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Definition: Default

Default occurs when a debtor does not honour the debt contract. It may be non-payment of interest obligation or non-payment of principal amount. This is known as “DEBT-SERVICE DEFAULT”.

There’s another type of default known as “TECHNICAL DEFAULT”. It occurs when the debtor violates any covenant (terms and conditions) present in the debt contract.

Default does not mean Bankruptcy or Insolvency. Default may also occur when the debtor has the money but unwilling to pay.


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