Lok Sabha approves changes in Debt Recovery Bill amid walkout by BJP, Left

NEW DELHI: The LokSabha on Monday approved changes to the debt recovery law that will help speed up resolution of non-performing loans even as the BJP, Left and some other parties staged a walk out demanding the standing committee on finance vet the amendments.


The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011, was approved by a voice vote after finance minister P Chidambaram said sending the bill to the committee would delay it further.

"We have got this Bill finally listed for a debate in 2012 and it is necessary in the interests of the very banking system that everybody was keen to protect that this Bill should be passed now," he said, adding that the changes were technical in nature but necessary to address the issue of rising non-performing assets (NPAs).

The Bill seeks to amend two laws-Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act of 2002, and the Recovery of Debts Due to Banks and Financial Institutions Act of 1993.

The amended law will allow the lenders to convert fully or in part their loan to a stressed entity into equity, helping lenders provide relief to stressed borrowers from high interest payments.

"Because of stress in the economy, several sectors are not doing well. So, gross NPAs have risen. Efforts are to ensure that these sectors come out of difficulty. We must do some handholding to bring them out of stress," Chidambaram said, urging that the Bill be passed by the house. He said that when the Bill was introduced in December 2011, the speaker had decided against referring it to the standing committee on finance.



Chidambaram said that though gross NPAs had risen to around 3.5%, it was not too high for an emerging economy like India and he expected the situation to improve. The net NPAs are pegged at 1.62%, the finance minister told the house. He also sought to allay the concerns that the Bill undermined the interests of farmers and small borrowers.

"SARFAESI Act does not apply to a loan which is less than Rs 10 lakh. The Debt Recovery Act does not apply to loans of less than Rs 10 lakh," the finance minister said. Chidambaram clarified that the government was not showing any favours to a large corporate.

"A particular case was mentioned, where there was a huge NPA; the strictest action is being taken by the banks, in asking them to put up the money upfront before any kind of accommodation can be given; no fresh loans are being given," Chidambaram said replying to charges that the government was favouring Kingfisher Airlines.

The amended law limits the number of adjournments to a maximum of six to ensure faster resolution of cases pending before tribunals.