Missed Two Loan EMIs? Here’s What Banks and NBFCs Can Do and How It Impacts You

Missing loan EMIs can quickly turn into a serious financial issue if not handled on time. While a delay of a few days may seem harmless, consistently missing repayments, especially two consecutive EMIs, can prompt banks and Non-Banking Financial Companies (NBFCs) to take stricter action. Understanding how lenders respond at each stage can help borrowers act early and reduce long-term damage.

What Happens After Missing the First EMI?

When a borrower misses the first EMI, most banks and NBFCs treat it as a temporary delay rather than a default. At this stage, lenders usually send payment reminders through SMS, emails, or phone calls. A late payment fee or penalty is often charged, which may range from a few hundred to a few thousand rupees depending on the loan amount and lender policy.

If the overdue EMI is paid within a month, the impact on the borrower’s credit score is usually minimal or, in some cases, negligible. The loan account is marked as “overdue” internally but continues to remain in the “regular” category. However, repeated delays can raise red flags for lenders.

Second EMI Missed: Lender Action Intensifies

The situation becomes more serious when the second EMI is missed, pushing the payment delay to around 60 days. At this point, banks and NBFCs become significantly more proactive. They use multiple channels to contact the borrower, including frequent calls and follow-ups.

In the case of unsecured loans, such as personal loans or credit card dues, lenders may involve their collection teams. Importantly, delays of this nature are reported to credit bureaus, leading to a sharp decline in the borrower’s credit score. A reduced credit score can affect future loan approvals, credit card eligibility, and even interest rates.

Credit Score Impact After 60 Days

Once a payment delay crosses 60 days, the negative impact on the credit score becomes substantial. Credit bureaus record this as a serious repayment lapse, and recovering from such a drop can take several years, even after clearing dues. During this time, lenders may classify the borrower as high-risk.

What Happens If EMIs Are Unpaid for 90 Days?

If loan repayments remain unpaid for 90 consecutive days, the Reserve Bank of India (RBI) guidelines require banks and NBFCs to classify the loan as a Non-Performing Asset (NPA). Once a loan becomes an NPA, the lender’s approach becomes much stricter.

For secured loans, such as home loans or car loans, banks generally avoid immediate legal action after just two missed EMIs. However, monitoring of the account is increased. Once the loan turns into an NPA, the lender issues formal notices and may initiate recovery proceedings. In such cases, banks gain the right to recover dues by enforcing claims on the collateral or mortgaged assets.

For unsecured loans, lenders may threaten or initiate civil recovery proceedings or arbitration. Interest on the outstanding amount continues to accrue, increasing the borrower’s total liability.

Common Mistake Borrowers Make

A major mistake many borrowers make is delaying communication with their bank or NBFC. Hoping the problem will resolve on its own often worsens the situation. Experts advise borrowers to reach out to their lender immediately after missing the first EMI instead of waiting for recovery calls or legal notices.

Why Proactive Communication Helps

If borrowers proactively inform lenders about genuine issues such as delayed salary, medical emergencies, or temporary financial stress, banks are often willing to cooperate. In many cases, lenders may offer solutions such as:

• Temporary reduction in EMI amount

• Moratorium on repayments for a limited period

• Loan restructuring, especially in home loan cases

Home loans typically offer greater flexibility for restructuring due to their longer tenure and secured nature. Banks may extend the loan tenure or adjust repayment schedules to ease short-term pressure.

Final Takeaway

Missing two EMIs is a serious warning sign that should not be ignored. While banks and NBFCs do provide some flexibility initially, continued delays can severely damage credit scores, increase financial stress, and even lead to legal or recovery action. The smartest approach is early communication, timely partial or full payments when possible, and seeking professional advice if financial difficulties persist. Taking quick action can prevent long-term financial consequences and help restore stability.