Bankers’ panel to draft law on borrowers’ rights

MUMBAI: To pacify corporate India, which has dubbed the NPA Ordinance as financial Pota, the Finance Ministry has appointed a five-member committee of bankers to draft a new legislation on borrowers'' rights.
This legislation will go in conjunction with the Securitisation and Reconstruction of Assets and Enforcement of Security Interest Ordinance, ‘02.
The committee will draft a bill, which will look into on liabilities of lenders. The committee would be headed by Shekar Agarwal, joint secretary of banking division in the Finance Ministry.
The other members in the committee include Janki Ballabh, chairman of State Bank of India, M R Umarji, former executive director of Reserve Bank of India, R S Loone, deputy general manager of Industrial Development Bank of India and M R Srinivasan, chief general manager of the RBI.
Although the committee does not have a single representative from corporate sector, sources said the bill will be drafted after interacting with borrowers.
Sources said the committee, which was formed on Wednesday, has been asked to submit its report by September 30. The first meeting of the committee is scheduled on Tuesday in the Capital.
The committee is asked to examine the lenders liability law existing in other countries and likewise recommend a bill which would be applicable in India. Bankers could be held responsible if the credit requirement of the borrower is not met or there is a delay in doing so.
The committee will look in various ways of addressing this issue. Sources said that although this will not be at par with Chapter 11, the US Bankrupcy Act, it may mean some respite for lenders who are held liable under the new ordinance on NPA.
The proposed bill will also aimed at speeding up credit delivery mechanism. At present its takes close to three to six months for any project loan to be cleared by a consortium of bankers.
A section of corporates and industry associations has strongly objected to the new NPA bill saying it gives enormous power to bankers.
A secured lenders can sell, lease and even change the management of the defaulting corporate after issuing a 60-day notice. Moreover, the NPA ordinance supersedes the BIFR.