Debt Finance 2026 Comparisons

India’s debt finance market exhibited notable resilience during the past year, supported by a combination of favourable monetary policy, improved asset quality and sustained domestic demand. According to reports published by EY, credit deployment by scheduled commercial banks grew by approximately 11% year-on-year as of March 2025, with total credit outstanding reaching USD2.02 trillion. This momentum continued, with growth accelerating to 12.2% year-on-year by December 2025, according to data published by the Reserve Bank of India (RBI).

According to reports published by RBI, RBI’s cumulative reduction of 125 basis points in the repo rate over the course of 2025, bringing it down to 5.25% by December 2025, helped ease systemic liquidity and facilitated broader credit transmission across the financial system. Asset quality reportedly continued to improve, with the gross non-performing asset ratio of scheduled commercial banks declining to a “historic low” of 2.15% as at the end of September 2025. In the private credit segment, according to reports published by EY, 2025 recorded USD12.4 billion across 166 transactions, representing a 35% year-on-year growth in value, and outstanding corporate bonds stood at approximately USD642 billion as of March 2025, equivalent to approximately 15% of GDP.

The major market players in the Indian debt finance sector are as follows.

• Public sector banks – there are 12 major public sector banks in India, with State Bank of India being the largest. Public sector banks are commercial banks owned by the Indian government, and have historically dominated the lending space in India. Although private banks are now catching up, public sector banks continue to hold a majority share in total outstanding credit issued. The share of public sector banks in credit growth during the quarter ending 31 December 2026 increased to 54.4%.
• Private sector banks and branches of foreign banks – most of the other commercial banks in India are private sector banks that are not owned by the government, or branches of foreign banks. These banks are licensed to undertake banking activities and also have a significant presence in the market.
• Non-banking financial companies (NBFCs) – NBFCs are companies registered with RBI that undertake permitted financial activities, such as the provision of loans and advances. They are not licensed as banks and are therefore subject to a lesser degree of regulation, although RBI has indicated a change in this policy and has been increasing regulatory compliance applicable to NBFCs.
• Banks and NBFCs are both regulated by RBI, which issues prudential norms and other directions pertaining to their functioning (including their exposure, asset classification and operations). These banks and NBFCs may invest in debt in the form of loans and debt securities, in each case subject to the prudential limits and other directions applicable to them. Banks may further offer non-fund-based facilities such as bank guarantee facilities and letter of credit facilities.

Debt Funds/Foreign Lenders

These include the following.

• Alternative investment funds (AIFs) are funds set up in India and registered with the Securities and Exchange Board of India (SEBI), India’s securities market regulator. These funds pool investments and set up schemes for investing in debt or equity securities.
• Foreign portfolio investors (FPIs) are foreign entities registered with SEBI. They may invest in debt and equity securities, with debt funding being extended in the form of INR-denominated debt securities, and are not eligible to extend loans.
• Foreign lenders may also lend to Indian entities through external commercial borrowings (ECBs) – this route was previously heavily restricted but was substantially liberalised by RBI in February 2026.
• Other investors, such as mutual funds.

According to reports published by EY, while global funds remained dominant in the private credit market over the first half of 2025, domestic funds increasingly focused on mid-market and opportunistic transactions.

The recent confluence of geopolitical and macroeconomic events, armed conflict, sanctions escalation, fuel price volatility and trade protectionism has fundamentally altered the risk environment for participants in the Indian debt finance market. The Russian invasion of Ukraine in February 2022 precipitated capital outflows from emerging markets, significant depreciation pressure on the Indian rupee, and a marked shift in RBI’s monetary stance from dovish to hawkish, with cumulative policy rate increases of 250 basis points between May 2022 and February 2023.

The unprecedented scope of Western sanctions – including asset freezes, the exclusion of major Russian banks from the SWIFT payments system, and restrictions on transactions with the Central Bank of Russia – disrupted cross-border payment flows and also impacted the Indian markets.

The recent impositions of tariffs by the United States on Indian exports, inter alia, triggered foreign portfolio outflows and further rupee depreciation. These outflows resulted in higher borrowing costs and reduced external financing; however, these disruptions were absorbed to a certain extent by strong domestic demand and policy support. With escalating conflicts in the Middle East, lenders are proceeding with caution, although cross-border and domestic deal activity continues to increase steadily. Confidence in India’s private credit market remains strong, with RBI’s liberalisation of the framework applicable to ECBs set to attract a wide variety of new lenders.

The type of debt finance transaction primarily depends on the participants (ie, the lender and the borrower), the purpose of the borrowing and other commercial considerations. Debt financing is raised primarily through the issuance of debt securities, which might be bonds (also referred to as “non-convertible debentures”) or securitised debt instruments and availing loans.

Depending on the purpose of borrowing, the transaction may fall within one of the following categories or may be structured as a bespoke facility tailored to the parties’ specific commercial needs.

