Foreclosure India Blog

Amid all the hype and popularity of taking over the management of the affairs of the Corporate Debtor under the Insolvency And Bankruptcy Code, 2016 (IBC), a NAVRATNA enterprise has become the first company in India to take over management of a debtor under provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI).

As many as 27 public sector banks, including SBI and its five associates, in 2016-17 have written off Rs81,683 crore, 41% higher than the previous fiscal

Dismissing appeals filed by around 60 companies, the Supreme Court on Wednesday upheld the amendment to the Securitisation Act that gave power to every financial institution to decide a period after which a bad loan can be declared as a non-performing asset (NPA). Before the 2004 amendment to the Securitisation Act and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (Sarfaesi Act), RBI was the regulator for the banking, non-banking and securitisation institutions for deciding the period after which loans could be treated as NPA. Till 2004, RBI had set the NPA period for banks at 90 days and at 180 days for NBFCs.

Calcutta, March 8: Non-bank finance companies (NBFCs) have welcomed the Centre’s decision to allow access to the Sarfaesi Act, which facilitates the recovery of non-performing assets without court intervention. Sarfaesi, or the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, enables banks to expedite recovery and improve credit behaviour. The NBFCs registered with the RBI and having an asset size of Rs 500 crore and above (considered as systemically important) will be eligible to access the provisions of the act.

That is the amount of bad loans waived in last three financial years, more than the write-off in the previous nine. Twenty-nine state-owned banks wrote off a total of Rs 1.14 lakh crore of bad debts between financial years 2013 and 2015, much more than they had done in the preceding nine years

India’s 29 state-owned banks have written off a total of Rs 1.14 lakh crore between 2012-13 and 2014-15, a sum large enough to build more than 10,000 km of highways. The Indian Express reported on Monday that “twenty-nine state-owned banks wrote off a total of Rs 1.14 lakh crore of bad debts between financial years 2013 and 2015, much more than they had done in the preceding nine years.”

MUMBAI:The government has thrown new rules at state-owned banks, nudging them to salvage their junk loans, which have strained balance sheets and re-priced stocks of several lenders.The finance ministry, concerned that a mountain of loss assets could call for bigger fund infusion into banks, has stepped in as the junk loan market has been at a standstill since last year.

Report said the move is credit-positive for NBFCs with a retail focus, especially those which are in the mortgage space. Domestic rating agency Icra has said the decision to extend provisions of the Sarfaesi Act to loans given by non-banking finance companies will help bring down delinquencies and may result in cheaper funds for borrowers. “The access to the Sarfaesi Act will strengthen NBFCs’ ability to contain life-time losses,” the rating agency said in a weekend note after the finance ministry decided recently to extend the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act 2002 to non-banking financial companies (NBFCs) with over Rs 500 crore in assets.

The Reserve Bank of India on Thursday expanded the market for banks’ stressed assets by permitting them to be sold to other lenders, including non-banking financial companies and financial institutions. The central bank also issued guidelines specifying that all assets classified as doubtful should be reviewed by the board of banks or a committee of board members.

Though banks have been making serious efforts to reduce their non-performing assets through various legal channels, the amount recovered by scheduled commercial banks (SCBs) in 2015-16 at ₹22,768 crore was 26 per cent lower compared with ₹30,792 crore in the previous year, the Reserve Bank of India said. The legal channels that banks resort to for reducing NPAs include Lok Adalats, Debt Recovery Tribunals (DRTs) and invocation of SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act).