Lok Sabha clears key bill to amend Sarfaesi, debt recovery tribunal Acts
In an important step to give banks more teeth to recover bad loans, the Lok Sabha on Monday passed a bill to amend the existing Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, and the debt recovery tribunal (DRT) Act.
The government had introduced the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016 in May. The bill was referred to a joint Parliament committee which submitted its report last month.
The bill, which seeks to amend four laws – the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, the Recovery of Debts due to Banks and Financial Institutions Act, 1993, the Indian Stamp Act, 1899 and the Depositories Act, 1996 -, aims at faster recovery of debt by PSU banks.
The bill empowers banks to take possession of collateral, except for farm land, in the case of loan default.
Finance Minister Arun Jaitley said the new law will empower the Reserve Bank of India (RBI) to examine the statements and any information of Asset Reconstruction Companies related to their business.
The bill further empowers the RBI to carry out audit and inspection of these companies, and the central bank may penalise a company if it fails to comply with any directions issued by it.
The changes in the Sarfaesi Act allow secured creditors to take over collateral against which a loan had been provided, upon default in repayment, and also provides that the process will have to be completed within 30 days by the district magistrate.
Jaitley said, “We should not create this culture where somebody can just take loan and be under an assumption that now it is the headache of the bank, I will sleep well, and bank should be answerable.”
Jaitley said any section of society should know it pretty clearly that “when it takes loans, the loan amount has to be paid back”.
“Nobody can move on the Assumption, whether it is large industry or small industry or MSMEs, that loans will not be given back,” he said while responding to queries in the Parliament.
The bill was passed by a voice vote after the amendments moved by opposition members were either withdrawn or negated. The bill will now go to the Rajya Sabha for its approval.