The Union Finance Ministry has urged Debt Recovery Tribunals (DRTs) and banks to proactively engage with borrowers outside of formal tribunal settings in an effort to alleviate the backlog of cases. A senior official from the finance ministry, who requested anonymity, shared insights with Business Standard regarding this initiative.
The official highlighted that a significant number of low-value cases are contributing to the congestion within DRTs. “Many small-ticket loans are causing delays; these cases often take years to resolve,” they explained. For instance, if a loan amounting to Rs 30 lakh takes three or four years for recovery, its time value diminishes considerably over that period. The ministry suggests exploring alternative dispute resolution methods like Lok Adalats for settlements, which still fall under DRT jurisdiction and provide an official endorsement. This strategy aims to expedite case resolutions and significantly reduce the burden on DRTs by focusing on smaller claims.
Further elaborating on the issue, the official noted that approximately 75% of pending cases in DRTs involve amounts ranging from Rs 20 lakh to Rs 1 crore. “This range is where we see most delays,” they stated.
In a recent conference held in New Delhi, M Nagaraju, Secretary of the Department of Financial Services (DFS), convened with chairpersons from Debt Recovery Appellate Tribunals (DRATs) and presiding officers from various DRTs. Senior representatives from both public and private sector banks were also present at this meeting.
“Our approach emphasizes maximizing recoveries,” added the finance ministry representative. They indicated that banks should prioritize high-value claims exceeding Rs 100 crore by designating specific DRTs—one each in Delhi, Mumbai, and Chennai—to handle these significant cases exclusively. Although high-value disputes may be fewer in number compared to lower-value ones, they account for a substantial portion of funds tied up within financial institutions.
Currently operating across India are 39 DRTs alongside five DRATs; each tribunal is led by a presiding officer or chairperson respectively.
The finance ministry’s representative further advised banks to rethink conventional recovery strategies due to inefficiencies observed during proceedings at DRTs. “Often after some recovery efforts have been made—whether through court orders or other means—there may be little left for borrowers,” they noted. When residual balances remain unpaid without any assets available for collection, these cases tend to linger indefinitely as financial institutions continue their legal battles over them.
To combat this issue effectively while minimizing case backlogs further down the line—the recommendation was made for banks considering withdrawing such prolonged disputes unless new assets come into play later on; otherwise these matters could remain unresolved unnecessarily long without realistic prospects for recovery.
Recent government statistics reveal alarming figures: as reported on January 24th, 2024 there were approximately 185 thousand pending cases before various tribunals lasting beyond 180 days—with 142 thousand categorized as Original Applications (OAs) while another 42 thousand fell under Securitisation Applications (SAs).
Moreover it was disclosed that overall pending caseload totals around 215 thousand, comprising roughly 162 thousand OAs filed under Section 19 of RDB Act along with about 53 thousand SAs lodged pursuant Section17 SARFAESI Act regulations established back in year two-thousand-two .
“Ensuring adherence towards principles governing natural justice remains paramount within our framework,” emphasized one senior figure involved . “We’ve instructed all relevant parties adhere strictly summary procedures aimed expediting resolutions thereby enhancing operational efficiency.”
Additionally ongoing initiatives focused upon capacity building training programs will continue being prioritized moving forward ensuring necessary resources available support effective functioning throughout entire system .
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