Credit Curators FAQ | NPA, SARFAESI & Funding Answers

Frequently Asked Questions

A 13(2) notice is a formal demand issued by a secured lender to a borrower to clear outstanding dues within 60 days. Failure to comply allows the lender to enforce security interests without court intervention, which can be mitigated through expert advisory and incubation.

If dues aren’t cleared post 13(2) notice, Section 13(4) empowers the lender to seize, sell, lease, or manage the secured asset to recover dues. Borrowers can explore distressed account funding to satisfy bank demands and halt asset sales.

IBC is India’s unified law for resolving corporate and personal insolvency. It enables creditors to recover dues through a time-bound process, ensuring faster turnaround of stressed assets with strategic special situation funding.

NPAs are loans where interest or principal payments are overdue for 90+ days. They reflect borrower default and are key indicators of asset quality for banks, often requiring distressed account funding to settle outstanding debt.

ARCs buy distressed loans from banks at a discount and work to recover or reconstruct value. They help clean up lenders’ balance sheets and revive stressed assets in collaboration with sell side advisory mandates.

Borrowers can appeal to Debt Recovery Tribunals (DRTs) within 45 days of lender action under Section 17 of the SARFAESI Act, challenging wrongful possession or recovery measures while setting up a debt restructuring plan.

A DRT is a specialized tribunal that hears cases related to the recovery of debts by banks and financial institutions, offering quicker resolution than regular courts.

A strong credit rating lowers borrowing costs and improves access to capital. Poor ratings trigger higher interest rates, tougher terms, and limited credit opportunities, requiring specialized stressed account funding.

Properties under SARFAESI enforcement may be auctioned without clear possession. Buyers should engage buy side advisory to check for litigation risks and lender titles before purchase.

CDR is a voluntary process where lenders and borrowers negotiate new loan terms — like extended tenures or lower interest — through advisory and incubation to help stressed companies regain financial health.

OTS is an agreement where a borrower pays a negotiated lump sum to settle a loan, often at a discount, helping both borrower and lender close the account cleanly via advisory support.

An SMA is an early warning classification for loans showing signs of stress before becoming NPAs, helping banks monitor and act proactively.

ESI allows lenders to repossess and sell secured assets without court intervention under SARFAESI, after proper notices and timelines are observed.

A Resolution Plan is a proposal submitted by investors to revive a stressed company by restructuring its debt, infusing capital via special situation funding, or operational turnaround.

If no viable resolution plan emerges, the company’s assets are sold to repay creditors through a court-monitored liquidation process under IBC.

Financial creditors are lenders (banks, NBFCs) providing finance, while operational creditors are suppliers of goods/services. Both have different rights under IBC proceedings.

An IRP manages the company during insolvency proceedings, protecting assets, collecting claims, and inviting resolution plans.

These are transactions aimed at defrauding creditors or favoring certain parties before insolvency. The IBC allows them to be reversed by courts.

After Section 13(4) action, lenders auction the asset via public notices. Buyers using buy side advisory must verify titles and clear dues before bidding.

These are funds, companies, or ARCs that specialize in buying and turning around distressed loans, aiming for high returns through restructuring or recovery.

A legal claim or charge on collateral offered to secure a loan. It allows lenders to enforce claims on default without lengthy litigation.

Hypothecation is a charge on movable assets without transfer of possession (e.g., vehicles), while a mortgage is a charge on immovable property like land or buildings.

If a borrower defaults, personal guarantors can be directly pursued for repayment under SARFAESI or IBC, exposing their personal assets.

Banks classify loans as Standard, SMA, Substandard, Doubtful, or Loss based on overdue status and asset quality.

Credit appraisal is the lender’s evaluation of a borrower's financials, business viability, and risk before sanctioning a loan.

Successful bidders can secure title to the auctioned property but must ensure due diligence, as possession risks or legal claims may exist.

Pre-pack is a faster insolvency mechanism where a resolution plan is negotiated with creditors before formal IBC proceedings, saving time and value.

A DRT issues an RC after adjudicating a bank's claim, which allows the bank to enforce recovery through court-appointed officers.

RBI mandates fair practices, proper notices, and non-coercive methods for loan recoveries, protecting borrower rights while allowing recovery.

Using the same collateral to secure multiple loans. It increases lender security but complicates asset sales in defaults.

Cross-border insolvency deals with debt resolution involving multiple countries. India follows the UNCITRAL Model Law framework in a limited form under IBC.

A haircut is the portion of debt a creditor agrees to write off during settlement, accepting a reduced repayment to close recovery faster.

A TRA is a monitored account where a borrower's revenues are deposited and controlled by lenders to ensure loan repayment before other expenses.

