India's largest glossary on NPA, OTS, SARFAESI, DRT & bank auctions

An NPA, or Non-Performing Asset, is a loan or advance where interest or principal has remained overdue for more than 90 days. Indian banks classify such accounts under RBI's prudential norms because they stop generating reliable income for the lender.

A Standard Asset is a loan account where the borrower is paying interest and principal on time, with no overdue beyond 90 days. It carries the lowest provisioning requirement and is treated as a fully performing loan by the bank.

A Substandard Asset is an account that has remained an NPA for up to 12 months. It signals weakness in the borrower's repayment ability and requires higher provisioning — generally 15% on the secured portion and 25% on the unsecured portion.

A Doubtful Asset is a loan that has been an NPA for more than 12 months. Recovery is doubtful, and the bank must provide much higher provisioning — up to 100% on the unsecured portion, depending on how long the account has been doubtful.

A Loss Asset is a loan identified by the bank, auditors, or RBI inspection as uncollectable, where the bank may still hold some security but recovery is negligible. It typically requires 100% provisioning and is usually written off in the books.

SMA-0 (Special Mention Account-0) is the earliest stress flag. A loan is reported as SMA-0 when principal or interest is overdue between 1 and 30 days, even though it is not yet classified as an NPA under RBI norms.

SMA-1 is a Special Mention Account where principal or interest has been overdue for 31 to 60 days. It is the second early-warning stage in RBI's stress framework, prompting banks to engage the borrower for cure before NPA classification at day 90.

SMA-2 is the final pre-NPA stage where principal or interest is overdue between 61 and 90 days. CRILC reporting at SMA-2 is widely visible to other lenders and is often the trigger for joint lender action and recovery discussions.

A Special Mention Account (SMA) is a loan showing early signs of stress but not yet classified as an NPA. RBI uses three sub-categories — SMA-0, SMA-1 and SMA-2 — based on how long principal or interest has been overdue, so banks can act early.

A Restructured Loan is one whose original terms — tenure, interest rate, instalment or repayment schedule — have been formally modified by the bank because the borrower is in genuine financial difficulty. It is governed by RBI's resolution frameworks for stressed accounts.

Loan Restructuring is the formal process by which a bank revises the terms of an existing loan — instalment size, tenure, interest rate or moratorium — to match the borrower's revised cash flow. It is intended for viable borrowers facing temporary stress, not chronic default.

Corporate Debt Restructuring (CDR) was a structured framework for restructuring large corporate debt across multiple lenders. Although the formal CDR mechanism has been replaced by the RBI's June 2019 Prudential Framework, the term is still used for multi-bank corporate workouts in India.

Debt Resolution is the overall process of resolving a stressed or defaulted loan through restructuring, One Time Settlement, sale to an ARC, SARFAESI action or insolvency proceedings. The goal is a final, written outcome between the borrower and the lender.

Debt Recovery is the legal and operational process by which a bank, NBFC or ARC collects amounts due on a defaulted loan. It can include reminders, SARFAESI action, DRT applications, IBC proceedings, sale of security and assignment to an Asset Reconstruction Company.

The Outstanding Balance is the total amount the borrower owes the bank as of a given date — principal, accrued interest, penal interest, charges and recovery costs combined. It is the starting point for any settlement, restructuring or recovery action.

The Overdue Amount is the portion of the loan — interest or principal instalments — that has fallen due but has not been paid by the borrower. Overdue status is tracked in days; beyond 90 days, the account becomes an NPA under RBI norms.

Default is the failure of a borrower to pay interest, principal or any other amount when due under a loan agreement. Default does not always equal NPA classification — but unresolved default beyond 90 days triggers it under RBI's prudential framework.

Loan Default occurs when a borrower fails to repay interest or principal under the loan agreement. The bank may issue a recall notice, accelerate the loan, classify it as NPA after 90 days, initiate SARFAESI action or file before the DRT depending on the size and security.

A Borrower is the person or entity that takes a loan from a bank, NBFC or financial institution and is primarily responsible for repayment as per the loan agreement. The borrower's obligations include EMI payments, security maintenance and providing financial information.

A Co-Borrower is a person who jointly signs the loan agreement with the principal borrower and is equally liable for repayment. Co-borrowers are often spouses or business partners and their assets and credit history can be acted upon if the loan turns NPA.

A Guarantor is a person who agrees, under a contract of guarantee, to pay the bank if the principal borrower defaults. Banks can proceed against the guarantor's assets independently of the borrower, including under SARFAESI where the guarantor has offered security.

A Personal Guarantor is an individual who guarantees the debt of a borrower — usually a company — in their personal capacity. Under the Insolvency and Bankruptcy Code, personal insolvency proceedings can be initiated against personal guarantors to corporate debtors.

A Corporate Guarantor is a company that, by board resolution, guarantees the debt of another entity — typically a group company or subsidiary. The guarantee is enforceable against the guarantor company's assets and is a common structure in group-level lending.

