Finance Ministry Current Affairs

Government doubles monetary limit for filing cases in DRT

 Union Finance Ministry has doubled pecuniary limit to Rs. 20 lakh from Rs.10 lakh for filing loan recovery application in Debt Recovery Tribunals (DRT) by banks and financial institutions. It means that bank or financial institution or consortium of banks or financial institutions cannot approach DRTs if pecuniary limit amount due is less than Rs 20 lakh. This move is aimed at helping reduce pendency of cases in DRTs.

Background

Banks and financial institutions’ recovery of dues (loans) takes place on ongoing basis through legal mechanisms, which inter-alia includes Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002; Recovery of Debts to Banks and Financial Institution (DRT) Act, 1993 and Lok Adalats. The borrowers of such loans continue to be liable for repayment even when the loans have been removed from the balance sheet of the bank(s) concerned. To make recovery tribunals more effective and to facilitate fast disposal of debt recovery cases, government has made several amendments in different laws, including SARFAESI Act.

Debt Recovery Tribunals (DRT)

DRTs were first set up under Recovery of Debts Due to Banks and Financial Institutions Act 1993, also known as DRT Act. Under it, DRTs were established to facilitate debt recovery involving banks and other financial institutions with their customers. Under existing norms, DRT is supposed to dispose of matter referred to it within 180 days of receipt of application and appeal can be filed against DRT order with Debt Recovery Appellate Tribunals (DRATs). There are 39 DRTs and 5 DRATs functioning at various parts of the country.

Month: Categories: Banking Current Affairs 2018

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Government to infuse Rs 11,336 crore capital in 5 public sector banks by September-end

Union Finance Ministry is planning to infuse additional capital close to Rs 11,336 crore in 5 more public sector banks (PSBs) by September 2018-end. These five state-owned banks are Punjab National Bank (PNB), Corporation Bank, Andhra Bank, Allahabad Bank and Indian Overseas Bank (IOB).

Key Facts

This round of capital infusion will be done through issuance of recapitalisation bonds and not directly from Budget. This additional capital will help these banks to meet minimum regulatory capital adequacy ratio (CAR) and enable them to make interest payments on certain bonds on time.

Within capital infusion plan of these five PSBs, PNB is expected to get highest amount of Rs 2,816 crore. Corporation Bank is will get Rs 2,555 crore followed by Indian Overseas Bank (Rs 2157 crore), Andhra Bank (Rs 2,019 crore) and Allahabad Bank (Rs 1,790 crore).

This capital infusion by Government will be only for purpose of meeting minimum regulatory requirement and will be not growth capital which will be provided in second half of current fiscal year. The growth capital will only be given to those banks which meet performance targets and modalities set by Finance Ministry as per agreement signed with each bank.

Background

The latest round capital infusion in these 5 PSBs will be part of remaining Rs 65,000 crore out of Rs 2.11 lakh crore capital infusion announced by Union Government for two financial years. In October 2017, Union Government had announced Rs 2.11 lakh crore capital infusion programme, under which PSBs were to get Rs 1.35 lakh crore through recapitalisation bonds, and balance Rs 58,000 crore through raising of capital from market and remaining through budgetary support. The government has already infused Rs 80,000 crore out of Rs 1.35 lakh crore through recapitalisation bonds in PSBs  and balance will be done during this financial year (2018-19).

Month: Categories: Banking Current Affairs 2018

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