Huge build-up of NPAs: Why debt recovery tribunals are in no shape to perform



In 1992, after the Harshad Mehta securities scandal — in which the broker used bank funds to rig up stocks — almost all banks faced a huge build-up of non-performing assets (NPAs).

Various committees recommended that it is necessary to have separate tribunals for recovery of bank dues. The civil procedure code does not apply to these debt recovery tribunals (DRTs). Though the DRT Act was passed in 1993, till 1995 not a single tribunal was established. In 1995, only one tribunal was established in Bengaluru and, subsequently, 38 DRTs and only five debt recovery appellate tribunals (DRAT) have been established in India.

Thousands of bank recovery suits were transferred to DRTs from civil courts. Since inception, the DRTs did not have adequate infrastructure. Looking at the current pile-up of cases, we require at least 200 DRTs and about 25 DRATs. In and around 2002 or so, the government felt that DRTs are not working and therefore The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi) was passed. The same DRTs were given exclusive jurisdiction to attend to appeals under section 17 of the Act.

The tribunals hardly get time to attend to these cases. It is a real tragedy especially in view of the fact that bank gross NPAs have crossed Rs 3 lakh crore. Currently a suit for recovery in DRT takes more than five years. Every day hundreds of appeals are filed at DRTs. As per the DRT Act, a recovery certificate must be issued within six months and appeals to be decided by 120 days; in reality it is only a cry in the wilderness.

There are ways of expanding the DRT system quickly. DRT judges should be chosen from amongst young bank officers, say, holding a position of DGM rank with a law degree. On completion of their term, they should be elevated on priority in banks. The second issue is that of lack of infrastructure such as premises, stenographers, administrative staff, computers and the like. This can be easily solved if each bank provides an area of 5,000 to 10,000 sqft from their buildings. Authorities are aware of this miserable condition in respect of recovery but definitely lack the only reason Recovery of public is being delayed, needs to be addressed at the earliest, otherwise tribunals meet the fate of cases in courts. If a will, there is always a way, but in this case where is the will.