Banking and Debt Recovery Law

Reserve Bank of India, established in accordance with Reserve Bank Act of India, 1935 is the Central Bank of India, supervising and controlling banking structure in the country. Banking sector in India is divided into scheduled and non-scheduled banks. Scheduled banks include nationalised banks, State Bank of India and its associates, Regional Rural Banks, foreign banks and other private banks. The commercial banks, both scheduled and non-scheduled are regulated under Banking Regulation Act, 1949.

This banking structure under RBI, forms the backbone of financial institutions and plays a greater role in implementation of micro and macroeconomic policies of India.

One of the major functions of banks is providing debt or loan for individuals and institutions for various purposes. This brings to the crucial activity of debt recovery by financial institutions.

Under Banks and Financial Institutions Act,1993, Debts Recovery Tribunal has been constituted. Tribunal receives the claims of banks and financial institutions against their defaulting borrowers.

Debt Recovery Tribunal and its appellate tribunal called DRAT though effective in case of smaller defaulters, could not control powerful borrowers. For resolving this issue stringent act called Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, also called as SARFAESI Act was introduced.