Acquisition Finance

This refers to funding specifically availed for the purpose of acquiring or investing in another entity. Traditionally, commercial banks in India were subject to prudential norms that discouraged acquisition financing, resulting in funding being largely undertaken by NBFCs or through INR-denominated non-convertible debentures issued to FPIs, mutual funds and AIFs. However, recent RBI regulations now permit banks to participate in acquisition financing, subject to financing caps, borrower eligibility criteria and other conditions.

Project Finance

This usually involves funding long-term projects such as public infrastructure, energy, real estate, industrial and manufacturing projects. The debt is usually paid back from the cash flow generated by the project. Such financing is usually obtained from domestic banks and financial institutions, but also from foreign lenders through ECBs.

Asset-Based Finance

Asset-based lending is generally less structured and is secured by some collateral. The terms and conditions of asset-based finance depend on the type and value of the assets offered as security. If the asset securing the loan is a highly liquid collateral that can be readily converted into cash on enforcement, then the terms and conditions of the finance may be a bit flexible for the borrower (such as lower interest rates).

Securitisation

Securitisation involves pooling debt assets and repackaging them into interest bearing securities. Under a securitisation transaction, an issuer designs a marketable financial instrument by merging financial assets. Investors who purchase these securities receive the principal and interest payments of the underlying assets. In India, both stressed and standard assets can be securitised, and the securitisation market is regulated by both SEBI and RBI. FPIs and mutual funds are major investors in security receipts issued by securitisation trusts in India.

Structuring debt finance depends on various factors, including the lender.

Loan Facilities

The most common form of debt finance is borrowing from a bank or other financial institution. Broadly, loan facilities can be classified into secured or unsecured loans. Corporate loans are typically secured lending and may include one or more of the following types of facilities.

• Working capital loans – banks and financial institutions extend working capital loans to help businesses meet their working capital needs. These loans include cash credit lines, overdraft facilities and other fund-based and non-fund-based limits.
• Term loans – under a term loan, the borrower receives a lump sum of cash upfront in exchange for specific borrowing terms. Term loans are usually raised for specific business purposes, such as expanding business operations, purchasing assets or launching new projects. Project loans extended for infrastructure projects fall within this category.
• Non-fund-based facilities – banks regularly provide bank guarantees and letters of credit facilities to borrowers to support their businesses. Under these facilities, the borrower may request the issuance of such instruments to its suppliers or contracting counterparties.

Larger loans can often be syndicated; syndication usually occurs when a borrower requires a sum that is too risky for one lender to bear or when the loan quantum is too high for one lender. One of the lenders from the syndication typically acts as a lender representative to administer the process. Unlike bonds, syndicated loans are not tradable by nature, although they can be transferred in a secondary market. However, the structure of syndicated loans is more geared to lenders who intend to remain locked into the deal and take a longer-term view, rather than bondholders who can offload their investment in the market whenever they wish.

Another difference, which stems largely from their tradability and from the identity of the investors, is that the bonds are rated and that, apart from high-yield issues, they are issued by investment-grade companies, whereas loans can be lent to any company, although the terms on which they will be made depend on the creditworthiness of the borrower. Lenders’ rights in a syndicated loan can be several, and each lender can have the right to enforce the debt owed to it individually unlike debt securities, where the subscribers to the debt securities are usually not able to severally enforce the security and all actions are taken via a stated majority and through the trustee.

The advantages of debt syndication include the following.

• As the risk is distributed between the lenders, the interest rate on the loan facility can be competitive.
• Usually, the syndicated debt is provided under one agreement instead of executing separate agreements with each lender, which saves time and efforts, especially during execution of the transaction documents.
• Borrowers enjoy more flexibility in structure and pricing.

The disadvantages of debt syndication include the following.

• Negotiation time is usually longer, as multiple lenders have their exposures at stake.
• There can be difficulty in co-ordination with multiple lenders for the borrower as well as lenders inter se.
• There can also be difficulty in and delays in agreeing to waiver(s), extension(s), amendment(s) and/or any other change or restructuring of terms (especially if the syndication is broad-based).

Debt Securities

Other than loans, the issuance of debt securities to avail funds is a popular form of raising debt for Indian corporate borrowers. The most common instrument used for this purpose is a “non-convertible debenture” issued under the (Indian) Companies Act, 2013 (“CA 2013”), which is an INR-denominated bond that may or may not be listed.

A non-convertible debenture (NCD) issuance is structured to have the issuer appoint a debenture trustee to act for the investors. The NCDs are issued to subscribers, and the debenture trustee serves as a trustee to hold the security and other obligations associated with the NCDs for the benefit of the holders thereof. NCDs may be secured or unsecured. Other than retail investors and domestic financial institutions (such as banks, NBFCs, mutual funds, insurance companies and AIFs), investors in debt securities usually include FPIs.

The transaction documentation for debt financing depends on the nature of the finance. The most common forms of transaction documents in a typical loan or NCD issuance are set out below.

