When Borrowers Cross Borders: A Boardroom Perspective on Managing Absconding Risk Between the UAE and India

Posted On - 27 February, 2026 • By - Jidesh Kumar

In an era of unprecedented mobility of capital and people, banks are increasingly exposed to a structural risk that transcends conventional credit analysis: cross-border evasion. For financial institutions operating in the United Arab Emirates, particularly those with significant exposure to Indian nationals and India-linked businesses, one recurring challenge stands out is that borrower who defaults and relocates to India.

While the commercial relationship may have been initiated, documented, and disbursed within the UAE, enforcement may ultimately unfold thousands of kilometres away. For Boards of Directors, this is not merely a legal contingency but a governance issue, a capital preservation issue, and increasingly, a reputational issue.

This essay explores how Boards should think about managing absconding risk, what institutional safeguards should be embedded at policy level, how enforcement pathways between the UAE and India function, and how facility agreements should be structured to future-proof recovery rights.

The Nature of the Risk: Mobility as a Credit Variable

Cross-border mobility transforms default dynamics. A borrower who remains physically present in the UAE is subject to immediate local enforcement mechanisms: travel restrictions, attachment orders, freezing measures, and regulatory pressure. Once the borrower relocates to India, the bank must pivot to a different procedural ecosystem.

This shift introduces:

  • Jurisdictional complexity
  • Evidentiary hurdles
  • Delay risk
  • Asset tracing challenges
  • Increased litigation cost

The issue is not whether recovery is legally possible but whether recovery is institutionally prepared. Boards must recognise that absconding risk is not an exception. It is a foreseeable credit event in cross-border lending corridors.

India and the UAE maintain a structured legal relationship through:

  • Judicial cooperation arrangements
  • An extradition treaty
  • A mutual legal assistance framework
  • India’s recognition of UAE civil judgments as reciprocally enforceable

This architecture enables UAE court judgments to be executed in India without retrial on merits, subject to statutory safeguards. That development has significantly improved recovery prospects.

However, enforceability is document sensitive. Indian courts will examine:

  • Jurisdiction of the UAE court
  • Service of process
  • Compliance with natural justice
  • Absence of fraud
  • Public policy compatibility

This means Boards must insist that documentation is litigation-ready from day one not reconstructed during crisis.

Structural Differences: Why Recovery in India Feels Different

Understanding enforcement risk requires appreciating judicial culture.

UAE Courts

  • Civil law system
  • Judge-led proceedings
  • Heavy reliance on documentary evidence
  • Relatively faster timelines
  • Structured appellate hierarchy

Indian Courts

  • Common law tradition
  • Adversarial system
  • Evidence tested through cross-examination
  • Extensive procedural layers
  • Significant backlog in certain jurisdictions

In practical terms, this means:

  • Affidavits alone are insufficient in contested Indian trials
  • Witness examination may be required
  • Electronic evidence must comply with statutory certification
  • Procedural objections are common

Boards must adjust recovery timelines accordingly.

The Governance Imperative: Prevention Over Cure

Effective management of absconding risk begins before disbursement.

A Board-approved cross-border lending policy should include:

  1. Enhanced due diligence for Indian-linked borrowers
  2. Mandatory disclosure of Indian assets
  3. Personal guarantees with Indian nexus
  4. Asset disclosure covenants
  5. Change-of-residence notification clauses
  6. Waivers against jurisdictional objections

The objective is simple: preserve optionality. Recovery strategy should never depend on goodwill alone.

Early Warning Architecture

Absconding rarely happens overnight. It is often preceded by signals:

  • Visa cancellation
  • Employment resignation
  • Rapid transfer of funds to India
  • Communication breakdown
  • Non-cooperation in documentation

Boards should require management to implement trigger-based escalation.

When early warning signs appear:

  • Undrawn facilities should be frozen
  • Legal review initiated
  • Asset tracing commenced
  • Electronic records preserved

Speed is leverage.

The Importance of Documentation Discipline

Indian enforcement is unforgiving of evidentiary gaps. From a Board perspective, it is critical to institutionalise:

  • Notarised and attested agreements
  • Properly executed guarantees
  • Certified statements of account
  • Board resolutions authorising enforcement
  • KYC documentation
  • Proof of service records

Without proper authentication and attestation, Indian authorities may decline to register criminal complaints or courts may delay enforcement. Documentation discipline is not a back-office function but  a strategic asset.

Insolvency as a Recovery Tool

In cases involving corporate borrowers, insolvency proceedings in India may be more effective than prolonged civil suits. Insolvency triggers:

  • Moratorium
  • Professional oversight
  • Asset disclosure
  • Resolution process

Boards should consider insolvency strategy as part of cross-border recovery planning.

The Contractual Solution: Embedding Enforcement Rights

One of the most powerful tools available to banks lies in drafting. Facility agreements should include a provision that addresses absconding explicitly. A well-drafted clause should:

  • Recognise relocation as an event of concern
  • Permit enforcement in India upon absconding
  • Allow disclosure to Indian authorities
  • Include waiver of jurisdictional objections
  • Preserve UAE jurisdiction concurrently

Such a clause does not create jurisdiction artificially; it reinforces enforceability and reduces procedural friction.

Illustrative Clause Concept (Simplified for Essay Context)

The borrower should acknowledge that if it relocates to India after default, the bank may initiate civil or criminal proceedings in India, enforce UAE judgments there, and the borrower waives objections to such enforcement. This clause should be accompanied by:

  • Submission to jurisdiction
  • Waiver of forum non conveniens
  • Consent to cross-border enforcement

Drafting must align with both UAE and Indian legal principles.

Board Oversight & Reporting

Cross-border recovery risk should not remain buried within legal departments. Boards should require:

  • Quarterly cross-border exposure reports
  • Status of enforcement actions
  • Recovery rate analytics
  • Documentation audit reports
  • Early warning case tracking

Transparency reduces surprise write-offs.

The Strategic Mindset Shift

Cross-border absconding is not a legal anomaly; it is a foreseeable operational risk in the India–UAE financial corridor. The correct Board-level question is not “Can we recover?” But rather “Have we structured ourselves to recover?”

Banks that treat enforcement as an afterthought incur higher loss ratios. Institutions that embed enforceability into documentation, governance, and response architecture recover faster and more consistently.

Conclusion: Preparedness as Competitive Advantage

The legal framework between India and the UAE today offers real and workable enforcement mechanisms. Recognition of civil judgments, treaty-based cooperation, and insolvency processes have made cross-border recovery far more viable than in the past. Yet these tools are only as effective as the preparation behind them.

For Boards, the true advantage lies in foresight. Strengthening due diligence, embedding enforceability into documentation, establishing early warning systems, and ensuring disciplined record-keeping are not merely compliance measures, they are risk-control strategies. Institutions that plan for cross-border default before it occurs are far better positioned to respond decisively when it does.

In the India-UAE corridor, success will belong to banks that treat preparedness as a competitive advantage, transforming potential disruption into structured, manageable exposure.

Contributed by Atul N Menon.