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Debt Collection in India

Debt Collection in India

Debt collection in India is common between two businesses (B2B) when one of the companies fails to meet its obligations. Although most cases involve business to business situations, in some situations it may be needed to collect debts from a client (B2C).

Our team of Indian lawyers answers some of the most common questions about recovering due debts in India and why it is helpful to work with a team of experts. In case you need to recover a debt in another country, for example in Poland, we recommend our partners – DebtCollectionPoland.eu.

We can also give you details about immigration to India.

 Quick Facts  
 Applicable law The Financial Institutions Act, the Insolvency and Bankruptcy Code, the Consumer Protection Act, and others 

Other specific regulations that apply (Yes/No) 

 Certain regulations on the limitations on debt recovery.

Types of debts that can be recovered in India 

Examples include debts from contractual relations, unpaid private loans, credit cards, bills, uncollected goods, etc. 

 Recovery period Generally 3 years 
 Court proceedings

Complaints filed as per the Civil Procedure Code 

 When to commence court debt collection

Typically when amicable recovery yielded no results 

The Court in charge of debt collection in India 

The Debts recovery Tribunals and Appellate Tribunal 

 Number of debts recovery tribunals

Presently, 39 such tribunals and 5 appellate courts 

 Debt collection court proceedings duration in India

Varies depending on the type of debt collection 

 Amicable debt collection option Yes 
 Amicable debt collection duration

Can be shorter than court collection 

Foreign court debt collection order recognition 

Usually by filing an execution petition, subject to conditions. 

 Debt collection agency is commonly used (Yes/No)


 Services offered by a debt collection agency

 Domestic debt collection, amicable debt collection and, as needed, court procedures commencement, representation and handling.

 Legal representation for debt collection Upon request, offered by our experienced lawyers in India. 

What is non-judicial debt collection?

Debt collection in India can take place outside of a court of law. This is a preferred method, if possible, because of the lower costs implied and the fact that (in some cases) the entire process may be faster compared to commencing the litigation proceedings. The common steps are the following:

  • Send a reminder: the business can send an invoice payment reminder, with the payment details.
  • Send a notification: this is the first notification of the undue payment and can be sent via e-mail.
  • Contact: contacting the debtor can be useful, especially if an unpredicted situation of which the creditor was unaware it took place.
  • Final notice: if the creditor cannot be persuaded to pay the due debt amicably, then the court proceedings can be commenced.

What is judicial debt collection?

Legal or judicial debt collection is the process that takes place in court. Our lawyers in India who specialize in litigation can help you with debt collection.

There are several options when choosing to take the case to court and the procedural differences appear when discussing different types of debts, for example creditor debts as opposed to debts that are owed to banks or other financial institutions.

A creditor who wishes to recover debts in India, for example a company that has unpaid debts from another legal entity, can commence a commercial lawsuit under the Commercial Courts Act. In this case, debt collection in India takes place before a competent civil court for commercial matters.

Banks and financial institutions are subject to other laws. In this case, the Debts Recovery Tribunal is the one to provide for a quick solution for lenders and borrowers and it functions under the Recovery of Debts and Bankruptcy Act 1993. For banks in India seeking to recover debts from their clients, the Securitization and Reconstruction of Financial Assets and the Enforcement of Security Interest Act 2002 is the one that allows them to recover secured debts from the borrowers. In this particular case, Court intervention is not needed during the first stage.

It is common for commercial disputes that include a debt over 300,000 INR to be considered a commercial dispute and to be brought in front of the Commercial Courts. When a bank is involved, more specifically when a bank or financial institution is the one to commence the proceedings and the case in front of a Debt Recovery Tribunal, the amount should be at least 2 million INR.

It is advisable to select the services offered by a debt collection agency in India when dealing with litigation matters as a team of experts will be able to provide you with the most suitable solutions in your case.

What are the steps of court debt collection in India?

A certain process is followed by the creditor who wishes to recover due debts in India. Part of these mandatory issues concern the pre-action conduct which includes sending the legal notice to the debtor. This is done before the legal proceedings are commenced. When banks attempt to recover debts they must first declare the bank account a non-performing asset and serve a legal PR demand notice before starting any recovery proceedings in court.

In some situations, it may be mandatory to resort to mediation, however, this is not always the case. Working with a debt collection agency in India is essential during all of the court debt collection stages, including when drafting the claim document, as it is drafted according to the Code of Civil Procedure rules.

Once the claim has been filed with the competent court, the summons can be issued to the debtor. The service of the summons is performed as per the Code of Civil Procedure and certain formalities are followed. After this step, the debtor has a period of 30 days in most cases to offer his response. In some cases, it can be extended, however, a maximum period is provided for. The process of debt collection in India also includes steps such as the admission of documents (submitted by both parties), the examination and cross-examination of witnesses, as well as hearing the final arguments. When the creditor obtains a judgment in his favor, he can then proceed to enforce the said judgment. If the debtor still refuses to pay, the court may order that his assets and/or property are seized.

What method should be used?

Amicable debt collection is usually the preferred method because it allows the creditor to maintain a positive business relationship and a professional relation with the customers. However, when non-contentious solutions are no longer profitable for the business, then litigation can be taken into consideration.

