In today’s dynamic business environment, effective management of receivables is crucial for maintaining liquidity and financial stability. With rising instances of delayed payments, defaults, and non-performing assets, organizations increasingly rely on Debt Recovery Advisory services to protect their financial interests. Debt Recovery Advisory plays a strategic role in assisting creditors—such as banks, financial institutions, corporates, and individual lenders—in recovering outstanding dues through lawful, structured, and commercially viable mechanisms.
Debt Recovery Advisory refers to professional advisory services that assist creditors in the identification, management, and recovery of outstanding debts from borrowers or defaulters, while ensuring compliance with applicable laws and ethical standards. These services are designed to guide clients through the entire debt recovery lifecycle—from early-stage defaults to enforcement and resolution.
Debt recovery advisors act as strategic consultants who evaluate the debtor’s financial position, assess the recoverability of the debt, recommend appropriate recovery mechanisms, and implement tailored recovery strategies. The advisory may involve pre-litigation measures, restructuring or settlement negotiations, legal proceedings, or statutory enforcement actions, depending on the nature and severity of the default.
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The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SARFAESI Act) constitutes one of the most significant legislative instruments governing debt recovery in India. Enacted with the objective of empowering banks and financial institutions to enforce security interests without the intervention of courts, the Act has substantially strengthened creditor rights and expedited the recovery of non-performing assets (NPAs).
From a Debt Recovery Advisory perspective, the SARFAESI Act serves as a strategic enforcement tool that enables creditors to achieve time-bound recovery while ensuring statutory compliance, procedural fairness, and risk mitigation.
The SARFAESI Act was introduced to address systemic delays in debt recovery and to facilitate efficient asset reconstruction and securitisation. It applies to secured creditors, including banks and notified financial institutions, and covers secured assets created by way of mortgage, hypothecation, or assignment.
The Act excludes certain categories such as agricultural land, small loans below the statutory threshold, and security interests in aircraft and vessels, thereby maintaining a balanced legislative approach.
Debt Recovery Advisory under the SARFAESI framework involves strategic assessment, procedural execution, and compliance oversight. Advisors assist lenders in evaluating the enforceability of security interests, classification of accounts as NPAs, and selection of SARFAESI as an appropriate recovery mechanism vis-à-vis alternative remedies under the Recovery of Debts and Bankruptcy Act, 1993 or the Insolvency and Bankruptcy Code, 2016.
The advisory role is particularly critical in ensuring that enforcement actions withstand judicial scrutiny and do not suffer from procedural infirmities.
Initiation of Corporate Insolvency Resolution Process (CIRP)
Debt recovery under the IBC is initiated through the Corporate Insolvency Resolution Process (CIRP). Financial creditors, operational creditors, or the corporate debtor itself may file an application before the National Company Law Tribunal (NCLT) upon occurrence of default, subject to statutory thresholds.
From an advisory standpoint, careful evaluation of the nature of debt, existence of default, and documentary evidence is crucial before invoking the Code.
Banks and Non-Banking Financial Companies (NBFCs) constitute the backbone of the formal credit system and play a central role in the process of debt recovery. As primary lenders to individuals, businesses, and corporate entities, they are entrusted not only with the disbursement of credit but also with the responsible recovery of dues in the event of default. Effective debt recovery by banks and NBFCs is essential for maintaining liquidity, safeguarding depositor and investor interests, and ensuring overall financial stability.
From a Debt Recovery Advisory perspective, banks and NBFCs function as both initiators and executors of recovery mechanisms, operating within a robust statutory and regulatory framework.
Banks and NBFCs are governed by a comprehensive legal and regulatory regime, including:
Compliance with these frameworks ensures that recovery actions are lawful, ethical, and procedurally sound.
The role of banks and NBFCs in debt recovery begins prior to default. Through continuous monitoring of loan accounts, lenders identify early warning signals such as payment delays, deterioration in financial ratios, or covenant breaches.
Preventive measures include:
Such early interventions often result in amicable resolution, reducing the need for coercive enforcement.
Banks and NBFCs frequently engage in settlement and restructuring negotiations, including One-Time Settlement schemes, particularly where litigation may not yield optimal recovery.
Debt recovery advisory assists lenders in evaluating settlement proposals, balancing recovery maximisation with commercial feasibility and regulatory compliance.
Debt Recovery Advisory has emerged as a critical pillar of the modern financial and legal ecosystem, bridging the gap between creditor rights, regulatory compliance, and commercial prudence. In an environment marked by financial distress, rising non-performing assets, and complex regulatory frameworks, a structured advisory approach ensures that recovery actions are strategic, lawful, and outcome-oriented.
By integrating legal expertise, financial analysis, governance standards, and ethical enforcement practices, Debt Recovery Advisory enables creditors to navigate multiple recovery mechanisms—including SARFAESI, Insolvency and Bankruptcy Code proceedings, and tribunal-based enforcement—with precision and foresight. Beyond mere recovery of dues, it promotes value maximisation, risk mitigation, and preservation of institutional credibility.
Ultimately, an effective Debt Recovery Advisory framework contributes to stronger credit discipline, improved financial stability, and enhanced confidence among stakeholders. As regulatory scrutiny intensifies and recovery mechanisms continue to evolve, professional advisory support will remain indispensable in achieving sustainable and compliant debt resolution outcomes.
Banks, NBFCs, financial institutions, corporates, MSMEs, investors, and individual creditors can avail debt recovery advisory services.
Unlike conventional debt collection, Debt Recovery Advisory focuses on legal compliance, strategic planning, and risk management, rather than mere follow-up or coercive recovery.
Debt recovery is governed by statutes such as the SARFAESI Act, 2002, Insolvency and Bankruptcy Code, 2016, Recovery of Debts and Bankruptcy Act, 1993, along with RBI regulations and judicial precedents.
Advisory support is recommended at the early signs of default, during NPA classification, before initiating legal proceedings, or while evaluating settlement or restructuring options.
Advisors assist in drafting statutory notices, ensuring procedural compliance, managing enforcement actions, and mitigating legal risks during asset possession and sale.
Advisory services guide creditors in initiating insolvency proceedings, filing claims, participating in the Committee of Creditors, and evaluating resolution plans.
Yes. Advisory services assist in unsecured debt recovery through civil remedies, insolvency proceedings, negotiated settlements, and risk-based recovery strategies.
Governance and compliance ensure that recovery actions are transparent, ethical, legally defensible, and aligned with regulatory standards and internal policies.
Yes. Advisors evaluate settlement proposals, negotiate terms, and ensure regulatory and internal policy compliance while maximizing recovery value.
By ensuring strict compliance with laws, fair recovery practices, documentation standards, and ethical enforcement, advisors reduce litigation and reputational risks.
