What Happens If You Don’t Pay Credit Card or Personal Loan in India?
What Happens If You Don’t Pay Credit Card or Personal Loan in India?
Many people face situations where they are unable to pay their credit card bills or personal loans due to financial hardship. But what happens next? How long can banks and recovery agents keep calling you? What are your rights under RBI guidelines? And what about the 3-year limitation rule? This detailed guide explains everything step by step.
📑 Table of Contents
- RBI Guidelines on Recovery Calls
- What Happens If You Don’t Pay
- What Is Time-Barred Debt (3-Year Rule)
- What Recovery Agents Can & Cannot Do
- Impact on CIBIL & Credit Score
- How to Protect Yourself from Harassment
- Possible Legal Actions by Banks
- Step-by-Step Guide if You Can’t Pay
- Frequently Asked Questions
- Final Thoughts
RBI Guidelines on Recovery Calls
As per the Reserve Bank of India (RBI), recovery agents can only contact borrowers between 8:00 AM and 7:00 PM. They must behave politely, show proper identification, and cannot harass or threaten. They also cannot call your relatives, employer, or neighbors to shame you. If they violate these rules, you can file a complaint with the bank and escalate it to the RBI Banking Ombudsman.
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| What Happens If You Don’t Pay Credit Card or Personal Loan in India |
What Happens If You Don’t Pay
If you stop paying your credit card or loan:
- You will start receiving calls and reminders.
- After 90 days of non-payment, your account becomes an NPA (Non-Performing Asset).
- Your case may be handed to recovery agents.
- Your credit report will show “default” or “written off.”
- Banks may file a legal case within 3 years of your last payment.
What Is Time-Barred Debt (3-Year Rule)
Under the Limitation Act, banks have 3 years from your last payment or written acknowledgement to file a case in court. After 3 years, the debt becomes time-barred. This means the debt still exists, but the bank cannot take you to court for recovery. However, recovery calls may still continue, and your CIBIL report will remain affected.
What Recovery Agents Can & Cannot Do
They Can:
- Call you between 8 AM – 7 PM.
- Visit your residence after showing ID.
- Request payment or settlement.
They Cannot:
- Call late at night or early morning.
- Threaten, abuse, or harass you.
- Contact your family, employer, or neighbors.
- Seize property without a proper court order.
Impact on CIBIL & Credit Score
Non-payment of loans and credit cards will hurt your CIBIL score and other credit bureau reports. A default or write-off status usually stays on record for up to 7 years. This makes it very difficult to get new loans, credit cards, or even home/auto loans in the future. Even if you later settle, your credit report may show “settled” instead of “closed,” which still affects credibility.
How to Protect Yourself from Harassment
- Do not restart the limitation clock by making small payments after 3 years.
- Ask agents for written proof of their authority.
- Record calls/messages (if legally allowed) as evidence.
- File complaints with the bank’s grievance cell if harassment continues.
- Escalate to the RBI Banking Ombudsman if unresolved in 30 days.
Possible Legal Actions by Banks
If dues remain unpaid, banks can (within 3 years):
- File a case in Civil Court for recovery.
- Approach the Debt Recovery Tribunal (if dues exceed ₹20 lakh).
- Invoke arbitration clauses in your loan agreement.
Courts can order repayment, salary attachment, or even asset seizure. But after 3 years, such legal action is no longer possible unless you have acknowledged the debt.
Step-by-Step Guide if You Can’t Pay
- Check your account status: Find your last payment date and outstanding dues.
- Talk to your bank: Request restructuring or reduced EMI if facing financial hardship.
- Negotiate settlement: If heavily overdue, request a one-time settlement (OTS) and get it in writing.
- Don’t restart limitation: Avoid token payments or written acknowledgements if debt is over 3 years old.
- Document harassment: Keep records of calls, messages, and visits.
- File complaints: Start with the bank, then RBI Ombudsman, and finally police/consumer forum if needed.
Frequently Asked Questions
Q. Can banks call me after 8 PM?
No. As per RBI, recovery calls are allowed only between 8 AM and 7 PM.
Q. Does debt vanish after 3 years?
No. The debt still exists, but banks cannot legally sue you after the limitation period.
Q. How long does default stay on CIBIL?
Usually for 7 years, even if you later settle the dues.
Q. Can recovery agents harass or threaten me?
No. Harassment is against RBI rules and you can file complaints against it.
🔑 Key Takeaways
- Recovery agents can only call between 8 AM – 7 PM (RBI rule).
- After 90 days of non-payment, loans/credit cards are classified as NPA.
- Non-payment damages your CIBIL score for up to 7 years.
- Banks can take legal action within 3 years of your last payment/acknowledgement.
- After 3 years, the debt becomes time-barred (no court case possible).
- You can file complaints with the RBI Ombudsman or police if harassed.
- Always try for settlement or restructuring to protect your credit history.
Final Thoughts
If you are struggling to pay your credit card or personal loan, know your rights and the rules banks must follow. Non-payment will affect your credit score, but harassment is not allowed. Always try to negotiate a settlement or restructure if possible. If the debt is more than 3 years old, remember that it becomes time-barred and banks cannot legally sue you. Stay informed, protect yourself, and take wise decisions.
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