First of all Bank can not take any collateral securityfor giving PMRY Loan. But over-enthusiastic managers do obtain some security.
Selling away your land is not easy. They must have kept the original document with them, but they can not sell it either under Securitization Act or by initiating civil suit.
Only loss for you is,, the document may not be made availabel to you until the loan cleared. Hence do not be afraid of selling awaythe property. Bank can not do it in any case.
The other alternative is go to the Bank personally meet the Manager that you are willing pay under Onetime Settlement. They may not waive the entire interest, but they may waive interest from the day theloanbecame bad. During the discussion, you clearly tell the Manager that they do not have any right to sell the property as keeping the document itself is against the rules of PMRY and hence OTS is the best option for both bank and you. I hope the matter will be settled if you represent the points properly - which include a) default isnot wilful and your father's financial condition is bad 2) Ready to pay OTS if the some porition of interest is waived 3) Bank do not have right on the property and the sdocument is illegally obtained against the norms of PMRY Scheme.