Loan Transaction

• Loan agreement – this is a loan/facility agreement.
• Security documents – these include:
1. an agreement to appoint a security trustee or agent if required; and
2. security documents to create security, which varies based on the security package offered for the facility (see 5. Guarantees and Security for further details on the security that may be offered).
• Escrow/account control agreements – these are common in project loans and involve trapping or at least monitoring the borrower’s cash flows. Such an arrangement requires the parties to engage an escrow bank or escrow agent to manage the account into which the escrowed cash is remitted.
• Intercreditor agreement – these are executed if the lending is in the form of syndicated or multiple banking or consortium arrangements to determine the inter se rights between the lenders.

Financing documents for loan transactions where the lenders are Indian parties are typically governed by Indian law. In such cases, there is no industry-accepted format that dictates the terms of the agreement, and the financing documents are often negotiated.

Where the lenders are foreign entities, the parties may opt for loan agreements governed by foreign law (such as English law) that follow the Asia Pacific Loan Market Association (APLMA) or Loan Market Association (LMA) drafts.

Security and guarantee documents in relation to such debt finance are generally governed by the law of the jurisdiction where the assets are located or the jurisdiction where the guarantors are located/incorporated.

NCDs

• Debenture trustee appointment agreement – this agreement is executed regarding the appointment of a debenture trustee and governs the debenture trustee’s rights and obligations vis-à-vis the investors.
• Debenture trust deed – this agreement governs the terms and conditions of a debenture issuance between the debenture trustee and the borrower/issuer.
• Offer documents (private placement offer letters, key information documents and general information documents) – these documents are issued to prospective investors and detail the key terms of the debenture issuance. The format is dictated by whether the NCDs are listed or unlisted.
• Security documents – these create security in favour of the debenture trustee. The security varies based on the security package offered for the facility (see 5. Guarantees and Security for further details on the security that may be offered).
• Escrow/account control agreements – these are common in project loans and involve trapping or at least monitoring the borrower’s cash flows. Such an arrangement requires the parties to engage an escrow bank or escrow agent to manage the account into which the escrowed cash is remitted.

Financing documents for NCD issuances are governed by Indian law. Security and guarantee documents related to such debt finance are generally governed by the law of the jurisdiction where the assets are located or where the guarantors are located/incorporated.

India is an exchange-controlled economy and, as such, structuring any cross-border financing requires an analysis of the applicable exchange control regulations. Cross-border financing can be raised in one of two ways.

• ECBs – such borrowing must comply with specific regulations that outline various parameters, including who is eligible to borrow, who can serve as a lender, the maximum borrowing amount, the minimum average maturity of the loan, interest costs and whether the intended purpose of the loan is permitted. Borrowings can be raised in INR or in any freely convertible foreign currency.
• NCDs issued to FPIs – FPIs can only invest in permitted securities as provided in the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 (“SEBI FPI Regulations”). FPIs are not permitted to extend loans; they may subscribe to NCDs but such subscription is subject to certain conditions. An FPI may invest through the general investment route, which has conditions as to minimum maturity, against concentration, etc, or through the voluntary retention route (VRR), which also has conditions as to the investment amount being retained in India for at least three years but relaxes some of the requirements around instrument level maturity and concentration norms. Pursuant to recent amendments by RBI, separate investment limits applicable to VRR have been merged into the overall category-wise limits prescribed under the general route.

Institutional lenders, such as AIFs, also have various regulations on the nature and scope of investment they are permitted to do in Indian debt, which are typically enforced by RBI and SEBI.

Exchange Control Regulations

India is an exchange-controlled economy, and any cross-border lending by an Indian borrower/lender is governed by the Foreign Exchange Management Act, 1999 (FEMA) and allied rules, regulations and circulars. Indian borrowers must comply with the regulations prescribed by RBI, such as the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 (as recently amended with effect from 16 February 2026) and the Foreign Exchange Management (Debt Instruments) Regulations, 2019. These regulations prescribe the terms on which an Indian resident may raise debt from a non-resident party, as well as the requirements for tenor, interest, concentration, etc (see 4.2 Impact of Types of Investors for further details).

Special Enforcement Options

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”) enables certain secured lenders, such as banks, notified financial institutions and debenture trustees for listed NCDs, to enforce the mortgage without court intervention, provided the charge is registered with the Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI), which is a central online security interest registry, and subject to obtaining consent from secured lenders representing at least 60% in value and other conditions. This benefit is particularly significant in India because a court process for enforcement or any other reason is often time-consuming. The SARFAESI Act is available to Indian banks and notified Indian financial institutions but may also be accessible to other lenders (including FPIs and/or AIFs) who have lent through subscription to listed NCDs.

Registrations and Filings

A host of registrations and execution steps are relevant to debt finance transactions, including the following.

