Do you know who will pay the debt if the debtor dies prematurely? RBI new rule
Hello friends, welcome to a new article. The information that we will tell you in our article today is that many people take loans from banks for various needs. But if the borrower dies prematurely, who should pay the loan and who will be liable for the loan is given in this article. Read till the end.
RBI Loan Rules
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RBI Loan Rule: If the borrower dies before repaying the loan, questions arise about repayment of the loan. The Reserve Bank of India reserve bank of India (RBI) has laid down some guidelines for banks in such situations.
Currently there are no specific rules regarding loan repayment in case of death of the borrower. For a home loan, after the death of the borrower the legal heirs of the borrower are liable to repay the outstanding loan amount.
This is a regulated requirement. If the heir fails to repay, the bank can auction the property to repay the loan. If the home loan is insured, the insurance company will pay the loan amount.
For term policies, the claim amount is credited to the nominee’s account. For car and personal loans, banks approach the borrower’s family members. The legal heirs can keep the car by paying the remaining installments.
Rest banks can repossess and sell the vehicle to recover the dues. Personal loans and credit cards do not require collateral. So banks cannot compel the legal heirs to pay the dues.
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But option of co-applicant for refund exists. The rest of the bank loans should be classified as non-performing assets (NPA). In short, the loan repayment terms on the death of the borrower depend on the type of loan and whether the loan is secured or not.
It depends. The legal heirs are bound to repay the home loan. For other unsecured loans, banks have limited re