Make an application befire insolvency court for your declaration as insolvent 

in alternative approach your creditors to reschedule your loan .reducing installments and increase in tenure of your loans 

- As per the RBI, the bank should give proper time and offers for the settlement of loan amount.,  on the ground of health and sudden loss 

- If, the bank is not agreed to give time, then let them to start legal action against you.

- Firstly, the bank will issue demand notice prior to take legal action from the court. You can reply the same after narrating the whole story of business failure or loss.

- Even, if the bank filed a case before the Court, you will have much time to repay the said loan amount and to settle the matter according to your present situation.

- If bank official/people are harassing, then even you can lodge a complaint to the police , as they are not allowed to take law in their hand. 

You can contact me, if further suggestion needed. 

Recently the Reserve Bank of India (RBI) issued a warning note highlighting the risks associated with retail unsecured loans. Validating the RBI’s concerns

The RBI guidelines have definitely brought some relief to defaulters. They allow defaulters to restructure their loans and make smaller payments, which can help them get back on their feet financially. The guidelines also provide for a longer repayment period, which can make it easier for defaulters to manage their debt.

In India, the legal rights of defaulters are widely protected by legislation and regulatory frameworks. In a recent communication, The Reserve Bank of India (RBI) directed banks and finance companies to undertake compromise settlements or technical write-offs on accounts categorized as wilful defaulters or fraud. This implies that a wilful offender or a company involved in fraud will no longer face prejudice by lenders, on account of criminal proceedings against them.

If nothing works out then you can file an insolvency petition with the National Company Law Tribunal (NCLT). .

As a salaried individual who defaults on a personal loan can apply for insolvency proceedings. The Insolvency and Bankruptcy Code (IBC) of 2016 allows individuals, including salaried employees, to file for bankruptcy if they are unable to repay their debts.

Dear Client,

Urgent measures are needed in order to prevent defaults and avoid any form of legal issues. To begin with, you are advised to negotiate with your lenders for restructuring or rescheduling of loans, that may involve stretching the tenure, or decreasing EMIs, or decreasing the interest rates to ensure repayment ease. Consolidation of debt bundling several loans into one loan with a lower rate of interest can also make payments easier and that may be an easier way to the burden lower. Refrain from taking fresh loans or speculative investments to settle debts, as this can deepen your financial situation. Pay the minimum EMIs at least to avoid defaulting and adverse credit reporting. If restructuring cannot be done, get advice from a financial advisor or credit counselling agency for a repayment schedule. In extreme situations, one can go in for legal insolvency under the Insolvency and Bankruptcy Code, but that should be a last resort. Being proactive and talking to lenders is the best way to avoid future entanglements.

If the loan is not secured against immovable property and if you don’t own any immovable property, file insolvency petition in the Court of Small Causes, Hyderabad if your are located in Hyderabad. Insolvency petition is an application filed in Court giving details of all your lenders/banks/creditors and your debtors. You can pray to the Court that  you are due a certain amount to your creditors but you have lost your business and cannot repay. The Court can recover your due amount from your debtors, if any, and pay to the creditor. The Court will also direct all your creditors not to harass you even if the creditors are not paid. Once order is passed by Court no creditor can force you to pay anything or come to your doorsteps. You can also seek direction to local police from Court against any unlawful threats by creditors/lenders.

Settling with the banks after the same becomes NPA is only the option 

Sir/Madam,

You are suggested to have other sources of income as well and get the loans settled. Keep paying the EMIs, else the banks and NBFC will not spare the same.   

You’re at high risk of loan default, but you still have options to reduce long-term damage:

Immediate Steps:

1. Stop taking new loans – borrowing more will worsen the debt trap.

2. Contact all lenders immediately:

   • Request for loan restructuring or moratorium.

   • Ask for reduced EMIs or tenure extension based on financial hardship.

3. Prioritize payments:

   • Pay EMIs for bank loans first (they affect your credit score more heavily).

   • Negotiate with NBFCs for temporary relief or one-time settlement.

Legal Option (Last Resort):

• File under the Insolvency and Bankruptcy Code (IBC) for individuals if negotiations fail.

• It will stop collection calls, but affects credit score for years.

Additional Support:

• Contact a debt counselor or legal aid center.

• Track every communication in writing for future proof.

Don't Ignore:

Silence leads to legal notices, credit damage, and mental stress. Early action gives you the best chance to regain control.