20th May, 2002
Ministry Of Law, Justice & Commpany Affairs


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.

 
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