PRESIDENT PROMULGATES ORDINANCE FOR RECOVERY
OF DEBTS
The President has re-promulgated
the Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Ordinance, 2002. Numbered as
Ordinance No. 3 of the year 2002, it seeks to replace the similar
Ordinance promulgated first on June 21, 2002.
The Ordinance seeks to
deal with three distinct actions in respect of financial assets
held by banks and financial institutions in the form of securitization
of financial assets, setting up of assets re-construction companies
and enforcement of security interest.
The Centre and the Reserve Bank
of India (RBI) have advised banks and financial institutions to
take several steps for recovery of dues by evolving and implementation
of recovery policy, compromise settlements through Settlement
Advisory Committee and Monitoring and follow-up of Non Performing
Assets (NPAs) at various levels in the banks. The banks have also
been advised to use the forum of Lok Adalats for compromise settlements
of their NPAs and guidelines have been issued by the RBI in may
2001 for making use of Lok Adalats to settle disputes involving
outstanding balance in NPA accounts up to Rs. 5 lakhs. Besides,
Credit Information Bureau (CIB) is being set up to disseminate
information on borrowers to the banks.
Meanwhile, the Debut Recovery
Tribunals (DRTs), over a period, registered a substantial improvement
in the recovery of debts due to banks and financial institutions.
The amount recovered through DRTs increased from 752 crores in
1999-2000 to Rs. 1,185 crores in 2000-2001 and to Rs. 2153 crores
during 2001-2002. The size of debts for recovery before DRTs is
of the order of Rs. 1,10,000 crores as against the size of the
Union Budget at Rs. 4,50,000.
