Developing the asian markets for non performing assets developments in india
Sponsored Links
This presentation is the property of its rightful owner.
1 / 15

Developing the Asian Markets for Non-Performing Assets - Developments in India PowerPoint PPT Presentation


  • 95 Views
  • Uploaded on
  • Presentation posted in: General

Developing the Asian Markets for Non-Performing Assets - Developments in India. By Sumant Batra Partner, Kesar Dass B & Associates Corporate Lawyers New Delhi. What is a Non Performing Asset ?.

Download Presentation

Developing the Asian Markets for Non-Performing Assets - Developments in India

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Developing the Asian Markets for Non-Performing Assets- Developments in India

By

Sumant Batra

Partner,

Kesar Dass B & Associates

Corporate Lawyers

New Delhi


What is a Non Performing Asset ?

  • In India, an asset is classified as Non-Performing Asset (NPA) if interest or installments of principal due remain unpaid for more than 180 days.

  • However, with effect from March, 2004, default status would be given to a borrower if dues are not paid for 90 days. If any advance or credit facilities granted by a bank to a borrower becomes non-performing, then the bank will have to treat all the advances/credit facilities granted to that borrower as non-performing without having any regard to the fact that there may still exist certain advances / credit facilities having performing status.


Recent Significant Developments in Law

  • DEBT RECOVERY TRIBUNALS

  • THE COMPANIES (SECOND AMENDMENT) ACT, 2002

  • SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT 2002

  • CORPORATE DEBT RECONSTRUCTING SCHEME


Recovery of Debts Due to Banks and Financial Institutions Act, 1993

The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (DRT Act) enables:

  • The banks and financial institutions to initiate recovery proceedings before the Debt Recovery Tribunals constituted under the DRT Act in various states in India.

  • DRT’s deal with recovery applications by following a summary procedure.


Recovery of Debts Due to Banks and Financial Institutions Act, 1993

  • Once their claim is adjudicated, a Recovery Certificate for the amount found due and payable is issued by Debt Recovery Tribunal.

  • On the basis of the Recovery Certificate, execution proceedings are initiated by the Recovery Officer appointed for facilitating recovery of money under the Recovery Certificate.

  • The DRT Act and the rules and regulations framed there under provide for a self-contained mechanism and procedure for execution of Recovery Certificates


The Companies (Second Amendment) Act, 2002

  • The Companies (Second Amendment) Act, 2002 (Second Amendment) enables:

  • Setting up of a National Company Law Tribunal(NCLT). NCLT will have –

    • The power to consider revival and rehabilitation of companies– a mandate presently entrusted to BIFR under SICA.

    • The jurisdiction and power relating to winding up of companies presently vested in the High Court.


The Companies (Second Amendment) Act, 2002

  • The jurisdiction & power exercised by the Company Law Board under the 1956 Act.

  • The Company Law Board will stand abolished.

  • Various new provisions introduced and amendments carried.


Securitisation And Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

  • Securitisation and Reconstruction of Financial Assets And Enforcement of Security Interest Act,2002 (SARFESI) enables:

    • Enforcement of security interests by secured creditors in movable (tangible or intangible, including accounts receivable) and immovable property without the intervention of court.

    • Establishment of Asset Reconstruction Companies.

    • Securitisation of Assets.


Corporate Debt Restructuring Scheme

The CDR Scheme was sponsored by Reserve Bank of India in 2002. The main features of CDR Scheme are:

  • Legal basis for the mechanism will be provided by Inter-Creditor Agreement. All participants in the CDR mechanism shall have to enter into a legally binding ICA with necessary enforcement and penal clauses.

  • It would be a voluntary system based on debtor-creditor agreement and inter-creditor agreement.


Corporate Debt Restructuring Scheme

  • The scheme will apply to accounts involving multiple banking accounts/ syndication/consortium accounts with outstanding exposure of Rs. 20 crore and above by banks and institutions.

  • The CDR system would only be applicable to standard and substandard accounts, with potential cases of NPAs getting a priority.

  • Till 31 July, 2003, 45 CDR proposals worth Rs 44,204 crore had been cleared.

  • Steel Sector was the biggest beneficiary. The Rs 9,863-crore, Essar Oil CDR cleared in last July is, perhaps, the latest and biggest example.


Some General Observations on the New Laws

  • DEBT RECOVERY TRIBUNALS

  • THE COMPANIES (SECOND AMENDMENT) ACT, 2002

  • SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT 2002

  • CORPORATE DEBT RECONSTRUCTING SCHEME


DEBT RECOVERY TRIBUNALS

  • A failure due to lack of suitable appointments & infrastructure

  • Delay

  • Many gray areas in the law

  • No improvement in recovery


The Companies (Second Amendment) Act, 2002

  • Implementation with same spirit

  • Suspension of proceedings

  • Defective trigger point for reorganization

  • Appointment of suitable judges

  • Training of judges


Securitisation And Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

  • Build infrastructure

  • More Asset Reconstruction Companies to be approved.

  • To balance the law between creditor-debtor.


CORPORATE DEBT RECONSTRUCTING SCHEME

  • Need to make it more participative.

  • Need to provide legal sanctity.


  • Login