Lok Sabha approves changes in Debt Recovery Bill

New Delhi: The Lok Sabha today approved an amendment bill to make easier recovery of bad loans by banks amid walkout by the BJP, Left and some other parties after the government rejected their demand for referring it to the Standing Committee.

The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011, which was approved by voice vote in the Lower House, seeks to convert any part of debt into shares of defaulting company by the asset reconstruction Company (ARC).

The Bill was introduced in Lok Sabha in December, 2011. While the opposition demanded that the bill be referred to the Standing Committee for scrutiny, Finance Minister P Chidambaram said when the bill was introduced last year the Speaker decided against referring it to the Parliamentary committee.

Referring it to the committee now would delay the process further, he said, adding the then minister wanted it to be passed without delay as amendments were of technical nature. “The bill was introduced in 2011 and should not be referred (to Standing Committee) now after 12 months…It would defeat the very purpose the bill. In the interest of banking sector, it is necessary to pass the bill in 2012,” he said, adding the move would quicken the process of loan recovery.

On the issue of rising non-performing assets (NPAs) of banks, Chidambaram said the banking sector is well regulated and the gross NPA, which is around 3.5 percent of total loans, was not high and the situation would improve with economic recovery.

Chidambaram said, “Because of stress in economy, several sectors are not doing well. So gross NPAs has risen. Efforts are to ensure that these sectors come out of difficulty. We must do some handholding to them to bring them out of stress.” Dismissing concerns of members that the bill was against farmers and small borrowers, he said the Debt Recovery Tribunal (DRT) law deals with only those persons who had borrowed in excess of Rs 10 lakh.

He said that in order to promote financial inclusion, the banks are opening branches at the rate of 20 per day. Chidambaram said RBI lays down guidelines for ARCs and 64,000 cases are pending before the DRT and that is why it was necessary to limit the number of adjournments to six.

Ideally, he said, these cases should be disposed of in one or two hearings as these are well documented.

Responding to allegations of members that banks refrain from taking actions against large corporates like Kingfisher, Chidambaram said no favour is being shown to anyone and law is taking its own course.

He said tax authorities have taken severe action in attaching property and banks have not given any fresh loan to them. On concerns of allowing 49 percent FDI in ARCs, Chidambaram said permission was given by RBI in 2005 for foreign investment as domestic companies did not have any experience in setting up this business.

PTI