Changes in recovery law to expedite disposal of 70k NPA cases

By: | Published: August 18, 2016 7:45 PM

Far-reaching changes in the loan recovery law will help expedite disposal of over 70,000 pending cases involving more than Rs 5 lakh crore and ease the NPA situation, official sources said.

Indian rupee, rupeeThe amendment law, which received presidential assent on August 16, sets time limit for disposal of debt recovery cases and seeks to improve ease of doing business by ensuring speedier resolution of defaulted loans. (Reuters)

Far-reaching changes in the loan recovery law will help expedite disposal of over 70,000 pending cases involving more than Rs 5 lakh crore and ease the NPA situation, official sources said.

The amendment law, which received presidential assent on August 16, sets time limit for disposal of debt recovery cases and seeks to improve ease of doing business by ensuring speedier resolution of defaulted loans.

The highlights of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 are expansion of definition of security interest, inclusion of debenture trustees and strengthening of asset reconstruction companies (ARCs).

Besides, secured creditors like banks and financial institutions (FIs), ARCs and debenture trustees will get priority over any other dues, including taxation ones of central and state governments or any local bodies, the sources said.

Now, a district magistrate has to decide on applications by banks and FIs within a specific time limit of 30 days.

However, this period may be extended by another 30 days further in exceptional situations for reasons recorded.

The legislation provides stamp duty exemption on loans assigned by banks and financial institutions to asset reconstruction firms.

Around 70,000 cases involving more than Rs 5 lakh crore are pending in Debt Recovery Tribunals (DRT) and the proposed amendments will facilitate expeditious disposal of recovery applications.

The Act also proposes creation of a national database. Currently, security interests created in favour of banks and FIs are registered with the central registry CERSAI.

Now, all secured creditors and taxation authorities issuing attachment orders are enabled to register with CERSAI and this will help in creating a national database of encumbrances on property rights.

The Act, approved by Parliament earlier this month, amends four laws — the Sarfaesi Act, the DRT Act, the Indian Stamp Act and the Depositories Act.

“So far, the laws were in favour of the defaulters. We tried to correct the balance. There should be firmness, coupled with fairness in recovery of loans,” Finance Minister Arun Jaitley had said.

The move assumes significance as it comes against the backdrop of the episode involving liquor baron Vijay Mallya, who owes Rs 9,000 crore to banks, but has left the country to take refuge in England.

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