Slow legal system hurting debt recovery by PSBs: FM

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Finance Minister Arun Jaitley said Monday a slow and complex legal system may be thwarting the efforts of public sector banks (PSBs) to recover their dues and clean up their balance sheets. A whopping Rs 1.14-lakh crore of bad loans have been written off by 27 public sector banks during financial years 2012-15, with the last fiscal alone witnessing a steep 53 per cent rise in write-offs as part of balance sheet clean-up. For the fiscal ended March 2015, PSBs wrote-off loans amounting to ₹52,542 crore, an increase of 52.6 per cent over the previous fiscal.

Jaitley called for introspection on whether the legal system was supportive of PSBs’ efforts at recovering dues from borrowers. “The biggest challenge for us today is our legal system. Did our legal system act as a hurdle in recovery of bank dues? Every institution should look within on this aspect,” Jaitley said, in his reply to the discussions on the Budget in the Lok Sabha.

The FM also said that India “desperately” needs a “bankruptcy and insolvency code” and hoped the joint committee looking into this code would submit its report soon. In recent years, banks knocking on the doors of debt recovery tribunals were often frustrated by postponement of hearings with borrowers buying time via repeated adjournments. A case in point was the now defunct Kingfisher Airlines, where banks are still struggling to recover dues, mainly due to legal hurdles.

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