The Hindu Business Line : Bankers upbeat about better asset recovery

BANKERS have welcomed the Supreme Court judgement upholding the constitutional validity of the Securitation Act, even if it has provided some respite to defaulting borrowers by annulling Section 17(2) of the Act as unconstitutional.

Earlier, the provision made it obligatory for companies to deposit 75 per cent of the defaulting amount with the court, if they appealed against the order of attachment of their assets under the Sarfaesi Act.

While some industry watchers are of the view that withdrawing this provision will lead to a flooding of appeals in the DRTs, others feel that the Supreme Court's decision on Thursday has at least in part met with bankers expectations.

``Now, we can at least talk to defaulters from a point of strength, while earlier they would not take us seriously because there was so much ambiguity about the Act,'' said Mr P.S. Shenoy, Chairman and Managing Director, Bank of Baroda.

This development has to be viewed positively even if all our expectations weren't met entirely, with regards to the provision on appeals. At least with the upholding of the Act, banks now have the right to seize and sell assets, where earlier they had to file a suit even when they wanted to seize the asset. Some may go for appeals, but some may not, he said.

Speaking to Business Line, Mr Rathnakar Hegde, Execuitive Director, Union Bank of India, said, ``The validity of the Act which was questioned, was upheld today and that is a major positive development for the banking sector. By withdrawing the provision pertaining to the appeal, there will be more appeals in the future. But even then the cases will have to be decided as per the Act.''

Mr H.N. Sinor, Chief Executive and Secretary, Indian Bank's Association, said, ``This is a very positive development for bankers, much awaited. It will hasten the process on the recovery front for banks. This itself will also act as a deterrent for errant borrowers. These days there is also a lot of corporate interest in acquiring sick industrial units. With the Asset Reconstruction Committee also active, the Supreme Court judgment is very timely. ``Aside from this, the decision by the CVC to limit its jurisdiction to officers of Scale V and above in public sector banks, is also a positive thing that will help enhance lending operations of banks, where officers can now be free to take commercial decisions without fear. These two together are two very encouraging developments for the banking industry today.''

More Stories on : Non-Performing Assets | Securitisation | Courts/Legal Issues

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