What is Haircut vs Recovery?
Haircut is the percentage the lender writes down; Recovery is the percentage realised. The two add up to 100% — if the bank takes a 55% haircut, it recovers 45%. Both perspectives are used in OTS, ARC and IBC outcomes.
| Meaning | Haircut is the percentage the lender writes down; Recovery is the percentage realised. The two add up to 100% — if the bank takes a 55% haircut, it recovers 45%. Both perspectives are used in OTS, ARC and IBC outcomes. |
|---|---|
| Category | Settlement & Recovery |
| Related Laws | RBI master directions, SARFAESI Act 2002, RDB Act 1993, IBC 2016 (as applicable). |
| Who Uses It | Banks, ARCs, IPs, advisors |
| Why It Matters | Two ways of looking at the same outcome. |
Haircut vs Recovery explained in plain English
A practitioner's view written for borrowers and advisors — not a textbook definition.
Haircut is the percentage the lender writes down; Recovery is the percentage realised. The two add up to 100% — if the bank takes a 55% haircut, it recovers 45%. Both perspectives are used in OTS, ARC and IBC outcomes.
In practice, Haircut vs Recovery is used most often by banks, arcs, ips, advisors. Each of them sees the term from a slightly different angle: borrowers care about protection and outcomes, lenders care about classification and recovery, regulators care about consistency and disclosure.
Haircut vs Recovery is shaped by RBI master directions and India's recovery laws — primarily the SARFAESI Act 2002, the RDB Act 1993 and the IBC 2016 — and case-specific application matters far more than textbook reading.
Why does it matter? Two ways of looking at the same outcome. For a stressed borrower, getting this concept right early often saves several months of penal interest, legal cost and credit-score damage.
A real example: ₹100 crore claim resolved at ₹40 crore — 60% haircut, 40% recovery. The mechanics may look complex, but the underlying logic — the bank wants closure, the borrower wants a fair outcome — is straightforward once the right framework is in place.
If you are facing a situation involving Haircut vs Recovery, the safest first step is a structured case review with a senior ex-banker who has handled comparable matters across banks and ARCs in India.
Where you'll encounter Haircut vs Recovery
Whenever a loan moves from "Standard" to "stressed", Haircut vs Recovery is one of the words that starts appearing in notices, bank emails and lawyers' opinions.
Sanctioning committees, recovery teams and risk officers use Haircut vs Recovery to classify accounts, decide provisioning and approve resolution paths.
Haircut vs Recovery appears in pleadings, securitisation applications, OAs, Section 7/9 petitions and SARFAESI writs as part of the dispute record.
When stressed loans are sold to ARCs or special-situations investors, Haircut vs Recovery is used in term sheets, assignment agreements and due-diligence reports.