What will happen if Kisan Credit Card (KCC) loan is not repaid? Does land really get auctioned? Know the whole truth

Kisan Credit Card (KCC) scheme is no less than a lifesaver for millions of farmers of the country. It provides them easy loans for their farming needs. But many times, due to crop failure, illness or any other reason, farmers are not able to repay this loan on time. In such a situation, a fear sets in their mind – what will happen now? Will the bank auction our land? Will we go to jail?

Let us remove this fear today and understand in simple language that if a farmer is unable to repay the KCC loan, then what steps does the bank take and what options are left for you.

Does the government waive off loans?

It is often heard that the government has waived off the loans of farmers. This is true, but it does not always happen or with everyone. The government announces loan waiver only in certain special circumstances. Therefore, assuming that the government will waive the loan can be a big mistake.

When and how does the bank initiate action?

If you do not pay 3 or more installments (EMI) continuously, the bank starts the process of taking action. This process proceeds one by one.

Step 1: Notice and Warning
First of all the bank sends you notices one after the other, a total of three times. This is a kind of warning that you should come and talk to the bank and find a way to repay the loan. If you respond to this notice and meet the bank manager and explain your problem, then the matter can be resolved here.

Step 2: Recovery agent comes to your home
If you do not respond to the notice, the bank sends a recovery agent to your home. The job of these agents is to urge you to repay the loan. They can also tell you what further legal steps the bank can take if you do not repay the loan.

Remember: Recovery agents can put moral pressure on you, but they cannot misbehave, abuse or assault you in any way. If someone does this, you can complain about it immediately.

Biggest shock: Being declared a defaulter (NPA)
When both the notice and recovery agent methods fail, the bank declares your account as a ‘defaulter’ or NPA (Non-Performing Asset). This has a very bad effect on your financial life:

• Bad CIBIL Score: Your CIBIL score becomes so bad that it becomes almost impossible for you to take any loan from any bank in future.
• Future Roads Closed: Once declared a defaulter, your financial track record gets spoiled.

Last chance: Settlement or court?
Even after this, the bank can give you one last chance, which is called ‘One Time Settlement’. In this, the bank can waive off all your interest, penalty etc. and ask you to repay only the principal amount. But adopting this path also means that your CIBIL score will be bad and you will not be able to take a loan in future.

If you miss even this opportunity, the bank files a case against you in the court.

The final and most tragic step: auctioning the land.
Only after the court order, the bank can start the process of auctioning your mortgaged property (like land or house). The bank proposes an auction in front of everyone in the village. The bank deducts its loan, interest and other expenses from the money received from the auction.

• If money is left, it is returned to you.
• But if the auction money is less than the loan amount, you may have to pay the remaining amount, otherwise legal action can be even more stringent.

Then what to do? the wisest way

If you feel that you will not be able to repay the loan, do not remain silent out of fear. The best way is:

• Go to the bank yourself: Do not wait for the notice from the bank. As soon as you feel that you will not be able to pay the installment, go straight to the bank manager.
• Explain your situation: Tell them openly about your problems and compulsions.
• Ask for options: Request the bank to extend the loan repayment period (loan restructuring) or reduce the interest rate. Many times banks are ready to help the farmers.
• Get in writing: If the bank takes any step to help you, then definitely take it in writing so that there is no problem in future.

Remember, the first objective of the bank is not to auction your property, but to recover your money. If you tell your problem honestly, some solution will definitely emerge.