Amendment in SARFAESI Act. DM has to complete recovery process with in 30 days – new bill 2016

Amendment in SARFAESI Act. DM has to complete recovery process with in 30 days – new bill 2016

The Government has shown its concern over the mounting NPA’s of the Banks which has grown to Rs. 4.37 trillion of bad loans which were Rs. 2.92 trillion a year ago. The flaws & tedious time-consuming recovery process has contributed in the bad loans. In order to make the recovery of the bad debts faster & effective the central government has introduced the bill “The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016” for the better implementation of Sarfaesi Act, 2002.

The changes have been made for faster & speedy recovery as well as transparent system, to tackle the bad loans and to make the recovery process easier. The keys amendments are mentioned herein below:-

1. The bill mandates the DM to complete the recovery process within 30 days. This includes the DM application, DM order, assistance in providing police for taking possession etc.

2. The borrower/debtor has to deposit 50% of the amount of debt due before filing an appeal in DRT.

3. In the case of default by the company, the bill also enable’s the banks/secured creditors to take over the management of the company and the procedure is also laid down.

4. To tackle frauds, the bill creates a central database to incorporate records of property registered under various registration systems and the secured creditors will not be able to take possession of the collateral until they are registered with this registry.

5. The stamp duty will not be charged on transactions commenced for transfer of financial assets in favor of asset reconstruction companies.

6. The RBI has given more powers to audit and inspect ARCs and RBI can also remove the chairman or any director and appoint central bank officials to the board and the penalty has also been increased to Rs. 1 Crore.

7. The bill enables the electronic filing of recovery applications, documents, and written statements. The DRT’s will deal with all insolvency proceedings involving individuals.

Sameer Aggarwal, the banking lawyer of Supreme Laws at Chandigarh, said that execution of the changes will be important and if the changes are implemented in all its seriousness certainly it will reduce the bad loans. We require strong recovery mechanism so that the wilful defaulter cannot escape its liability. It takes a lot of time to take the permission from the DM till physical possession but now the DM has to complete this process within 30 days will bring a lot of changes, he added.