Gurgaon, Nov. 5 (PTI): Finance minister Arun Jaitley today exhorted banks to support corporate houses to help spur private investment, a must for the economy to take off in a big way.
“The Indian private sector needs to expand in a big way. It needs to invest and that’s when all engines of the economy start firing,” Jaitley said at a seminar on debt recovery organised by the finance ministry.
“To support that, you need banks to ensure flow of credit and support the private sector in order to expand their (private sector) investments,” he said.
The minister further said bank credit has to pick up, which has slowed over the last few years because of rising bad loans and a slow recovery process.
Debt recovery cases
Pitching for faster closure of debt recovery cases, Jaitley said giving an opportunity to defaulters to defend themselves need not be carried to an “unnatural extent”.
“It is not an usual judicial or quasi-judicial procedure when endless opportunities have to be granted to people to defend cases because if natural justice is carried on to unnatural extents, litigation will become unending. Therefore, efficiency has to be introduced into the recovery procedure as far as the defaulting parties are concerned,” he said.
Close to 95,000 cases involving more than Rs 5 lakh crore are pending before debt recovery tribunals in the country.
“So, every case that the litigant manages to delay hurts the larger investment environment because if money is blocked with defaulters, it prevents the bank from funding others who could have utilised this investment for fruitful purposes and for the benefit of the country,” he said.
The minister also spoke of liberalisation of FDI policies because of which India has emerged as a preferred destination of foreign investment.
“Foreign investors are getting far greater returns on their investment here than in any other country,” Jaitley said.
“Public investment and foreign capital on which the economy is firing are intact… domestic investment is still a challenge.”
The minister said there is a “silver lining” visible with festive purchases, but domestic investment will have to pick up in a big way for which banks need to do their bit by supporting corporate houses that will boost growth.
On debt recovery, Jaitley said legislative changes and empowering banks will make the process efficient.
“Besides making changes in the insolvency law, the government has made changes in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) law and debt laws. And we have cut short procedures in order to add efficiency to the whole system,” Jaitley said.
The RBI has been very pro-active in this, Jaitley said, adding that it has come out with various policies providing flexibility to banks to restructure debt and change management.
Recent changes made in the recovery law set the time limit for disposal of debt recovery cases and seek to improve the ease of doing business by ensuring speedier resolution of bad loans.
The highlights of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 are expansion of definition of security interest, inclusion of debenture trustees and strengthening of asset reconstruction companies (ARCs).
Besides, secure creditors such as banks and financial institutions (FIs), ARCs and debenture trustees will get priority over any other dues, including taxation ones, of central and state governments or any local bodies, sources said.
Now, a district magistrate has to decide on applications by banks and FIs within 30 days.