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The Thane revenue department in Maharashtra has initiated action against around 300 residents who allegedly defaulted on repaying bank loans taken to purchase immovable properties. The department is in the process of attaching the properties for which the loans, collectively valued over Rs 300 crore, were secured, and will hand them over to the respective lending institutions for recovery.
The action is in response to requests from lending institutions, including banks, to seize the assets of defaulters in order to recoup the loan amounts that have been designated as non-performing assets (NPA) under the terms of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI Act), which was passed in 2008.
Officials said majority of the applications were received last year and have now come up for execution. Loans obtained to buy immovable property, including those for residential, commercial, and industrial purposes, are principally covered by this law. Financial companies classify an account as NPA after a period of missed EMI payments. The bank recovery department then approaches the district collector, who then transfers authority to the sub-divisional magistrate, who has the authority to order the seizure process, which is carried out in the presence of police.
According to industry players, the defaults may be attributed to the economic slowdown, which may have led to reduced salaries or business profits. Some buyers might have also opted out from projects that were stuck in litigation.
It is worth noting that loan defaults can have a significant impact on the economy, and the SARFAESI Act is one of the measures taken by the government to address this issue. The act empowers lending institutions to recover their dues from borrowers without having to go through a lengthy legal process. However, it is essential to ensure that the process is carried out fairly and transparently, and borrowers are given adequate opportunities to repay their loans before seizing their properties.
Apart from the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, which empowers lending institutions to recover their dues from borrowers without having to go through a lengthy legal process, the government has taken several other measures to address loan defaults. The Insolvency and Bankruptcy Code (IBC), which offers a time-limited procedure for resolving insolvency in businesses and people, is one such solution. The IBC enables the restructuring or liquidation of the debtor's assets and offers a procedure for the resolution of debt-related disputes.
The government has also set up the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) to adjudicate on matters related to corporate insolvency and bankruptcy. These tribunals have been set up to provide a faster resolution of disputes and reduce the burden on the courts.
Additionally, the Reserve Bank of India (RBI) has introduced several measures to address loan defaults, including the formation of a Central Repository of Information on Large Credits (CRILC) to collect, store, and disseminate credit data to lenders. The RBI has also introduced the Prudential Framework for Resolution of Stressed Assets, which provides a framework for the resolution of stressed assets in the banking system.
In conclusion, the government has taken several measures to address loan defaults, including the SARFAESI Act, IBC, NCLT, NCLAT, CRILC, and the Prudential Framework for Resolution of Stressed Assets. These measures aim to provide a mechanism for resolving debt-related disputes and ensure that lenders can recover their dues without having to go through a lengthy legal process. The government has also launched several schemes to support borrowers who are facing financial difficulties and provide financial assistance to those who do not have access to formal credit channels.
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