The Corporation issues demand notice prior to the due dates of repayment of installment of principal and interest in terms of loan agreement and the borrowers are expected to make the payment on or before due dates.

In case of default, higher rate of interest inclusive of penal interest as per the provisions in the loan documents is charged on the defaulted amount and for the defaulted period from due date.

The borrowers are expected to clear the dues immediately but if due to certain unavoidable circumstances, the payment is not feasible, the borrowers could approach the Corporation with a request for reschedulement. The Corporation does allow reschedulement depending upon the merits of the case and working of the unit.

1st reschedulement request is accepted by the Corporation without charging any penal interest.

Subsequent reschedulements if allowed due to specific reasons of a particular unit, these are subject to charging of penal interest as per provisions in the loan documents.

If a unit fails to approach the Corporation for reschedulement and also does not repay the loan in terms of loan documents and the repayment schedule approved by the Corporation inspite of follow up, Registered Notice is issued giving 15 days time to the borrowers to clear the default and become regular. If the borrower still fails to clear the dues, the entire loan is recalled by the Corporation under section 30 of SFC's Act giving 30 days notice to clear the dues. Even, after recall if the borrower does not respond and takes no corrective steps to clear the dues/get the loan account rescheduled, the Corporation issues notice under section 29 of the SFC's Act whereby the Corporation is empowered to take the possession of the unit. Under this recovery mode, a notice of 21 days is given to the borrower to clear the dues/or alternatively hand over the possession of the unit to the Corporation. Failing to respond, the corporation puts lock on the unit under section 29 of the SFC's Act on the given date. The Corporation is empowered to take the possession of the unit under section 29 without concurrence of the borrower and even without presence of the borrower.

The unit thus taken under possession is put to auction and after following due procedure including public notice in Newspapers, the sale of the unit is confirmed and the amount recovered is credited to the borrowers account. The borrower is given notice every time the tender is published or a notice for sale of the unit is published in the newspapers and before the sale is confirmed, the borrower has an option to approach the Corporation for clearance of dues or for settlement of loan accounts. The borrower has also an option to bring a better buyer within a given time after the highest bid is received during the open auction.

After making two attempts for the disposal of primary security the Corporation also takes immediate steps to put the collateral security on sale. If the amount thus recovered is less than the amount outstanding in the loan account then for the shortfall amount, the Corporation issues Recovery Certificate under section 32G of SFC's Act to the respective District Collector who in turn makes the act effective by attachment of personal properties in the name of the borrowers/guarantors and a borrower could be punished by way of imprisonment.

For those units which have been unable to repay the dues of the Corporation on due dates and punitive actions have been initiated against the promoters/borrowers such as recall of loan, possession of the primary/collateral security, sale of unit and issue of recovery certificate to the District Collector etc., the Corporation has formulated various settlement schemes under which the borrowers can avail the benefit of waiver of penal interest/compound interest besides getting additional advantage in terms of interest rate and additional time to repay the loan.