The RBI will ask the Government to consider participation of large NBFCs (non-banking financial companies) and PE (private equity) firms in auction of stressed assets.

“Such entities will have to be provided authority under Sarfaesi Act on selective basis to deal with specific assets. However, a bank/NBFC cannot sell assets to its own promoted ARC or an ARC where it owns at least 10 per cent equity,” RBI’s discussion paper released on Tuesday said.

Sarfaesi or the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act empowers banks to recover their NPAs without the intervention of the court. RBI will also push for a bigger role to PE firms and other institutions to bring their expertise and additional funds in restructuring of troubled company accounts.

In addition, current restrictions of the Government/Central Vigilance Commission on bilateral sale of assets (by way of private treaty) would be taken up with the Government.

Price controls The RBI has suggested controls such as price to be higher than reserve price fixed for the asset, public advertisements of sale and that if the bilateral sale covers all dues to the bank and is with the consent of the borrower, the auction process may be dispensed with.

The RBI also wants the Government to fill large-scale vacancies in Debt Recovery Tribunals through experienced ex-bankers. It also wants a separate Bench for speedy disposal of Sarfaesi-related cases and adequate staffing of recovery officers, expedite setting up of special benches in every High Court for corporate cases, fix ‘limits’ to last moment raised tax or workers’ claims and review lengthy termination payment procedures in case of default in infrastructure project loans.

The Government may also mandate to register all types of mortgages with Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) to be strictly enforced among banks and NBFCs.

beena.parmar@thehindu.co.in

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