The government is finalising changes to various debt recovery laws to empower banks and other lenders to swiftly resolve non-performing loans, the Economic Times has reported, as concerns grow over the slow pace of these processes and quantum of recoveries.
The proposed changes include enabling special debt recovery tribunals (DRTs) to handle high-value cases and granting legal validity to electronic notices sent by banks.
The government is also look to amend the Insolvency and Bankruptcy Code (IBC) to address existing shortcomings.
"These reforms are aimed at expeditious loan recoveries, providing more legal support to recovery tribunals, and countering delay tactics by borrowers during the recovery process," the report quoted a government official as saying.
Moneycontrol couldn’t verify the report independently.
In her budget speech, finance minister Nirmala Sitharaman said the government would take steps to reform and strengthen DRTs. "Additional tribunals will be established to speed up recovery," she said while presenting the Budget for FY25 on July 23.
The proposed changes are based on the recommendations of a finance ministry committee. One of the key suggestions is to provide legal backing for recovery notices sent by financial institutions through electronic means such as emails and messages to borrowers' registered mobile numbers, another official told ET.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, last amended in 2016, is also under review.
The government is looking to address legal challenges related to transferring all cases above Rs 100 crore to the three designated tribunals in Delhi, Chennai and Mumbai. "That decision has faced challenges, and in some instances, appellants have obtained a stay. The government may implement necessary amendments," a senior bank executive said.
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