Debt Recovery Tribunal - A ray of hope against NPA's - Seeker's Thoughts

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Tuesday, 11 September 2018

Debt Recovery Tribunal - A ray of hope against NPA's

Introduction: Debt and NPA


India has been facing non-performing asset's problem since last few years. Non-performing assets are the assets when the borrower stops paying interest or principal on a loan, the lender will lose moneyIndian banking industry is seriously affected by Non-Performing Assets.

As a result, to solve the debt crisis of the banks and other financial institutions quickly and efficiently, Indian government constituted 33 Debt recovery Tribunal and 5 debt recovery Appellate.

The Debt Recovery Tribunal

Debt Recovery Tribunal or DRT is a special court which deals with the cases of defaulting firms. It tries to forge a compromise formula between debtor and creditors . CDR is one such formula. As a last Resort it may order the winding up of defaulting firms.

No bank or financial institution, or consortium of banks or financial institutions can approach the debt recovery tribunals if the amount due is less than 20 lakhs. 
Setting up of Debt Recovery Tribunal is dependent upon the volume of cases. Higher the number of cases within a territorial area, more Debt recovery tribunal would be set up.
Each Debt Recovery is presided over by a presided over by a presiding officer. The presiding officer is generally a judge of the rank of dist.& Session Judge. Each debt recovery Tribunal has two recovery officers.

Ruling of DRT-The debt recovery tribunals are governed by provisions of the recovery of debt due to banks and financial institutions act 1993, also popularly called as the RDB Act. Thus, DRT are statutory bodies. Rules have been framed and notified under the Recovery of Debts due to Banks and financial institutions Act 1993
Dispute Redressal- Banks approach DRTs for disputed loans above Rs 20 lakh. The DRTs are expected to resolve the cases within 6 months.

A debt recovery presided over by a presiding officer who is appointed by central government. And who shall be qualified to be a district judge; with tenure of 5 years or the age of 62, which is earlier.

No court in the country other than supreme court and high court and that too, only under article 226 and 227 of the constitution have jurisdiction over this matter.

Recent issues related with DRTs
 The leading issue related with debt recovery through DRTs is the slow process of resolution (settling debts and finding end to defaults). Like several other debt recovery mechanisms, the DRTs are slow to work out on pending disputes. Nearly 93000 cases are pending in front of all the DRTs in the country at the end of 2016. The World Bank estimated that it took 4.3 years on average in India to resolve insolvency under the old laws, more than twice as long as in China. Similarly, the average recoveries were just 25.7 cents on the dollar in India. This is one of the worst among the similar economies

A way ahead- Debt Recovery Tribunal
NPAs story is not new in India and there have been several steps taken by the GOI on legal, financial, policy level reforms. In the year 1991, Narasimhan committee recommended many reforms to tackle NPAs. 
Debt Recovery Tribunal would help to solve high debt cases in a short time period. However, government should ensure banks and financial institutions that this debt recovery tribunal will work with transparency and corruption free with proper frame work. 



The number of DRTs are small given the increasing number of cases, so government should consider the increase in numbers. Delaying of the cases should be low, and there should be appointments on time.