E-notice provision, other amendments to SARFAESI, DRTA in pipeline to streamline debt recovery

By Vishu Adhana
New Delhi [India], March 19 : The Ministry of Finance has constituted a committee to determine further amendments to the SARFAESI and DRT Acts, including providing legal cover to e-notice for expeditious debt recovery, sources in the ministry said.
The committee held several meetings and discussions are in the "advanced stage," sources told ANI.
Last month, the finance ministry held extensive discussions with the top brass of banks and debt recovery tribunals regarding amendments to the SARFAESI and DRT Acts.
The centre has undertaken several amendments to the SARFAESI Act over the years.
During the last five financial years, Rs 1,51,428 crore has been recovered by Scheduled Commercial Banks (SCBs) through SARFAESI, sources said.
"We have formed a committee led by the Additional Secretary to determine amendments. The aim is to make the (debt recovery) process less tedious and streamline it. We are planning to introduce a provision on e-notices, which will give legal provision to e-notices. So that SMSs and emails sent by banks can be considered as notice, this will help in making the process less tedious and fastrack the recovery of debt," sources said.
"The committee has met four times and they are in an advanced stage of discussion," sources added.
The Debt Recovery Tribunals (DRTs) Act was enacted in 1993 to provide a legal framework for the expeditious adjudication and recovery of debts due to banks and financial institutions.
However, the efficacy of this legislation in expediting debt recovery proved to be limited. As a result, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act was enacted to address these shortcomings and provide a more robust framework for debt recovery.
The sources said asset quality has improved in recent years with the gross NPA ratio of Scheduled Commercial Bank (SCBs); declining to 3.87 per cent (USD 5.71 lakh crore) on March 23 from 4.28 per cent (73.23 lakh crore) in Mar 2015 and from a peak of 11.18 per cent (710.36 lakh crore) in Mar 2018, sources informed.
Meanwhile, net NPAs of SCBs have declined to USD 1.36 lakh crore (0.95 percent) in March 2023 from 22.31 lakh crore (3.13 per cent) in March 2014 and from a peak of USD 5.2 lakh crore (5.94 percent) in Mar 2018.
Resilience has increased with the provision coverage ratio (PCR) of SCBs increasing from 49.3 per cent in Mar 2015 to a healthy 90.9 per cent in March.
During last month's meeting chaired by Vivek Joshi, Secretary of the Department of Financial Services (DFS), banks were told by the Finance Ministry to conduct a periodical review of the performance of empanelled advocates at debt recovery tribunals (DRTs) and rationalise the cases assigned to them based on performance.
The meeting also discussed that DRTs and DRATs would take all possible steps to reduce pendency at various stages through strict monitoring.
Banks have also been directed to ensure the presence of their officers at all the hearings of their respective cases before judicial forums.