Debt Act May Be Amended To Protect Adb, Ifc Interests

Move to help multilateral FIs bodies move DRT to recover local dues

The Centre is set to amend the Recovery of Debt Due to Banks and Financial Institutions Act, 1993 to enable the Asian Development Bank (ADB) and the International Finance Corporation (IFC) to approach debt recovery tribunals (DRTs) to recover their dues from Indian corporates.

This measure paves the way for stepped up foreign direct investments by these multilateral financial institutions in Indian companies.

Though both ADB and IFC have made direct investments amounting to a few billion dollars in Indian companies over the last decade, thus far they have not had the benefit of taking recourse to specialised recovery mechanisms that are available to local banks and institutions.

 

With the Reserve Bank of India (RBI) giving the green signal to extending the jurisdiction of DRTs to ADB and IFC, the decks are now clear for amending the Act.

The finance ministry had recently made a reference to the central bank to examine the feasibility of extending the benefits of this Act to these institutions.

As the situation obtains now, IFC can resort to recovery of sticky loans only under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002.

However, ADB does not enjoy even this benefit despite the quantum of investments it has pumped in over the years.

To correct this anomaly, the finance ministry has decided to include both these entities under the RDDBFI Act, 1993.