To tackle the backlog of cases, the finance ministry has advised debt recovery tribunals (DRTs) and banks to engage directly with borrowers, as reported by a senior official to a popular media.

“There are many small-ticket cases clogging DRTs, which adds to the pendency. We’ve suggested that banks and DRTs mobilize borrowers directly. For instance, if recovering a Rs 30 lakh loan takes three to four years, the time value of money diminishes. If a borrower is willing to settle, we can consider alternative dispute resolution methods, like Lok Adalats, where settlements can be reached. These still fall under DRT jurisdiction, ensuring official approval. This approach could help resolve many cases and reduce the burden on DRTs by addressing small-value cases,” the official said.

The official also pointed out the significant number of low-value cases in DRTs. “The jurisdiction of DRTs starts at Rs 20 lakh, and about 75 percent of the pending cases fall between Rs 20 lakh and Rs 1 crore,” the official noted.

On Saturday, M. Nagaraju, Secretary of the Department of Financial Services, chaired a conference with chairpersons of debt recovery appellate tribunals (DRATs) and presiding officers of DRTs in New Delhi. Senior officials from public and private banks, as well as the deputy CEO of the Indian Banks’ Association, attended the meeting.

“Our strategy is focused on maximizing recovery. We’ve advised banks and DRTs to prioritize high-value cases of Rs 100 crore and above. Three DRTs—one each in Delhi, Mumbai, and Chennai—are exclusively handling these cases. While they may be few, high-value cases account for a large portion of the total amounts stuck in the system,” the official stated. Currently, there are 39 DRTs and five DRATs operational in India, each led by a presiding officer or chairperson.

The official also urged banks to rethink traditional recovery methods. “Often, after recovery officers have collected some money, borrowers are left with no assets. This leads to prolonged cases as banks continue to contest the remaining balances,” the official explained.

This prolonged litigation adds to the backlog, with little chance of further recovery. “When assets are exhausted, banks have been advised to consider withdrawing cases, with the option to refile if new assets are found. Otherwise, these cases remain pending indefinitely with no real prospect of recovery,” the official explained.

According to government data provided in a parliamentary reply, as of January 24, 2024, there were 185,076 cases pending for over 180 days before DRTs. This included 142,187 original applications (OAs) and 42,889 securitisation applications (SAs). Overall, 215,431 cases were pending, comprising 162,317 OAs filed under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993, and 53,114 SAs under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

“DRTs must uphold the principles of natural justice. We’ve instructed them to adopt summary procedures to resolve cases quickly, which should improve efficiency,” the finance ministry official added.

We are also focusing on capacity building and training, with a commitment to strengthen these efforts. Moving forward, we will emphasize training even more to ensure DRTs have the necessary capacity to function effectively,” the finance ministry official stated.

Case File

As of January 24, 2024, there were 185,076 cases pending for over 180 days before DRTs:

• 142,187 original applications (OAs)
• 42,889 securitisation applications (SAs)

In total, 215,431 cases were pending before DRTs:

• 162,317 OAs filed under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993
• 53,114 SAs filed under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002