| Borrowers often do not honour commitment reached in Lok Adalats. |
Chennai, Nov. 20 Lok Adalats have not proved to be a good means
of effecting recoveries from bad loans, statistics show. The ‘public courts’
have accounted for only 5 to 8 per cent of delinquent loans recovered in
the last couple of years. Also, as the Chairman and Managing Director of
Indian Bank, Mr M.S. Sundara Rajan, observes, borrowers often do not
honour the commitment reached in Lok Adalats.
However, banks have found the mechanism of Debts Recovery
Tribunal and the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest (SARFAESI) Act,
more helpful. SARFAESI empowers banks to recover their
non-performing assets without the intervention of the Court.
A borrower aggrieved by the action of the bank can file an appeal
with DRT and then with the Debt Recovery Appellate Tribunal (DRAT),
but not with any civil court. The borrower has to deposit 50 per cent of
the dues before an appeal with DRAT.
Many bankers have told Business Line that it is easier to
recover small-ticket bad loans, of around Rs 1 crore,
because they are typically backed by securities and borrowers
come forward to negotiate.
On the other hand, the large borrowers are seen to have
sufficient ‘muscle’ and succeed in stalling the recovery process.
In addition to DRTs and the SARFAESI, the 11 registered
asset reconstruction companies that buy off the bad loans from
banks and make the recovery by themselves, seem to have
found favour with banks.
The total amount of financial assets acquired by
these 11 entities rose 25 per cent in the year July 2008-June 2009.
At the end of the period, the total assets with them stood at Rs 51,542 crore.
Source:The Busines line
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