A credit event is a breach (like payment default or covenant violation) triggering lender rights to demand repayment, renegotiate terms, or enforce securities.

These are suspicious transactions that unfairly benefit one party at the cost of others, reversible by insolvency courts to protect creditors.

Distressed M&A involves acquiring assets or companies undergoing insolvency, often at discounted values, requiring fast negotiation through buy side advisory or sell side advisory teams.

The CoC, composed of financial creditors, makes key decisions in insolvency, including approving resolution plans, liquidation, or restructuring.

PPIRP allows debtors and creditors to agree on a resolution plan before formal insolvency proceedings, reducing time, costs, and asset value erosion.

Subordination makes certain debts lower in priority for repayment compared to senior debt, especially critical during insolvency or liquidation scenarios.

An Interim RP is appointed to take charge initially; after CoC confirmation, the same person (or a new one) continues as full Resolution Professional.

Group insolvency refers to simultaneous insolvency proceedings for multiple companies within a group, optimizing resolution across interlinked entities.

Under Swiss Challenge, a bid for a stressed asset is published, inviting better competing offers to ensure transparency and maximize value.

An IM is a confidential document prepared by the RP detailing a company's financials, liabilities, and assets to help investors assess resolution opportunities.

It is the hierarchy of payment distribution during liquidation: insolvency costs, secured creditors, unsecured creditors, employees, and lastly, shareholders.

Contingent liabilities (like guarantees) are admitted into claims after careful assessment of likelihood and quantum, affecting final recoveries.

Avoidance actions are suits filed to reverse fraudulent, preferential, or undervalued transactions, preserving asset value for creditors.

An anchor investor leads investment in stressed deals, bringing credibility and often attracting co-investors by committing early.

Credit enhancement includes measures like guarantees, over-collateralization, or structured payment mechanisms to make distressed assets more attractive to investors.

Dissenting creditors must be paid at least liquidation value under the resolution plan even if they oppose the plan, protecting minority rights.

In reverse CIRP, resolution focuses on completing projects (especially real estate) without replacing management, protecting stakeholders' interests.

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Welcome To Credit Curators

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Frequently Asked Questions

What is Notice under Section 13(2) of the SARFAESI Act?

What Happens After Notice under Section 13(4) of the SARFAESI Act?

What is the Insolvency and Bankruptcy Code (IBC)?

What are Non-Performing Assets (NPAs)?

What is an Asset Reconstruction Company (ARC)?

What Legal Remedies Exist for Borrowers under SARFAESI?

What is a Debt Recovery Tribunal (DRT)?

How Do Credit Ratings Affect Borrowers?

How Does the SARFAESI Act Impact Real Estate Buyers?

What is Corporate Debt Restructuring (CDR)?

What is a One-Time Settlement (OTS)?

What is a Special Mention Account (SMA)?

What is an Enforcement of Security Interest (ESI) Action?

What is a Resolution Plan under IBC?

What is Liquidation under IBC?

What is Financial vs Operational Creditor?

What is the Role of an Interim Resolution Professional (IRP)?

What are Fraudulent and Preferential Transactions?

How Does Property Auction Work Under SARFAESI?

What is a Stressed Asset Investor?

What is a Security Interest?

What is a Hypothecation vs Mortgage?

What is a Personal Guarantor's Liability?

How Does a Bank Classify Loan Accounts?

What is a Credit Appraisal?

What are the Rights of Buyers in SARFAESI Auctions?

What is Pre-Pack Insolvency?

What is a Recovery Certificate (RC)?

What are the RBI Guidelines on Loan Recovery?

What is Cross-Collateralization?

What is Cross-Border Insolvency?

What is a Haircut in Debt Resolution?

What is a Trust and Retention Account (TRA)?

What is a Credit Event under Loan Covenants?

What are Preferential, Undervalued, and Fraudulent Transactions under IBC?

What is Distressed M&A?

What is a Committee of Creditors (CoC)?

What is a Pre-Packaged Insolvency Resolution Process (PPIRP)?

What is Subordination of Debt?

How is a Resolution Professional (RP) Different from an Interim RP?

What is Group Insolvency?

What is Swiss Challenge Method in Stressed Asset Sales?

What is an Information Memorandum (IM) in Insolvency?

What is a Liquidation Waterfall under IBC?

How Are Contingent Claims Treated in Insolvency?

What is Avoidance Litigation under IBC?

What is an Anchor Investor in Stressed Asset Acquisition?

What is Credit Enhancement in Distressed Deals?

How Are Dissenting Financial Creditors Treated under IBC?

What is Reverse CIRP (Corporate Insolvency Resolution Process)?

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