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L.N. Revathy

Coimbatore , Sept. 29

THE response to RBI's third OTS (one-time settlement) offer has evoked poor response. With just a day left for the receipt of applications under the scheme, most bankers concede that it had made `no special impact' this time.

Bankers lament that a majority of the defaulters see this as a recurring one and think that by postponing their commitment they stand to benefit.

Bankers allege that the borrowers prefer to take legal recourse to make the banker accept their offer of paying `nothing more than the balance outstanding' in their account, contending that the RBI's guidelines were `statutory in nature and as such the bank could not further negotiate on the offer made'.

Their contention is based on a Supreme Court decision, wherein it is held that `circulars issued by the RBI under Section 21 or 35 of the Banking Regulation Act are statutory in nature and are to be complied by the banks'.

It may be noted that section 21 of the said Act relates to the power of the apex bank to control advances by banking companies.

Further, an anomaly appears to have crept in, as RBI, in its revised guidelines `for compromise settlement of chronic non-performing assets (NPAs) of public sector banks' offered to provide a `simplified, non-discretionary and non-discriminatory mechanism' in settlement.

Explaining the present situation, Mr R. Ravikumar, Manager (Law), Central Bank of India, told Business Line that the defaulters' contention on `settlement of outstanding dues' was misplaced this time.

He pointed out that the Karnataka High Court, in a recent judgement held that the OTS guidelines of RBI were not issued under section 21 or 35 of the Banking Regulations Act and was therefore not statutory in nature.

Taking cue from this order, DRAT (Debt Recovery Appellate Tribunal) Chennai negated the contention made by Raghavendra Theatre, Bangalore on the settlement issue. ``There is no question of a compromise settlement, if an offer cannot be negotiated,'' argue bankers. They further point out that banks do discriminate its constituents and use discretion based on facts and circumstances of each case, especially in arriving at a settlement.

DRAT has said the OTS was being effected only for quick realisation of the amount and matters compromised.

``After effecting compromise, if the defaulter drags on for a number of years without making any payment as per the compromise effected, it is no longer open to the defaulter to contend that only as per the compromise the bank must receive the amount. In such instances, the default clause has to be invoked and the compromise would have to be treated as broken. After committing the default, the borrower is not at all entitled to contend that the bank must accept only that amount. If the defaulter's contention is accepted, the banking policy for lending money would be adversely affected and with it the depositor's and public interest would suffer to a great extent,'' the DRAT ruled.

Meanwhile, it is reliably learnt that some of their banks have chalked out their recovery schemes, and the response is `positive'.

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