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EMI Bounce Rule: Everyone wants a good house. Nowadays, banks are helping to make this dream come true. They are offering many attractive offers on home loans, so that the common man can buy his house quickly instead of waiting for a long time. This initiative of banks is making it easier for people to realize the dream of 'their home'.

However, taking a loan for a house is also not an easy task. Home loans and loan EMIs can be very complicated at times. If someone takes a loan and has a problem in repaying its EMI, then in such a situation, the bank from which the loan has been taken has many rights to recover the loan amount. If someone defaults on EMI, then the bank or financial institutions can auction their property. However, there are some rules for this, and the bank has to follow a process. The act related to this is the SARFAESI Act, which is related to auctioning the property.

What is the SARFAESI Act?

The SARFAESI Act 2002 gives the right to banks and financial institutions that when a loan taker is unable to repay his dues, they can recover their money by selling his property without the approval of the court. However, for this process, banks have to follow some rules. If there is any dispute related to this Act, then it is heard in the Debt Recovery Tribunal (DRT), which is 39 in number in the country. Apart from this, five Debt Recovery Appellate Tribunals (DRATs) also exist.

What is the process?

The auction process starts when the customer stops paying EMI. If the EMI is not paid for more than 30 days, then it is called a 'Special Mention Account' (SMA) 1. If there is no payment for more than 60 days, then it is called SMA 2. If there is no payment for more than 90 days, the account is considered a non-performing asset (NPA).

When a bank puts an account in SMA or NPA, its information is sent to credit bureau companies like Experian, CRIF, and CIBIL. This can have a bad impact on the credit score of the customer and the loan guarantor.

If a customer is unable to repay the EMI due to uncontrollable reasons, the bank can give additional time for repayment. However, if the payment is not made even after a legal notice, the bank can initiate the process under Section 13(2) of the SARFAESI Act. After this, the mortgaged property can be taken over through the court under Section 13(4). This process helps banks to recover their outstanding loans.

Disclaimer: This content has been sourced and edited from Hr Breaking. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.