Modi to set credit discipline in Banks
The ongoing Narendra Modi Government has initiated formulation of laws to secure prudential banking and help effect a culture of credit discipline.
Insolvency and Bankruptcy Code, 2016 (IBC) has been enacted to create a unified framework for resolving insolvency and bankruptcy matters. IBC, by adopting a creditor-in-saddle approach, with the interim resolution professional taking over management of affairs of corporate debtor at the outset, coupled with debarment of wilful defaulters and persons associated with NPA accounts from the resolution process, has effected a fundamental change in the creditor-debtor relationship.
The Banking Regulation Act, 1949 has been amended to provide for authorisation to Reserve Bank of India to issue directions to banks to initiate the insolvency resolution process under IBC. The Fugitive Economic Offenders Act, 2018 has been enacted to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts, provides for attachment of property of a fugitive economic offender, confiscation of such offender’s property and disentitlement of the offender from defending any civil claim.
To make other recovery mechanisms as well more effective, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) has been amended to provide for three months’ imprisonment in case borrower does not provide asset details, and for lender getting possession of mortgaged property within 30 days.
Six new Debts Recovery Tribunals (DRTs) have been established and the minimum pecuniary limit for filing of cases in DRTs has been revised in 2018 from Rs. 10 lakh to Rs. 20 lakh to enable focus on higher value cases in these fast-track tribunals.
