SARFAESI Act Section 13: Notice Period, Enforcement Process and Borrower Rights

Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 sets out how a secured lender enforces its security when a borrower defaults. For a home loan, the security is usually the mortgaged house.

• The lender can start only after the loan account becomes a non-performing asset (NPA), usually when dues are overdue for more than 90 days.
• The Section 13(2) demand notice gives the borrower 60 days to repay the full amount stated in it.
• If the borrower objects, the lender must reply with reasons within 15 days of receiving the objection.
• After 60 days, the lender can take possession of the property and sell it under Section 13(4).
• The borrower can stop the sale by paying all dues and costs before the auction notice is published.
• A borrower can challenge a Section 13(4) measure before the Debt Recovery Tribunal (DRT) within 45 days.

If you receive a demand notice, note its date and the 60-day deadline straight away. Then check the amount against your loan statement and reply in writing if you find any errors.

Section 13 lets a secured creditor, such as a bank or an eligible non-banking financial company (NBFC), enforce a security interest without first getting a court decree. It covers the demand notice, the borrower's objection, the enforcement measures, the use of sale proceeds and the borrower's right to redeem the property.

A security interest is the right a lender holds over an asset given as security. In a home loan, this is the mortgage on the house. When the borrower defaults and the account becomes an NPA, the lender can use Section 13 to recover the dues from the property.

Section 13 works with two other sections:

• Section 14: the Chief Metropolitan Magistrate or District Magistrate helps the lender take physical possession of the property
• Section 17: the borrower can apply to the DRT against any measure taken under Section 13(4)

A lender can send a Section 13(2) notice when two conditions are met: the borrower has defaulted on the secured loan, and the lender has classified the account as an NPA.

Under RBI norms, a loan account becomes an NPA when any instalment stays overdue for more than 90 days. One missed EMI does not by itself allow a Section 13(2) notice.

The notice must:

• Demand repayment of the full outstanding liability within 60 days of the notice date
• State the amount payable
• Identify the secured assets the lender plans to enforce if the dues are not paid

Each stage of the process has a fixed time limit.

Last updated: 19th October 2026


Use the 60 days to check the demand, repay or settle where you can, and respond in writing.

1. Write down the notice date and the date 60 days later.
2. Compare the amount demanded with your loan statement, EMI receipts and bank statements.
3. Contact the lender's official customer service to discuss repayment, restructuring or settlement.
4. Get any agreed arrangement in writing, including its effect on the notice.
5. Send an objection in writing if the amount, the asset or the default is wrong, with supporting documents.
6. Keep proof of delivery for every letter you send.

Under Section 13(3A), you can send a representation or objection to the lender after receiving the Section 13(2) notice. The lender must consider it, and if it rejects it, it must send you the reasons within 15 days of receiving it.

Make the objection specific. Point to the exact error, such as a payment not credited or a wrong outstanding amount, and attach the bank statement, receipt or letter that proves it.

The lender's reply to your objection is not itself an order you can challenge before the DRT. The DRT route opens once the lender takes a measure under Section 13(4), such as taking possession.

If you do not repay the full amount within 60 days, the lender can take one or more of these measures:

• Take possession of the property: and transfer it by lease, assignment or sale to recover the dues
• Take over management of the business: where business assets are the security, subject to the Act's conditions
• Appoint a manager: to manage the secured assets taken into possession
• Collect from third parties: by asking anyone who owes money to the borrower, such as a tenant paying rent on the property, to pay the lender instead

For a home loan, possession and sale of the mortgaged house are the measures that matter most.

Possession and sale are separate stages, each with its own notice under the Security Interest (Enforcement) Rules, 2002.

1. Possession notice: the lender serves a possession notice on the borrower and publishes it in two newspapers.
2. Physical possession: if the property is not handed over, the lender applies to the Chief Metropolitan Magistrate or District Magistrate under Section 14.
3. Valuation: an approved valuer fixes the reserve price for the sale.
4. Sale notice: the lender gives the borrower at least 30 days' notice before the sale, and publishes the auction or tender notice.
5. Sale: the property is sold by public auction, tender, quotation or private treaty.

Read every notice you receive after the demand notice and note its date, since the DRT deadline runs from the date of each measure.

Under Section 13(7), the lender first uses the sale money to cover the costs of enforcement, then to repay its dues. Any amount left over goes to the person entitled to it, usually the borrower.

If the sale proceeds fall short of the dues, the lender can recover the balance by applying to the DRT under Section 13(10). Ask the lender for a written account of the sale proceeds and how they were applied to your loan.

Yes. Under Section 13(8), if you pay the full dues with all costs and expenses before the lender publishes the auction or tender notice, the lender cannot sell the property.

After the auction notice is published, this right ends. To use it, ask the lender for a written statement of the total amount due, including costs, and pay before the notice date.

Apply to the DRT with jurisdiction under Section 17, within 45 days from the date of the Section 13(4) measure you are challenging. The DRT checks whether the lender followed the Act and the rules.

If the DRT finds the measure unlawful, it can declare it invalid and order the property or management to be returned to you. Either side can appeal the DRT order to the Debt Recovery Appellate Tribunal (DRAT) within 30 days under Section 18. A borrower filing the appeal must deposit 50% of the amount due, which the DRAT can reduce to 25%.

Keep these documents for any challenge:

• The demand notice, your objection and the lender's reply
• Possession, sale and auction notices, with dates
• Loan statements, EMI receipts and bank statements
• Proof of delivery for all correspondence

Section 31 lists cases where the Act does not apply, and lenders must meet eligibility conditions to use it.

• Agricultural land: security interests in agricultural land are excluded
• Small loans: loans where the amount due is below Rs. 1 lakh are excluded
• Mostly repaid loans: the Act does not apply where the amount due is less than 20% of the principal and interest
• NBFC lenders: NBFCs with assets of Rs. 100 crore or more can use the Act for secured loans of Rs. 20 lakh or more

Whether the Act applies to a specific loan depends on the lender, the security and the loan documents.

If you are planning to purchase a home, Bajaj Finance offers home loan to eligible applicants. Before applying, choose an EMI that fits your regular income with room for emergencies, and contact Bajaj Finance through its official channels as soon as any repayment difficulty arises.

Bajaj Finance offers home loans starting at 7.50% p.a.*, with loan amounts up to Rs. 15 crore* and repayment tenures of up to 32 years. Review the loan terms and check your home loan eligibility before applying.