• Stamp duty – any instrument executed in India or received in India after execution must be stamped for the duty payable on such instrument under Indian stamp law. Indian stamp laws vary from state to state and may prescribe a flat duty for some instruments, whereas an ad valorem duty (calculated as a percentage of the transaction value) may be imposed on certain other documents. Certain documents with respect to immovable property must be registered with the Sub-Registrar of Assurances under provisions of Indian stamp law and the Transfer of Property Act, 1908.
• Filing with information utility – parties should register their debt and security with an Information Utility (IU). An IU is a centralised electronic database set up under the Insolvency and Bankruptcy Code, 2016 (IBC), and registered with the Insolvency and Bankruptcy Board of India (IBBI), which collects and authenticates the financial information of debtors and security providers. Registering the debt and security with an IU could prove to be crucial to substantiate proof of claim in the insolvency of the borrower/security provider.
• Registration of security – while all forms of security need to be registered with the Registrar of Companies under CA 2013, there may also be additional registration requirements, such as security on immovable assets needing to be registered with local land authorities, the filing of securities charges with depositories with which they are held, and registrations with CERSAI of some forms of security (see 5.1 Guarantee and Security Packages for further details).

Security for debt financing transactions in India may be provided over:

• immovable properties such as land, or benefits arising out of land; and
• movable properties, which include properties of every description other than immovable properties.

The assets of the borrower or a third party may be provided as security, subject to the conditions mentioned below and under 5.2 Key Considerations for Security and Guarantees.

The typical security and guarantee package in debt financing transactions includes the following.

Mortgage Over Immovable Properties

A mortgage is the transfer of an interest in an immovable property as security for existing or future debt, and is primarily governed by the Transfer of Property Act of 1882 (TPA). The TPA requires any mortgage (other than an equitable mortgage) securing repayment of a debt exceeding INR100 to be created by an instrument (deed/indenture) signed by the mortgagor, attested by two witnesses, and registered with the local sub-registrar of assurances.

The prominent forms of mortgage in the Indian market are as follows.

• English mortgage – an English mortgage represents an absolute transfer of the mortgagor’s interest in the mortgaged property without transfer of possession in favour of the lender/agent. It is created by the parties executing a registrable instrument. In an English mortgage, the mortgagee has the power to sell the mortgaged property without court intervention.
• Equitable mortgage – also known as a mortgage by deposit of title deeds, an equitable mortgage is created by the delivery of title documents over the mortgaged property by the mortgagor (or their authorised representative) to the lender/agent, intending to create security for the repayment of debt. Equitable mortgages may be created only in notified Indian cities. While an equitable mortgage does not require a document for creation, parties generally record the deposit of title deeds by a “Memorandum”, which is executed by the lender/agent, and also by a “Declaration”, which is executed by the mortgagor (or their authorised representative). This form of mortgage may not be enforced without court intervention unless the lenders benefit from the SARFAESI Act.

Hypothecation Over Bank Accounts, Receivables and Other Movable Properties

A hypothecation is a charge over any existing or future movable property without bailment created by a deed of hypothecation between the charger and the lender/agent. It may be a fixed charge or a floating charge, and is commonly used to secure bank accounts, receivables, and plant and machinery.

Pledge Over Shares and Other Securities

A pledge is the bailment of movable property for the repayment of debt or the performance of a promise. Shares and other securities are the most common movable properties secured by way of a pledge. The pledge is created by:

• delivery of the physical security certificates (in case of securities in physical form) together with undated transfer forms pertaining to the security or movable property to the lender/agent; or
• where the securities are held in dematerialised form, by marking a pledge over the securities in favour of the lender/agent in the depository by notice to the depository through the depository participants of pledgor and pledgee.

Corporate and Personal Guarantees

An individual or a corporate body may execute a deed of guarantee to provide a guarantee for the repayment of debt and other obligations of the borrower.

Recent jurisprudence under the (Indian) Insolvency & Bankruptcy Code, 2016, has some observations raising questions as to:

• the nature of guarantee obligations as “financial debt” absent inflow of funds to the guarantor; and
• rights to submit claims (for insolvency resolution) based on uninvoked guarantee obligations.

While the market is largely in agreement that the observations regarding the nature of guarantee obligations as “financial debt” may be fact-specific and so should not be applied broadly, the position as to the second issue above is not yet settled, so some investors include alternate and stronger triggers under relevant guarantee and security documents.

Formalities

Where the security provider is an Indian company, necessary corporate approvals must be procured prior to security creation. These considerations are further discussed under 5.2 Key Considerations for Security and Guarantees.

The charge creation documents will have to be stamped by payment of adequate stamp duty in accordance with the Indian Stamp Act of 1899 (“Stamp Act”) and local laws. In addition, agreements/documents pertaining to security over immovable properties need to be registered with the local land authorities under the (Indian) Registration Act of 1908.

Where the charge creation documents are coupled with a power of attorney (POA) by the security provider in favour of the lender/agent, the POA has to be notarised, and adequate stamp duty has to be paid. If the POA is executed by an Indian company possessing a common seal, the common seal has to be affixed to the POA.

