Easier, faster loan recovery for banks soon

Banks will soon be able to recover loans faster from errant borrowers; the cabinet has cleared two amendment bills. The move will also help financial institutions reduce their non-performing assets (NPAs); it will also release funds for home, retail or corporate credit needs, and at the same time, protect borrowers' rights.

The Cabinet approved the introduction of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011, in the winter session of Parliament.

Effectively, the new Bill could bring down lending rates for retail as well as corporate loan.

One key provision among the suggested changes relates to mandatory registration of subsisting security interest (equitable mortgages). This will have to be done within 30 days of the transaction with the Central Registry. It should promote innovation in credit information by banks.

A government communiqué said, "The proposed amendments would enable banks to improve their operational efficiency, deploy more funds for credit disbursement to retail investors, home loan borrowers, etc without fearing for recovery, thus bringing about equity."

The bill will amend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act and Recovery of Debts due to Banks and Financial Institutions (RDBF) Act.