Friday, October 14, 2011

Amendments to SARFAESI Act : BA Prabhakar, Bank of India

Source :14 OCT, 2011, 02.50PM IST : ET NOW -TV Interview

In an interview with ET Now, BA Prabhakar, ED,Bank of India,
 gives his views on the amendments made
 in the SARFAESI Act. 


What is your first take of the amendments and 
how they speed up the process of actually recovering 
bad debts and bringing down NPAs? 

The details of the proposed amendments are not very clear but what we read from the press is that it is more about the procedural issues that are involved in the invoking of the SARFAESI Act. 

We understand that it enables the government to create an electronic registry for all the mortgages created.

 It is also going to simplify the approval process that banks have to obtain from the District Magistrate or the Metropolitan Magistrate before they really go ahead with the action.

 But we do not have the full details about this proposed amendment. 

If you could highlight with an example,
 about how this act which came into place in 2002,
 will really help banks in bringing down their NPAlevels
 and speeding up the process of recovery for bad debts? 

It has definitely helped the banks improve the recovery performance. 

We need to differentiate the NPA recovery in 2 ways. 

One is: If the NPA has to be recovered through sale of securities, then definitely this act has been helpful to the banks. 

But if we are looking to NPA recovery, then we have to wait for the whole environment to improve and the economy to perform better. 

Then only much of the NPAs can be recovered. 

Most of the NPAs fall in the category which are subject
 to the stresses in the economy and what you can recover
 from sale of security is not a very significant portion. 

What we are finding is in many of the recovery actions taken by us, 
we find that the borrowers immediately go to the courts,
 put stay orders, even though banks are allowed as per the act
 to sell the securities. 

So the whole process of vacating the stay will take time. 
So these are some of the bottlenecks which are being streamlined now. 

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