A Wilful Defaulter, as defined by the RBI Master Circular, is a borrower who has the capacity to pay but does not, or who diverts/siphons funds, or disposes of secured assets without lender consent. The tag carries serious legal, credit and reputational consequences.

A Non-Cooperative Borrower, under RBI norms, is one who deliberately fails to respond to the lender's requests, doesn't co-operate in the audit, inspection or recovery process. The tag means stricter provisioning and higher pricing for any future credit attempts.

A Credit Rating is an opinion on the creditworthiness of a borrower or instrument issued by an RBI-accredited rating agency. Ratings range from AAA (highest) to D (default) and influence loan pricing, eligibility and capital relief for the lender.

A CIBIL Score is a 3-digit number between 300 and 900 issued by TransUnion CIBIL that summarises an individual's credit behaviour. A score above 750 is considered strong; settled, written-off or NPA accounts pull the score down sharply and limit future borrowing.

Credit History is the complete record of an individual's or business's borrowing and repayment behaviour — loans taken, EMIs paid, defaults, settlements, write-offs and enquiries — held with credit bureaus such as CIBIL, Experian, Equifax and CRIF High Mark.

A Credit Bureau is a regulated agency that collects credit information from banks and NBFCs and provides credit scores and reports. The four RBI-licensed bureaus in India are TransUnion CIBIL, Experian, Equifax and CRIF High Mark.

A Write-Off is an accounting entry where the bank removes a defaulted loan from its active books once full provisioning is made. It does not extinguish the borrower's liability — the bank can still pursue recovery, but the loan no longer appears as an asset.

A Technical Write-Off is a book-entry where the bank removes a fully provisioned NPA from its principal balance sheet but continues to track it for recovery purposes. The borrower's legal liability and the bank's right to recover remain fully intact.

Recovery is the process by which a lender realises dues from a defaulting borrower — through reminders, settlement, SARFAESI sale, DRT decree, IBC resolution or sale of the loan to an ARC. Recovery may yield part or full repayment depending on security and effort.

A Recovery Agent is a person or agency engaged by a bank or NBFC to follow up on defaulted loans. RBI has prescribed a strict Code of Conduct on hours, communication and conduct; harassment by recovery agents is actionable.

A Recovery Notice is a written communication from the lender demanding payment of the overdue or accelerated loan amount. Depending on the law invoked, it may be a recall notice, a 13(2) SARFAESI demand notice, or a legal notice through counsel.

A Recall Notice is a formal letter from the bank declaring the loan immediately due and payable because the borrower has breached the loan agreement — usually persistent default. It accelerates the entire outstanding balance and is often a precursor to SARFAESI or DRT action.

A Legal Notice is a formal letter from a lawyer on behalf of the lender, demanding payment or compliance from the borrower within a stated period. It is often the precursor to a civil suit, a SARFAESI enforcement, a DRT application, or insolvency proceedings.

IRAC (Income Recognition, Asset Classification and Provisioning) Norms are RBI's master rules under which banks classify loans as Standard, Substandard, Doubtful or Loss and hold appropriate provisions. They define when interest can be booked as income and when an account becomes NPA.

CRILC (Central Repository of Information on Large Credits) is an RBI database to which banks and NBFCs report exposures of ₹5 crore and above, including SMA and NPA status. CRILC reporting drives early visibility of stress across lenders.

NPA Classification is the act of categorising a loan as Standard, Substandard, Doubtful or Loss based on RBI's IRAC norms. Classification depends on how long the account has been an NPA and the security cover, and directly drives provisioning.

NPA Ageing is the number of months a loan has remained classified as an NPA. Ageing drives upgrades in classification — Substandard up to 12 months, Doubtful from 12 to 36 months and beyond — and corresponding increases in provisioning.

NPA Upgradation is the reclassification of an NPA back to Standard once the borrower has cleared all overdues and demonstrated a satisfactory repayment record as prescribed by RBI. Restructured accounts have stricter upgradation rules.

NPA Recovery is the realisation of amounts due on an NPA through settlement, SARFAESI enforcement, DRT decree, IBC resolution or sale to an ARC. Recovery rates depend on security cover, asset quality and the resolution route chosen.

NPA Provisioning is the amount banks must set aside against NPAs as per RBI's IRAC norms — rising sharply from 15% (Substandard secured) to 100% (Loss). Provisioning hits profits but builds the cushion for eventual write-down or settlement.

Gross NPA is the total amount of NPAs on a bank's books before deducting provisions. It is reported in the bank's quarterly results as a percentage of total advances and is the headline indicator of asset-quality stress.

Net NPA is the Gross NPA reduced by the provisions held against it. It represents the net stressed exposure on the bank's books and is a sharper measure of unprovided credit risk than Gross NPA.

