Iba To Seek Action Plan On Defaulters

The Indian Banks' Association (IBA) has called a meeting of the general managers in charge of recovery and legal cells of all banks to chalk out the action plan for dealing with bank defaulters in the light of the 'Securitisation and Reconstruction of Financial Assets and Enforecement of Security Interest Ordinance, 2002'.

The Ordinance gives teeth to the banks to summarily proceed against wilful defaulters and effect recoveries. Hitherto, the banks had to go through the long-winded legal procedure, which took years on end to conclude.

The IBA meeting will examine issues like the legal complications involved in dealing with the high profile defaulters and find ways on how to take over the property, plant & machinery of the defaulting borrowers.

"Under the new Ordinance, once a borrower defaults the bank can give a 60-day notice period within which he has to make good outstanding dues. If the borrower still fails to pay up then the bank is entitled to seize/take possession of the securities mortgaged to it in the presence of a local magistrate. Then the bank may dispose off (auction)/ transfer/ assign the securities as it deems fit," P Subba Rao, general manager (recoveries), Central Bank of India.

If even after the disposal of securities the dues are outstanding, then the bank can take recourse to the Debt Recovery Tribunal (DRT), he added.

Rao pointed out that property like land, buildings and flats can easily be disposed off but when it comes to plant & machinery banks could find it difficult to find a buyer at the right price. Agricultural land, borrowings upto one lakh rupees and a borrower who has paid up 80 per cent of his outstanding are exempt from application of this ordinance.