By Arosh John | Founder – John Real Estate | Editor-in-Chief – Thane Real Estate News
Missing a couple of EMIs may feel like a temporary setback. But if left unresolved, it sets off a chain of events that can escalate quickly—from your loan being tagged as an NPA (Non-Performing Asset) to your property being possessed and auctioned under the SARFAESI Act, 2002.
Here’s a clear, step-by-step breakdown of what happens, what your rights are, and how you can protect yourself.
When does a missed EMI become an NPA?
- Under RBI norms, a term loan is treated as an NPA after 90 days of overdue payments (about three consecutive missed EMIs).
- Once tagged as an NPA, the lender gains powers under the SARFAESI Act.
The SARFAESI Process: Step by Step
1. 60-Day Demand Notice (Section 13(2))
- After NPA classification, the bank issues a demand notice giving you 60 days to clear dues.
- You may file objections, and the bank must respond with reasons.
2. Enforcement Measures (Section 13(4))
- If dues remain unpaid, the bank may:
- Take possession of the secured property,
- Take over management, or
- Sell/lease the asset.
- No civil court order is required: SARFAESI allows direct enforcement.
- For physical possession, lenders usually approach the District Magistrate or Chief Metropolitan Magistrate under Section 14—this is an administrative process, not a civil suit.
3. Auction / Sale
- An approved valuer assesses the property, a reserve price is fixed, and a 30-day sale notice is published.
- Sale proceeds first clear bank dues; any surplus is returned to you.
Typical Timeline
- Months 1–3: EMI defaults, reminders sent.
- Month 3: Loan tagged NPA.
- Months 3–5: Bank issues 60-day demand notice.
- Months 5–7: Possession notice, Section 14 application if needed, then auction.
Borrower Rights
Even after default, the law protects you:
- 60-Day Notice: Mandatory before enforcement.
- Right to Object: Banks must consider and reply to your written objections.
- Right to Appeal: You can approach the Debt Recovery Tribunal (DRT) within 45 days of any action under Section 13(4).
- Right of Redemption: You can clear dues before the sale is completed to reclaim your property.
- Surplus Return: Any auction surplus beyond dues is yours.
- Protection from Harassment: Banks must act lawfully. If you experience intimidation or unlawful conduct by recovery agents:
- File a grievance with the bank’s internal redressal cell.
- Escalate to the Banking Ombudsman (RBI).
- Approach the police if there is criminal intimidation or trespass.
- Seek a remedy through the High Court if due process is violated.
How to Safeguard Yourself
- Act early—talk to your bank before defaults pile up.
- Seek restructuring—longer tenure or lower EMI may be possible.
- Request a moratorium—temporary relief in exceptional cases.
- Use emergency funds—clear partial dues to avoid an NPA tag.
- One-Time Settlement (OTS)—negotiate if full repayment isn’t feasible.
- Consider selling the property yourself before the auction to control the value.
Consequences if Ignored
- Credit score damage: Defaults stay for up to 7 years.
- Future loan difficulties: Borrowing becomes harder and costlier.
- Loss of property: Auctions often realize less than market value.
About the Author
Arosh John is a MahaRERA-registered and ISO-certified real estate consultant, recognized as one of the leading real estate agents in Thane and Mumbai. With over a decade of expertise, he is the Founder of John Real Estate and Editor-in-Chief of Thane Real Estate News. Arosh specializes in premium and luxury properties, detailed micro-market analysis, and buyer education—empowering clients with transparent advice to make informed property decisions across the Mumbai Metropolitan Region.
Disclaimer
This article is for general information only as of September 2025, based on the SARFAESI Act, 2002, Security Interest (Enforcement) Rules, 2002, and RBI NPA norms. It does not constitute legal advice. Processes may vary depending on the lender, property type, and case facts. For specific situations, consult your lender and a qualified legal professional.
