LS hails JPC-recommended Debt Recovery Bill as reform-friendly

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Members in the Lok Sabha today hailed an amendment Bill brought by the government on recommendation from the Joint Parliamentary Committee (JPC) for amending four banking laws with objective of ensuring a good health in the banking sector and facilitate pending banking reforms.
Piloting The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016, Finance Minister Arun Jaitley said the Bill seeks to amend four legislation — Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, The Recovery of Debts due to Banks and Financial Institutions Act, 1993, the Indian Stamp Act, 1899 and the Depositories Act, 1996.
He said SARFAESI Act allows secured creditors to take possession over a collateral, against which a loan had been provided, upon a default in repayment.
This process is undertaken with the assistance of the district magistrate, and does not require the intervention of courts or tribunals’. According to the draft recommended by the JPC, the Bill makes this process time bound, to be completed by the District Magistrate within 30 days. It accords the magistrate power to help banks take over the management of a company, in case it 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 per cent or more in the company. The Act creates a central registry to maintain records of transactions related to secured assets. The Bill creates a central database to integrate records of property registered under various registration systems with this central registry. The Act empowers the Reserve Bank of India to examine the statements of Asset Reconstruction Companies related to their business. The Bill further empowers the RBI to carry out audit and inspection of these companies. The RBI may penalise a company if the company fails to comply with any directions issued by it.

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