Bank loan

Bank loan recovery in recent years has mirrored Hindu growth rate -Governance Now

Initially, for those unfamiliar with the nomenclature “Hindu Rate of Growth”, it refers to the slow economic growth of post-independence India until the 1990s when several economic liberalization measures were undertaken . Until the 1990s, the growth rate was around 4%, which accelerated later after the 1990s to 8-9%.

Banks have three major legal avenues for recovering loans. The much talked about bankruptcy code (IBC), creditors direct the enforcement of security under a law called SARFAESI and recovery through special courts called Debt Recovery Courts (DRT). Over the past three years, the percentage of recovery through this DRT mechanism has been as follows:

2017-18: 5%
2018-19: 4%
2019-20: 4%
(Data according to Trend and Progress of banking published by RBI. 2021 data not available at this time)

The recovery of the DRT mechanism is very critical, as the amount at stake is the highest. By way of example, for the year 2020, the amount committed in the various recovery channels is as follows:

DRT: ₹2.45 million lakh
IBC: ₹2.32 million
SARFAESI: ₹1.96 million lakh

In the meantime, based on the instructions in response to a brief query, the Ministry of Finance has solicited comments and suggestions from stakeholders regarding the settlement of cases in DRTs for an amount involving more than ₹100 crore.

The threshold for admitting a case into DRT is ₹20 lakh. However, DRTs also handle high value cases of amounts over ₹100 crore. These high value cases get mixed up with small loans and lose the attention, urgency and criticality they deserve. My suggestion would be to have at least two high value dedicated courts, one in the commercial capital Mumbai and the other in Delhi for the rest of India, to try high value cases above ₹100 crore.

Without going into the details of the processes and technical details involved, the fact remains that the prescribed 180-day deadline must be respected. DRT cases must be settled on time, and the reasons for the delay must be recorded and presented to the Department of Financial Services which oversees the operation of the DRTs. Like IBC, this time frame can be subdivided into various activities like hearing, arguments, judgments, etc., and put into the public domain in a quarterly newsletter, modeled on that set up by IBBI. In fact, it would be a good idea to put DRT oversight in a separate body along the lines of IBBI, instead of keeping it in the Department of Financial Services.

‘Tareekh pe Tareekh’ – This has been the bane of the justice system in general. DRTs are no exception. However, it should be remembered that the primary underlying purpose of summary conviction is to ensure expeditious hearing and disposition of suits where there is no such question of law and limited to matters of non-payment. debts. This procedure is instituted to avoid unreasonable obstacles raised by the defendants in the usual cases. Thus, there should be an extremely limited number of adjournments in exceptional circumstances and the next hearing date should not exceed 15 days.

Needless to add that all the benches of the DRT and the appeal courts called DRAT should be filled quickly. With no manpower, cases go unheard for months and people in one state have to move to another state, which additionally handles the affairs of that state due to the continued vacancy in another state. There are currently 39 DRTs and 5 DRATs in the country. Each DRT/DRAT is managed respectively by a Chairman of the meeting and a Chairman. The office of presiding officer is equivalent to that of a district judge and the office of presiding officer is equivalent to that of a judge of the High Court.

An important aspect that needs to be highlighted is the improvement of the DRT/DRAT infrastructure and the complete computerization of systems and processes, including records, documents and judgments, etc. IT can play an important role in improving the functional efficiency of DRTs and making them accessible and transparent for users.

My personal view is, as stated above, apart from process improvement, what we need is the establishment of two high value dedicated benches in Mumbai and Delhi to handle cases involving ₹100 crore and above . Understand that even a 1% improvement in recovery translates to approx. ₹2,450 crore, and thus any additional expense for creating such dedicated benches can be justified solely from a cost-benefit analysis.

Mishra is a political analyst and commentator.