Foreign Monetary Policy Insights: Indian Trade and Debt Recovery Reforms

Government Moves to Reform Debt Recovery

The government is finalising changes in various debt recovery laws to empower banks and other lenders to quickly resolve non-performing loans. The measures include enabling special Debt Recovery Tribunals (DRTs) to handle high-value cases and granting legal validity to e-notices sent by banks.

Amendments to the Insolvency and Bankruptcy Code

Simultaneously, a set of amendments to the Insolvency and Bankruptcy Code (IBC) is being considered to rectify potential shortcomings in the law. These reforms aim for expeditious loan recoveries, providing more legal backing to recovery tribunals, and tackling delays caused by borrowers in the recovery process.

Future Plans and Implementation

Finance Minister Nirmala Sitharaman, during her budget speech, reaffirmed the government's commitment to reforming and strengthening DRTs by establishing additional tribunals. This initiative is based on recommendations from a finance ministry committee.

Addressing Legal Challenges

One recommendation includes granting legal backing to recovery notices sent by financial institutions through electronic means such as emails and messages to registered mobile numbers of borrowers.

Pending Cases and Tribunal Efficiency

Government data reveals that as of January 21, there were 215,000 cases pending in the DRTs, with a striking 185,000 cases pending for over 180 days, highlighting the need for effective reforms to ensure timely debt recovery.