With debt recovery tribunals (DRTs) continuing to clear less than a third of the new cases for loan recovery filed before them by banks, the outstanding debts on which orders are yet to be passed crossed Rs 4,50,000 crore by December 31, 2015. That’s a little higher than gross non-performing assets (NPAs) of banks in the same period.
While the government has just cleared the Bankruptcy Act as a solution to the failure of the DRT process, its efficacy remains to be seen.
This is the third straight year when outstanding DRT orders outstripped gross NPAs. In FY13, by contrast, while the outstanding at DRTs was Rs 1,43,000 crore, NPAs were nearly Rs 1,80,000 crore.
Data from the finance ministry show that while R93,477 crore worth of cases were filed for recovery at the DRTs by banks in FY15, just R32,237 crore of them were disposed of. In the first nine months of FY16, while R88,974 crore worth of cases were filed, just R31,215 crore of cases were disposed of by the DRTs.
Established consequent to the passing of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, to assist the banks in the speedy adjudication of matters relating to recovery of NPAs of R10 lakh and above, the DRTs have been the primary source of bank debt recovery. Appeals against orders passed by DRTs lie before Debts Recovery Appellate Tribunal (DRAT). At present, there are 33 DRTs and 5 DRATs functioning all over the country.
In November 2014, Reserve Bank of India governor Raghuram Rajan had said that although cases before the DRTs should be disposed of within six months, only about a fourth of the cases pending at the start of the year are disposed of during the year, suggesting a four-year wait even if the tribunals focus only on old cases.
Bankers also say that the tribunals have also been giving too much leeway to borrowers who seek regular adjournments. Former State Bank of India deputy managing director (stressed assets management) PK Malhotra had told FE in an interview that apart from the DRTs being saddled with too many cases, borrowers start playing the judicial system by seeking more and more dates.
“So DRTs have not delivered to the extent that the financial system had expected them to deliver,” Malhotra had said.