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Securitisation Bill passed as Jaswant offers one-off scheme

Parliament on Tuesday passed the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Bill, 2002, with the Rajya Sabha approving it after Finance Minister Jaswant Singh announced a one-time settlement scheme for loan defaulters who had borrowed upto Rs 10 crore (Rs 100 million) from public sector banks.

The Lok Sabha had passed the Securitisation Bill last week and the Rajya Sabha unanimously passed it with voice vote on Tuesday after two days of discussion.

Replying to the debate, which witnessed members across the board supporting the bill, Singh announced a new one-time settlement scheme for defaulters who had borrowed upto Rs 10 crore (Rs 100 million) from public sector banks.

The detailed guidelines of the scheme would be announced by the Reserve Bank of India very shortly, he added.

The new scheme is to be patterned along a similar one-time settlement offer for non performing assets made by the Reserve Bank of India in July, 2000.

However, while the ceiling in that scheme, which was in operation till June 30, 2001, was Rs 5 crore (Rs 50 million), the cap in the new scheme is being pushed upto Rs 10 crore (Rs 100 million), the finance minister said.

Singh said the response to the earlier scheme was ''moderate'', with 900,000 people accounting for 19 per cent of the borrowers and over Rs 3,000 crore (Rs 30 billion) in borrowings approaching the banks to avail of the one-time settlement offer.

He expressed hope that the new scheme would elicit a better response, especially in the light of the new legislation which makes it easier for banks to sell and dispose off their non-peforming assets without getting mired in long drawn-out judicial proceedings.

''I have reason to expect that with the enactment of this legislation, borrowers will now feel more inclined to settle outstanding dues,'' Singh added.

Earlier, replying to a range of concerns raised by the members, the minister assured them that the rules and regulations would be formulated in such a manner that the bill was implemented in a most transparent and effective way.

The Securitisation Bill will replace a Presidential Ordinance promulgated in June and then re-promulgated in August this year.

While passing the bill, the Rajya Sabha rejected, also by a voice vote, a statutory resolution moved by Kapil Sibal (Congress) on Monday, disapproving the ordinances.

Singh said that after the promulgation of the ordinance, 25 banks had issued notices to about 10,000 defaulters who owed more than Rs 3,000 crore (Rs 30 billion). Similarly, five financial institutions had issued notices to 123 defaulters owing about Rs 3,600 crore (Rs 36 billion).

Giving a break-up of the outstanding dues, the minister said 49 per cent of the NPAs were accounted for by about 7,000 borrowers who had taken loans of amounts ranging between Rs 1 crore (Rs 10 million) and Rs 50 crore (Rs 500 million).

About 17 per cent of the outstanding dues were owed by 7.5 million borrowers, who had taken loans of less than Rs 1 lakh (Rs 100,000) each.

Twelve per cent of the defaulters had taken loans ranging from Rs 1 lakh to Rs 10 lakh (Rs 1 million). Fourteen per cent of the defaulters had taken loans from Rs 10 lakh to Rs 1 crore, while six per cent (numbering only 56 borrowers) had taken loans of above Rs 50 crore each.

Replying to several issues raised by the members, Singh said the declaration of wilful defaulters was not going to be arbitrary or subjective decisions of the bank management.

There were well defined RBI guidelines on what constituted wilful default. Also, nearly 7.5 million people, accounting for nearly 17 per cent of the borrowers, were being left out of the purview of the Securitisation Bill as they had borrowed less than Rs 100,000 each.

The Bill also clearly laid down the modalities for valuation and sale of assets. There would be no arbitrary disposal of assets, the minister assured the House.

As for the outstanding dues of workers of sick industries, Singh said the Bill clearly provided for their dues to be met by the sale of assets.

About penal action against bank staff found conniving with defaulters, Singh said banks do affix responsibility and accountability, and even initiate criminal action, against such employees.

Stating that the rules and regulations under the Bill would ensure full transparency, Singh said the government would keep in mind the various responses of the members on the issue of defaulters having to deposit 75 per cent of the due amount before approaching the Debt Recovery Tribunals against the banks' decisions to take over their assets.

Earlier, members from across the board welcomed the Bill as long due and said it was the right step in dealing with the mounting problem of non-performing assets of banks and financial institutions, which, according to some estimates, had reached Rs 1,20,000 crore (Rs 1200 billion).

However, while implementing the Bill, it should be ensured that genuine defaulters were not penalised, the members said.

V V Raghavan (CPI) said the only way to deal with wilful defaulters, who were playing with large sums of public money, was to put them behind bars.

He regretted that while the country had been hit by corporate-engineered scams one after another, no salutary action had been taken against them.

Subirami Reddy (Congress) stressed that the problems of genuine defaulters and the banks not given sweeping powers to dispose off assets should be looked into.

UNI

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