The Senate has passed the Financial Institutions Recovery Finance Amendment Bill 2026, introducing a stricter legal framework for action against housing finance defaulters.
The bill will come into force immediately after approval by the President.
Under the amended law, banks will be allowed to auction mortgaged properties after issuing a final notice to housing finance defaulters. The requirement of court permission for auctioning such properties has been abolished.
Financial institutions will now be authorised to take recovery action on their own under the new framework.
According to the bill, housing finance defaulters will be issued three written notices. Each notice will carry a period of 30 days. After the final notice, the bank will have the authority to auction the mortgaged property.
Loan rescheduling requests timeframe
The amended law also makes it mandatory for banks to decide requests for loan rescheduling or settlement within 30 days. This provision is aimed at giving borrowers a defined process before recovery action moves forward.
Under the new regulations, property auction will be allowed at least 15 business days after the advertisement is issued. Financial institutions themselves will also be able to participate in the auction process.
The consumer will be given a final opportunity to place an equal bid within five business days.
DCs to assist banks
Banks will be able to seek direct assistance from deputy commissioners to obtain possession of mortgaged properties. Deputy commissioners will be required to take possession of the property and hand it over to the financial institution.
The amendment bill also states that banking courts will not be able to issue a restraining order without first hearing the financial institution’s position.
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