Perfection Requirements

Where the security provider is an Indian company, the charge in favour of the beneficiary has to be recorded by the security provider with the Registrar of Companies within a specified period from creation.

In addition, security created by way of hypothecation and mortgage has to be registered with CERSAI. CERSAI registration enables the lender to enforce its security in a fast-track process under the SARFAESI Act.

Corporate Approvals

Where the security provider/guarantor is an Indian company, CA 2013 requires the company to procure corporate approvals before providing the security/guarantee. Such approvals are in the form of board resolutions; in special circumstances, approval from the shareholders by a special majority of 75% is required, such as where:

• the debt in connection with which the security/guarantee that is sought to be provided exceeds 60% of the company’s paid-up share capital, free reserves and securities premium account or 100% of its free reserves and securities premium account, whichever is more;
• security/guarantee is provided for a loan taken by a borrower in whom any director of the guarantor/security provider is interested, and the loan has been availed for the principal business activities of the borrower; or
• the security or guarantee limits set by the shareholders of the security provider/guarantor will be exceeded by such security or guarantee.

Restrictions on Upstream Security

An Indian company can provide upstream security or guarantees for the indebtedness of its Indian holding company, provided that the provisions of CA 2013 are complied with (especially where the provision of such security or guarantee exceeds prescribed limits or where the directors of the guarantors/security providers are “interested” in the borrower). However, an Indian company cannot create upstream security for financing availed by an offshore holding company, and the same is restricted under FEMA.

Corporate Benefit

Consideration is essential for a valid contract under the Indian Contract Act of 1872. In the case of a contract of guarantee/provision of security, Indian courts have held that the consideration between the lender and the principal debtor may constitute sufficient consideration for the surety/security provider to provide the guarantee/security for a group company. Hence, direct consideration for the guarantor, such as guarantee fees, is not a strict requirement for a valid guarantee, although it is usually levied in the form of a commission by banks in case of bank guarantees.

Financial Assistance

Under CA 2013, public companies are prohibited from providing direct or indirect financial assistance to any person for acquiring their own shares or shares in their holding company. Private companies and companies registered as banking companies in India are not subject to such prohibition.

Agent/Trustee as Beneficiary

Agency and trust concepts are well recognised, accepted and practised in India.

For domestic financing transactions involving a consortium of lenders, it is accepted market practice to create security interest in favour of a security trustee, who holds the security for the benefit of the consortium. There are specialised trustee agencies and companies who provide such services. Facility agents are also commonly appointed, who undertake administrative responsibilities for co-ordination amongst the members of the consortium.

For ECBs, the security interest is traditionally created in favour of a domestic security trustee or agent, particularly in the case of security interest over immovable and movable properties (including shares) in India.

For an Indian company to issue secured NCDs, appointing a trustee to act on behalf of the NCD holders is mandatory. Accordingly, for the issuance of secured NCDs to FPIs, it is standard practice to appoint a debenture trustee and to have all security interest for the NCDs created in favour of the debenture trustee acting for the benefit of the NCD holders.

Intercreditor arrangements via contractual subordination are primarily used in the Indian debt market to document security and cash flow sharing among multiple lenders. Parties generally enter into an intercreditor agreement or a deed of subordination to document their intercreditor arrangement. Apart from the treatment of common security and the waterfall for distribution of enforcement proceeds, intercreditor agreements also govern voting rights and thresholds for taking certain lender actions, such as triggering enforcement action in the event of default.

Intercreditor arrangements are also found in securitisation transactions where the securitisation trust issues different tranches of security receipts/pass-through certificates. Lenders may also opt for structural subordination in specific circumstances, such as in cross-border debt financings by lending to a foreign equity holder for on-lending to the Indian company, which will involve the need for an intercreditor arrangement.

Intercreditor arrangements are also common in debt restructuring transactions. For instance, intercreditor agreements are mandatory in certain scenarios, such as in an RBI-regulated out-of-court restructuring process, as discussed in more detail under 8.1 Rescue and Reorganisation Procedures.

When a company is admitted into insolvency under the IBC, any contractual subordination arrangements between lenders may be disregarded by the resolution professional (who administers the resolution process) or liquidator. The proceeds from the resolution plan will be distributed in the manner determined by the committee of creditors (CoC) – keeping in mind the minimum entitlement and priority in paying out certain debts, such as costs for running the insolvency process, claims of operational creditors (ie, creditors who have disbursed funds in relation to the provision of goods and services) and dissenting financial creditors (ie, creditors who have disbursed funds against consideration for the time value of money and have voted against the resolution plan). This distribution mechanism could override any intercreditor or subordination arrangements between lenders and may or may not consider seniority or security. However, lenders may seek to enforce intercreditor agreements, including turnover provisions, against each other outside the insolvency process.

Lenders/trustees can generally enforce the security/guarantee upon a default of the principal obligations, and subject to other contractual terms and conditions. Where the security provider/guarantor has been admitted into the corporate insolvency resolution process (CIRP) under the IBC, additional restrictions (such as a moratorium on enforcement and litigation) will apply. Furthermore, cross-border security/guarantee enforcement will require compliance with FEMA and relevant RBI directions.

