The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011, which was approved by voice vote in the Lower House, seeks to convert any part of debt into shares of defaulting company by the asset reconstruction Company (ARC). The Bill was introduced in Lok Sabha in December, 2011.
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While the opposition demanded that the bill be referred to the Standing Committee for scrutiny, Finance Minister P Chidambaram said when the bill was introduced last year the Speaker decided against referring it to the Parliamentary committee.
Referring it to the committee now would delay the process further, he said, adding the then minister wanted it to be passed without delay as amendments were of technical nature.
"The bill was introduced in 2011 and should not be referred (to Standing Committee) now after 12 months...It would defeat the very purpose the bill. In the interest of banking sector, it is necessary to pass the bill in 2012," he said, adding the move would quicken the process of loan recovery.
On the issue of rising non-performing assets (NPAs) of banks, Chidambaram said the banking sector is well regulated and the gross NPA, which is around 3.5 per cent of total loans, was not high and the situation would improve with economic recovery. Chidambaram said, "Because of stress in economy, several sectors are not doing well. So gross NPAs has risen. Efforts are to ensure that these sectors come out of difficulty. We must do some handholding to them to bring them out of stress."
Dismissing concerns of members that the bill was against farmers and small borrowers, he said the Debt Recovery Tribunal (DRT) law deals with only those persons who had borrowed in excess of Rs 10 lakh.
He said that in order to promote financial inclusion, the banks are opening branches at the rate of 20 per day.
Chidambaram said RBI lays down guidelines for ARCs and 64,000 cases are pending before the DRT and that is why it was necessary to limit the number of adjournments to six.
Ideally, he said, these cases should be disposed of in one or two hearings as these are well documented.
Responding to allegations of members that banks refrain from taking actions against large corporates like Kingfisher, Chidambaram said no favour is being shown to anyone and law is taking its own course.
He said tax authorities have taken severe action in attaching property and banks have not given any fresh loan to them.
On concerns of allowing 49 percent FDI in ARCs, Chidambaram said permission was given by RBI in 2005 for foreign investment as domestic companies did not have any experience in setting up this business.
Chidambaram said though there are 14 ARCs, only one has FDI of 31 percent.
Nine ARCs have no foreign investment, he said, adding there is a possibility of closing the window of FDI once the country gains experience in asset restructuring.
At present there are 14 ARCs in India, of which 60 percent of the business in handled by ARCIL, which is promoted by the public sector banks.
Referring to the issue of jurisdiction, the Minister made it clear that it would not be possible to take away the writ jurisdiction of High Courts or Supreme Court.
On persistent opposition by parties like BJP, Left and Trinamool Congress, he said, "I have explained everything. Some are satisfied, some are not. But that is life."
Several opposition members, including Chairman of the Standing Committee Yashwant Sinha, demanded that the Bill be refereed to Parliamentary panel for scrutiny.
Members including Shailendra Kumar (SP), Saugata Roy (TMC), Gorakhnath Pandey (BSP) and Gurudas Dasgupta (CPI) too pressed for referring the bill to the Standing Committee.
Most of them regretted that banks act tough with small borrowers while they are lenient when it comes to dealing with large corporate defaulters.
Dasgupta described the amendments as toothless and superfluous and demanded that the government come out with a strong bill to deal with large corporate defaulters like Kingfisher.
Others who participated in the discussion were A Sampath (CPI-M), Pinaki Mishra (BJD), Anandrao Adsul (Shiv Sena) and Raghuvansh Prasad Singh (RJD).
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