Journal of International Law, Politics and Society
International Open Access Double Blind Peer Reviewed, Referred Journal
ISSN No. : 3108-0464
ISSN No. : 3108-0464
Legal Mechanisms for Recovery and Management of Non-Performing Assets
Abstract
The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 empowers banks to take possession and sell secured assets without court intervention after 90 days of default, following which these assets are termed as Non-Performing Assets (NPAs). NPAs are loans or advances where principal or interest payments are overdue for a specific period, typically 90 days, meaning the asset is not generating income for the lender. Other mechanisms include the Insolvency and Bankruptcy Code, 2016 which provides for a unified framework for resolving insolvency, allowing creditors or banks to initiate resolution proceedings within a strict timeline of 180, and extendable up to 90 days. The Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act, now the Recovery of Debts and Bankruptcy Act, 1993 established the Debts Recovery Tribunals and Debts Recovery Appellate Tribunals to expedite the process of recovery of debts exceeding rupees 20 lakhs. This provides a specialized and quicker mechanism than civil courts and allows lenders to recover blocked funds and protect their interests. The Act was amended and renamed in order to incorporate provisions for insolvency resolution for individuals and partnership firms under Part III of the Insolvency and Bankruptcy Code. The stability of the financial sector is intrinsically linked to the health of its credit portfolios. Non-performing assets (NPAs) pose a significant threat to the liquidity and profitability of banking institutions. This paper examines the primary legal mechanisms established in India to address the recovery and management of these assets, specifically focusing on the SARFAESI Act, 2002, the Insolvency and Bankruptcy Code, 2016, and the Recovery of Debts and Bankruptcy Act, 1993. By analyzing these frameworks, the paper illustrates the shift from protracted litigation to time-bound, specialized recovery processes.