16.9 Recovery readiness from underwriting

Most diligence focuses on whether to lend. Recovery readiness is the diligence that focuses on whether recovery is feasible if lending turns out wrong. Done at sanction, it costs nothing extra; done as an afterthought during recovery, it costs months and often the principal.

This page lists what to capture at sanction so that recovery, if needed, has the data it requires.

Why this matters

When a loan turns NPA and the borrower stops responding, the recovery team’s first questions are:

Where is the borrower now? (residence, business)
How do we reach them? (mobile, alternate mobile, family, business)
What assets do they have that we have a claim on or could have visibility into?
Who else has visibility on the borrower (PG, references, group entities)?
What’s the legal recovery path?

If all of this needs to be discovered post-NPA, the recovery timeline triples and recovery rate drops sharply. If it’s all captured cleanly at sanction, recovery is operationally efficient.

What to capture beyond standard KYC

A. Multiple verified addresses

Standard application captures:

Borrower entity’s registered address.
Borrower entity’s principal place of business.
Promoter’s permanent address.
Promoter’s current address.

For recovery readiness, also capture:

Promoter’s native address (often different from current; useful if borrower disappears).
Family residential address (if different from promoter’s current).
Alternate business location (warehouse / branch / office).

All addresses photographed during field verification where possible.

B. Multiple verified contacts

Standard captures borrower’s mobile + business landline (if any). For recovery:

Promoter’s mobile (primary).
Promoter’s spouse / family mobile (with consent — DPDP-aware).
Alternate mobile of promoter (many people have two phones).
Business landline.
Email (multiple).
PG-providers’ contacts — each PG provider has independent contact info.
Reference contacts captured at application (customers / suppliers / neighbours / banker).

All verified at application (test SMS or call).

C. PG (Personal Guarantee) with rigour

For entity borrowers, PGs are routine. The rigour matters:

PG provider’s full KYC with current address, mobile, email.
PG provider’s CIBIL pulled.
PG provider’s net-worth declaration with supporting documents (own bank statement, property documents, income tax returns).
PG signed in original / eSigned with audit trail.
PG specifically refers to the loan (not a generic guarantee).
PG provider explicitly acknowledged understanding of joint and several liability.

A weak PG is no better than no PG; rigorous PG opens a real recovery vector.

Borrower’s assets visible to the lender (without security being explicitly created on them):

Property owned — even if not collateralised, knowing the borrower owns property at a specific address opens a recovery vector via civil suit.
Vehicles owned — RC / fleet.
Other business equipment — known via field FI.
Promoter’s residential property — known via address declaration.

Document what’s visible; this is intel for recovery, not security.

E. Bank account discipline

Primary collection account — single account where all repayments come.
Mandate: NACH on this account.
Secondary mandate: UPI AutoPay as backup.
All operating accounts disclosed — knowing all borrower bank accounts helps recovery garnishment and account-attachment.

If borrower is part of a group:

Map other entities in the group.
Cross-PG from group entities where commercially permissible.
Knowing group structure helps recovery analysis (group has cash flow if individual entity doesn’t).

G. Industry and recovery context

Industry-specific recovery patterns documented (FMCG distributor recovery is different from manufacturing recovery).
Channel-specific recovery hand-off (DSA / CA may help with recovery on referrals they made — captured as the channel relationship).

H. Behavioural baseline

Documented at application:

Borrower’s communication style.
Owner’s daily presence at business.
Owner’s family / personal context.
Owner’s other commitments (other businesses, professional engagements).

This baseline helps recovery teams understand the borrower contextually.

I. SARFAESI eligibility documentation (for secured products)

If the product is secured (LAP, equipment loan), the SARFAESI process requires:

Original property documents.
Valuation report.
Search report (title chain).
Mortgage deed (registered or equitable via MOTD).
CERSAI registration.
All notices delivered to recorded addresses.

For SARFAESI to work cleanly at recovery, all these must be in order at sanction. See 17.3 SARFAESI.

J. DRT eligibility documentation (for unsecured)

For unsecured loans pursued via DRT (above the DRT threshold):

All loan documents original.
DPN signed.
Calculation of dues with interest.
Demand notice delivered.
Evidence of demand acknowledgement.

K. Arbitration clause invocation

If the loan agreement includes an arbitration clause:

Specific seat of arbitration named.
Arbitrator nomination clause clear.
Notice procedures defined.

Knowing in advance whether arbitration vs civil suit will be the recovery route shapes the documentation at sanction.

What to do at sanction (operational checklist)

When sanctioning a loan, the operations team verifies:

Recovery-readiness in the data room

The platform’s data room (3.D) should have a recovery-readiness section per borrower, surfacing:

Address set.
Contact set.
Asset visibility.
Group entities.
PG details.
Reference contacts.
Bank accounts.
Mandates.
Documentation completeness.

For active borrowers, this is maintained over time — addresses / mobiles change; the platform must invite borrowers to update.

DPDP balance

Recovery-readiness data includes some that, if used wrongly, could violate borrower’s privacy or constitute harassment. The discipline:

Data captured with consent at sanction.
Data used only for legitimate purposes — recovery within FPC bounds.
Data NOT shared with non-essential parties.
Family / reference contacts used per Fair Practices Code — no third-party harassment.

The platform’s recovery workflow (3.K) must constrain access to recovery-readiness data to authorised users only.

Recovery vectors documented in agreement

The loan agreement should clearly state:

Borrower’s joint and several liability with PGs.
Lender’s right to set-off against any borrower account.
Lender’s right to assign the loan to any third party.
Borrower’s covenants (no major business decisions without notice, no negative pledge, etc.).
Lender’s enforcement rights including SARFAESI (for secured), arbitration, civil suit.

A poorly-drafted agreement limits recovery options; a well-drafted agreement maximises them.

Operational rhythm

At sanction: full recovery-readiness capture per checklist.
At renewal: re-verify addresses, contacts, mandates.
On EWS: refresh contacts in particular (borrowers in distress sometimes change mobile to avoid lender contact).
At NPA: hand-off to recovery with complete data room.

Outcomes

Borrowers handled with recovery-readiness rigour at sanction show:

Recovery cycle from NPA to substantial recovery: 30 – 50% shorter than borrowers without rigour.
Recovery rate (% of outstanding recovered): meaningfully higher (+20 – 40%).
Operational cost of recovery: lower (less time spent finding the borrower).

These outcomes justify the small additional effort at sanction.

17. Recovery deep-dive — what recovery actually does with this data.
3.K Collections.
3.H Documentation — agreement / PG drafting.
2.11 Fair Practices, grievance, recovery.
16.6 Physical verification protocols.