National Australia Bank has pulled out of a court case that, if successful, would have opened the way for banks to evict tenants without notice when landlords default on loans.

NAB took the Sheriff of Victoria to court in September after it failed to evict the tenants of two Ivanhoe East properties where the mortgagor had defaulted on repayments.

The court action prompted a furious reaction from tenant groups and The Age's online readers, who labelled the bank's actions ''cold hearted''.

The case centred on the sheriff's refusal to evict the tenants because NAB had not complied with the Residential Tenancies Act requirement that renters be given 28 days' notice.

NAB had argued the sheriff should enforce a court-issued warrant of possession on the homes without requiring the bank to go to the Victorian Civil and Administrative Tribunal and give the tenants notice.