Slippage is the migration of an account from Standard to NPA during a reporting period. Banks track slippages quarterly as a leading indicator of stress; high slippage often forces tighter underwriting and more aggressive recovery.

Upgrade is the reclassification of an NPA back to Standard category once dues are cleared and the borrower demonstrates consistent payment behaviour as per RBI norms. Upgrade reverses provisioning and restores normal account operations.

NPA Resolution is the final outcome plan for a non-performing loan — through settlement, restructuring, sale to ARC, SARFAESI enforcement, DRT decree or IBC. It is the bank's chosen path to convert a stressed asset into cash or off-balance-sheet entry.

A Haircut is the discount a lender accepts on the original dues during settlement, restructuring or insolvency resolution. Haircuts are typically expressed as a percentage of total claims and depend on security cover, asset quality and the resolution route.

A Technical Default is a breach of non-payment covenants in a loan agreement — such as failure to submit stock statements, maintain insurance, or comply with financial covenants — even when EMIs are paid. Banks may use it as a trigger for recall or higher pricing.

Turnaround is the strategic process of returning a stressed business to viability — through cost rationalisation, refinancing, asset sales, change of management or restructuring. Turnaround is most effective before the loan turns NPA but is also pursued during CIRP.

Debt Rejig is an informal term for restructuring or rescheduling of debt — typically reshaping the EMI or principal-repayment structure to fit revised cash flows of the borrower, while keeping the loan within the standard or restructured category.

The Ability to Pay Test is the internal assessment by a bank's settlement or sanctioning committee of how much the borrower can realistically pay as a settlement amount — based on income, business cash flows, sale of assets and contributions from family or guarantors.

A Demand Notice under Section 13(2) of the SARFAESI Act is a written notice from a secured creditor to a borrower in default, demanding payment of the full dues within 60 days. If unpaid, the bank can take possession of the secured asset under Section 13(4).

A Possession Notice under Section 13(4) of the SARFAESI Act is issued by the bank after the 60-day demand notice period expires without payment. It states the secured asset has been taken into possession — symbolic at first — and warns the borrower not to deal with it.

A Security Interest is any right, title or interest of any kind created on a property in favour of a secured creditor — mortgage, hypothecation, pledge or charge. SARFAESI 2002 lets banks enforce such security interest without court intervention.

SARFAESI is the short form of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. It lets banks and notified NBFCs enforce security interest on defaulted secured loans without court intervention, subject to the procedure laid down in the Act.

The SARFAESI Act, 2002 empowers secured creditors to recover dues from defaulting borrowers by enforcing security interest without court intervention. It applies to secured loans above ₹1 lakh, allows asset reconstruction by ARCs, and gives borrowers remedies before the DRT.

Section 13(2) of the SARFAESI Act requires the secured creditor to issue a written notice to the borrower demanding payment of the full dues within 60 days. The notice must specify the amount, the secured asset, and the consequence of non-payment under Section 13(4).

Section 13(4) of the SARFAESI Act allows the secured creditor, after the 60-day notice period under 13(2), to take possession of the secured asset, take over the management of the business, appoint a manager, or require third parties owing money to the borrower to pay the bank.

Section 14 of the SARFAESI Act lets a secured creditor approach the Chief Metropolitan Magistrate (CMM) or District Magistrate (DM) for assistance in taking physical possession of a secured asset. The Magistrate is required to pass orders within 60 days, extendable to 90.

The Chief Metropolitan Magistrate (CMM) is the senior judicial magistrate in a metropolitan area who, on a Section 14 application under SARFAESI, can pass orders enabling the bank to take physical possession of a secured asset within its jurisdiction.

A District Magistrate (DM) is the senior administrative officer of a district who can, on a Section 14 application under SARFAESI, pass orders to help a secured creditor take physical possession of a secured asset in non-metropolitan jurisdictions.

Symbolic Possession is the first step taken under Section 13(4) of SARFAESI, where the bank notionally takes possession of the secured asset by affixing a possession notice on the property. The borrower may still be in physical occupation at this stage.

Physical Possession is the actual takeover of the secured asset by the bank, usually with the help of the CMM or DM under Section 14 of SARFAESI. The borrower and occupants must vacate; the bank holds the asset for valuation, marketing and auction.

A Sale Notice is the public notice issued by the secured creditor under SARFAESI announcing the intended sale of a secured asset. It must give 30 clear days to the borrower and the public, set out reserve price, EMD, inspection details and auction terms.

An Auction Notice is the published advertisement giving details of an upcoming bank or ARC auction — property, reserve price, EMD, inspection date, bid increment, mode (e-auction or physical), and terms. Published in newspapers and on bank portals to attract genuine bidders.

An Authorized Officer is the bank or ARC official empowered to take all SARFAESI actions — issuing notices, taking possession, ordering valuation, conducting auction and confirming sale. The Authorized Officer must be of a rank prescribed under the Security Interest Rules.

