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Introduction to Debentures

In case of de...

Question

In case of default in repayment of loan, the bank auction the property for sale and recover their money. This procedure is called .

A

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B

foreclosure

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C

non-closure

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D

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Solution

The correct option is B foreclosure
Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.

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In case of default, the bank auction the property for sale and recover their money. This procedure is called ___________.

Q. Statement: The Reserve Bank of India has directed the banks to refuse fresh loans to major defaulters.
Assumptions:
I. The banks may still give loans to the defaulters.
II. The defaulters may repay the earlier loan to get fresh loan.
III. The banks may recover the bad loans through such harsh measures.

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Q. As published in the newspapers, the RBI has issued certain guidelines to be followed by the Recovery Agents appointed by the banks. In addition to this, the Indian Bank Association (IBA) has to formulate a special training course for them. Why do RBI and IBA have to come into picture for such an issue which is the responsibility of the banks?
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