Bank Rules: Everyone needs a house, but it is not an easy thing for everyone to buy it. This is even more challenging especially for the employed because it is not easy to combine money for property with the needs of the house from a salary.
Keeping these conditions in mind, loan facility is provided by all the financial institutions like banks etc. You can take a loan from the bank not only for the house, but also for meeting all other needs ranging from car.
The loan amount along with interest has to be paid every month in the form of EMI. But sometimes due to difficult circumstances the EMI gets bounced. The situation for one or two months can be handled somehow, but if three consecutive EMIs are bounced then the bank can also declare you a defaulter and your property can be declared as NPA. Know here how your problem can increase due to continuous loan installment bounce.
What is the rule
According to the rules, if the installment of a bank loan is not repaid for 90 days i.e. for three months, then that loan is declared as NPA. In case of other financial institutions, this limit is 120 days. Increasing NPA is also not considered good for the health of any bank and it also creates many problems for the borrower.
Bad cibil score
The worst effect of loan installment bounce is on the CIBIL score. This spoils the CIBIL score. Due to bad CIBIL score, you may face problems in getting loans in future because the bank does not consider such people as reliable. In such a situation, even if the loan is somehow available, then very high interest rates have to be paid for that loan.
There are three categories of NPA
Even if the bank declares a property as NPA, it does not mean that it will be auctioned immediately. The bank has also made three categories in NPA. Substandard Assets, Doubtful Assets and Loss Assets. A loan account remains in the category of Substandard Assets account for one year, after that it becomes Doubtful Assets and when there is no hope of loan recovery, it is treated as a ‘Loss Asset’. After becoming a loss asset, there is a situation of auctioning the mortgaged property against the loan.
Compensation is done by auction
When the person is unable to repay the loan even after giving all the opportunities to repay the loan, then the bank takes possession of the mortgaged property. But after that the property is auctioned. That is, the bank gives many opportunities to repay the loan, yet the customer does not repay the loan, then as a last option, the loan amount is reimbursed by auctioning the mortgaged property.
