News: Three Missed EMIs Cost a Bengaluru Man His Flat-10-03-2026

A Bengaluru-based chartered accountant recently recounted how her neighbour allegedly lost his home after missing three EMIs. She said he had taken a loan for a Rs 1.1 crore flat, and after the default the bank repossessed the property and auctioned it for Rs 95 lakh.

The case shows how quickly missed payments can lead to legal recovery, particularly when a borrower ignores notices or does not engage with the lender. Amit Prakash Singh, co-founder and CBO at Urban Money, said default typically escalates after 90 days, when the loan is classified as a Non-Performing Asset (NPA). Banks first send reminders and recovery notices, then a legal demand notice, often of 60 days. Continued default lets the lender take possession and auction the property.

Advisers suggest building a buffer before borrowing. EMIs should stay under 40-50% of net income, and CIBIL scores should be checked regularly. Madhupam Krishna, Sebi registered investment advisor (RIA) and chief planner, WealthWisher Financial Planner and Advisors, recommends an emergency fund covering 9-12 months of expenses, including EMIs. With monthly expenses of Rs 30,000, including a Rs 20,000 EMI, he said, one should aim for Rs 4.5 lakh or more in liquid assets such as high-yield savings or liquid funds.

A home loan protection plan (HLPP) is voluntary but worth considering. It repays the outstanding loan if the borrower dies or becomes disabled. Krishna said it is not RBI-mandated, and premiums are flexible. Some policies offer a rider under which the insurer pays EMIs for a limited period, for example 3-12 months, after a job loss.

Borrowers should contact the bank at the first sign of stress instead of waiting for notices. Singh said many lenders offer restructuring, such as temporary EMI deferment or a longer tenure, especially to those with a stable credit profile. Krishna advised seeking restructuring under RBI guidelines, such as moratoriums of up to 6 months in crises or tenure extension.

Recovery under RBI guidelines and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) is typically triggered after three consecutive missed EMIs. The warning signs come in stages:

Initial reminders by SMS, email or letter flag overdue EMIs, late fees of 2-4% per month and grace periods, often 15-30 days.

An NPA classification notice, often after 90 days, warns of credit score damage, with the CIBIL score dropping below 600, and restricted banking services.

A formal 60-day notice under SARFAESI Section 13(2) lists the dues, demands repayment and threatens possession. Borrowers should negotiate or object within this window.

Notices under Section 13(4) for symbolic or physical possession follow, and then auction publication in newspapers. Recovery agents may visit, but harassment violates RBI’s Fair Practices Code.

Loan agreements also contain clauses on default triggers, acceleration of full principal repayment and guarantor liability, which should be reviewed in advance. DRT (Debt Recovery Tribunal) filings or auction valuation notices mark the final stages before the property is lost.