Bill to check wilful loan defaults likely in Winter session

Department of Financial Services has set up a panel for suggesting changes in existing laws to make debt recovery more effective

Seeking to deal firmly with wilful defaults in payment of bank loans like Kingfisher, government is planning to come out with a separate Bill on the issue in the next session of Parliament.

"The Finance Ministry is working on draft Bill on wilful defaulters with penal provisions and it is making efforts to table it in the Winter session," sources said.

Stringent action against the wilful defaulters in terms of attachment of properties under Sarfaesi Act (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act), change in management and other legal action against the promoters are being considered to be included in the draft Bill, sources added.

In order to prepare the draft Bill, the Department of Financial Services has set up a panel for suggesting changes in the existing laws to make debt recovery more effective and frame a statute with harsh penal provisions for wilful defaulters.

The members of the panel entrusted to revisit existing debt recovery laws include Former law Secretary V K Bhasin, representatives of DRT, RBI, IBA and bar associations.

The panel was set up to plug the loopholes in the current legal framework for debt recovery.

The committee constituted would suggest amendments in Sarfaesi Act and RDDB Act (Recovery of Debts Due to Banks and Financial Institutions).

Recently, United Bank of India declared Kingfisher Airlines, its promoter Vijay Mallya and three other directors as wilful defaulter citing alleged diversion of funds. IDBI Bank is also considering similar action and is serving out a 15-day notice period on non-payment of dues.

Noting that the rising Non Performing Assets (NPAs) of public sector banks is a matter of concern for the government, Finance Minister Arun Jaitley in the Budget speech had announced setting up of six new Debt Recovery Tribunals at Chandigarh, Bengaluru, Ernakulum, Dehradun, Siliguri and Hyderabad.

"Government will work out effective means for revival of other stressed assets," he had said.

There are over 40,000 cases worth Rs 1.73 lakh crore pending before various courts and Debt Recovery Tribunals. In March 2014, the Gross non-performing assets (GNPAs) in banking system gone up 4.4% from 3.8% of the total assets in the previous fiscal.

The Gross NPA of public sector banks jumped by 39% to Rs 2.16 lakh crore at the end of March 2014 from Rs 1.55 lakh crore in the previous fiscal.

However, Gross NPA in case of private sector banks rose 13.76% to Rs 22,744 crore as compared to Rs 19,992 crore at the end of March 2013.

During 2013-14, public sector banks recovered Rs 33,486 crore against the written-off amount of Rs 34,620 crore.