99.97% Debt Haircut: What It Costs You as a Borrower?

A court allowed a major borrower to settle nearly all his debt for almost nothing. This is called a debt haircut — and when big borrowers escape, banks quietly pass the cost to regular loan customers like you.

Here's what happened: An NCLT order allowed a high-profile promoter to settle his debt at a 99.97% haircut, meaning lenders recovered almost nothing from a large admitted claim.. HDFC Bank, which inherited the loan exposure through its merger with HDFC Limited, is considering a legal challenge to the tribunal's order.. Debt haircuts of this scale are permitted under India's Insolvency and Bankruptcy Code (IBC) when a resolution plan is approved by the required majority of creditors..

What you should do: Check your bank's gross NPA ratio before locking into a long-term FD — high NPAs signal stress that can affect deposit rates and bank stability.. Compare personal and home loan rates across at least three lenders right now, since banks with heavy NPA burdens are slower to pass repo rate cuts to retail borrowers.. If you have a floating-rate home loan, ask your lender in writing when the last repo cut was reflected in your EMI — banks are legally required to reset rates under EBLR within a defined cycle..

Under RBI's External Benchmark Lending Rate rules, your floating home loan rate MUST reset within 3 months of a repo rate change — if it hasn't, file a written complaint with your bank's nodal officer.