Finance ministry sets up panel to give more teeth to debt recovery laws
Panel to suggest changes in the existing laws to make debt recovery more effective
New Delhi: The finance ministry has constituted a panel to give more teeth to the debt recovery laws to effectively deal with wilful defaulters and check bad loans which have soared to ₹ 2.40 trillion.
A panel has been constituted by Department of Financial Services for suggesting changes in the existing laws to make debt recovery more effective, sources said.
The members of the panel entrusted to revisit existing debt recovery laws include Anurag Jain, joint secretary Department of Financial Services, former law secretary V.K. Bhasin, representatives of Debts Recovery Tribunal (DRT), Reserve Bank of India (RBI), Indian Banks’ Association (IBA) and bar associations, sources added.
Besides, panel has been also assigned to draft a new statute with harsh penal provisions for wilful defaulters. The panel was set up to plug the loopholes in the current legal framework for debt recovery.
According to sources, there has been instances of promoters getting rich and companies becoming bankrupt and defaulting on bank loan repayment. The committee constituted would suggest amendments in Sarfaesi Act (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act) and RDDB Act (Recovery of Debts Due to Banks and Financial Institutions). Among other things, the panel would also recommend making penal provisions more stringent in case of wilful defaulters.
Noting that the rising non performing assets (NPAs) of public sector banks is a matter of concern for the government, finance minister Arun Jaitley in the budget speech had announced setting up of six new Debt Recovery Tribunals at Chandigarh, Bengaluru, Ernakulum, Dehradun, Siliguri and Hyderabad.
“Government will work out effective means for revival of other stressed assets," he had said. There are over 40,000 cases worth ₹ 1.73 trillion pending before various courts and Debt Recovery Tribunals.
In March 2014, the gross non-performing assets (GNPAs) in banking system gone up 4.4% from 3.8% of the total assets in the previous fiscal. The gross NPA of public sector banks jumped by a 39% to ₹ 2.16 trillion at the end of March 2014 from ₹ 1.55 trillion in the previous fiscal.
However, gross NPA in case of private sector bank rose to a 13.76% to ₹ 22,744 crore as compared to ₹ 19,992 crore at the end of March 2013. During 2013-14, public sector banks recovered ₹ 33,486 crore against the written-off amount of ₹ 34,620 crore.
PTI
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