Source: News Bharati English02 Aug 2016 10:06:48
New Delhi, August 2: With a view to seek expedite disposal of debt recovery, the Lok Sabha on Monday passed a law empowering banks to take possession of collateral in the case of loan default, except for farm land. "One of the big challenges that we face is with regard to the enforcement of securities and the recovery of debt by financial institutions," Finance Minister Arun Jaitley said moving the Bill in the Lok Sabha, which later passed it by a voice vote. The changes will strengthen the insolvency framework that is being implemented through the Insolvency and Bankruptcy Code passed by Parliament in May.The bill that provides for expeditious recovery of bad loans by the banks, with the government saying the country cannot have a banking system where people take loans and do not repay. The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016, which was passed by voice vote, seeks to amend four laws- the Sarfaesi Act, the DRT Act, the Indian Stamp Act and the Depositories Act.
The changes in the Sarfaesi Act allow secured creditors to take over collateral against which a loan had been provided, upon default in repayment. It also provides that the process will have to be completed within 30 days by the district magistrate.
With an objective to improve the ease of doing business in the country, Finance Minister Arun Jaitley said the banks must be empowered to take effective legal action against defaulters and the insolvency law, securitization law and DRT law are steps in that direction. At the same time, he assured the House that banks will take a compassionate view on education loan defaults but there will be no waiver. "The present law simplifies the procedure by which there will be quick disposal of pending cases of banks and financial institutions by the debt recovery tribunal," Jaitley said.
"The present law simplifies the procedure by which there will be quick disposal of pending cases of banks and financial institutions by Debt Recovery Tribunal," Jaitley said. Pitching for speedier recovery of debt, he said, "We cannot have a banking system where people take loans and do not repay." He said the changes in the law are aimed at simplifying the procedure for quick disposal of pending cases.
According to media agencies, 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. Jaitley said if loans taken are not repaid, the Centre or state budget will have to provide for the waiver. "If loans are to be waived off, someone has to step in. We should not create a culture that I have taken a loan and I can sleep well and banks should be answerable," Jaitley said.