Page 30 - Banking Finance January 2018

COVER STORY

ENFORCEMENT OF

SECURITY INTEREST AND

RECOVERY OF DEBTS LAWS

AND MISCELLANEOUS

PROVISIONS (AMENDMENT)

ACT, 2016

Higher prescription to 'Recover' from

'Distressed Assets'

Introduction to give the desired outcome, resulting in the bad debts of
Banks and FIs mounting day by day. As the level of distressed
Non performing asset (NPA) is one of the major concerns
assets within the Indian banking system reached an alarm-
for scheduled commercial banks in India . Banks have been
ing level, Asset Reconstruction Companies (ARCs) emerged
reeling under pressure due to the rising bad loans affecting
their bottom line. It is necessary to trim down NPAs by as an important resolution mechanism. However , ARCs also
utilizing various recovery mechanism to improve the finan- could not able to make much headway in dealing with
cial health of the banking system and also economy. Gov- distressed assets .Flaws in the existing recovery process have
ernment and RBI had put in place and enacted various contributed to the problems of bad loans.
recovery mechanism such as The Recovery of Debts due to
In order to facilitate quick disposal of recovery applications
Banks and Financial Institutions Act, 1993 (RDDBFI Act) and
the Securitization and Reconstruction of Financial Assets and and thereby speed up the recovery process, Government has
Enforcement of Security Interest Act, 2002 (SARFAESI Act) initiated steps to amend the RDDBFI and SARFAESI Acts and
also to make consequential amendments to the India Stamp
,LokAdalat , for expeditious recovery of bad loans of banks
Act, 1899 and the Depositories Act, 1996. Coming on the
and Financial Institutions (FIs).
heels of the enactment of the Insolvency and Bankruptcy
However, due to various reasons, these laws were unable Code 2016, these amendments aims to improve ease of
doing business and facilitate investment leading to higher
About the author economic growth and development.

M. Ramamoorthy The changes are aimed at a faster and more transparent
BE(Mechanical), CAIIB, MBA (Banking
Finance), F.I.V system to tackle the bad debts in the banking system by fast-
Senior Manager (Faculty- Credit Discipline ) tracking the recovery process for banks and other financial
Union Bank of India Staff College institutions and making it easier for asset reconstruction
Bangalore companies (ARCs) to function. The government is hoping

30 | 2018 | JANUARY | BANKING FINANCE

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