B S :Aditi Phadnis / New Delhi Dec 10, 2012, 19:57 IST
Bill seeks to convert any part of debt into shares of defaulting company by Asset Reconstruction Company
A bill to make technical changes in the system of debt recovery was today passed in the form of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011, with Finance Minister P Chidambaram assuring the House that problem of mounting Non Performing Assets (NPAs) of banks was not insurmountable and was certainly not alarming.
However, several members questioned the rationale for the hurry shown by Chidambaram in having the law passed to the extent that the legislation bypassed the Standing Committee on Finance. The BJP led by former Finance Minister Yashwant Sinha walked out in protest.
The bill seeks to convert any part of debt into shares of defaulting company by the asset reconstruction Company (ARC).
Chidambaram said when the bill was introduced last year the Speaker decided against referring it to the Parliamentary committee. Referring it to the committee now would delay the process further, he said,
Trinamool Congress’ Saugata Roy said he had no serious differences with the government on the bill
A Sampath (CPIM) pointed out the misutilisation of public sector financing institutions like NABARD.
Pinaki Mishra (Biju Janata Dal) raised the issue of inefficiency of the public sector banks. “The NPAs of all nationalised banks in India stand at a staggering figure of Rs.1,23,462 crore,” he said.
Critiquing the legislations for their “inefficacy” he said, “There are 67,524 cases are pending before the Debt Recovery Tribunals.” There is just no accountability in the public sector banking institutions he added.
Mishra argued that Asset Reconstruction Companies should be able to pass on debt to one another. “The purpose of SARFAESI was to ensure the expeditious recovery of debts. Therefore, if Section 5 of SARFAESI could be suitably amended and there could be an inter se re-assignment of debt, this could be much more expeditious and efficacious way of settling these issues.
Mishra also said a codified structure was needed by which banks can show complete transparency in their assignment of debts to ARCs.“So far, this has been done in an extremely cloak and dagger fashion which does not inspire any confidence”.
He also said one of the difficulties being faced by the secured creditors under SARFAESI Act is the determination of the priority of debts.
“There is a complication because the State Sales Tax Act always have a provision in their various State enactments that their’s shall be the first charge on the assets. Therefore, on realization of debts, the secured creditors are left high and dry and the purpose of SARFAESI Act is not served” he said. He argued for an in the SARFAESI Act so that it has overrding effect on all statutory dues including Sales Tax, Income Tax, Central Excise so that other secured creditors will have priority in realization of debts, of course, pro rata with workers,” Mishra said
He also pointed out that the Stamp Act is inconsistent across states. “the Stamp Act must be uniform in all the States that have the SARFAESI Act” , he said . Gurudas Dasgupta (CPI) raised the issue of Kingfisher Airlines and lauded the State Bank of India was refusing to lend any more to the ailing airline. In his reply, Chidambaram said no leinency would be shown to anyone.
While conceding that Non Performing Assets of banks had indeed been going up – it was no approximately 3.5% - the Finance Minister said this was a function of the performance of the economy. “Because the RBI is very strict inrequiring the banks to make provision, the net NPA is still only 1.62%. The effort is to ensure that sectors which are under stress are helped to get out of this difficult time and units which are making money, we must recover the loans. Units which are genuinely stressed must be helped.
“I said that there must be some hand-holding in a time of stress so that they all do not become bankrupt or insolvent. They come out of the stress. We have to protect employment; we have to protect jobs; and we have to protect manufacturing. They will come out of the difficulty, once the economy recovers. We are going through a difficult time. And it is this difficulty which is reflected in this rising gross NPAs. But let me tell you, thanks to the RBI, thanks to the strict vigilance, thanks
to the provisions made, the net NPAs are well under control. There is no reason to think that our banking system is in difficulty. In fact, many Members rightly complimented the banking system. When over a thousand banks failed in the United States, not one bank in India failed.…” Chidambaram said.
He was clear that no special favours would be shown to anyone including individual cases referred to by other members, he said. “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. In fact, the Tax Department has taken severe action in attaching those assets. So, no favours are being shown to any one, irrespective of whoever he may be. The law is taking its course”.
Posts
No comments:
Post a Comment