As banks cry over NPAs, debt recovery tribunals sit on cases worth Rs 1.43 L cr

Written by Arun S | New Delhi | Updated: Aug 14 2013, 00:08am hrs
Close to 43,000 cases involving a whopping Rs 1.43 lakh crore were pending with 33 debt recovery tribunals (DRTs) across the country at the end of FY13. This has added to the woes of banks and financial institutions and asset reconstruction companies looking to buy out these assets.

Data compiled by the finance ministry showed that the number of original applications (cases filed by banks and financial institutions to recover their debt) pending in the DRTs jumped 21.6% from 35,221 at the end of 2011-12 to 42,819 as on March 31, 2013, while the amount involved in the cases rose 30% from R1.1 lakh crore to R1.43 lakh crore.

Of course, the DRTs managed to dispose of 9,816 cases in the last fiscal involving R18,162 crore. But fresh filings of 14,666 cases in the last fiscal with claims of R48,037 crore pushed up the overall pendency.

Incidentally, the net non-performing assets or NPAs (bad loans after making provisions) of banks had gone up 51% in FY13 to R92,825 crore. According to a recent Crisil report, the gross NPAs of banks are slated to increase from 3.3% in March 2013 to 4% by March 2014.

The delays in DRTs have in turn affected the value of assets that are to be recovered, which is a matter of concern for banks, financial institutions and asset reconstruction companies.

The huge pendency is a worry especially because DRTs were set up by the government under the Recovery of Debt Due to Banks and Financial Institutions Act, 1993 (RDBFI Act), to expedite the recovery of bad debts of banks and FIs. Notably, the Act advises the tribunals to dispose of each case within 180 days from the date of its filing.

Topping the list of pendency is the Mumbai region where the three DRTs have a total pendency of 3,632 cases involving Rs 43,401.37 crore. The Kolkata region, having three DRTs, also has a high pendency with 11,212 cases involving Rs 20,642.74 crore.

The Chennai region with three DRTs had 1,703 cases involving Rs 7,742.66 crore, while the Delhi region with three DRTs had a total pendency of 2,943 cases involving Rs 18,908 crore. Hyderabad with a single DRT had 2,590 pending cases involving Rs 11,614 crore.

The rising pendency is due to many reasons including the shortage of DRTs and debt recovery appellate tribunals (DRATs) in the country.

A PSB officer said owing to the delays in DRTs, the lenders now consider provisions under Sarfaesi Act so that without court intervention they can get the properties of defaulting companies or individuals attached and thereby recover the NPAs by enforcing the security. In a bid to reduce the delays at DRTs, the finance ministry now holds regular meetings with the nodal officers of DRTs and banks to sort out the outstanding problems, the officer said.

"For instance, there is only one DRT in Bangalore for the whole of Karnataka, which is a fairly big state. Similarly, there is only one DRT in Lucknow for Uttar Pradesh. People find it difficult to come from far away places to attend the hearings, leading to adjournments and delays," said AV Bagur, a lawyer specialising in DRT cases.

In fact, this was pointed out by the Supreme Court in the case 'Union of India versus Debts Recovery Tribunal Bar Association'. The apex court then cited a submission on the need for an increase in these tribunals to reduce the workload of existing ones. The court also observed that the DRTs and DRATs suffer from many constraints including that several recovery officers in these tribunals "do not have a judicial background or are appointed on deputation from those very banks or financial institutions which are filing recovery cases in DRTs, thereby raising serious questions about their independence, impartiality and fairness.

It was suggested by the court that filling up of vacancies for the posts of senior officials be expedited and computerisation of publication of notices and auctions on the website should be explored. The apex court also wanted the government to expeditiously implement the "e-DRT Project" to automate and improve DRT services by building IT systems.