beginning of the last decade of the 20th century, more than 15 lakhs
of cases filed by the Public Sector Banks and Financial Institutions
(FIs) were pending in various courts of the country involving more
than 6,013 crores of rupees in dues. Such a big amount of funds
locked in litigation prevented its use for national development.
The Banks and FIs encountered grave roadblocks in recovering the
loans advanced and in enforcing the securities charged with them due
to the then existing procedure for recovery of debts.
Way back in 1981, the T. Tiwari Committee had suggested setting up
of Special Tribunals for recovery of dues of the Banks and FIs by
following a summary procedure.
In the wake of economic liberalization and financial sector reforms,
the M. Narasimhan Committee on Financial System had considered
setting up of the Special Tribunals with special powers for
adjudication of such matters and speedy recovery as critical to
their successful implementation.
It was felt desirable to set up Special Tribunals and Appellate
Tribunals for expeditious adjudication and recovery of debts due to
Banks and FIs.
Accordingly, The Recovery Of Debts Due To Banks And Financial
Institutions Act came in 1993, as amended in 1995, 2000 and 2004.
In accordance with the provisions of the Act, Debts Recovery
Tribunals (DRTs) and Debts Recovery Appellate Tribunals (DRATs) were
During the course of time, it was seen that there were no legal ways
and means to facilitate securitization of financial assets of the
Banks and FIs. The recovery of defaulting loans was at a very slow
pace resulting in steadily rising levels of non-performing assets of
Banks and FIs.
The Narasimhan Committee I and II and Andhyarujina Committee
constituted by the Government of India for examining Banking Sector
reforms considered the need for changes in the legal system in
respect of these areas. These committees, inter alia, suggested
enactment of a new legislation for securitization and empowering
Banks and FIs to take possession of the securities and to sell them
with out the intervention of the courts of law.
Acting on these suggestions, The Securitisation and Reconstruction
of Financial Assets And Enforcement of Security Interest Act came in
2002, as amended in 2004.