Rajya Sabha passes the Bill to ease debt recovery

The Dollar Business Bureau

The Upper House of the Parliament has passed a Bill, which provides for amendments in four separate Acts in order to speed up the disposal of applications related to debt recovery, and will also complement the bankruptcy law, The Insolvency and Bankruptcy Code, which was passed in May.

The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016, amends four Acts namely, the Indian Stamp Act of 1899, the Recovery of Debts due to Banks and Financial Institutions Act of 1993, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act of 2002, and the Depositories Act of 1996. The Bill had been passed by the Lok Sabha, earlier this month.

“We cannot have a culture where somebody just takes loan and is under the assumption that it will now be the headache of the banks to recover the money, and banks should be answerable,” Finance Minister Arun Jaitley said in a reply to the discussion in Rajya Sabha on the Bill.

In case of default of a loan, the Bill permits the secured creditors to take control of the loan security, under the SARFAESI Act along with the support of the district magistrate (DM).

It has been provided in the Bill that 50 percent of the loan has to be submitted for filing an appeal. The Bill also has the provision for Reserve Bank of India’s oversight over ARCs (asset reconstruction companies). A 30-day timeframe has been fixed in the Bill for DM to finish the given process and DM will also provide assistance to the lender for taking over the company if the lender has held over 51 percent stake in the company by converting debt into equity.

“The Bill will simplify the process through which speedy disposal will take place of the pending cases of financial institutions and banks by the debt recovery tribunal,” Jaitley said.

The main aim of the law is to give authority to the banking system lawfully and expeditiously, he added.