Though armed with a stiff legislation on debt recovery now, the government hopes to lure 60-70 per cent bank defaulters into settling their outstandings with a one-time settlement (OTS) scheme that will be directed at bad accounts worth Rs 10 crore or less.
Dubbing it as “another opportunity for debtors to avoid the hassles from notices and seizures” under the securitisation ordinance, senior banking division officials told FE on Wednesday that Reserve Bank of India (RBI) guidelines for the scheme announced by the finance minister recently are expected by mid-December.
The first OTS offer announced by RBI (that was extended by three months till June last year) applied to dues up to Rs 5 crore. Under that, about 8.87 lakh accounts involving Rs 4,649 crore were settled, but that formed less than 20 per cent of the eligible defaulters, the officials pointed out. In a later scheme launched in December 2001 for accounts up to Rs 25,000, 1.79 lakh cases were settled by March 31, 2002, involving Rs 149 crore.
They attributed the lacklustre performance of the scheme to the fact that there was no compulsion which could be brought to bear on the borrowers. In the current scenario, debtors are being given a choice to come forward on their own before their creditors invoke the new law, they asserted.
The new OTS would cover about 90 per cent of the cases of outstanding dues, and about 60-70 per cent of the total non-performing assets in the system. In fact, cases involving Rs 5 crore or less formed 64 per cent of the NPA accounts, they added.