ENTREPRENEURS DEBT RECOVERY MANAGEMENT

2. Entrepreneurship
Ecosystem and
Opportunities for
Start-Ups
28Th March 2023.

3. Coverage:
 Startups
 Classification of debt
 Debt recovery/resolution laws
 IBC 2016

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5. Creativity-IPR-Intangible
Assets

6. DEBT AND DEFAULT

7. ‘Debt’
 Debt is an amount of money borrowed by one party from
another.
 Debt is used by many corporations and individuals as a
method of making large purchases that they could not
afford under normal circumstances.
 A debt arrangement gives the borrowing party permission
to borrow money under the condition that is to be paid
back at a later date, usually with interest.

8. •Improper selection of an entrepreneur
•Deficient analysis of project viability
•Inadequacy of collateral security/Equitable Mortgage
against loan
•Unrealistic Terms and Schedule of Repayment
•Lack of Follow up Measures
•Default due natural calamities
Defaults of loan

9. Types of Loan Defaults
Loan Default
• Means a borrower has not fulfilled the conditions in
repayment of a debt
1) Debt Service Default
2) Technical Default
3) Sovereign Default
4) Strategic Default

10. Defaults Classification
• Defaults are classified into two baskets – Soft and Hard.
• The borrowers are segregated into baskets on the basis of
the time period of default.
• The baskets are usually on the basis number on the basis of
number of days.
• The soft basket is when default is at usually below 90 days.
• The default shifts into hard asked if it is beyond 90 days.
NO PAYMENTS FOR
90 DAYS

11. DEBT RECOVERY MANAGEMENT IN BANKS
• A debt from a loan, credit line or accounts receivable
that is recovered either in whole or in part after it has
been written off or classified as a bad debt

12. Collection
supervisors
had to run
Reports and
Queries to
identify
delinquent
customer
accounts
Download
customer
accounts into
spreadsheets
Manually
segment
customer
accounts
depending on
customer
category
Run separate set of
Reports and Queries
for each customer
segment to prioritize
customer accounts
Collection
specialists
through
paper print-
outs or by
forwarding
spreadsheets
to process
Manually
Segment
Download
Prioritize
Accounts
Distribute
Accounts
Collections
Process

13. DEBT RECOVERY MANAGEMENT
MANAGEMENT
 Recovery
agents
LAWS

14. Engagement of Recovery Agency
• The Bank may utilize the services of recovery agencies for collection of dues and
repossession of securities. Recovery agencies will be appointed as per regulatory
guidelines issued in this regard.
 The name and address of all Recovery Agencies on the Bank’s website for
information.
 Only recovery agencies from the approved panels will be engaged by the Bank.
 Employees of the recovery agencies, after completing the mandatory Debt
Recovery Agent (DRA) training. Will be issued valid ID cards authorizing them to
collect dues from the Bank’s customers.

15. Debt recovery /Resolution laws

16. Recovery /Resolution laws
• Debt Recovery Tribunal Act 1993
• The Securitization And Reconstruction of Financial Assets
And Enforcement of Security Interest Act, 2002
• Civil procedure code1908
• Micro, Small and Medium Enterprises Development Act,
2006
• Insolvency and Bankruptcy code 2016

17. Who can file a case?
Through ?
Fee to file a case with DRT
?

18. INSOLVENCY BANKRUPTCY CODE 2016

19. Any Company incorporated under the Companies
Act, 2013 or under any provisions
Any other Company governed by any Special Act
Any LLP incorporated under the LLP Act, 2008
Any other body, as notified by the Central
Government
Partnership Firms
Individuals

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The objective of the new law is to promote entrepreneurship, availability of
credit, and balance the interests of all stakeholders by consolidating and
amending the laws relating to reorganization and insolvency resolution of
corporate persons, partnership firms and individuals in a time bound manner
IBC proposes a paradigm shift from the existing ‘Debtor in possession’ to a
‘Creditor in control’ regime
IBC aims at consolidating all existing insolvency related laws as well as
amending multiple legislation including the Companies Act.

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24. Government dues take a backseat
Fragmented status gets clubbed into one
Scope of professionals like CS / CA / CWAs has
been enhanced
Individual bankruptcy gets included
Financial creditors are voting at par as per their credit
value
Application under the Code can be made by financial creditor /
operational creditors / debtor himself
But decision making is in the hands of financial creditors
Decentralisation on the part of government
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India currently ranks 136 out of 189 countries in the World Bank's index on the
ease of Resolving Insolvencies.
Ease of DoingBusiness
The Code promises to bring about far-reaching reforms with a thrust on
Creditor Driven Insolvency Resolution.
It aims at early identification of financial failure and Maximizing The
Asset Value Of Insolvent Firms.

27. Adjudicator
27
National Company
Law Tribunal
Debt Recovery
Tribunal
Corporate
Entities
Companies
/LLPs
Non-Corporate
Entities
Individuals and
Partnership Firms

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LIQUIDATION
is the process of
winding up a
corporation or
incorporated
entity.
BANKRUPTCY
is when a person is
declared incapable
of paying their due
and payable bills.

30. Opportunity
• Set back and Relax
• Fresh Start
Threats
• Negative Brand Image
• Disqualifying the
position as Director
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What is the role of
Director/Entrepreneur?

32. To attend the
Committee of
Creditors
Meeting
To take note of
the minutes
To seek
information
within the ambit
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