Banks have the complete authority to approve or reject the loans of the borrower. As per the customer can choose the lender bank too has the right to choose a right borrower. There are 21 PSU banks in India,80 private banks & 1000+ co-operative banks & NBFC’s which also provide the loans. Like banks similarly, NBFC’s also have the right to reject the home loans application of the borrower. The rejection of the loan application is solely the bank’s authority, and no rejection can be challenged in court for the rejection of the loans. The loan applicant has the right to certainly know the reason for the rejection of the loans so that the borrower can improve their mistake while applying for the loan a second time with another borrower. The housing project should be of a clear title, and also the structure should be in proper condition and not the dilapidated ones in case of even the resale property. Bank inspects the property & also the documents of the land records and flat ownership before the approval of the loans.
A bank loan is expected to be repaid on time by the borrower to avoid a penalty being charged. The rules and regulations of the home loans agreement should be followed properly, failing which the bank can either take legal action or else charge a penalty to the borrower. The loans can be rejected due to multiple reasons which the bank feels that either the borrower or the proposed property is not suitable for extending the loans to the borrower. The banks are in need of the borrowers; they need the right people to extend the loans to the borrowers as the loan extended should not turn into bad debt. In spite of the bank taking utmost care for the extension of the loans, many loans still turn into bad debts, and the bank has to suffer heavy loss for the extended property loan. On average, amongst most of the leading banks, many banks sell 1000’s of properties in an auction every year, which the owners of the property could not repay the loans. These properties include houses, plots, shops, showroom spaces, industrial gala, office spaces. etc. Amongst the properties all over India.
Rights of the bank while extending loans to the lenders:
- The bank has the right to reject the home loans application for the following reasons:
- Improper documents for the fulfillment of the loan criteria.
- Poor CIBIL score leading to rejection of the loans.
- Improper documentation of the property titles or disputes in the case of the proposed property.
- In the case of resale property, the building was found in a dilapidated stage.
- The borrower’s age is too high, and thus the bank does not trust the applicant for the repayment.
- Applicant found to be hiding the actual income or found amongst the defaulter of income tax.
- The applicant has a criminal record.
- The applicant does not have a proper source of income or employment.
- Very low bank balance maintained by the applicant, which states that the borrower is financially unstable.
- Applicants found medically unfit can lose the bank’s confidence in the borrower before the approval of the loans.
- If the borrower already has the default history.
Bank has the right to charge penalty & seal the assets of the borrower:
Bank has the right to charge a penalty if the monthly installment is not paid on time before the due date. Also, the bank has the right to seal the assets if the borrower is found to have continuously been defaulting the loans for consecutively 90 days. After that, the bank has to issue 1 month notice and, after 120 days, can seal the borrower’s assets.
Right to file the court case against the borrower:
If the borrower does not repay the installments on time and still does not cooperate with the seal of assets, then the bank can file a legal case against the borrower. Also, in case of the borrower is found to be submitting any forgery documents can lead to a court case being filed by the bank against the applicant. Also, cheque bounce can be one of the reasons for the bank filing a court case against the borrower.
Right to recover the money even if there is a stay on the housing project:
The bank reserves the right to recover the dues of the amount being paid by the bank to the real estate developer from the borrower, even if there is a stay on the project. If the borrower defaults, the loan bank may take legal action against the borrower.
Right to update the credit history of the borrower:
If the loan applicant is amongst the honest credit payers, the bank can help improve the borrower’s credit score. While as in the case if the borrower defaults on the loan, then the bank may update the same in the CIBIL and can get the credit history down of the borrower. Also, the bank can put remarks in the credit history if the applicant has defaulted on any of the loans.
We can conclude that the borrower should be careful while applying for the loan from the bank and after the loan from the bank. If the borrower misuses the credit facility extended by the bank, then the lender can land the borrower in trouble very easily. Thus, it is better advisable that the borrower follow all the bank’s compliance policies before the approval and after the approval of the loan.