When the two parties have signed an arbitration agreement, debt recovery can take place according to the arbitration proceedings and under the Arbitration and Conciliation Act 1996. It should be noted that in those cases in which the agreement between the two parties included an arbitration clause, this is the mandatory route for solving due debts between the parties. Our team of lawyers in India can give you more details about these mandatory requirements for arbitration and assist you if you wish to include such as clause in an existing agreement. 

If you are looking for a suitable method for debt collection as a foreign national, our immigration lawyers in India can provide additional information in your case.

We invite you to watch a video about the debt collection methods:

Limit for the recovery of debts in India

The Limitation Act of 1963 sets out the general limitation periods for different types of debts. In general, the limitation period for debt recovery in India is three years from the date the cause of action arises. However, different types of debts may have different limitation periods, so it’s advised to consult with our Indian lawyers.

For cases involving negotiable instruments like cheques, the Negotiable Instruments Act of 1881 provides a specific limitation period. Typically, a complaint for the dishonor of a cheque must be filed within 30 days from the date of receipt of the dishonored cheque notice.

The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 regulates the recovery of debts by financial institutions. Under this act, a creditor can apply to the Debt Recovery Tribunal (DRT) within three years from the date the debt became due.

If the debtor is unable to repay the debt, creditors can initiate insolvency proceedings under the Insolvency and Bankruptcy Code (IBC). The IBC provides a structured and time-bound process for the resolution or liquidation of insolvent debtors.

The duration of debt collection in India varies based on the complexity of the claim. Typically, it can take several weeks to recover payments in a regular debt collection case.  

Our law firm in India can help you with debt collection.

What does a debt collector in India do?

A debt collector in India is someone appointed by a lender (for example a bank or financial institution) to recover unpaid debts from borrowers. He/she acts as a financial recovery specialist within legal boundaries. Our Indian lawyers can be appointed as debt collectors.

Debt collection activities in India are subject to regulations and guidelines set by authorities such as the Reserve Bank of India (RBI) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act. These regulations safeguard the rights of both debtors and creditors.

Debt collectors have several strategies to recover owed amounts, all of which must comply with established legal guidelines, such as:

  • Communication with debtors through letters, emails, phone calls, or in-person visits to discuss the outstanding debt, remind them of their financial obligations and negotiate repayment terms. Debt collectors need to maintain professionalism and respect the frequency and timing of contact, as outlined by consumer protection laws;
  • Debt collectors in India often engage in negotiation with debtors to reach a mutually acceptable agreement for repayment. He/she can negotiate lower payment amounts, extended repayment periods, or settlement offers;
  • If communication and negotiation efforts fail, debt collectors may resort to legal measures to recover the owed amounts. This can involve initiating legal proceedings, such as filing a lawsuit against the debtor to obtain a court judgment for the repayment of the debt;
  • Debt collection in India includes maintaining detailed records of communication with debtors, including copies of letters, notes from phone calls, and documentation of any payment arrangements or agreements reached.

Our attorneys in India can help with debt collection while respecting the regulatory and legal requirements.

How can an Indian law firm help me?

Our attorneys in India have extensive experience in local and international debt collection. They can evaluate your case and outline a debt collection strategy that will allow you to cultivate a positive business relationship.

When working with our team you can recover the due debts in time. It is useful to know that certain limitation periods apply. One advantage of seeking specialized legal advice and services from a debt collection agency in India is that you will be able to recover the debt within the three-year period that is prescribed in most of these cases in the Limitation Act and in the other relevant laws that regulate the procedure of debt collection.

According to the Department of Financial Services, there are 39 Debts Recovery Tribunals and 5 Debts Recovery Appellate Tribunals operating in India. The available data shows the following number of cases handled by these over the years:

  • 13,069 original applications were disposed between 2021 and 2022;
  • 6.330 securitisation application were disposed between 2021 and 2022;
  • The total amount of money involved in the securitisation application cases was 54.007,32 rupees;
  • The total amount of money involved in the original application cases was 91.940,25 rupees.

We also provide debt collection services to non-residents, as well as those who have obtained Indian residency, based on their prolonged stay in the country. You can also reach out to us if you have any questions about issues concerning your temporary residency and the applications that are mandatory for foreigners who wish to remain in India while our team assists with debt collection.

We are also here to assist foreign nationals in other matters, such as those related to all matters concerning the process to immigrate to India. You can reach out to us if you have questions.

Our lawyers in India can also help you if you are a business owner looking for more details about Indian citizenship. The naturalization option is the route most often available to foreign nationals, especially if they are not married to an Indian citizen at the time of their application. A lengthy prior residence in the country (twelve years) applies in this case and our team can give you more details.

Contact our law firm in India for more information about the legal services we provide for debt collection in India, as well as other services for resident and non-resident businesses.  

Our team also provides other types of services, such as those required by foreign nationals interested in immigration to India. Our relocation specialists are able to answer questions about visas and residence permits according to the applicant’s purpose of stay. With our help, you will be able to apply for a work, business, or study permit as fast as possible and by submitting all the needed documents.

Our lawyers in India can also help you if you are a business owner looking for more details about Indian citizenship by investment.