Business Daily from THE HINDU group of publications
Friday, Oct 12, 2007
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Business Daily from THE HINDU group of publications Friday, Oct 12, 2007 ePaper |
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Money & Banking
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Non-Performing Assets Industry & Economy - SSI SARFAESI Act too harsh on us, say micro units
The threshold limit of the applicability of the Act must be raised to Rs 25 lakh overdues. Notice period must be raised from 60 days to six months. Borrowers should have a right to appeal against seizures under SARFAESI. Our Bureau Chennai, Oct 11 Is the SARFAESI Act being used to ‘shoot sitting ducks’, the small and micro enterprises are asking. When the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) 2002, was brought in, the idea was to recover the Rs 75,000-odd crore of bank NPAs, half of which were of the large companies. But today, while the large borrowers “negotiate” for waivers and rebated repayments, banks seize the assets of micro units, alleges the newly formed All India Micro, Agro, Rural & Small Industries Association. At a press conference here, Mr K.V. Kanakambaram, President of the association, observed that banks found it easy to give a 60-day notice and sell off the hypothecated assets on the 61st day, often for a value well below the market price. Before SARFAESI came in, banks would sit with the overdue borrower and find out his problems and try to rehabilitate the unit. Now, the aspect of trying to rehabilitation is completely gone—banks, armed with SARFAESI, seize assets. Charter of demandsThe association has come up with a charter of demands which it intends to present to the Ministry of Finance. The essential demands are: Raise the threshold limit of the applicability of the Act from Rs 1 lakh (of overdue amount) to Rs 25 lakh; raise the notice period from 60 days to six months; the Ministry of Finance should bring out a White Paper on the implementation and impact of the SARFAESI Act and bring in the promised Lenders Liability Act. It has also said that the Fair Practices Code of the RBI is inadequate and the borrowers should have a right to appeal against seizurea under SARFAESI Act. On the last point, Mr D.E. Ramakrishnan, President, Industrial and Financial Reconstruction for Small and Medium Enterprises, said that a borrower could only file a suit at the Debts Recover Tribunals — not appeal against the bank’s action under SARFAESI Act. Even the suit could be filed only after payment of 25 per cent of the loan amount. No unit will be in a position to pay the amount first and wait for protracted legal battle against banks, Mr Ramakrishnan said. More Stories on : Non-Performing Assets | SSI
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