Personal loan is a very useful tool in any special situation or emergency. When a personal loan becomes a timely companion of a customer, then it is the responsibility of the customer to repay this loan on time. But if the customer has taken a personal loan but is not repaying it to the bank or financial institution, then doing so can be costly for the customer. Default in personal loan repayment or default on the loan in India can have serious financial and legal consequences. According to the rules, one may have to face legal action. Come, let us understand these things here.
These may be legal actions
According to Bajaj Finserv, legal action against a personal loan defaulter in India includes a civil suit. Banks can file a case in civil court demanding repayment. Also, the property of the defaulter can be confiscated or the salary can be confiscated. Additionally, options for negotiation and settlement can be explored before resorting to legal recourse. Apart from all this, know one thing that non-repayment of personal loan also affects the credit history of the customer. There may be difficulties in getting loan in future. The customer may also be booked under section 420 of the Indian Penal Code, which includes imprisonment.
When the lenders i.e. banks are unable to recover the loan amount, they may resort to appointing loan recovery agencies to recover the outstanding amount. This can lead to harassment from debt collectors, which can cause a lot of stress and anxiety.
RBI guidelines for personal loan defaulters
The Reserve Bank of India mandates fair dealing in loan recovery for personal loans. In cases of loan default, banks have to follow RBI guidelines. In this the borrowers are entitled to get notice before starting the recovery. Banks have been asked by RBI to conduct proper and respectful communication as per the guidelines. Banks have been asked to avoid harassment.
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