If you do not pay the home loan EMI on time, it can have serious consequences. The bank can even auction your house to recover the outstanding amount. However, this process is not so easy. The bank has to follow many legal rules and procedures before doing this.
In India, this entire process is implemented under the SARFAESI Act and Reserve Bank of India rules. If during this period the borrower repays the outstanding amount with interest, the auction of the house can also be stopped.
Action can be initiated if three EMIs are missed
According to legal experts, if a person does not pay the home loan EMI for 90 consecutive days then the bank can declare that loan account as NPA (Non-Performing Asset). After being declared NPA, the bank sends a 60-day notice to the borrower, asking him to repay the entire outstanding amount. If the borrower objects or responds to this notice, the bank has to respond within 15 days.
Total time approximately 105 days
According to experts, the bank has to give about 105 days before the process of auctioning the house starts. This includes 60 days notice, 15 days for response and approximately 30 days for notice of sale. If the house is not sold in the first attempt, an additional notice of 15 days can also be given.
What can the bank do before the auction
If payment is not made even after notice, the bank has some legal rights. The bank can take possession of the mortgaged property. After this, valuation of the property is done and then it can be sold through tender, public auction or e-auction.
Court approval is not necessary
Under the SARFAESI Act, the bank does not need to take permission from the court for such recovery. However, the entire process is done as per the prescribed rules.
Auction can save on timely payment
Experts say that if the borrower pays the outstanding amount on time, the auction process can be stopped. Therefore, in case of missed EMI, it is better to talk to the bank as soon as possible and arrange payment.