A Secured Creditor is a bank, financial institution, notified NBFC, or ARC that holds a security interest over the assets of a borrower. Only a secured creditor can invoke SARFAESI; unsecured lenders must use other recovery routes such as civil suits or IBC.

Section 17 of the SARFAESI Act lets a borrower, guarantor or third party challenge measures taken by the secured creditor under Section 13(4) — possession, sale, management — by filing a Securitisation Application before the DRT within 45 days of the action.

Section 17A of the SARFAESI Act applies to Jammu & Kashmir and allows borrowers in J&K to challenge SARFAESI actions before the relevant District Court, since DRTs do not have full jurisdiction in that region.

Section 18 of SARFAESI provides for an appeal against a DRT order in a Section 17 matter to the Debt Recovery Appellate Tribunal (DRAT). The borrower must usually pre-deposit 50% of dues (reducible to 25% at DRAT's discretion) before the appeal can be heard.

Section 31 of SARFAESI exempts certain assets — like agricultural land, security under aircraft and ship mortgages, and security below ₹1 lakh — from the Act's enforcement mechanism. Lenders cannot use SARFAESI against these.

Symbolic Possession is notional, achieved by affixing the possession notice on the property; Physical Possession is actual takeover, requiring CMM/DM assistance under Section 14 when occupants don't vacate. Banks can usually sell at either stage, but bidders prefer physical possession.

A Valuation Report is a written assessment of an asset's market value by a registered valuer. SARFAESI requires a fresh valuation before fixing reserve price for auction; in the event of failed auctions, a fresh valuation may be obtained before re-listing.

The Authorised Officer's powers under SARFAESI include issuing notices under 13(2) and 13(4), taking possession, ordering valuation, conducting auction, accepting the highest bid, issuing the sale certificate and handing over possession to the buyer.

Section 13(3A) of SARFAESI lets a borrower file objections or representations against the 13(2) demand notice within 60 days. The secured creditor must consider and respond to the objections within 15 days, with reasons, before taking action under Section 13(4).

Auction Cancellation is the setting aside or annulment of a SARFAESI auction by the bank or by order of a court/DRT — for instance, on grounds of inadequate notice, irregular procedure, or success of a settlement before sale confirmation.

Section 13(3A) of SARFAESI lets the borrower file written objections or representations within 60 days of receiving the 13(2) notice. The secured creditor is required to consider and reply within 15 days. Skipping this step has been held by courts to vitiate the enforcement.

A Secured Loan is a loan backed by an asset offered as collateral — property, plant, machinery, shares or gold. If the borrower defaults, the lender can sell the security under SARFAESI to recover dues. Secured loans typically carry lower interest rates than unsecured loans.

An Unsecured Loan is a loan extended without any collateral — relying solely on the borrower's creditworthiness, income and credit history. Personal loans and credit-card outstandings are common examples. Recovery is via legal action, not SARFAESI.

Collateral is an asset — property, plant, machinery, shares, gold or fixed deposits — pledged or mortgaged by the borrower to secure a loan. If the borrower defaults, the lender can sell the collateral to recover dues, subject to the security documentation.

A Mortgage is the transfer of an interest in immovable property to secure a loan. Indian law recognises six types — including registered, equitable (deposit of title deeds), English and conditional. Registered and equitable mortgages are most common in bank lending.

Hypothecation is the creation of a charge on movable property — like vehicles, stock and book debts — without transferring possession. The borrower retains possession and use, while the bank can take possession on default. Common in working capital and vehicle loans.

A Pledge is the bailment of movable goods as security for a loan, where the lender takes physical or constructive possession of the goods. Common in gold loans and loans against shares. On default, the pledgee can sell the goods after notice to recover dues.

A Lien is a right of the creditor to retain possession of goods or balances belonging to the debtor until the dues are paid. Banks routinely mark a lien on fixed deposits or shares when granting an overdraft facility against them.

A Charge is a right created on an asset to secure payment of a debt, without transfer of ownership or possession. Charges may be fixed or floating, and on company assets must be registered with the Registrar of Companies under the Companies Act, 2013.

A Floating Charge is a charge on a class of fluctuating assets — like stock-in-trade or book debts — that the borrower can deal with in the ordinary course of business. It crystallises into a fixed charge on a defined event, typically default or winding up.

A Fixed Charge is a charge created on identifiable, specific assets — such as a particular building, machine or piece of land. The borrower cannot dispose of the asset without the lender's consent. It gives the strongest security position to the lender.

The Reserve Bank of India (RBI) is the country's central bank and primary banking regulator. RBI sets rules on lending, NPA classification, provisioning, SARFAESI enforcement, ARC licensing, and resolution frameworks for stressed assets across banks and NBFCs.

An NBFC is a company registered with the RBI that lends, leases, hire-purchases or invests but is not a bank. NBFCs are governed under the RBI Act and master directions, and certain larger NBFCs are notified under SARFAESI for enforcement of secured loans.

