What is Security Receipt (SR)?
A Security Receipt (SR) is a tradable security issued by an ARC's trust to qualified institutional buyers as consideration for acquiring NPAs from banks. SRs entitle holders to a proportionate share of recoveries from the underlying loan, net of ARC's management fees.
| Meaning | A Security Receipt (SR) is a tradable security issued by an ARC's trust to qualified institutional buyers as consideration for acquiring NPAs from banks. SRs entitle holders to a proportionate share of recoveries from the underlying loan, net of ARC's management fees. |
|---|---|
| Category | ARC |
| Related Laws | SARFAESI 2002; RBI Master Direction on ARCs |
| Who Uses It | Banks, ARCs, QIBs |
| Why It Matters | Lets banks defer recognition of recovery until cash flows. |
Security Receipt (SR) explained in plain English
A practitioner's view written for borrowers and advisors — not a textbook definition.
A Security Receipt (SR) is a tradable security issued by an ARC's trust to qualified institutional buyers as consideration for acquiring NPAs from banks. SRs entitle holders to a proportionate share of recoveries from the underlying loan, net of ARC's management fees.
In practice, Security Receipt (SR) is used most often by banks, arcs, qibs. 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.
The legal anchor for Security Receipt (SR) is SARFAESI 2002; RBI Master Direction on ARCs. RBI master directions, the SARFAESI Act 2002, the RDB Act 1993 and the IBC 2016 commonly interplay, depending on the loan size, security and stage of stress.
Why does it matter? Lets banks defer recognition of recovery until cash flows. 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: Bank receives 85% of the consideration in SRs and 15% in cash. 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 Security Receipt (SR), 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 Security Receipt (SR)
Whenever a loan moves from "Standard" to "stressed", Security Receipt (SR) is one of the words that starts appearing in notices, bank emails and lawyers' opinions.
Sanctioning committees, recovery teams and risk officers use Security Receipt (SR) to classify accounts, decide provisioning and approve resolution paths.
Security Receipt (SR) 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, Security Receipt (SR) is used in term sheets, assignment agreements and due-diligence reports.