The Hindu Business Line : Lenders may get better deal in amended Securitisation Act

Besides toying with the idea of stipulating a fixed time frame for the appellate courts to dispose of cases, the Ministry of Finance is also considering a mandatory upfront payment of about 25 per cent of the disputed amount by any aggrieved borrower who goes on appeal against action taken by lenders.

The Ministry feels that a 25 per cent upfront payment on appeals would be a "reasonable" amount against the earlier stipulation of 75 per cent that had been struck down by the Supreme Court on grounds of it being "against all canons of reasonableness."

"Some upfront payment is an absolute must to ensure against frivolous appeals. We feel that a level of around 25 per cent of the disputed amount would be a reasonable requirement," a top Finance Ministry official said.

The Finance Minister, Mr P. Chidambaram, had said in his Budget speech that the amendments to both the Securitisation Act and the Recovery of Debt Due to Banks and FIs Act, 1993 (DRT Act) would be proposed to "appropriately address the Supreme Court's concerns regarding a fair deal to borrowers while, at the same time, ensuring that the recovery process is not delayed or hampered."

The Securitisation Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) was enacted to provide lending institutions the powers to proceed with the attachment and subsequent auction of assets of chronic defaulters outside the legal process.

However, lenders could initiate action only after giving a 60-day notice to the borrower to settle the dues. Borrowers could go on appeal but only after making the upfront payment of 75 per cent.

The Supreme Court had struck down the provision of upfront payment as ultra vires of Constitution, though it had upheld the validity of the Securitisation Act.

However, banks and FIs had represented to the Government that having no upfront payment requirement would only flood the appellate court, the Debt Recovery Tribunals, with cases thereby delaying the entire recovery process.

More Stories on : Securitisation | Non-Performing Assets | Budget

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
FMCG sector looks to rain gods

MNCs see surge in free cash flows

First quarter fails to cheer beer companies' sales

Electronics hardware export up 37%: ESC

Lenders may get better deal in amended Securitisation Act

BSNL, pvt cos oppose TRAI access deficit charge plan