A Scheduled Commercial Bank is a bank listed in the Second Schedule of the RBI Act, 1934. Scheduled banks include public sector, private sector, foreign, regional rural and small finance banks, and have full access to RBI's refinancing and clearing systems.

A Cooperative Bank is a bank owned and operated by its members on cooperative principles. They are regulated jointly by RBI and the state Registrar of Cooperative Societies, and many are notified for limited SARFAESI enforcement rights.

A Public Sector Bank is a bank in which the Government of India holds a majority shareholding — for example, SBI, PNB, Bank of Baroda or Canara Bank. PSBs have larger branch networks and follow government-driven priority lending and resolution norms.

A Private Sector Bank is a bank owned by private shareholders — for example, HDFC Bank, ICICI Bank, Axis Bank or Kotak Mahindra Bank. They follow RBI regulations and tend to be more aggressive in pricing, technology and recovery actions.

A Financial Institution is a body engaged in financial activity — banks, NBFCs, ARCs, development finance institutions, housing finance companies and notified bodies under SARFAESI. The term is used widely in SARFAESI, RDB and IBC to define eligible secured creditors.

Consortium Lending is an arrangement where two or more banks jointly finance a borrower under a single set of documents and a common security structure. Each bank's share, pricing and rights are governed by a Joint Documentation and Inter-Creditor Agreement.

A Joint Lenders Forum (JLF) was a mandatory mechanism under earlier RBI frameworks where lenders to a stressed corporate borrower would meet to decide a corrective action plan. The formal JLF has since been replaced by the Inter-Creditor Agreement model under the 2019 framework.

Working Capital is the short-term funding a business needs to finance day-to-day operations — stocks, receivables and operating expenses. Banks fund this through cash credit, overdraft, bill discounting and short-term loans, secured by hypothecation of current assets.

Cash Credit (CC) is a working capital facility allowing the borrower to draw amounts up to a sanctioned limit, against hypothecated stock and receivables. Interest is charged only on the amount drawn, and the borrower must submit periodic stock statements.

A Term Loan is a fixed-amount loan repayable over a fixed tenure — typically 3 to 15 years — with scheduled EMIs of principal and interest. Term loans fund acquisition of assets like property, plant, equipment or vehicles and are usually secured by the asset financed.

A Loan Against Property (LAP) is a secured loan where the borrower mortgages residential or commercial property to raise funds. LAPs typically run 7–15 years, carry lower interest than personal loans, and on default are recoverable under SARFAESI.

A Home Loan is a secured loan to purchase, construct, renovate or extend a residential property. It is mortgaged in favour of the lender, typically runs 15–30 years, and on default is enforceable under SARFAESI like any other secured loan.

A Business Loan is a loan to a proprietorship, firm or company for working capital, expansion or acquisition. It can be secured or unsecured, and the recovery route depends on whether collateral exists — SARFAESI for secured, civil suit or DRT for unsecured large exposures.

An MSME Loan is a loan to a Micro, Small or Medium Enterprise as classified under the MSMED Act, 2006. Many MSME loans benefit from credit guarantees (CGTMSE) and special restructuring frameworks announced by RBI from time to time.

A Corporate Loan is a loan extended to a company or large enterprise — typically secured by hypothecation of current assets, mortgage of immovable property or pledge of shares. Recovery often involves consortium dynamics, DRT or IBC for large amounts.

A Personal Loan is an unsecured loan extended to an individual for any personal use. It is recovered by reminders, recall, civil suit or arbitration; SARFAESI does not apply since there is no security interest. Settlements are common and reportable to bureaus.

A Vehicle Loan is a loan to purchase a motor vehicle, where the vehicle itself is hypothecated to the lender. On default, the lender can repossess the vehicle under the hypothecation agreement (subject to RBI fair-practices code) and sell it to recover dues.

An Education Loan finances higher studies in India or abroad. Smaller loans are typically unsecured with a parent as co-borrower; larger loans require collateral. Government schemes provide credit guarantees and interest subsidies for eligible students.

A Gold Loan is a short-term loan secured by pledge of gold ornaments or coins, with the lender taking custody. On default, the lender can auction the pledged gold after notice, recovering dues and returning surplus, if any, to the borrower.

Credit Card Debt is unsecured revolving debt on a credit card. Default attracts high interest, late fees, recall, civil action or arbitration. Settlements are common and reported to bureaus; SARFAESI does not apply as there is no security interest.

An EMI, or Equated Monthly Instalment, is the fixed monthly payment a borrower makes towards principal and interest of a loan. EMIs are calculated based on loan amount, interest rate and tenure; missed EMIs lead to SMA tagging and eventual NPA classification.

Interest is the cost the borrower pays to the lender for using the loan, expressed as a percentage of the principal. It can be charged on a reducing or flat basis, fixed or floating, and is regulated by the RBI's marginal cost of funds-based lending rate (MCLR) and external benchmark norms.

