Vehicle repossession from car and two-wheeler buyers who default on loan repayments may soon get simpler. Discussions are currently underway among the Indian Banking Association, the Society of Indian Automobile Manufacturers and the Reserve Bank of India to bring about major changes in vehicle repossession norms. These changes are expected to plug the loopholes in the norms and make it easier for banks to recover vehicles from defaulting customers.
The first proposal is to record phone conversations between recovery agents and defaulters and to retain copies of letters reminding customers of late payment. The second is to record all visits by banks’ recovery agents to the defaulting customer’s residence or office in a log book. The third, and possibly the most significant proposal is to educate local police stations of the banks’ legal right to take repossession of vehicles if the customer has failed to pay the Equated Monthly Instalment (EMI) for three months in a row. Very often, local police stations are unaware of the banks’ rights and end up supporting the defaulters.
The new norms will take some time to be drafted because of the security agencies involved in the process. Last month, the Reserve Bank of India had released a set of vehicle repossession guidelines for Non Banking Financial Companies (NBFCs).
This should help both the bank and the defaulters. Because of the global recession, many people in India have lost theirs jobs and hence could not pay off the car loans in times. The new norms will certainly benefit the EMI defaulters and the banks as well.