Hindustan Times ·
Supreme Court bars lenders from forceful loan recovery
The Supreme Court said such a right can be exercised only by following safeguards laid down by law and the Reserve Bank of India.
The Supreme Court on Wednesday said banks and finance companies cannot use strong-arm tactics to recover loans or treat a loan default as “a licence” to forcibly seize a borrower’s assets, even when the loan agreement gives lenders the right to repossess them.
The court said such a right can be exercised only by following safeguards laid down by law and the Reserve Bank of India (RBI), and directed the RBI to ensure “genuine compliance” with its guidelines, master circulars and clarifications by NBFCs and scheduled commercial banks. This was necessary to ensure borrowers were not dispossessed of their livelihood “in the dead of night, without notice and without recourse”, it said.