Finmin asks banks to strengthen legal recovery processes

The finance ministry has directed banks to further strengthen legal recovery processes, including doing periodic reviews of empanelled advocates, rationalising case allocation, and reconciling settled cases in recovery tribunals.“Banks have been told to ensure that there are no delays and put in place effective monitoring and oversight mechanisms for efficient management of all cases, including those pending in the courts,” said a government official, requesting anonymity.

The ministry’s directive comes at a time when banks are still to work out their strategies on the Supreme Court verdict scrapping JSW Steel‘s ₹19,350-crore acquisition of Bhushan Power and Steel (BPSL) four years ago. The top court had observed that contradictory stands taken by the committee of creditors, or CoC, at various stages of proceedings clearly proved that it had played foul and not exercised its commercial wisdom in the interest of creditors.

While the government is inclined to back banks to explore all legal options, it wants them to plug the loopholes to avoid any further similar instances.

“The performance of advocates also needs to be assessed and accordingly rationalised in the assignment of cases,” the official cited above said, adding that the idea is to continuously monitor and reduce pendency at various stages.

A bank executive said lenders have also started to reconcile cases that are pending in debt recovery tribunals and DRATs but have already been settled.

“Different approaches will be pursued for small and high-value cases pending in DRTs so that resources are not spread and maximum recovery is achieved,” he said.

Last week, financial services secretary M Nagaraju chaired a review meeting to monitor the progress of PSBs in clearing pending cases for admission at the National Company Law Tribunal (NCLT).

In a statement, the finance ministry noted that banks were advised to expedite the resolution process by minimising delays in filing CIRP applications, avoiding asking for unnecessary adjournments, and simultaneously keeping other channels of recovery open.

“The Advocates of the Banks should oppose any attempts to delay proceedings on frivolous grounds by the opposing parties,” it said, adding banks were urged to review their top 20 cases regularly and also monitor accounts where resolution plans are pending for consideration with the CoC for more than three months.

The government further directed banks to focus on getting stay orders vacated so as to resume the resolution process without further loss of time.