EMI bounce, Section 25 and Section 138: what to do next

When an EMI bounces, you normally face a bank return charge, a lender's bounce fee and a mark on your credit record. A single bounce is rarely a court matter. A cheque bounce can lead to a Section 138 notice, and a failed ECS, NACH or e-mandate can lead to a Section 25 notice. If you receive one, you generally have 15 days from receipt to pay, so act at once. This guide is written for the person who receives the notice, and sets out the deadlines and how to respond.

What happens when an EMI bounces?

Your bank tries to debit the EMI through NACH, ECS or a post-dated cheque. If there is not enough money, it fails. Your bank may charge a return fee, and the lender may add a bounce fee and penal charges, usually with GST on top. The late payment can also show on your credit report. Next come reminders and, if it continues, stronger steps. One or two bounces do not usually bring a case, but repeated failures on a default can.

EMI bounce charges

There is no single national figure. Charges are set out in your loan agreement and in each bank's schedule of charges, and they vary by bank and lender. RBI's penal charges rules, in force since January 2024, say penal charges must be reasonable and must not be added to the principal to earn further interest. Check your statement. If a charge looks wrong or is not in your agreement, ask the lender to explain it in writing.

• Your bank's return charge for the failed debit.
• The lender's bounce or dishonour fee.
• Penal charges for late payment.
• GST on the applicable charges.

What is Section 138 of the Negotiable Instruments Act?

Section 138 makes the bounce of a cheque given for a debt an offence, if certain steps are followed. Many loans use post-dated or security cheques, so it comes up often. The cheque must be presented while valid, the holder must send a written notice within 30 days of learning of the bounce, and you must fail to pay within 15 days of receiving it. Then the holder can file a complaint within one month. This guide does not replace legal advice on your notice.

What is Section 25 of the Payment and Settlement Systems Act?

Section 25 does a similar job for electronic debits, such as ECS and NACH. It covers an electronic funds transfer that fails because of insufficient funds, or because it exceeds the arranged amount. The transfer has to be for a debt, and it must follow the payment system's procedural rules. Section 25(5) applies the cheque bounce chapter of the Negotiable Instruments Act where circumstances allow. So the notice and timelines generally work the same way as Section 138.

Deadlines for an EMI bounce notice

Courts have read parts of these timelines in different ways, especially for electronic mandates. Treat the table as a guide, and have your own notice checked. Keep the envelope, as the date you received it matters.

Is an EMI bounce a jail matter?

A missed or bounced EMI alone is not a crime. A Section 138 or Section 25 case can be, once the steps are complete and a complaint is filed, and the law does allow for prison. Even so, these offences can be compounded, meaning settled between the parties, and Section 147 of the Negotiable Instruments Act allows this. In many cases, the matter ends through payment or settlement. A court may also order interim compensation of up to 20% of the amount under Section 143A, so a case can bring costs early on. Ignoring a summons is the real danger, because a warrant can follow.

How to respond to a Section 138 or Section 25 notice

1. 1Note the date you received it and keep the envelope. Count 15 days from that date.
2. 2Check it is real: the sender, the loan number and the amount. Fake notices are common, especially on WhatsApp.
3. 3Match it against your records: the cheque or mandate date, the amount, the bank's return memo and the reason given.
4. 4If you can pay the amount within 15 days, do so through an official channel, and get written proof.
5. 5If you cannot pay, send a written reply through a legal expert within the 15 days, and raise any errors or disputes.
6. 6Ask the lender about a settlement, which can close both the loan and the notice, if it says so in writing.
7. 7If you get a court summons, attend or be represented on the date given.

Questions to check on your notice

• Was the notice sent on time after the bounce?
• Does the claimed amount match the cheque or debit, rather than the whole loan?
• Was the bounce actually due to insufficient funds, or was it a stopped mandate or technical failure?
• Is the cheque a security cheque, and what was due on its date?
• Is the sender the actual lender, or someone authorised by it?

These points can matter in court, and the answers depend on the facts. Do not assume you have a defence without having your papers reviewed.

How to stop EMI bounces from continuing

If you know the next EMI will fail, speak to the lender before the date. Ask about a date change, a short moratorium or restructuring. Do not simply cancel a mandate without talking to the lender, as your agreement may treat this as a default, and it does not end the debt. If you cannot repay at all, a settlement is often more useful than running up further charges. Our calculator can show what it might cost.

Why borrowers choose Legal Savvy for bounce notices

Legal Savvy is a legal expert-led loan settlement and debt relief company, headquartered in Madhapur, Hyderabad, that has helped 23,000+ borrowers across India. Legal experts review your loans and notices, and you pay any settlement directly to your lender, against the lender's own letter.

When a notice arrives, the clock is short. Our legal experts check your dates and records, help with your reply, and work with your lender on a settlement that closes the matter in writing.

Conclusion: count the 15 days first

An EMI bounce is a warning, and a Section 138 or Section 25 notice is a deadline. Note when you received it, check that it is real, and pay or reply within 15 days. Most cases can still be resolved. Share your notice with our legal experts as soon as it arrives.