In an in-depth exploration of the measures being taken to address the burgeoning issue of case pendency in Debt Recovery Tribunals (DRTs) across India, noteworthy strategies have been revealed by the Union Finance Ministry, aimed at enhancing efficiency and expediting the resolution of debt-related disputes. The backdrop to this strategic shift involves a considerable bottleneck within the DRTs, accentuated by the rising volume of low-value, small-ticket cases that significantly contribute to the overall pendency of cases. This situation underscores an urgent need for a more streamlined and effective approach to debt recovery in India.
Illustration: Ajay Mohanty
A senior finance ministry official, who opted to remain unnamed, divulged that there’s been an advisory push towards DRTs and banks to foster engagement with borrowers outside the tribunal framework. This move is primarily targeted at overcoming the challenges posed by numerous small-ticket cases that clutch the system, inhibiting the swift administration of justice and the recovery process. For loans around the Rs 30 lakh mark, which typically could span three to four years to recover through conventional DRT proceedings, exploring alternative dispute resolutions like Lok Adalats is seen as a viable solution. Lok Adalats, by offering a platform for consensual settlements, still afford an official sanction by falling under the DRT’s oversight, potentially directing a significant volume of cases out of the DRTs’ docket.
It’s notable that a high concentration of pendency in DRTs pertains to cases within the Rs 20 lakh to Rs 1 crore bracket, accounting for about 75 percent of total DRT pendencies, illustrating the extent to which smaller value claims clog the system. In response to this situation, a conference in New Delhi, steered by M Nagaraju, Secretary of the Department of Financial Services (DFS), gathered chairpersons of Debt Recovery Appellate Tribunals (DRATs), presiding officers of DRTs, and key figures from public and private sector banks, alongside representatives from the Indian Banks’ Association (IBA). The discourse underscored the vital strategy of prioritizing high-value cases, specifically those exceeding Rs 100 crore. A noteworthy decision was the allocation of three specific DRTs—in Delhi, Mumbai, and Chennai—solely for these high-value disputes, acknowledging that while few, these cases represent a substantial portion of the quagmire.
With 39 DRTs and five DRATs operational nationwide, the clarion call for a shift in recovery strategies is audible. Traditional recovery mechanisms often lead to scenarios where, post-recovery actions by officers or banks through various means, negligible assets remain with borrowers, prolonging cases unnecessarily with minimal hope for further recovery. This reality has prompted an advisory for banks to contemplate case withdrawals, with the liberty to refile upon any newfound assets, to mitigate undue pendency and optimize recovery chances.
Government statistics presented in a parliamentary enquiry as of January 24, 2024, highlighted the gravity of the situation with 185,076 cases pending for over 180 days before the DRTs, including a mix of Original Applications (OAs) and Securitisation Applications (SAs). This snapshot demonstrates the enormity of the challenge at hand and the push towards remedial and pragmatic approaches to unclog the bottleneck.
Efforts towards ensuring the principles of natural justice, including adopting summary procedures for swift resolution and ongoing initiatives in capacity building and training, underpin the finance ministry’s resolve to enhance the operational effectiveness of DRTs. The ministry’s forward-looking stance entails a stronger emphasis on training and capacity enhancement to ensure DRTs’ efficacy and responsiveness to the evolving landscape of financial disputes.
In a financial ecosystem as dynamic and complex as India’s, the imperative for efficient, effective, and expeditious handling of debt recovery cannot be overstated. The strategic pivot towards engaging borrowers outside traditional tribunal settings, prioritizing high-value cases, and revising recovery tactics signifies a holistic and nuanced approach to de-cluttering DRTs and ensuring faster resolution of debt disputes. It’s a narrative that promises not just to alter the operational dynamics of DRTs but also to restore faith in the system’s capability to deliver justice swiftly and fairly.
As this intricate tapestry of policies, strategies, and human stories continues to unfold, one thing remains clear: the path to resolving the systemic challenges within India’s debt recovery landscape is through innovation, efficiency, and an unwavering commitment to justice. For more intriguing insights and the latest updates in the world of finance, be sure to check out DeFi Daily News, your premier destination for news that makes you think, reflect, and, perhaps, even chuckle as we navigate the complexities of the financial world together.
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