New Delhi–The Lok Sabha on Monday passed a key bill empowering banks to take possession of collateral, except for farm land, in the case of loan default, even as Finance Minister Arun Jaitley asserted that a culture should not be promoted where banks only are responsible for recovery of loans.

“We should not create this culture where somebody can just take loan and be under an assumption that now it is the headache of the bank, I will sleep well, and bank should be answerable,” Jaitley said while piloting the the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016.

Indian Finance Minister Arun Jaitley
Indian Finance Minister Arun Jaitley

The bill, which seeks to amend four laws – the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, the Recovery of Debts due to Banks and Financial Institutions Act, 1993, the Indian Stamp Act, 1899 and the Depositories Act, 1996 -, aims at faster recovery of debt by PSU banks, which are grappling with Rs 4 lakh crore of NPAs and Rs 8 lakh crore of stressed assets.

Jaitley said any section of society should know it pretty clearly that “when it takes loans, the loan amount has to be paid back”.

“Nobody can move on theAassumption, whether it is large industry or small industry of MSMEs, that loans will not be given back,” he said as he answered queries from members including Saugata Roy (Trinamool Congress), B Mahtab (Biju Janata Dal) and N.K. Premchandran (Revolutionary Socialist Party) on the bill.

However, Jaitley ruled out any waiver in the event of education loan defaults, saying “some compassion” has to be shown if someone is unemployed, though clarifying that the loan cannot be written off totally.

“Internationally, educational loans have become very successful. Most children in higher education are supporting themselves through education loans. Loans are then repaid. Even as of today in India, the percentage of NPA in educational loan is reasonably high. Therefore, some compassion will have to be shown when somebody is unemployed or does not get a job,” he said.

The bill was passed by a voice vote after the amendments moved by opposition members were either withdrawn or negated.

Replying to queries on the bill from Lok Sabha members, including Mahtab and Tatagatha Sathpathy (both BJD), Roy and Sushmita Dev (Congress), the Finance Minister said the new law will empower the Reserve Bank of India (RBI) to examine the statements and any information of Asset Reconstruction Companies related to their business.

The bill further empowers the RBI to carry out audit and inspection of these companies, and the central bank may penalise a company if it fails to comply with any directions issued by it.

The changes in the Sarfaesi Act allow secured creditors to take over a collateral against which a loan had been provided, upon default in repayment, and also provides that the process will have to be completed within 30 days by the district magistrate.

“The present law simplifies the procedure by which there will be quick disposal of pending cases of banks and financial institutions by the debt recovery tribunal,” Jaitley said.

He told Premchandran that farm land has been kept out of the purview of the Act. (IANS)