India collection profile



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World Bank Doing Business
2014: 134/189 countries
2013: 131/189 countries

Complexity of collecting debt:

Notable High Very High Severe

Executive summary

  • DSO in India is high with payment usually taking place around 75 days on average. Late payments are not regulated and ownership protection may be difficult to enforce.
  • The court system is complex whilst extensive delays and costs make it unreasonable to commence legal action. Accelerated proceedings are not available for undisputed debts and foreign debt judgments would be enforced with difficulty.
  • The insolvency framework is made up of several overlapping bodies of laws applied by conflicting public authorities. Thus, it is extremely difficult to see through the system.
General Information GENERAL INFORMATION arrow-transparent
Collection Practices COLLECTION PRACTICES arrow-transparent
Court Proceedings Court PROCEEDINGS arrow-transparent
Insolvency Proceedings INSOLVENCY PROCEEDINGS arrow-transparent
General Information 


Days Sales Outstanding (DSO)

Payments in India usually take place around 75 days on average. The local payment culture is good but local partners usually insist on obtaining favorable payment terms of 60 days or more even though only 20% of transactions are paid on time. Therefore approving such terms is not advisable


Late payment interest

Indian law does not regulate late payments and does not provide for a legal late payment interest rate. Having said this, the courts generally awards payment of interest on the overdue amount in their judgments, even if there is no agreement related to payment of interest between the parties. However in amicable collection, as a practice, debtors do not pay interest on the overdue amounts.

As a general rule, collection costs are not charged to the debtor in India and must be recovered through legal proceedings.

collection practice 


Orchestrated negotiation first

Because the judicial system is overly slow and costly, amicable settlement opportunities constitute the strongest alternative to formal proceedings. Before starting legal proceedings against a debtor, assessing its assets is essential as it allows verifying whether the latter is still in activity and whether recovery chances are at best. In addition, it is essential to be aware of the debtor’s solvency status: if insolvency proceedings have been initiated, it indeed often becomes impossible to enforce a debt. In practice, although conciliation and mediation are no prerequisites to conducting legal action, the courts seem to be increasingly involved in helping the parties to reach an amicable settlement. Sometimes, the judges would actually draft the terms of an agreements and leave the parties to decide on their acceptability before referring the case to ADR.

Court Proceeding 


The court system in India is not very efficient because it is overly slow. Based on a quasi-federal structure, the country is composed of twenty-eight States which usually possess or share a High Court (twenty-four in total) and of several hundreds of administrative districts which each possess a District Court. As a general rule, commercial disputes must be brought before District Courts where the cause of action arose or where the debtor resides/carries on business or personally works for gain, but the quantum of debt in dispute also matters. The Delhi High Court has original jurisdiction and is also competent to hear recovery suits, however the Bombay High Court (Mumbai) has no authority to deal with such claims. In addition, various specialized courts deal specifically with specific debt recovery issues (bank loans, etc.), competition and anti-trust litigation, consumer protection, etc.

If the amicable phase fails or if the debtor questions the claim, the option of starting legal proceedings remains. No fast-track proceedings are available and the outcome of a lawsuit is haphazard, but the process would nonetheless take place as follows. A claim must be filed with the court, which then serves the debtor with summons if the claim is deemed admissible. The debtor is then given thirty days (sixty days if the respondent is a public entity) to pay or bring a defence. Failure to do so would entitle the claimant to request a default judgment from the court, but in practice the courts are flexible with this time requirement. Hearings would then be organized and evidence would be cross-examined before a judgment is rendered. In addition, judges must give the benefice of the doubt to defendants where the evidence is questionable, so that going to court when the claim is challenged may be extremely risky. Courts typically award remedies in the form of declaratory decisions (as to a title, a right or a legal status), specific performance, compensatory damages or injunctions. The courts would never award punitive damages.

insolvency Proceeding 


A debtor is deemed insolvent if it is unlikely to make its net worth exceed the accumulated losses whilst meeting its financial obligations within a reasonable period of time. In addition, a company is deemed 'sick' when losses over several years have reduced significantly its average net value or when it has failed to repay debts on a regular basis. Up until May 2015, the insolvency framework in India was made up of several bodies of laws whose overlapping provisions were applied by conflicting public authorities. Thus, it was extremely difficult to see through the system. Having said this, it should be emphasized that various efforts have been made to develop a company rescue culture insofar as the Companies Act of 1956 and the Sick Industrial Companies Act of 1985 (SICA) both provide for share capital and financial reorganization mechanisms. The Companies Act of 2013 was recently enacted and ought to replace the Companies Act of 1956. In a further progression, very recently the new bankruptcy and insolvency proceedings , and will simplify the previous overlapping provision in various bodies. This will lead to insolvencies and bankruptcy proceedings being concluded in 6 months (but can be extended for 3 months). However, it is not implemented yet. For this, the required authority bodies, mechanism and professional expertise are yet to be put in place, so its effect shall be reflected in the coming 2-3 years. In addition, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act of 2002 (SARFAESI) deals with assets held by banks and financial institutions. Companies may finally restructure their debt under the Corporate Debt Restructuring Scheme under the auspices of the Reserve Bank of India (RBI). The law imposes no debt write-off limitation.​


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