Penal Interest is additional interest charged by the lender for late payment, breach of covenants or non-submission of stock statements. RBI now requires that penal charges be levied as 'penal charges' (not capitalised as interest) and disclosed transparently.

A Moratorium is a period during which the borrower is not required to pay EMIs or principal — only interest may accrue or be capitalised. Banks grant moratoriums during construction phases, RBI relief schemes (e.g., COVID-19) or as part of restructuring packages.

A Restructuring Package is the formal set of revised terms — tenor, EMI, rate, moratorium, security — that a bank sanctions for a stressed borrower under RBI's resolution framework. It is documented through a restructuring sanction letter and supplemental security documents.

Rescheduling is the act of revising the repayment schedule of a loan — typically extending the tenure or revising the instalment amount — without other material changes. It is often the simplest form of restructuring for accounts under temporary stress.

Provisioning is the amount banks must set aside against potentially bad loans, as per RBI's IRAC norms. Provisioning rises sharply as an account moves from Standard to Substandard, Doubtful and Loss, reducing the bank's reported profits and capital.

Provision Coverage Ratio (PCR) is the ratio of total provisions held against an NPA portfolio to the gross NPAs. A higher PCR shows the bank is well-cushioned against losses on its NPAs and is a key metric tracked by RBI and rating agencies.

Capital Adequacy is the measure of a bank's capital against its risk-weighted assets, expressed as the Capital Adequacy Ratio (CAR). RBI prescribes minimum CAR under Basel III norms; banks below the threshold face prompt corrective action.

Basel Norms are the international banking supervision standards issued by the Basel Committee on Banking Supervision, covering capital adequacy, leverage, liquidity and risk management. India has adopted Basel III with RBI-specific calibrations.

A Sanction Letter is the bank's formal written approval of a credit facility or settlement proposal. It lists the amount, tenure, rate, security, conditions, validity and disbursement terms; acceptance by the borrower turns it into a binding offer.

A Government-Owned (or Public Sector) Bank is one in which the Government of India holds a majority of the equity. PSBs lead in priority-sector lending and large-ticket corporate finance, and account for most of India's stressed-asset stock.

A Small Finance Bank is a category of differentiated bank licensed by RBI to extend basic banking and lending to underserved segments — particularly small businesses, micro and small industries, and unorganised sector entities.

A Payments Bank is an RBI-licensed differentiated bank that can accept deposits up to ₹2 lakh, issue debit cards and facilitate remittances, but cannot lend or issue credit cards. Payments banks do not generate NPAs but support digital payments.

A Regional Rural Bank (RRB) is a scheduled commercial bank set up under the RRB Act, 1976, to extend banking and credit services to rural areas. RRBs are sponsored by larger public-sector banks and follow priority sector and agri-credit norms.

A Foreign Bank is a bank incorporated outside India operating in India through branches or wholly-owned subsidiaries, regulated by RBI. They follow Indian banking laws, including IRAC norms, SARFAESI and DRT, for stressed-asset recovery.

A Housing Finance Company (HFC) is a specialised NBFC regulated by RBI (post-2019) that primarily finances purchase, construction and renovation of residential housing. Many HFCs are notified under SARFAESI for enforcement of mortgage-backed loans.

A Development Finance Institution (DFI) is a specialised lender focused on long-term, large-ticket financing for infrastructure and industrial projects. NABFID is India's newest DFI; IFCI, IIFCL and SIDBI are existing examples.

Priority Sector Lending (PSL) refers to RBI-mandated lending to specified sectors — agriculture, MSMEs, education, housing, renewable energy, weaker sections — by all scheduled commercial banks, with sub-targets within an overall 40% of net bank credit.

CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) is a Government scheme that provides credit guarantee to banks and NBFCs on collateral-free loans to MSEs up to defined limits, reducing lender risk and improving credit access.

ECGC Limited (formerly Export Credit Guarantee Corporation) provides credit insurance to exporters and banks against export-related payment risks. Many export-finance loans rely on ECGC cover for risk mitigation and capital relief.

Priority Sector Lending Certificates (PSLCs) are tradable certificates allowing banks that have over-achieved PSL targets to sell excess to others. They are traded on the RBI's e-Kuber platform and help market-clear PSL obligations.

MCLR (Marginal Cost of Funds-based Lending Rate) is the minimum interest rate at which a bank can lend, prescribed by RBI in 2016 to improve monetary policy transmission. Many older retail and corporate loans are still linked to MCLR.

External Benchmark Lending Rate is the floating rate for retail and MSME loans linked to an external benchmark such as the RBI repo rate, since October 2019. It is intended to make rate transmission to borrowers faster and more transparent.

Base Rate was the older interest-rate benchmark for bank loans introduced by RBI in 2010 and superseded by MCLR in 2016 and the external benchmark regime in 2019. Some legacy loans remain pegged to Base Rate.

