Unforfeitable schemes in India..
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It is common for many people to take loans either from banks or from any lending institutions. It can be personal loan, vehicle loan, home loan or any other loan. Many times borrowers may be paying EMIs regularly. But, sometimes they are unable to repay the loan and become loan defaulters. In that case, the credit institutions will focus on the properties seized by the court or other savings schemes to recover the loan dues. However, legal provisions may prevent or even delay the application of the recovery weapon against certain assets. In such a case, let us know here whether the defaulter can recover his savings in EPF, PPF, NPS accounts or the money received through insurance through the court or not.
Protection
When there is a delay in payment of loans, it is doubtful whether the money in your EPF/PPF accounts can be taken by the court. Importantly, employees must have an EPF account. It should be noted that this account is for their needs and not for others. Many people may also have a Post Office PPF account. This is also the right of the respective account holder. According to Section 10 of the EPF Act, the cash in the EPF account of a member cannot be attached by court order for the loans taken by the member or as a guarantor. Balances in PPF account also get similar protection under the 'Government Savings Promotion Act'. Section 10 of the EPF Act makes this clear. Even though the lending institution has obtained orders from the court, the money in the member's EPF account has not been confiscated for that reason. The protection afforded by this Act also applies to certain amounts received through pension and insurance schemes. With regard to these retirement savings schemes, the law has provided considerable protection to the account holders.
If you have already withdrawn money from the EPF account, the situation may be different. When money comes out of a PF account and enters a regular bank account, the old protection may not apply to it. Courts will consider such cases separately depending on the nature of the recovery action.
NPS
According to the Pension Fund Regulatory Development Authority (PFRDA) Act, 2015, savings in NPS Tier 1 account are protected from court seizure. That is, in case of loan defaults, the banks do not draw on the cash saved in the scheme to collect the dues.
'Married Women's Property'(MWP) Act
Section 6 of the 'Married Women's Property'(MWP) Act of 1874..gives protection to life insurance policy taken for wife and children. If a policy is purchased under this Act, the insurance proceeds will go directly to the family members. Even if the policyholder has loans, the banks cannot claim this insurance money.
How is the situation/recovery of the loan institution..
The borrowers..cannot misuse this protection provided by the law as a complete cover for everything. A credit institution can also undertake debt collection through other legal means available for that particular debt. Depending on the case; Court proceedings may also include coercive actions against other assets not specifically protected by law. Here is another thing. Not every property purchased with cash from EPF/PPF accounts may be protected by itself.
Knowing that your EPF or PPF cannot be confiscated in general does not remove the obligation to repay the loan. Interest, late payment consequences and other collection actions may be pursued as per the loan agreement, applicable law. Therefore, no one should use this protection as an excuse to avoid due payments. The legal intention behind protecting funds like EPF, PPF..is to protect the family finances to some extent and it should be noted that borrowers do not help them to cheat the lending institutions.
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