The general process for the enforcement of security is as follows.

• Mortgage: under Indian law, the enforcement of mortgages cannot be submitted to arbitration, but must be decided by the civil court having ordinary original jurisdiction. With an English mortgage, the mortgagor can attempt to sell the mortgaged property without court intervention. This is required to be contractually provided under the mortgage deed.
• Hypothecation: with hypothecation, both ownership and possession remain with the debtor. The creditor has a charge over the property and is given the right to take possession and sell the hypothecated property to recover the related dues. SARFAESI allows secured lenders to enforce without court intervention. However, in practice, this may be difficult, given that possession of the hypothecated property remains with the security provider.
• Pledge: under the Indian Contract Act, the pledgee may enforce the pledge by selling the pledged shares after giving “reasonable notice”, although what constitutes this would depend on the facts of each case. While there are instances of pledge enforcement being challenged based on the sale price, one way to mitigate this risk is to obtain a valuation report from a reputable valuer.
• Guarantee: under Indian law, the liability of the principal debtor and the guarantor is co-extensive. This allows the creditors to initiate enforcement directly against the guarantor without any recourse to the principal debtor. Guarantee can be enforced by way of a suit in the court having jurisdiction or where the instrument provides for arbitration, by instituting arbitration proceedings.

Decrees Passed by Superior Courts From Reciprocating Territories

The Code of Civil Procedure, 1908 (CPC) governs the enforcement and execution of foreign court judgments in India. The CPC provides for a fast-track execution of certain decrees passed by superior courts of countries notified by the government of India as “reciprocating territories”. Reciprocating territories include the UK, Singapore and the UAE. This enforcement avenue applies to decrees for monetary payments, excluding taxes, fines or penalties.

The decree-holder is required to initiate the execution process by filing a certified copy of the foreign decree before the relevant Indian court, along with a certificate from the superior court stating the extent (if any) to which the decree has been satisfied or adjusted. The Indian court shall scrutinise whether the decree may be considered conclusive and shall refuse enforcement where it is satisfied that the decree:

• has not been pronounced by a court of competent jurisdiction;
• on the face of the proceedings, is founded on an incorrect view of international law or a refusal to recognise the law of India in cases where such law is applicable;
• has not been passed on the merits of the case;
• has been obtained by fraud;
• has been obtained under proceedings which are opposed to natural justice; or
• sustains a claim founded on a breach of any law in force in India.

Once the court is satisfied that the decree does not suffer from any of the above issues, it will hold it to be conclusive, and it may be executed as if it were a decree passed by an Indian court.

Other Decrees

For other judgments or decrees passed by foreign courts (not being courts in a reciprocating territory) and an interim injunction or any other interim order passed by a superior court of a reciprocating territory, a fresh civil suit may need to be filed before an Indian court of competent jurisdiction. The foreign judgment or interim order will be submitted as an evidentiary document in the case. A decree issued by the Indian court in this matter (subject to any appeals and their final outcomes) can then be enforced in India.

Foreign Arbitral Awards

In terms of the (Indian) Arbitration and Conciliation Act, 1996 (“Arbitration Act”), any foreign arbitral award can be enforced in India in accordance with Part II of the Arbitration Act if it is made:

• pursuant to an arbitration agreement to which the Convention on the Recognition and Enforcement of Foreign Awards, 1958 (“New York Convention”) applies; and
• in a country notified (by the Indian government) as a reciprocating territory to which the New York Convention applies.

The enforcement proceeding for the foreign arbitral award may be filed before the High Court within whose jurisdiction the subject matter/assets sought to be attached are located. Enforcement may be refused on narrow and limited grounds under the Arbitration Act (which does not include a review of the foreign award on merits). If the court holds the foreign arbitral award to be enforceable, the award will be binding on the parties and can be executed as a decree in India.

Aside from resolution via insolvency proceedings, the following rescue and reorganisation procedures are available in India.

Tribunal-Approved Schemes

Where the debtor/obligor is a company, the lenders or members of the company may file an application to initiate a scheme of compromise and arrangement before the National Company Law Tribunal (NCLT) under CA 2013. On application, the NCLT may direct the convening of a meeting of the lenders and/or company members to decide on the scheme.

RBI Prudential Framework

The RBI Prudential Framework for Resolution of Stressed Assets dated 7 June 2019 (“RBI Prudential Framework”) originally introduced a consensual out-of-court restructuring process between the lenders and the debtor, and continues to operate in a limited manner alongside subsequent prudential norms and regulatory developments. It applies to lenders who are entities regulated by RBI, such as scheduled commercial banks, financial institutions and certain NBFCs, and offers certain benefits to such lenders from the perspective of prudential norms if the lenders can achieve a time-bound resolution. Indian banks sometimes use this route.

