Amendments to SARFAESI Act to clear recovery processes: BA Prabhakar, Bank of India

In an interview with ET Now, BA Prabhakar, ED, Bank of India, gives his views on the amendments made in the SARFAESI Act. Excerpts:

What is your first take of the amendments and how they speed up the process of actually recovering bad debts and bringing down NPAs?

The details of the proposed amendments are not very clear but what we read from the press is that it is more about the procedural issues that are involved in the invoking of the SARFAESI Act. We understand that it enables the government to create an electronic registry for all the mortgages created. It is also going to simplify the approval process that banks have to obtain from the District Magistrate or the Metropolitan Magistrate before they really go ahead with the action. But we do not have the full details about this proposed amendment.

If you could highlight with an example, about how this act which came into place in 2002, will really help banks in bringing down their NPA levels and speeding up the process of recovery for bad debts?

It has definitely helped the banks improve the recovery performance. We need to differentiate the NPA recovery in 2 ways. One is: If the NPA has to be recovered through sale of securities, then definitely this act has been helpful to the banks. But if we are looking to NPA recovery, then we have to wait for the whole environment to improve and the economy to perform better. Then only much of the NPAs can be recovered.

Most of the NPAs fall in the category which are subject to the stresses in the economy and what you can recover from sale of security is not a very significant portion. What we are finding is in many of the recovery actions taken by us, we find that the borrowers immediately go to the courts, put stay orders, even though banks are allowed as per the act to sell the securities. So the whole process of vacating the stay will take time. So these are some of the bottlenecks which are being streamlined now. 

Would this in anyway facilitate faster recovery and favourable decisions from the debt recovery tribunal if I can use that term loosely because we see that forms are significant portion of NPAs for the PSU banks as well because we were given to understand that this would help faster auctioning of properties to recover the debts which was not possible in the past, is something like that going to happen?

Yes, it will definitely improve the faster recovery. There is no doubt about it.

This would be by virtue of special courts being set up or more powers being granted in the favours of the lenders which is the banks at the current point of time?

It will be removing some of the procedural bottlenecks which are there in the present provisions.

Currently what percentage of your NPAs are problematic or mortgaged against assets which you think will be helped if you could give us an amount since you gave us the 2 types of NPAs to monitor for recovery, what percentage do you think would get help under this act?

Maybe about 20% to 25% of the NPAs could fall under the securitisation act recovery actions that can happen, about 20% to 25% is what could be there.