Banks auction properties of ‘wilful’ defaulters
View(s):Commercial banks have resorted to auctioning a substantial number of mortgaged properties which have not been settled by creditors after the resumption of the parate execution law, allowing banks to seize mortgaged properties without court sanction.
Bankers told The Sunday Times Business that after June 30 this year they were allowed to auction properties above Rs. 50 million, after which most banks had placed newspaper adverts for the auction process. Parate execution will be permitted for properties below Rs. 25 million after December.
According to a senior banker, 93 per cent of the defaulted properties were above Rs. 50 million. “When we were notified of the parate execution, some of the customers settled early. What we noticed was that they were counting the time till the parate execution, hoping that it would be extended. We realise that most had not settled wilfully,” he said.
Bankers said that the complaints originate from a small subset of businesses, indicating that the funds they borrowed may have been misallocated to unintended activities.
Meanwhile, the Sri Lanka Banks’ Association (SLBA) has rejected claims by some borrowers about potential parate actions after a grace period, assuring that banks do not plan widespread proceedings. The government suspended the prudential laws until March 2025, and banks have provided protracted support for borrowers. Although some borrowers are causing panic about asset auctions, the SLBA states that most are working with banks to restructure loans. They encourage those struggling to engage proactively with banks, highlighting cooperation over fear.
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