The process under this framework requires participants to sign an intercreditor agreement. Non-signatories to the intercreditor agreement are not bound by the restructuring process and may choose to initiate parallel proceedings against the debtor. There is no cross-class cramdown (or any cramdown) or moratorium under this process unless agreed under the intercreditor agreement.

Contractual Restructuring/Settlements

The lenders and the debtor may choose to enter into restructuring or settlement arrangements that are purely contract-driven and subject to applicable law, including the considerations discussed in 9.2 Regulatory Considerations. Where lenders are entities regulated by RBI, any compromise settlements or debt write-offs must be in compliance with RBI directions.

The primary legislation governing insolvency resolution in India is the IBC., which currently extends to:

• debtors who are corporate persons (also known as “corporate debtors”); and
• personal guarantors.

The main considerations for a lender from an IBC perspective are set out below. The IBC is currently proposed to be amended extensively to address issues arising out of varying market practice and conflicting judgments passed by various courts, including issues pertaining to payments to dissenting creditors, the treatment of secured creditors and introducing provisions for creditor-initiated insolvency resolution process and speedy resolution of cases, group insolvency and cross-border insolvency situations.

Filing an Application for Insolvency

Financial creditors (FCs) are lenders who have disbursed debt against consideration for the time value of money and include beneficiaries of guarantees. Operational creditors (OCs) are lenders who are owed money in relation to the supply of goods and services. Both FCs and OCs may file an application to commence the insolvency of a corporate debtor. Where debt has been disbursed through debentures, either the debenture trustee or the debenture holders may apply to commence the insolvency of a corporate debtor. In addition, claims of debenture holders may be filed by the debenture trustee or the individual debenture holders.

Securing a Seat in the CoC

Recognition as an FC is beneficial since FCs unrelated to the corporate debtor get a seat at the CoC. Each FC on the CoC has a vote commensurate to their claim amount, and the CoC exercises control over many key decisions related to the corporate debtor, including choosing a resolution plan/bid.

Moratorium on Certain Lender Actions

The IBC imposes a moratorium on the corporate debtor from the date of admission into a CIRP until termination of the CIRP (which ends with the passing of a resolution plan or liquidation). During the moratorium period, lenders cannot:

• recover monies from the corporate debtor;
• foreclose, recover or enforce their security over the corporate debtor’s assets; or
• continue any pending suits or proceedings against the corporate debtor.

Lenders may pursue guarantors or third-party security providers when the principal debtor enters a CIRP. To avoid any risk of litigation regarding admission of their claim to the guarantor, lenders should invoke the guarantee before the guarantor is admitted into the CIRP.

Claw-Back Risks

The insolvency professional is required to detect avoidable transactions and file necessary applications before the NCLT. Avoidable transactions include the following.

Preferential transactions

These include where the corporate debtor has transferred any property or interest therein for the benefit of a creditor, surety or guarantor on account of an antecedent debt owed by the corporate debtor, and such transfer has the effect of putting such transferee in a more beneficial position than it would have been in the event of a distribution of assets in a liquidation of the corporate debtor.

Transfers made in the ordinary course of business or financial affairs of the corporate debtor or transferee do not constitute preferential transactions. The look-back period for such transactions is one year preceding the insolvency commencement date in the case of transactions with non-related parties, and two years preceding the insolvency commencement date in the case of transactions with related parties.

Undervalued transactions

These occur where the corporate debtor has made a gift or entered into a transaction that involves the transfer of its assets for a consideration that is significantly less than the value of consideration provided by the corporate debtor.

Such transactions in the ordinary course of business of the corporate debtor do not constitute undervalued transactions. The look-back period for such transactions is one year preceding the insolvency commencement date, and two years preceding the insolvency commencement date in the case of transactions with related parties.

The look-back period is not limited to where the corporate debtor entered into an undervalued transaction to defraud creditors.

Extortionate credit transactions

These are where the corporate debtor has been a party to an extortionate credit transaction, excluding any transaction where debt had been extended by a person providing financial services in compliance with applicable law. The relevant look-back period is two years preceding the insolvency commencement date.

Where the NCLT is satisfied that an impugned transaction is avoidable, it can pass necessary orders based on the type of avoidable transaction, which may include requiring any person to discharge any security interest created, reimburse any monies and/or retransfer any property received from the corporate debtor pursuant to such transaction.

Order of Payment

The manner of distributing resolution proceeds is a matter of determination for the CoC, which may, in its commercial wisdom, adopt any distribution mechanism within the contours of the IBC, keeping in mind the minimum entitlements and priority of certain payments, such as insolvency costs and payments to dissenting FCs.

Dissenting FCs are statutorily provided to be entitled to a value at least equivalent to liquidation value under the payment waterfall (discussed below) in any resolution plan. The interpretation of this statute has given rise to multiple orders. In India Resurgence ARC Pvt. Ltd. v Amit Metaliks Limited and Anr. (Amit Metaliks), the Supreme Court held that dissenting FCs need not be paid the value of their security interest. However, in DBS Bank Limited Singapore v Ruchi Soya Industries Limited and Anr. (Ruchi Soya) the Supreme Court differed on this point, holding that dissenting FCs should be entitled to the value of their security as liquidation value. The latter case has been referred to a larger bench for adjudication, but this matter has not yet been heard or decided and the reference remains outstanding.

