NEW LEGISLATION FOR RECOVERY OF DEBTS
The Government
has planned a new legislation titled the Securitization and Reconstruction
of Financial Assets and Enforcement of Security Interest Bill,
2002 to be introduced in the next Session of Parliament.
The proposed
law will deal with three distinct actions in respect of financial
assets held by banks and financial institutions in the form of
securitization of financial assets, setting up of asset reconstruction
companies and enforcement of security interest.
The proposed
Bill will be based on the recommendations of the Narasimham Committee
I and II and Andhyarujina Committee reports for enacting a new
law for regulation of securitization and reconstruction of financial
assets, enforcement of security interest and formation of asset
reconstruction companies. This would enable the banks and financial
institutions to recover their debts expeditiously from the defaulters
Meanwhile,
the Debt Recovery Tribunals (DRTs), over a period, registered
a substantial improvement in the recovery of debts due to banks
and financial institutions. The amount recovered through DRTs
increased from Rs. 752 crores in 1999-2000 to Rs. 1185 crores
in 2000-2001 and to Rs. 2153 crores during 2001-2002. The size
of debts for recovery before DRTs is of the order of Rs. 110,000
crores as against the size of the Union Budget at Rs. 450,000
crores.
The Government
of India and the Reserve Bank of India have advised banks and
financial institutions to take several steps for recovery of dues
by evolving and implementation of recovery policy, compromise
settlements through Settlement Advisory Committee and Monitoring
and follow up of Non-Performing Assets (NPAs) at various levels
in the banks. The banks have also been advised to use the forum
of Lok Adalats for compromise settlement of their NPAs and guidelines
have been issued by the Reserve Bank of India in May 2001 for
making increased use of Lok Adalats to settle disputes involving
outstanding balance in NPA accounts upto Rs. 5 lakhs. Besides,
Credit Information Bureau (CIB) is being set up to disseminate
information on borrowers to the banks.
