Debt Recovery Laws to be Strengthen

The Union Cabinet on Thursday decided to strengthen two crucial laws that enable lenders to recover their dues from borrowers. The move is expected to benefit banks in lowering their non-performing assets. As per the official data, the outstanding amount of large borrowers with public sector banks alone was R5,80,476 crore at the end of March 2011.
The amendments to the Sarfaesi Act and the Recovery of Debts due to Banks and Financial Institutions (RDBF) Act will be brought into force by introducing the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011 in the winter session of Parliament, information and broadcasting minister Ambika Soni said here after the Cabinet meeting.
An official release issued after the meeting stated that the proposed amendments would enable banks to improve their operational efficiency, deploy more funds for credit disbursement to retail investors and home loan borrowers without fearing for recovery, thus bringing about equity. The Bill seeks to strengthen the regulatory and institutional framework related to recovery of debts due to banks and financial institutions, the release stated without specifying the changes proposed. Banks have given suggestions for further strengthening of the secured creditor rights.
Insolvency experts, however, said reforms in the debt recovery regime have to be holistic and not incremental if access to credit is to be ensured to a larger section of the economy. “We need to take a holistic look at the Sarfaesi Act and address the many policy constraints that now impede the efficient functioning of asset reconstruction companies,” said Sumant Batra, past president of Insol International, a global body of corporate turnaround specialists and judges. The government has so far approved 14 securitisation and asset reconstruction companies (ARCs) but only Arcil, promoted by institutions like SBI and IDBI Bank, took off.
ARCs develop a market for the distressed assets they acquire from lenders. The Sarfaesi Act allows banks and financial institutions to take possession of assets when borrowers fail to repay their loans within 60 days of demanding repayment. Now, non-banking finance companies are not covered by the Sarfaesi Act, except the housing finance companies. Also, the central registry conceived under this Act does not cover the assets of proprietorships and partnerships and therefore banks have no way of ascertaining whether the assets of these entities have any charge on them. This lack of comfort discourages banks to lend to these entities that represent 92% of the economy.
From the Desk of Daniel & Boaz
Helpline:- 9962111818.

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2 Comments

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2 responses to “Debt Recovery Laws to be Strengthen

  1. Awesome Awesome Awesome,Good initiative

  2. nationalassetcommercial

    This will help The Debt Collectors a lot.

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