The Lok Sabha on Monday approved an amendment bill to make easier recovery of bad loans by banks amid walkout by the BJP, Left and some other parties after the government rejected their demand for referring it to the Standing Committee.
The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011, which was approved by voice vote in the Lower House, seeks to convert any part of debt into shares of defaulting company by the Asset Reconstruction Company (ARC).
The Bill was introduced in Lok Sabha in December, 2011.
While the opposition demanded that the bill be referred to the Standing Committee for scrutiny, Finance Minister P Chidambaram said when the bill was introduced last year the Speaker decided against referring it to the Parliamentary committee.
Referring it to the committee now would delay the process further, he said, adding the then minister wanted it to be passed without delay as amendments were of technical nature.
“The bill was introduced in 2011 and should not be referred (to Standing Committee) now after 12 months...It would defeat the very purpose the bill. In the interest of banking sector, it is necessary to pass the bill in 2012,” he said, adding the move would quicken the process of loan recovery.
On the issue of rising non-performing assets (NPAs) of banks, Chidambaram said the banking sector is well regulated and the gross NPA, which is around 3.5 per cent of total loans, was not high and the situation would improve with economic recovery.
Keywords: amendment bill, easier recovery of bad loans by banks, The Enforcement of Security Interest and Recovery of Debts Laws, Amendment, Bill, 2011, convert part of debt into shares of defaulting company, Asset Reconstruction Company, ARC
Comments:
If the bad loans are to be converted in to equity of defaulting company, naturally price of equity in the share market may fall drastically, which shall hamper interest of investors. [2] such conversion requires the approval of stake holders [3] even if LIC /UTI
buys shares of defaulting company prior to conversion, it shall hamper interest of lic /uti& investors
Such a inflated share value of defaulting company shall misguide investors, it shall be like same episode like that of " King fisher Airline"
Whether Banks have exhausted efforts to sale off security offered,
after giving due notice? such a move shall prevent willful defaulters to dupe Banks,
It is unacceptable arguments that all bad loans are due to economy slow down, after restructuring bad loans, borrower has scope to repay loan.
Jugglries are not permanent solutions, it is patch up exercise
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