A notable development is the Supreme Court’s decision in Paridhi Finvest Pvt. Ltd. v Value Infracon Buyers Association and Anr., decided by a three-judge bench. The Court summarily dismissed the appeal – which challenged a National Company Law Appellate Tribunal (NCLAT) order that had followed the judgment in Amit Metaliks – without engaging with the substantive conflict between Amit Metaliks and Ruchi Soya or the pending larger bench reference. This decision has been widely interpreted as effectively reinforcing the Amit Metaliks position – namely that dissenting FCs are entitled only to their share of liquidation value as determined by the CoC, and not to the value of their specific security interest. Critically, in Beacon Trusteeship Ltd v Jayesh Sanghrajka, the NCLAT subsequently held that “Amit Metaliks needs to be followed” until a different view is expressed by the Supreme Court in the pending larger bench reference.

The IBC provides for a payment waterfall for the distribution of recoveries in a liquidation scenario, which requires payments to be made to stakeholders in the following order of priority:

• the insolvency resolution costs (including any interim finance);
• secured creditors (who have agreed not to enforce their security outside the liquidation) and work-persons’ dues (for the past 24 months);
• employees’ dues and wages (other than work-people) for 12 months preceding the liquidation commencement date;
• unsecured FCs;
• government dues for the preceding 24 months, and unrealised dues of secured creditors who have enforced their security outside the liquidation;
• any remaining debts and dues;
• preference shareholders; and
• equity shareholders or partners.

Treatment of Related Parties

The IBC distinguishes between related and unrelated creditors of the corporate debtor. Related party FCs are not provided a seat on the CoC. The Supreme Court of India has permitted resolution applicants to make differential payments to related and unrelated creditors of the corporate debtor, including no payment to related party creditors.

Withholding Tax

Subject to tax treaties, as per the Income-tax Act, 2025 (replacing the earlier Income-tax Act, 1961) (“IT Act”), interest payable to a non-resident lender by any person in respect of any debt incurred for the purposes of a business carried by such person in India is deemed to accrue and arise in India and is subject to tax in the hands of the non-resident lender. In such a case, the IT Act imposes the obligation on the borrower to withhold tax as per the applicable rates while making interest payments and filing necessary withholding tax returns with the Indian income tax authority. Furthermore, interest payments on loans taken for business purposes are tax-deductible under the provisions of the IT Act, subject to conditions.

In the case of securitisation structures, the IT Act confers tax pass-through status on all income generated by the securitisation trust, which is taxed at the hands of the holder/investor of the security receipts/pass-through certificates. Any distributions by the securitisation trust will be subject to withholding tax, the rates of which are determined according to the tax residency of the holder of the security receipts/pass-through certificates.

Thin Capitalisation Rules

When a company has a high level of debt in its capital structure, the interest payments will be substantial, which reduces the company’s taxable income. This, in turn, can erode India’s tax base. In contrast, when a company relies more on equity, the dividends paid to shareholders are subject to taxation. To address the issue of base erosion caused by excessive debt and interest deductions, limitations on interest deductibility were introduced in the IT Act.

In terms of the IT Act, where an Indian company or permanent establishment of a foreign company in India incurs any expenditure by way of interest or similar payments exceeding INR10 million (approximately USD120,000) in respect of any debt owed to a non-resident that is an Associated Enterprise (AE), said interest is not deductible in the computation of income to the extent such interest is more than 30% of the borrower’s EBITDA or the interest paid or payable to AEs during the relevant year, whichever is less.

Furthermore, where the debt is owed to a lender who is not an AE, but one of the AEs of the taxpayer provides an explicit or implicit guarantee to the lender, such debt is deemed to have been issued by an AE and is subject to the aforesaid limitations. These restrictions do not apply to entities engaged in the business of banking or insurance, nor to a finance company located in any International Financial Services Centre, or such class of non-banking financial companies as may be notified.

Stamp Duty

See 4.3 Jurisdiction-Specific Terms regarding the payment of stamp duty.

Types of Lenders and Their Permitted Activities

Each type of lender discussed in 1.2 Market Players and 4.2 Impact of Types of Investors must comply with specific regulatory restrictions. This guide has discussed some of these, such as foreign lenders’ eligibility and bank lending restrictions for acquisition financing.

Purpose/End Use and Borrower’s Sector

Additional regulatory considerations apply based on the end use of the facility, as discussed in 2.1 Debt Finance Transactions (which also includes consideration of the borrower’s sector of business).

Cross-Border Considerations

Any cross-border debt financing transaction must be in compliance with FEMA.

There are no other crucial issues in debt finance transactions from a jurisdiction-specific perspective.