Finance Ministry note on changes in Sarfaesi law

There are amendments to the relevant laws to help banks recover dues faster in wilful defaults

To deal more effectively with bad issue, the finance ministry has sent a draft note for the cabinet to amend the relevant laws to help banks recover dues faster in wilful defaults.

The draft, by the department of financial services, has gone for inter-ministerial consultation. It proposes amendments in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) and debt recovery tribunal (DRT) laws.

An official said the changes, in the form of Bills, could be introduced in Parliament next week.

The total of stressed assets of the banking system is Rs 8 lakh crore, both restructured loans and non-performing assets (NPAs). The Sarfaesi law was enacted to enable banks to recover NPAs speedily and without intervention of courts.

The DRT will likely be streamlined to shift its processes online and an effort taken to compress the period taken to decide on a case there. “DRT will become country’s the first online court,” finance minister Arun Jaitley had said last month. Secured creditors will get priority under the changes to DRT, said the official.

Jaitely had in the recent Union Budget announced amendments to Sarfaesi for enabling the sponsor of an asset reconstruction company to hold up to 100 per cent stake in the latter, and to permit non-institutional investors to invest in securitisation receipts.

He’d also said DRTs would be strengthened, with focus on improving the existing infrastructure, including computerised processing of court cases.