The central government is planning to restore new laws on loan defaulters thereby making wilful default a serious criminal offence under IPC (Indian Penal Code) as well as giving timelines and defining it to make sure that those who have not repaid bank loans on time will not be able to avail any more loans from banks.
- Apart from this, various other provisions are also planned to be implemented by which lenders such as banks will be able to acquire major stakes of a company in case loan default happens. Under the new rule of RBI for strategic debt restructuring, banks can acquire majority of stakes of a company which has not repaid loans on time but the current legal provisions do not allow banks to acquire more than 30% stakes other than subsidiaries. The rule allows banks to take charge of companies by converting their loans into equity and thereby selling their stakes to another player.
- However, some bankers are in dilemma over whether it is possible to book a defaulter for criminal offence unless the bankers/lenders can establish that the loans have been diverted or some other offences have taken place including manipulation of books of accounts.
- RBI norms allow a bank to classify a borrower as a wilful defaulter if the borrower defaults in repaying bank loans while having the capability to repay the loan or he/she has diverted the funds or has disposed his/her assets which have been kept as mortgage to the bank without the bank’s knowledge.
- In the annual retreat of banks known as Gyan Sangam, the main theme was how to manage risk and recovery of loans. According to some industry sources, discussions took place to bring agricultural lands for commercial loans under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act. This law will help in recovering bank dues. This will duly work for cases in which farm land though has been acquired for a particular project but the loan repayment has not been proper.