Corporate Debt Restructuring India: The Process, Start to Finish
The mechanics of Corporate Debt Restructuring India are what clients ask about once they have decided to proceed. The questions below are the ones raised most often in practice; the full scope of the service is on the Corporate Debt Restructuring India page.
What is the difference between restructuring and insolvency (IBC)?
Restructuring is a consensual, negotiated process between the borrower and its lender(s) — the company remains in control of its operations throughout. Insolvency under the IBC is a formal, tribunal-supervised process triggered by a default above the prescribed threshold, where control typically passes to an interim resolution professional and then, if a resolution plan is approved, potentially to a new owner. Restructuring is generally the earlier, less disruptive path; IBC becomes the relevant path once restructuring has failed, was never attempted in time, or a creditor has already filed an application.
In practice: We are asked, more often than expected, whether restructuring can happen 'inside' the IBC process. It cannot in the traditional sense — once CIRP is admitted, the framework and the decision-makers change fundamentally. This is exactly why early engagement on restructuring, before a creditor files, matters so much.
What is the RBI's Prudential Framework for Resolution of Stressed Assets?
The RBI's stressed-asset resolution framework (originally the Prudential Framework of 7 June 2019, now carried into RBI's consolidated Resolution of Stressed Assets Directions, 2025) governs how banks and other regulated lenders must handle stressed corporate accounts. It requires lenders to review a borrower's account promptly upon default, and for accounts with exposure across multiple lenders, it enables them to enter an Inter-Creditor Agreement (ICA) and formulate a resolution plan collectively, with a defined majority (75% by value, 60% by number) able to bind all lenders including dissenters. It replaced the earlier CDR Cell, JLF, S4A, and SDR mechanisms, which were withdrawn following the Supreme Court's Dharani Sugars judgment striking down the RBI's earlier February 2018 circular.
In practice: This framework is lender-driven in structure — it obligates banks on their side of the process. As advisors to the borrower, our job is to make sure the company's proposal is strong enough and timely enough to get a favourable outcome within the framework's review windows, not to rely on the framework itself to protect the borrower's interests.
What is an Inter-Creditor Agreement (ICA) and why does it matter if I have multiple lenders?
An ICA is an agreement executed among all lenders with exposure to a stressed borrower, under which they agree on a joint decision-making process for the resolution plan — rather than each lender pursuing its own separate action. Under the current framework, a resolution plan approved by 75% of lenders by value and 60% by number binds all lenders who are party to the ICA, including those who voted against it. For a company with a multi-bank consortium, this is the mechanism through which a single, coordinated restructuring outcome is achieved instead of a fragmented set of individual lender actions that can work against each other.
In practice: The practical challenge with an ICA is that each lender still runs its own internal credit approval process on its own timeline. We track every lender's internal cycle in parallel and make sure the same consistent case — the same numbers, the same narrative — reaches every credit committee, because inconsistency across lenders is one of the fastest ways to derail an ICA vote.
What is a One Time Settlement (OTS) and how is it different from restructuring?
An OTS is a negotiated, discounted, lump-sum payment that closes out a loan account in full and final settlement — the borrower pays less than the total outstanding, and in exchange, the lender agrees to treat the account as fully settled and issues a no-dues certificate. It is fundamentally different from restructuring: restructuring keeps the loan alive under revised terms with the business continuing to service it over time; an OTS ends the lending relationship entirely with a one-time payment. Lenders typically consider OTS when they have concluded that a going-concern restructuring is not achievable, but a negotiated payoff still recovers more than enforcement action would.
In practice: RBI has directed banks to maintain a transparent, Board-approved OTS policy so that similarly placed borrowers are treated consistently. We benchmark every OTS offer against the lender's likely realistic recovery through SARFAESI enforcement or liquidation — that comparison is what makes an OTS offer commercially persuasive to the lender's decision-makers, not just an appeal for leniency.
Does my company need to be Ind AS-compliant for restructuring accounting to matter?
