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Banking, SARFAESI and DRT
Notes on Indian law filed under Banking, SARFAESI and DRT. The practice itself is described on its own page.
A bank guarantee is paid on a compliant demand, and a court stops payment only for a clear case of fraud, irretrievable injustice or special equities
An unconditional bank guarantee is a contract between the issuing bank and the beneficiary, separate from the contract it secures, so a demand that follows its terms obliges the bank to pay without weighing the dispute behind it.
A borrower has 45 days to challenge a SARFAESI measure before the Debts Recovery Tribunal, and an appeal needs a deposit of at least 25 per cent of the debt
A borrower, guarantor or mortgagor who wants to contest a measure taken under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) has 45 days from the measure to apply to the Debts Recovery Tribunal (DRT) under section 17, and any appeal to the Debts Recovery Appellate Tribunal (DRAT) under section 18 is not entertained until the borrower deposits 50 per cent of the debt, a sum that can be reduced to 25 per cent but never waived.
The SARFAESI clock in 2026: what each stage of enforcement costs while it runs
On an illustrative INR 25 crore non-performing exposure, a month of drift anywhere in the SARFAESI sequence costs about INR 38 lakh, roughly 1.5 per cent of the outstanding, and most of it is destroyed rather than transferred.
Half the new insolvency law is in force, and the half everyone talked about is not
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 received assent on 6 April 2026, and most of it commenced on 26 May 2026.
A commercial bank can classify a wilful defaulter only through two committees, a 21 day notice and a 15 day representation, and a compromise lifts the label only when it is paid in full
Under the Reserve Bank of India (Commercial Banks, Treatment of Wilful Defaulters and Large Defaulters) Directions, 2025, a commercial bank can label a borrower a wilful defaulter only through two committees and two written windows, 21 days for the borrower's reply to a show cause notice and 15 days for a representation to the review committee, and where the account was screened as a wilful default case at the outset, the whole process has to finish within six months of the loan becoming a non-performing asset (NPA).
Digital lending is now one instrument, and a default loss guarantee cannot exceed five per cent of what the portfolio disbursed
The Reserve Bank of India (Digital Lending) Directions, 2025 took three circulars written over five years and replaced them with one, and in doing so moved the default loss guarantee out of a standalone 2023 circular and into a chapter of the regime it always belonged to.
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