The Hindu Business Line : `Retain 75 pc upfront payment at Appellate DRT stage'

Discussions on the Securitisation Act are likely to figure prominently at Thursday's meeting of the Finance Minister with the chiefs of public sector banks.

New Delhi , Sept. 8

SEEKING stringent checks against defaulting borrowers attempting to delay the recovery process under the Securitisation Act, the Indian Banks' Association (IBA) has proposed to the Finance Ministry that an upfront payment of 75 per cent of the disputed amount should be retained at the second stage of appeal.

The second stage of appeal lies with the Appellate Debt Recovery Tribunals (DRTs) against orders passed by DRTs.

The proposal has been made as a follow-up to the Supreme Court's judgment that had struck down as "unreasonable" the earlier provision requiring borrowers to make a similar upfront payment of 75 per cent while moving the DRT against recovery action initiated by the lenders.

Under the Securitisation Act, a borrower not agreeing with the action taken by a lender has to first approach the DRT for relief.

IBA feels that making it mandatory to make an upfront payment at the Appellate DRT stage would check against frivolous cases landing up before the court that are filed only with the view to delay the payment of dues.

IBA has mooted the proposal as part of its suggestions to amend the Securitisation Act, formally known as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI).

The Finance Ministry, to which BA had sent its suggestions, has forwarded them to the Reserve Bank of India for its comments. The Ministry would decide on amending the Act only after receiving the comments from the regulator.

IBA has also proposed that the Securities Exchange Board of India (SEBI) should be made the regulator for transactions of securitised debt instrument arising out of the Securitisation Act. Currently, the task falls under the RBI's domain.

The association feels that that making SEBI the regulator for transaction of securitised debt instruments would bring about a structured framework for such deals. It would also help in bringing about a statutory framework for carrying out such transactions.

The Government has also been requested to clearly spell out the role of the DRTs and the Appellate DRTs in handling cases relating to the Securitisation Act that come up before them.

IBA has also suggested that SARFAESI should be amended to allow the facility of appeals to borrowers residing in Jammu and Kashmir where the recovery of debts due to the Banks and Financial Institutions Act (DRT Act) is not applicable.

Discussions on the Securitisation Act are likely to figure prominently at Thursday's meeting of the Finance Minister, Mr P. Chidambaram, with the chief executives of public sector banks.