Finance Ministry urges DRTs, banks to expedite loan recovery processes
New Delhi, Sep 22, 2024
FinMin calls on DRTs to engage borrowers in smaller cases outside tribunals to alleviate pendency burden
To address the backlog of cases, the finance ministry has advised debt recovery tribunals (DRTs) and banks to engage borrowers outside the tribunal process, according to a senior finance ministry official who spoke to Business Standard.
“There are numerous small-ticket cases clogging DRTs, contributing to the pendency. We’ve advised both banks and DRTs to mobilise borrowers directly. For example, if a loan of Rs 30 lakh takes three to four years to recover, the time value of money diminishes. If a borrower is willing to settle, we can explore alternative dispute resolution mechanisms, such as Lok Adalats, where settlements can be reached. These settlements still fall under the DRT’s jurisdiction, ensuring an official stamp of approval. This approach could help resolve many cases and ease the burden on DRTs by tackling small-value cases,” the official said.
The official also highlighted the overwhelming presence of low-value cases in DRTs. “The jurisdiction of DRTs starts from Rs 20 lakh. If you examine cases between Rs 20 lakh and Rs 1 crore, you’ll find that roughly 75 per cent of the total pendency falls within this range,” the official added.
Department of Financial Services Secretary M Nagaraju chaired a conference of chairpersons of debt recovery appellate tribunals (DRATs) and presiding officers of DRTs in New Delhi on Saturday. Senior officers from public and private sector banks and the deputy chief executive officer of the Indian Banks’ Association also attended the meeting.
“Our strategy focuses on maximising recovery. We have advised banks and DRTs to prioritise high-value cases of Rs 100 crore and above. Three DRTs — one each in Delhi, Mumbai, and Chennai — have been designated exclusively to handle these cases. While the number of high-value cases may be small, they represent a large portion of the total amount stuck in the system,” the official said.
Currently, 39 DRTs and five DRATs are operational across the country, each headed by a presiding officer or chairperson.
The official further advised banks to reconsider traditional recovery methods. “Often, after recovery officers or banks have recouped some money through other means, borrowers are left with no assets. In these cases, the remaining balance causes the case to drag on as banks continue to contest it,” the official explained.
This extended litigation contributes to the backlog, with minimal chances of further recovery. “When assets are exhausted, banks have been advised to consider withdrawing cases, with the option to refile if new assets are discovered. Otherwise, these cases remain pending indefinitely with no real prospect of recovery,” the official noted.
According to government data presented in a parliamentary reply, as of January 24, 2024, 185,076 cases were pending for more than 180 days before DRTs. Of these, 142,187 were original applications (OAs), and 42,889 were securitisation applications (SAs).
The parliamentary reply also stated that 215,431 cases were pending before DRTs, comprising 162,317 OAs filed under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993, and 53,114 SAs filed under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
“DRTs must uphold the principles of natural justice. We’ve instructed them to adopt summary procedures to resolve cases quickly, which should enhance efficiency. In addition, we are focusing on capacity building and training, and the ministry is committed to strengthening these efforts. Moving forward, we will place even greater emphasis on training to ensure DRTs have the necessary capacity to function effectively,” the finance ministry official added.
CASE FILE
As of January 24, 2024, 185,076 cases had been pending for more than 180 days before DRTs:
142,187 were original applications (OAs)
42,889 were securitisation applications (SAs)
In total, 215,431 cases were pending before DRTs:
162,317 OAs were filed under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993
53,114 SAs were filed under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
[The Business Standard]
