are the biggest banks in the country, which distribute home loans, auto loans and personal loans.
Home loan default, this will be the solution
Generally, if someone is not able to repay the home loan, then under the Sarfaesi Act 2002, the bank can take possession of the property held in guarantee and get it auctioned. During the first and second wave of Corona, home loan defaults have occurred due to loss of jobs, business collapse. The bank has to wait for 60 days after the demand notice is sent. If the borrower is unable to repay the loan in this time, then the bank goes to court and gets control of the property.
RBI’s guideline for loan recovery
1. The bank is responsible for appointing loan recovery agents and complaining against them.
2. The loan recovery agency should first be informed to the borrower
3. The recovery agent should have a copy of the authorization letter and bank notice
4. If the borrower complains, the bank should not send the case to the same recovery agency
5. Or the bank should look into the complaint and resolve it
Bad bank will focus only on big loans
Shriram said that the government has recently approved National Asset Reconstruction Company Ltd. (NARCL) has been approved. Indian banks struggling with bad loans will suffer from this bad bank and will help them to focus on their basic task of distributing loans. There are already close to 50 private asset reconstruction companies in India, which deal with small and medium-sized loans. But large-sized NPAs are not under its purview.
Why the need for a bad bank
According to fintech CEO Shriram, there was a great need for a bad bank, if it had come two years ago, a large number of companies could have been saved from sinking and it would have helped banks to keep their balance sheets clean. In the current system, if a bank’s NPA or bad debt becomes very high, then RBI puts a restriction on disbursing its loan. The bad bank will not only take the burden of this bad loan on itself, so that the banks will be able to disburse the loan easily. Will be able The economy will also get a boost by distributing more loans to banks. During the economic crisis during the Corona period, NPAs have increased, hence the need for a bad bank. The economy had gone to a historic low in 2020-21 during Kovid.
How much NPA in which sector
Service : 7.5%
Personal Loan: 2.1%
The first bad bank was opened in America
The world’s first bad bank was opened in America. Grant Street National Bank was the first bad bank, which was created to settle the bad loans of Mellon Bank. Even after the economic recession of 2008, bad banks opened rapidly in the world. The Federal Reserve Bank for the first time suggested the idea of a government bad bank to deal with the debt of private banks. In 2009 Ireland created the first state-run bad bank.