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Govt opposes Act to prevent banks` misuse of Securitisation Law
New Delhi, Sept 05: Government is not in favour of bringing in legislations to prevent misuse of Securitisation Law, which facilitates banks and FIs to speed up recovery of non-performing assets, estimated at about Rs 1,00,000 crore.
New Delhi, Sept 05: Government is not in favour of bringing in legislations to prevent misuse of Securitisation Law, which facilitates banks and FIs to speed up recovery of non-performing assets, estimated at about Rs 1,00,000 crore.
However, the Reserve Bank has come out with a 'lenders liability code' to discipline banks and FIs.
"A lenders liability code has been worked out and RBI has circulated it to banks," Finance Secretary D C Gupta said at the India-Asean Business Summit here today.
Asked whether government was planning to come up with a legislation on lenders liability, he said "no. Not at this moment."
This assumes importance in the wake of India Inc's strong objection to some of the provisions in the securitisation and reconstruction of finance assets and enforcement of Security Interest Act, which allowed banks to take possession of assets of defaulting companies without going through the cumbersome legal process.
Industry had strongly pitched for a lenders liability law to prevent banks and fis from misusing Securitisation Law.
Accordingly, the government had constituted a committee under the Finance Ministry to work out the modalities. RBI recently came out with a code in this regard.
"The Securitisation Law has resulted in reduction of NPAs of banks," Gupta said
NPAs in the banking sector have come down to 4.5 per cent last fiscal from about 6.5 per cent in 2001-02, mainly after the implementation of Securitisation Law.
Banks now target to reduce NPAs to 3.0 per cent this fiscal even if RBI tightens asset provisioning norms in line with international standards.
Bureau Report
However, the Reserve Bank has come out with a 'lenders liability code' to discipline banks and FIs.
"A lenders liability code has been worked out and RBI has circulated it to banks," Finance Secretary D C Gupta said at the India-Asean Business Summit here today.
Asked whether government was planning to come up with a legislation on lenders liability, he said "no. Not at this moment."
This assumes importance in the wake of India Inc's strong objection to some of the provisions in the securitisation and reconstruction of finance assets and enforcement of Security Interest Act, which allowed banks to take possession of assets of defaulting companies without going through the cumbersome legal process.
Industry had strongly pitched for a lenders liability law to prevent banks and fis from misusing Securitisation Law.
Accordingly, the government had constituted a committee under the Finance Ministry to work out the modalities. RBI recently came out with a code in this regard.
"The Securitisation Law has resulted in reduction of NPAs of banks," Gupta said
NPAs in the banking sector have come down to 4.5 per cent last fiscal from about 6.5 per cent in 2001-02, mainly after the implementation of Securitisation Law.
Banks now target to reduce NPAs to 3.0 per cent this fiscal even if RBI tightens asset provisioning norms in line with international standards.
Bureau Report