Page 35 - Banking Finance MAY 2017

ARTICLE

was aimed at assisting banks and financial institutions in The Bill provides details of procedures that the tribunals will
recovering outstanding debt from defaulters. follow in case of debt recovery proceedings. This includes
the requirement of applicants to specify the assets of the
Need for Amendments to RDDBFI Act, 1993 borrower, which have been collateralised. The Bill also pre-
Over the years, it has been observed that the DRTs do not scribes time limits for the completion of some of these pro-
comply with the stipulated time frame of resolving disputes cedures.
within six months. This has resulted in delays in disposal, and
a high pendency of cases before the DRTs.Between March Amendments to Indian Stamp Act 1899

2013 and December 2015, the number of pending cases The SARFAESI Act 2002 regulates the establishment and
before the DRTs increased from 43,000 to 70,000. With an functioning of Asset Reconstruction Companies (ARCs). ARCs
average disposal rate of 10,000 cases per year, it is esti- purchase Non-Performing Assets (NPAs) from banks at a dis-
mated that these DRTs will take about six to seven years to count. This allows banks to recover partial payment for an
clear the existing backlog of cases.DRT officers, responsible outstanding loan account, thereby helping them maintain
for debt recovery, lack experience in dealing with such cases. cash flow and liquidity.
Further, these officers are not adequately trained to adju-
dicate debt-related matters. Setting up of ARCs, along with the use of out-of-court sys-
tems to take possession of the collateral security, has cre-
Amendments to the RDDBFI Act 1993 ated an environment conducive to lending. The major con-
cerns related to the functioning of ARCs are limited num-
X The Bill increases the retirement age of Presiding Offic-
ers of Debt Recovery Tribunals from 62 years to 65 years. ber of buyers and capital entering the ARC business, and
high transaction costs involved in the transfer of assets in
X It increases the retirement age of Chairpersons of Ap- favour of these companies due to the levy of stamp duty.
pellate Tribunals from 65 years to 67 years.
X It also makes Presiding Officers and Chairpersons eli- Amendment Bill provides for exemption of stamp duty on
gible for reappointment to their positions. transfer of financial assets in favour of ARCs. This benefit
X This will allow the existing DRT officers to serve for will not be applicable if the asset has been transferred for
longer periods of time for quick resolve of pending cases. purposes other than securitisation or reconstruction (such
as for the ARCs own use or investment).
X The Act now allows banks to file cases in Debts Recov-
ery Tribunals having jurisdiction over the area of bank Consequently, the Bill amends the Indian Stamp Act, 1899.
branch where the debt is pending, in addition to filing
cases in tribunals having jurisdiction over the Impact of Amendment Bill:
defendant's area of residence or business.
In the context of the deterioration in the asset quality of
X The Bill provides that certain procedures under the Act banks, recent amendments made through this Bill propose
will be undertaken in electronic form to save time and a corrective action plan that offers timely revamp of ac-
energy. These include Electronic filing of recovery ap- counts considered to be unviable and prompt steps for re-
plications, summons, documents and written state- covery or sale of assets in the case of loans which are NPAs.
ments; (such as filing them on the DRT website). There will be a spurt in the sale of NPAs by banks to Asset
Reconstruction Companies (ARCs) which can substantially
reduce the NPA portfolio of Banking industries.

Several amendments made to the SARFAESI Act, 2002 will
make it more empowered to resolve the NPA problems
quickly as compared to existing rate at which the cases are
being disposed.All the stake holders including general pub-
lic are very much hopeful of some radical changes in the
reform measures in the Banking sector through these
amendments but only time will say the real impacts if things
are implemented in true spirit. T

BANKING FINANCE | MAY | 2017 | 35

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