A recent press report said that the Government has decided to introduce the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2001, during the Winter Session of Parliament.
According to the new Bill, it will modify nine sections of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, and four sections of the Recovery of Debts Due to Banks & Financial Institutions (RDBF) Act, 1993.
The new Bill is likely to bring down lending rates for retail (as well as corporate loan. As per the changes, it is mandatory to register the subsisting security interest (equitable mortgages) and the registration should be done within 30 days of the transaction with the Central Registry. This is expected to support innovation in credit information by banks.
The other key proposal is about conversion of debt into equity. So far banks, with the instructions from the RBI are making decisions on corporate debt restructuring on a case-to-case basis. But now there would be general provision to convert debt into equity in cases of business restructuring or revival under Section 9 of the SARFAESI Act.
On announcing the decision made by the cabinet, Ms. Ambika Soni, Information and Broadcasting Minister, said, that the proposed amendments would allow banks to improve their operational efficiency, organize more funds for credit disbursement to retail investors, home loan borrowers, etc. without fearing about its recovery.