banks take post dated cheques from the borrower. if these cheques bounce then they have recourse of section 138 of CRPC. which has penalty around 3 years and double the payment to be decided by civil court.
the banks also declare that the person is a 'willful defaulter' as guided by the reserve bank of india, which means no other bank will now give the person loan.
bank also is permitted to appoint recovery agents , who follow up and recover the loan from the bank.
this is the course when the loan does not have a third party guarantee and security. normally banks do not take the colletarals in the personal loan. otherwise banks can recover from your collaterals as well.