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Government considers system to ease loan recoveries

The government is considering putting in place a mechanism that would ensure time-bound closure of legal cases pertaining to non-performing assets, a move that would speed up the recovery process for banks.

business Updated: Nov 20, 2014 02:14 IST
Mahua Venkatesh

The government is considering putting in place a stringent mechanism that would ensure time-bound closure of legal cases pertaining to non-performing assets (NPA), a move that would speed up the recovery process for banks.

Non-performing assets are loans that do not yield returns.

At present, such cases can drag in various courts for several years, delaying the recovery process for banks.

“Recovery process is indefinitely delayed in many cases due to lengthy court procedures and cases and endless adjournments and this is an area the government is focusing on, the aim is to make it time bound,” said a senior government official quoting the Kingfisher Airlines case.

The official added that overall recovery mechanisms must be strengthened to protect the lenders as well.

The issue is likely to be brought up in the review meeting between public sector bank chiefs and financial services secretary, Hasmukh Adhia, to be held on Thursday.

Until now, existing recovery norms including the Sarfaesi Act 2002, which allows lenders to auction all properties of borrowers in case of default, have not given the desired results.

Meanwhile, the government has directed banks to be tough with wilful defaulters. Promoters of companies seeking corporate debt-restructuring are likely to be asked for a list of personal assets and these will be charged to the lending banks to ensure that banks have sufficient collateral to cover their loans in case of defaults.

That apart, banks would have the final authority to change the management of the company that goes in for restructuring. Banks have also been asked to aggressively adopt the “name and shame” policy to make public the list of wilful defaulters.

According to the All India Bank Employees’ Association (AIBEA), Kingfisher Airlines, Winsome Diamond & Jewellery, Moser Baer India, Deccan Chronicle Holdings and Educomp are among the top defaulters.

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