Taking a cue from the LIC Housing Finance Ltd, most of the banks have now started publishing details of willful housing loan defaulters in leading newspapers with their respective photographs. The recent entrants in the list are Indian Overseas Bank, Union Bank of India, UTI Bank, etc.
Most of the banks find this innovative method as the best option for housing loan recoveries. It is gaining ground in the banking industry as at least 60% to 70% of willful default cases get paid up after the free publicity.
All the bank does is give out a public notice on details of borrower along with a photograph, details of guarantor, housing account and the property details in a leading newspaper. The notice is given under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.
According to a senior banker with an old generation private sector bank, “LIC Housing Finance were the pioneers in this new recovery mechanism. Lot of banks are now following suit. It has benefited the recovery process considerably. At least 60% to 70% default cases get settled after the public notice. Most of the banks give an advance intimation to the borrowers about the public notice giving them enough opportunity to come around and make payment. Only when there is no response, the details are published. Lot of borrowers pay up their dues to protect their reputation.”