Priyanka Tiwari
Share
Suspense crime, Digital Desk : A home loan is a long-term commitment, and life’s uncertainties can sometimes make it difficult to keep up with Every Month's Installment (EMI). The fear of defaulting on a payment is a major source of stress for any homeowner. However, missing one or two payments does not mean you will instantly lose your home. The process is gradual, and as a borrower, you have specific rights. Understanding this timeline is crucial to navigating the situation and protecting your interests.
Here is a step-by-step breakdown of what happens when you default on your home loan EMI.
Step 1: The First 90 Days (The Warning Period)
When you miss your first EMI, the bank’s response is usually limited to reminders via SMS, email, and phone calls. You will likely be charged a late payment penalty, but the situation is still manageable. If you miss a second consecutive EMI, the reminders will become more frequent and firm. Your credit score will also take a hit.
The real turning point comes after 90 days (or three consecutive missed EMIs). At this stage, the bank is required by the Reserve Bank of India (RBI) guidelines to classify your loan account as a Non-Performing Asset (NPA). This is a formal declaration that the loan is now considered "at risk" of not being recovered.
Step 2: The Legal Notice (The SARFAESI Act Kicks In)
Once your account is declared an NPA, the bank will move from reminders to formal recovery proceedings. They will send you a legal notice, typically under the SARFAESI Act of 2002. This powerful law allows banks and financial institutions to seize and auction off a borrower's property to recover their dues without having to go through a lengthy court process.
This notice will give you a 60-day period to pay the entire outstanding loan amount—not just the missed EMIs.
Step 3: The Path to Property Auction
If you are unable to clear the total outstanding amount within the 60-day notice period, the bank has the right to take possession of your property. They will then proceed with the auction process:
Valuation: The bank will get the property valued by an approved valuer to determine its market price and set a "reserve price" (the minimum bid amount) for the auction.
Auction Notice: The bank must issue another public notice, at least 30 days before the auction date, announcing the details of the sale. They must also inform you of the auction date and the reserve price.
Know Your Rights as a Borrower
Even when facing a default, you are not powerless. The law provides you with several important rights:
Right to a Fair Price: You have the right to ensure your property is being sold at a fair market value. If you believe the bank's reserve price is too low, you can object and present your own valuation.
Right to Surplus Funds: If the property is sold at auction for more than your total outstanding debt (including interest and all charges), the bank is legally obligated to return the surplus amount to you.
Right to Find a Buyer: You can try to find a buyer for your property yourself. If you bring a buyer to the bank who is willing to pay a fair price before the auction is finalized, the bank may consider the private sale.
Right to Appeal: You have the right to challenge the bank's actions by approaching the Debt Recovery Tribunal (DRT) if you believe the process was unfair or improper.
The most important step is to not ignore the problem. As soon as you anticipate difficulty in paying your EMI, communicate with your bank. They may be willing to offer solutions like a temporary deferment, loan restructuring, or a one-time settlement.
