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Recovery of bad loans yet to gather speed

Calcutta, May 20: Recovery of sticky assets lying with banks and financial institutions have failed to pick up despite all the brouhaha and enactment of the Securitisation Bill and other legislative and administrative changes. Figures released by the Reserve Bank of India (RBI) show that less than five per cent of non-performing assets of over Rs 110,000 crore have actually been recovered.

All the three means of recovering impaired assets — legal proceedings through debt recovery tribunals (DRT), one-time settlement scheme and action under the Securitisation Act — have had extremely limited success.

The Securitisation Act has lost its sting with RBI restraining banks from disposing of assets seized from defaulters. Though no bank has yet been able to sell seized assets, threatening notices have resulted in recovery of a little over Rs 100 crore so far.

Rakesh Mohan, deputy governor of RBI said, “We are waiting for the Supreme Court to deliver its judgement on the suit filed by Mardia Chemicals to formulate our guidelines on disposal of defaulters’ assets. Till such time, the Securitisation Act may not be of much help.”

The tribunal had its own problems till about a year ago. It did not have proper judges, and even the authority to conclusively dispose of certain matters. Till March 31, 2002, close to 57,000 cases had been filed in DRTs. These involved whopping NPAs of Rs 1,08,665 crore of both banks and financial institutions.

The tribunal managed to dispose of only 23,393 cases by March 31 last year, leading to an aggregate recovery of Rs 4,737 crore — or 4.36 per cent of the amount locked up in litigation. Bankers blame legislative loopholes for the tribunal’s inability to deliver respectable recoveries.

“But now all the 29 units of the tribunal are fully functional. They have proper judges and legislative loopholes have been plugged,” said a spokesperson for RBI.

The one-time settlement scheme has been relatively more successful. Madhukar, chairman and managing director of United Bank of India, says his bank was able to recover substantial amounts.

“The scheme, however, requires you to settle at a discount, which means someone from the bank has to take the responsibility for the deal. What if his decision is challenged later and he implicated' Most bankers would refuse to take such a responsibility on his shoulders. On the other hand, getting all settlements vetted by the board is not feasible,” says a senior banker.

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