Air cleared over NPA recovery Act

The Cabinet on Thursday approved the proposal to amend the Securitisation And Reconstruction of Financial Assets and Enforcement of Security...

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The Cabinet on Thursday approved the proposal to amend the Securitisation And Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act to enable banks and financial institutions recover bad loans.

Indian banks are estimated to have a bad loan portfolio of over Rs 1 lakh crore. The amendments have been brought in after the Supreme Court directed that banks should give borrowers an opportunity to make a representation before they pass orders and attach properties.

Upholding the constitutional validity of the Act, the Supreme Court had struck down the provisions under 17(2) of the Act mandating defaulters to deposit 75 per cent of the total dues before seeking legal redress.

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Finance Minister P. Chidambaram said the proposed amendments were aimed at dissuading borrowers from adopting ‘‘dilatory’’ tactics and enabling creditors to effect speedy recovery.

The Bill, seeking amendments to the Sarfaesi Act, would replace the Ordinance on the said Act.

Recovery of arrears and cleaning up of the balance sheet has become the need of the hour in the wake of the Basel II norms.