Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011

The Union Cabinet has approved the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011 and it will be tabled in the next session of Parliament, says a press note issued today October 12, 2011, by the Ministry of Finance.

The banks and financial institutions had been facing numerous problems in recovery of defaulted loans on account of delays in disposal of recovery proceedings. The Government, therefore, enacted the Recovery of Debts due to Banks & Financial Institutions (RDBF) Act in 1993 and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act in 2002 for the purpose of expeditious recovery of non-performing assets (NPAs) of the banks and FIs.

According to Department of Financial Services Secretary D K Mittal, four sections of the RDBF Act, 1993, and six sections of the SARFAESI Act, 2002, will be amended - reports Firstpost.

The proposed amendments is aimed at enabling banks to improve their operational efficiency, deploying more funds for credit disbursement to retail investors, home loan borrowers, etc. without fearing for recovery, thus bringing about equity. Further, mandatory registration of subsisting security interest (equitable mortgages) would promote innovation in credit information. 

The suggested amendments would strengthen the ability of banks to recover debts due from the borrowers, enhance the ability of the banks to extend credit to both corporate and retail borrowers, reduce the cost of funds for banks and their customers and reduce the level of non-performing assets, says the  press note.

The Bill seeks to amend the SARFAESI Act and RDBF Act to strengthen the regulatory and institutional framework related to recovery of debts due to banks and financial institutions.