Debt recovery bill gets clearance from Lok Sabha

The Lok Sabha on Monday passed the Debt Recovery Bill that will help speedy recovery of bad loans and help banks clean up their balance sheets of stressed assets.

Finance Minister Arun Jaitley introduced the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill in the Lok Sabha incorporating changes pointed out by the Parliamentary Joint Committee. Later replying to the discussions, Jaitley said that while wilful defaulters cannot escape the long hands of the law, those with NPAs will have to be tackled differently.

“Wilful defaulters should be prosecuted but the case with NPAs are different. When the loan is given for right proposes but it is not paid back for reasons such as business cycle adverse, do we paralyse the entire sector for which the loan was granted…?” quipped Jaitley giving the example of steel sector which is facing stress in India and the other states largely due to cheap dumping from China.

Jaitley said the Bill when passed will strengthen NPA recovery laws. Later the Bill was passed after a voice vote.

The Bill seeks to amend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Recovery of Debts due to Banks and Financial Institutions Act, 1993, the Indian Stamp Act, 1899, and the Depositories Act, 1996.

In addition, the Bill empowers the district magistrate to assist banks in taking over the management of a company, in case the company is unable to repay loans.  This will be done in case the banks convert their outstanding debt into equity shares, and consequently hold a stake of 51% or more in the company.