Reform measures are expected to be introduced soon to speed up debt recovery

2024-08-28 00:00:00

New Delhi: The Indian government is finalising changes to several debt recovery laws to empower banks and other lenders to quickly resolve bad loans. The measures include allowing special debt recovery tribunals (DRTs) to handle high-value cases and giving legal force to electronic notices sent by banks.

Separately, the government is considering a series of amendments to the Insolvency and Bankruptcy Code (IBC) to address any gaps in the law. “The reforms are aimed at speeding up loan recoveries, providing more legal support to recovery tribunals and addressing delaying tactics used by borrowers in the recovery process,” said a government official aware of the developments.

Finance Minister Nirmala Sitharaman said in her budget speech in July that the government would take steps to reform and strengthen the DRT.

“We will set up more courts to speed up the recovery process,” she said.

The changes being considered are based on proposals from the Treasury Committee.

Meeting the challenges
“One of the recommendations is to give legal backing to demand notices sent by financial institutions through electronic means, including emails and text messages to the borrower’s registered mobile number,” another official said.

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act was last amended in 2016.

The government will also seek to resolve the legal challenge to the transfer of all cases above Rs 100 crore to three designated tribunals in Delhi, Chennai and Mumbai. “The decision has been challenged and in some cases, the appellants have also been granted a stay. The government may make necessary changes,” said a senior bank executive.

In 2022, the government issued a notification stating that all applications involving debt amounts of Rs 100 crore and above that fall under the jurisdiction of the DRT will be handled by exclusive tribunals in the three cities. In the same year, the Bombay High Court asked the government to make necessary changes to give this legal support.

Earlier this year, the finance ministry, after holding a review meeting to improve the efficiency of DRT, directed banks to review the performance of their lawyer teams regularly and allocate cases based on their performance. Banks were also directed to ensure that their officers attend all hearings of their cases in judicial forums.

According to government data, as of January 21, the DRT had a total of 215,000 cases pending before it, of which 185,000 were pending for more than 180 days.

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