Loan Foreclosure is voluntary closure of a loan by the borrower by repaying the entire outstanding before the original schedule. Charges may apply, especially on fixed-rate loans; floating-rate retail loans cannot be charged foreclosure fees as per RBI norms.

Loan Recall is the bank's act of declaring the entire outstanding immediately due and payable on default or breach of loan covenants. A recall accelerates the EMI loan into a single lump-sum demand and is often a precursor to SARFAESI or DRT action.

An Acceleration Clause is a standard provision in loan agreements that allows the lender, on borrower default or covenant breach, to declare the entire outstanding immediately due and payable, regardless of the original repayment schedule.

Cross Default is a clause in a loan agreement under which a default by the borrower on any other debt — to the same or different lender, above a defined threshold — is treated as a default under this loan as well, triggering acceleration and other remedies.

Loan Covenants are conditions in a loan agreement that the borrower must comply with during the life of the loan — financial covenants (like debt-service coverage ratio), affirmative covenants (e.g., submit financials) and negative covenants (e.g., no additional debt without consent).

DSCR (Debt-Service Coverage Ratio) measures a borrower's ability to service debt — operating cash flows divided by debt-service obligations (interest + principal). Lenders typically prescribe a minimum DSCR of 1.25x to 1.5x and monitor it as a covenant.

LTV (Loan-to-Value) is the ratio of the loan amount to the market value of the security. RBI prescribes caps — e.g., 75–90% for home loans depending on size — and breaches require higher provisioning. LTV directly drives recovery comfort.

An Appeal is a legal proceeding filed before a higher court or tribunal challenging an order of a lower forum. In DRT matters, appeals lie before the DRAT; in IBC matters, before NCLAT; in writ matters, before the High Court or Supreme Court.

An Interim Order is a temporary order passed by a court or tribunal pending final decision in a matter. In SARFAESI and DRT proceedings, interim orders may restrain auction, direct status quo on possession, or impose conditions on payment.

A Stay Order is an order from a court or tribunal that halts specified proceedings or actions — for instance, stopping an auction, halting a recovery certificate or suspending a sale confirmation — until further hearing or final decision in the matter.

Execution Proceedings are the post-decree steps before a court, tribunal or Recovery Officer to enforce a money decree — through attachment, garnishee, sale, and arrest in limited civil matters. In DRT matters they are governed by Schedule II of the Income Tax Act.

A Tribunal is a specialised quasi-judicial body that decides specific categories of disputes — for example, DRT for bank recovery, NCLT for company and insolvency matters, ITAT for income tax. Tribunals follow simpler procedures than civil courts.

The Limitation Act, 1963, prescribes the time within which a suit, appeal or application can be filed in court. For most money recovery suits the period is 3 years from the date of default; SARFAESI, DRT and IBC actions are also tested against limitation.

Insolvency is the financial state where a person or entity cannot pay its debts as they fall due. India's Insolvency and Bankruptcy Code, 2016, provides time-bound mechanisms for corporate insolvency resolution, individual insolvency and personal guarantor insolvency.

The Insolvency and Bankruptcy Code, 2016 (IBC) is India's unified insolvency law. It provides a time-bound process for resolving corporate insolvency, individual insolvency and personal guarantor insolvency through the NCLT and DRT respectively, under the supervision of insolvency professionals.

The National Company Law Tribunal (NCLT) is the adjudicating authority for corporate insolvency under IBC, and for matters under the Companies Act, 2013. NCLT admits insolvency petitions, approves resolution plans, and orders liquidation where resolution fails.

The National Company Law Appellate Tribunal (NCLAT) hears appeals against orders of the NCLT and the CCI. In IBC matters, an appeal lies to NCLAT within 30 days of the NCLT order, and from NCLAT to the Supreme Court on questions of law.

An Insolvency Professional (IP) is a regulated professional registered with IBBI who manages insolvency, liquidation and bankruptcy proceedings. IPs act as Interim Resolution Professional, Resolution Professional or Liquidator depending on the stage and process.

A Resolution Professional (RP) is an Insolvency Professional confirmed by the Committee of Creditors to conduct the Corporate Insolvency Resolution Process. The RP runs the company as a going concern, invites resolution plans and presents the approved plan to NCLT.

Liquidation is the process by which a company's assets are sold and the proceeds distributed among creditors under a fixed priority. Under IBC, liquidation is ordered by NCLT when no resolution plan is approved during CIRP or when CoC opts for it.

A Resolution Plan is the binding proposal submitted by a resolution applicant during CIRP, setting out how the corporate debtor's debts will be addressed, what creditors will receive, and how the company will be revived. It must be approved by the CoC and the NCLT.

An Operational Creditor under IBC is a person to whom an operational debt is owed — typically trade payables, employees and statutory dues — as opposed to financial creditors who lend money. Operational creditors can file Section 9 applications on default above ₹1 crore.

