Separately, a set of amendments to the Insolvency and Bankruptcy Code (IBC) is being considered to fix any shortcomings in the law. “These reforms are aimed at expeditious loan recoveries, giving more legal backing to recovery tribunals, and addressing delay tactics by borrowers in the recovery process,” said a government official aware of the developments.
Finance minister Nirmala Sitharaman, in her budget speech in July, had said the government will take steps to reform and strengthen DRTs.
“Additional tribunals will be established to speed up recovery,” she had said.
The changes being considered are based on the proposals of a finance ministry committee.
Addressing Challenges
“One of the recommendations is to give legal backing to recovery notices sent by financial institutions through electronic means, including emails and messages to the registered mobile number of borrowers,” said another official.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act was last amended in 2016.
The government will also look to address legal challenges on the issue of transferring all cases above ?100 crore to the three designated tribunals in Delhi, Chennai, and Mumbai. “That decision has been challenged, and in some cases, the appellants also got a stay. The government may make necessary amendments,” said a senior bank executive.
In 2022, the government issued a notification that all applications involving debt amounts of ?100 crore and above falling under the jurisdiction of DRTs will be handled by exclusive benches in the three cities. The same year, the Bombay High Court had asked the government to make the necessary amendments to give this legal backing.
Earlier this year, the finance ministry, after a review meeting to enhance the efficacy of DRTs, directed banks to conduct periodic reviews of the performance of empanelled advocates and rationalise the assignment of their cases, taking into account their performance. Banks were further directed to ensure the presence of their officers at all the hearings of their respective cases before judicial forums.
According to government data, as of January 21, there were 215,000 cases pending in the DRTs, of which 185,000 cases were pending for more than 180 days.