Banks, FIs get LS okay to seize defaulters' assets

NEW DELHI: The Lok Sabha on Thursday passed the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Bill, 2002 by a voice vote. Replying to the debate on the Bill, finance minister Jaswant Singh told the Lok Sabha that a lender''s liability law was in the works and that a ‘Serious Frauds Office’ (SFO) to look into the corporate delinquency will soon be constituted.
Mr Singh underlined the importance of reining in the burgeoning non-performing assets (NPAs) of banks and financial institutions (FIs). “The finance ministry shall constitute the SFO. Significant progress has been made in this direction. We''re in consultation with the law ministry,� he told the House.
Among the lenders, SBI has already invoked the NPA law to seize the assets of a hotel in Nashik, forcing the borrower to agree on a repayment plan. ICICI Bank is expected to move in to take possession of the secured assets of Mardia Chemicals, where the bank has an outstanding of Rs 250 crore, and a few other borrowers. The Bill, apart from paving the way for asset reconstruction companies, will help lenders enforce their security without additional court procedures.
The finance minister maintained that just like the borrowers, lenders too had a responsibility to continue servicing the borrower positively and supportively. “We''re in the process of formulating a lenders'' liability law as the identification of borrowers cannot be subjective and selective. Their selection has to be governed by commercial considerations.�
Mr Singh took the occasion to reassure the MPs that the government will not discriminate while implementing the provisions of the Bill. “They''ll be enforced without fear or favour,� he said, adding, “The finance ministry acts only in the interests of the country. We''ll start with the larger NPAs first, and then move on to others.�
Mr Singh claimed that banks had reported a positive response to the Ordinance, which is now being sought to be replaced by the Bill. “Defaulters had started approaching the FIs that had issued notices to 123 account-holders for a one-time settlement,� he pointed out.
He told the members that the rules concerning the Ordinance had already been notified. “The Reserve Bank of India is in the process of issuing guidelines. Among the 27 nationalised banks, 25 have already issued notices,� the minister disclosed.
He told the MPs that state financial corporations will also be covered under the provisions of the Bill. “Under its provisions, the banks and FIs could also take the help of metropolitan magistrates if necessary for the recovery of the assets,� he said.
As for the contention of the members that its provisions were not sufficiently harsh or were too harsh, Mr Singh sought to assure both points of view, saying that the government was committed to reviewing them constantly.
Members cutting across partylines, including the Congress chief whip PR Dasmunshi and Raghuvansh Prasad Singh of the RJD, wanted the government to bring the defaulters under criminal prosecution as a deterrent to mounting NPAs, saying that these ranged from Rs 70,000 crore to over Rs 100,000 crore. Basudeb Acharya, who moved the resolution opposing the Bill, wanted the Bill to be referred to the standing committee in view of its importance — a contention which was supported by Pawan Kumar Bansal of Congress.
Describing the NPAs as a “loot�, Rupchand Pal of CPI(M) wanted to know whether the government was ready to take stern action against defaulters. He alleged that officials from major defaulting companies were being given public sector posts. “Even in Pakistan, such defaulters are not allowed to hold public office or even contest elections,� he asserted.