Exploring the Modes of Debt Recovery in India: A Comprehensive Guide


In the complex world of finance, debt recovery plays a vital role in maintaining financial stability for both individuals and businesses. In India, several modes of debt recovery are available to creditors to help recover outstanding dues. This blog post aims to provide an insightful guide on the various modes of debt recovery in India.


  1. Negotiated Settlements

Negotiated settlements are a common mode of debt recovery in India, wherein the creditor and debtor mutually agree on a settlement amount that is lower than the total outstanding debt. This mode allows both parties to avoid lengthy legal proceedings and arrive at a mutually acceptable resolution. Negotiated settlements often involve negotiations, discussions, and reaching a compromise that suits the financial interests of both the creditor and debtor.


2 . Recovery Tribunals 

For certain types of debts, such as those covered under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, creditors can approach Debt Recovery Tribunals (DRTs). DRTs are specialized quasi-judicial bodies established for expeditious recovery of debts. Creditors file a recovery application with the relevant DRT, which then conducts hearings, examines the evidence, and passes orders for the recovery of the debt. DRTs provide a more streamlined and time-bound process for debt recovery.


3 . Act on Securitization, Reconstruction, and Enforcement of Financial Assets and Security Interests (SARFAESI)

The SARFAESI Act, enacted in 2002, enables secured creditors (banks and financial institutions) to recover their dues without the intervention of the court. Under this act, creditors have the power to take possession of the secured assets and sell them through public auction or private treaty. They can also issue notices to defaulting borrowers and guarantors, demanding repayment of the outstanding dues. SARFAESI provides an efficient mechanism for secured creditors to enforce their security interests and recover debts.


4 . Insolvency and Bankruptcy Code (IBC) 

Introduced in 2016, the Insolvency and Bankruptcy Code (IBC) revolutionized the debt recovery landscape in India. Under the IBC, both individual and corporate debtors can be subjected to insolvency proceedings. The code provides for the appointment of insolvency professionals, the formation of the Insolvency and Bankruptcy Board of India (IBBI), and the establishment of the National Company Law Tribunal (NCLT) and the Debt Recovery Appellate Tribunal (DRAT). The IBC offers a structured and time-bound process for debt resolution, aiming to maximize the value of assets and facilitate efficient debt recovery.



Debt recovery is a critical aspect of maintaining financial stability in India. The various modes of debt recovery, including negotiated settlements, Recovery Tribunals, SARFAESI Act, and the Insolvency and Bankruptcy Code, provide creditors with effective tools to recover their outstanding dues. It is essential for both creditors and debtors to be aware of these modes and seek appropriate legal guidance when pursuing debt recovery in India.

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