The specific requirement to recognise a 'gain on restructuring' through profit and loss, per the derecognition and modification principles of Ind AS 109, applies to companies that report under Indian Accounting Standards (Ind AS) — generally larger companies and those meeting prescribed net worth or listing thresholds under the MCA's Ind AS roadmap. Companies reporting under the older Accounting Standards (AS) framework follow a different, generally simpler treatment for restructured debt. Either way, the accounting treatment of a restructuring has a direct bearing on reported profit, and by extension, on tax computation and on how the balance sheet reads to future lenders or investors.
In practice: We determine which framework applies to your company at the outset of any restructuring engagement, and we coordinate directly with your statutory auditor on the accounting treatment — this is not a decision to leave until the year-end audit, because it affects how the restructuring itself should be structured and documented from the start.
What is a pre-pack insolvency resolution process, and does my company qualify?
A pre-pack (pre-packaged insolvency resolution process) is an expedited version of the IBC process introduced in 2021 (Chapter III-A of the IBC), available specifically to corporate debtors classified as Micro, Small or Medium Enterprises under the MSME Development Act. It allows the company's existing management to negotiate a resolution plan informally with its unrelated financial creditors before filing, and then take that base plan to the NCLT for a faster, less disruptive approval process compared to a full CIRP. It requires approval by the prescribed majority, by value, of unrelated financial creditors before the NCLT application is filed. The 2026 Amendment Act revised parts of this pre-pack chapter, so confirm the current eligibility and approval threshold before relying on it.
In practice: For an MSME-qualifying company where bilateral restructuring negotiations have stalled, a pre-pack can be a meaningfully better outcome than drifting into a full CIRP filed by a creditor — it keeps more control with existing management and moves faster. We assess MSME eligibility early in any distress engagement precisely because this option exists only for qualifying companies and the eligibility conditions are specific.
How does a personal guarantee given by a promoter get affected by corporate restructuring?
A personal guarantee is a separate, distinct obligation from the corporate loan — restructuring or settling the corporate account does not automatically release the guarantor unless the restructuring or settlement agreement explicitly addresses the guarantee. If the corporate account defaults and proceeds to insolvency, personal guarantors of corporate debtors can themselves be subject to a separate insolvency process under Part III of the IBC (introduced via rules effective December 2019), which the Supreme Court upheld in the Lalit Kumar Jain judgment. This means a promoter's personal financial exposure can continue, or even accelerate, independent of what happens to the company.
In practice: We treat the guarantor's position as part of the same engagement, not a separate matter to be addressed later. Any restructuring or settlement proposal we help negotiate explicitly addresses what happens to the personal guarantee — because leaving that unresolved defeats much of the purpose of restructuring the corporate side in the first place.
Can a company be restructured more than once?
Yes, there is no absolute statutory bar on multiple restructurings, but each subsequent restructuring faces materially higher scrutiny from lenders. A second restructuring within a short period signals to the lender that the first restructuring's viability assumptions did not hold, which affects both the lender's willingness to approve further relief and the provisioning and classification treatment the lender must apply to a repeatedly restructured account under RBI's prudential norms.
In practice: If we are engaged on a first restructuring, we build in meaningful downside stress-testing precisely to reduce the odds of needing a second round. A restructuring plan that only works if every assumption holds exactly as projected is not a plan we are comfortable presenting to a lender — or to a client.
How much promoter contribution do lenders typically expect as part of a restructuring?
There is no fixed statutory percentage — it is a matter of lender policy and negotiation, and it varies by exposure size, sector, and the lender's assessment of the promoter's actual capacity to contribute. What lenders consistently look for is visible commitment: additional equity infusion, a personal guarantee where one does not already exist, pledge of unencumbered shares or assets, or a combination. The absence of any promoter contribution is one of the more common reasons a restructuring proposal fails at the credit committee stage, regardless of how sound the underlying business case is.
In practice: We structure promoter contribution to be meaningful to the lender without being disproportionate to the promoter's actual resources or to what the situation reasonably calls for. Overcommitting personal exposure to secure a restructuring that itself may not succeed is a mistake we actively guard clients against.
Where this sits in the wider engagement
Corporate Debt Restructuring India rarely arrives on its own. The statutory basis and the current requirements are set out on the Corporate Debt Restructuring India service page, and the related services are grouped under Corporate Finance.
What PNPC does
PNPC Global has practised since 1986 across India and the UAE. On Corporate Debt Restructuring India we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.