A Financial Creditor under IBC is a person to whom a financial debt is owed — typically banks, NBFCs, bondholders and other lenders of money. Financial creditors sit on the Committee of Creditors and have voting rights on the resolution plan in proportion to their claims.

The Committee of Creditors (CoC) is the body of all financial creditors of a corporate debtor under CIRP, with voting rights in proportion to their claims. The CoC takes key decisions — appointing the RP, evaluating resolution plans and recommending liquidation if needed.

Interim Relief is a temporary protective order — such as a stay or status quo direction — granted by a court or tribunal pending final decision. In recovery and SARFAESI matters, interim relief can stop possession, halt auction, or condition further action on a deposit.

An Affidavit is a written statement of facts sworn to be true by the deponent before a notary, commissioner of oaths or other authorised officer. Affidavits are required for many SARFAESI, DRT and IBC pleadings, and false statements attract perjury under the Penal Code.

Execution is the process of enforcing a decree or recovery certificate — through attachment, sale of property, garnishee orders or arrest in civil matters. In DRT proceedings, execution is handled by the Recovery Officer under Schedule II of the Income Tax Act.

Jurisdiction is the authority of a court or tribunal to hear and decide a matter — based on subject matter, value, and territorial limits. A SARFAESI Section 14 application, for instance, must be filed before the CMM/DM having territorial jurisdiction over the property.

A Decree is the formal expression of the adjudication by a civil court that conclusively determines the rights of the parties. Under the RDB Act, a DRT's order in an Original Application is treated as a decree and enforced by the Recovery Officer.

A Petition is a formal written application to a court or tribunal seeking specific relief — for example, a writ petition before a High Court under Article 226, an insolvency petition under Section 7 of IBC, or a securitisation application before DRT under Section 17 of SARFAESI.

An Order is a formal decision of a court or tribunal on an issue arising in a proceeding — distinct from a decree, which concludes the suit. Interim orders, stay orders and orders on miscellaneous applications are common in SARFAESI and DRT litigation.

A Judgment is the reasoned decision of a court or tribunal stating the grounds for the decree or order passed. Judgments are appealable and form precedents for similar matters; reported judgments of the Supreme Court bind all subordinate courts and tribunals.

A Notice is a formal communication of an intended legal action or fact — for example, a SARFAESI 13(2) notice, a recall notice, a winding-up notice under Section 271 of the Companies Act, or a notice under Section 80 CPC against a government body.

A Review Petition is a request to the same court or tribunal that passed an order, asking it to reconsider on grounds permitted by law — typically an error apparent on the face of the record or discovery of new and material evidence.

A Writ Petition is a constitutional remedy filed before a High Court under Article 226 (or the Supreme Court under Article 32) to enforce fundamental or legal rights against the State or statutory authorities. Borrowers occasionally use writs to challenge SARFAESI actions where DRT remedies are inadequate.

Section 7 of the IBC allows a financial creditor to file an application before the NCLT for initiation of Corporate Insolvency Resolution Process against a corporate debtor on default of ₹1 crore or more. If admitted, a moratorium under Section 14 is imposed.

Section 9 of the IBC allows an operational creditor — suppliers, employees, statutory authorities — to file an application before the NCLT for initiation of CIRP, after serving a Section 8 demand notice and not receiving payment or a notice of dispute within 10 days.

Section 10 of the IBC lets a corporate debtor itself file for initiation of CIRP, admitting inability to pay its debts. This route — once popular — is used cautiously today, especially after the Section 10A pandemic-era restrictions.

Section 14 of the IBC imposes a moratorium from the date of admission of CIRP, barring fresh suits, recovery actions, SARFAESI enforcement, transfer of assets and termination of essential supplies. The moratorium continues until the resolution plan is approved or liquidation is ordered.

CIRP, or Corporate Insolvency Resolution Process, is the time-bound IBC procedure to resolve insolvency of a corporate debtor — typically within 180 days, extendable to 330. The Resolution Professional manages the company and invites resolution plans for CoC approval.

An Information Utility (IU) is an IBBI-registered repository of financial information — debts, defaults, securities — relied upon in IBC proceedings. National E-Governance Services Limited (NeSL) is India's first registered IU.

The Insolvency and Bankruptcy Board of India (IBBI) is the statutory regulator under IBC, overseeing insolvency professionals, IPAs, IUs and the insolvency profession in India. It issues regulations on CIRP, liquidation and personal insolvency.

An Inter-Creditor Agreement (ICA) under the RBI's 2019 framework is a binding agreement among lenders to a stressed borrower that lays down the resolution decision-making — majority threshold, dissenting lender treatment, payment waterfall and timelines for implementation.

Super-Majority Vote is the threshold required to approve key decisions in CIRP (66% of CoC for resolution plans, withdrawal etc.) and under ICA-based restructurings (75% by value of lenders). It is designed to bind dissenting lenders to a credible plan.