The Hindu : Securitisation Bill passed

Online edition of India's National Newspaper
Wednesday, Nov 27, 2002

Business

Business

Securitisation Bill passed

By Our Special Correspondent

NEW DELHI NOV. 26. Parliament today passed the Securitisation Bill, which ensures against time-consuming judicial intervention when banks and financial institutions (FIs) seek to recover their dues in the form of non-performing assets (NPAs) with corporates.

Commending the Bill for passing by the Rajya Sabha today, the Union Finance Minister, Jaswant Singh, said the Government would soon offer a one-time settlement opportunity for borrowings of less than Rs. 10 crores. The Reserve Bank of India will be issuing detailed guidelines in this regard.

Though a similar experiment last year met with moderate success, Mr. Singh was confident that the renewed offer would evoke a better response. Last time only 19 per cent of the borrowers applied for a settlement but this was in the absence of the securitisation legislation. "We have reason to expect that with the enactment of the legislation, borrowers would now feel more inclined for settlement of outstanding dues. Therefore, it is proper and fair we give them one more opportunity by launching a one-time settlement scheme.''

In response to apprehensions of unbridled power being exercised by the lenders, Mr. Singh agreed that it was necessary for borrowers to behave responsibly and they should meet their genuine requirements adequately and on time. That is why the Government had constituted a panel to examine the lenders' liability provisions in other countries and make suitable recommendations for India. This group has already recommended the introduction of a fair practice code and the RBI will soon issue instructions in this regard. The lenders' responsibility guidelines will be converted into legislation, assured the Finance Minister.

"The Government's intention is not to trouble borrowers, stop trading or industrial activity. Which is why we have offered to introduce the Lenders' Responsibility Bill.'' In a significant observation, he said the Bill can be extended to Unit Trust of India, cooperative banks and non-banking finance companies or any other banking institution by issuing a notification.

Earlier, Mr. Singh said 75 per cent of the defaulters owed up to Rs 1 lakhs while only 7,000 defaulters owed amounts from Rs. 1 crore to Rs. 5 crores. "In sum we are talking of a manageable figure,'' he observed.

If the experience of the Securitisation Ordinance issued in August was any indication, the legislation should be a run-away success. Under the Ordinance, 25 public sector banks issued notices to borrowers for recovering Rs. 3,260 crores. Five FIs also issued notices to 123 borrowers for Rs. 3,600 crores. "The impact of the Ordinance has been positive as a number of borrowers who were issued notices approached then for compliance,'' said the Minister.

Resuming the debate in the afternoon, Prem Chand Gupta (RJD) said apart from fixing accountability of borrowers, "we must identify those who extended these loans in the first place,'' while V. V. Ragahvan (CPI) warned against inviting private sector participation in setting up asset reconstruction companies.

He also urged the Government to deal with wilful defaulters strictly. Vidhutlai Virumbi (DMK) also felt the Government must exercise caution and go slow on privatisation of banks because priority sector lending, especially to the agriculture sector, will suffer.

Printer friendly page
Send this article to Friends by E-Mail

Business