Loan Tips: The Bank is auctioning property for not repaying the loan, knows how to stop, and borrowers should know their rights.


Every person creates a property like a house with the capital he has accumulated in his life. It is said that a house is the biggest investment in life because every person invests a lot of money to prepare the house of his dreams.


Therefore, every person takes a loan from the bank to build or buy a house. At the time of buying a home, you have to mortgage a property as a guarantee. If the person taking the loan does not repay the loan for any reason, then the bank recovers the loan amount by auctioning that house or property.

However, it is not the case that the bank confiscates your property just because you do not repay even one installment of the loan. There is a complete process for this. If such a situation arises in your life or someone you know faces such a situation, then you must know about your rights regarding property auctions.

When and why does the bank confiscate the property?

The loan taken from the bank for a house or any other property has to be repaid on time. If you do not pay the installment of a home loan or any other loan, the bank recovers its amount by seizing your property. However, it is not that if you do not pay the loan installment, 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 person taking the loan. Only auction is the last option. But even if for some reason the property gets auctioned, the person taking the loan still has many options.

If a person does not pay the loan EMI for 2 consecutive months, then the bank sends him a reminder i.e. reminds him about this. Even after this, when the third installment is not deposited, a legal notice is sent to the customer. However, if the EMI is not paid, the bank declares the property as NPA, and the person taking the loan is declared a defaulter.

Rules related to property auction-

However, it is not that your property will be auctioned after being declared NPA. In this also there are 3 categories – Substandard Assets, Doubtful Assets, and Loss Assets. In case of non-payment of EMI, first of all 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. The bank issues public notice for the auction.

When can the auction be challenged?

Before selling any kind of asset, the bank or the financial institution from where you have taken the loan has to issue a notice stating the exact price of the asset. In this, the reserve price and date, time and conditions of the auction have to be mentioned. A person whose property is being auctioned and feels that the price of his asset has been kept low can challenge the auction process.


If the bank auctions your property in case of non-repayment of the loan, then keep an eye on this entire process because after recovering the loan through auction, the borrower has the right to get the additional amount left and the bank has to return that money.

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