Unit 4: Recovery and securitization law

• Limitation Act, 1963: fixes time limits within which suits can be filed; after expiry, the remedy is barred (debt itself is not extinguished).

• Extension: written acknowledgement of debt signed before expiry (Section 18) or part payment (Section 19) starts a fresh period — banks obtain balance confirmations and revival letters.

• Certified copies of entries in bankers' books (including electronic records and printouts) are admissible as prima facie evidence in legal proceedings, without producing original books.
• Certificate by the principal accountant or manager; for printouts, a certificate about the computer system (Section 2A).
• Banks cannot be compelled to produce original books unless the court orders for special reasons.

• Originally the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 — set up Debt Recovery Tribunals (DRTs) and Debt Recovery Appellate Tribunals (DRATs) for speedy recovery.
• Threshold: debts of ₹20 lakh and above (raised from ₹10 lakh in 2018).
• Procedure: application to DRT → summons → defence → order → recovery certificate → Recovery Officer attaches and sells property; appeal to DRAT with 50% pre-deposit (can be reduced to 25%).
• DRTs also hear appeals under SARFAESI (Section 17) and act as adjudicating authority for individual insolvency under IBC.

• TDS on interest (Section 194A): banks deduct 10% on interest above ₹50,000 a year (₹1 lakh for senior citizens) from FY 2025-26; Form 15G/15H for non-deduction if income below taxable limit.
• TDS on cash withdrawals (Section 194N): 2% on cash withdrawals above ₹1 crore a year (₹20 lakh if returns not filed) — to discourage cash.
• Banking Cash Transaction Tax (BCTT): introduced in 2005 at 0.1% on cash withdrawals above ₹50,000 a day (individuals/HUFs) and ₹1 lakh (others) to track black money — abolished from 1 April 2009.
• Reporting: Statement of Financial Transactions (SFT) — cash deposits above ₹10 lakh a year, etc.

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act — lets secured creditors enforce security without court intervention.

• Applicability: secured debts of ₹1 lakh and above; not for agricultural land; at least 60% of secured creditors (by value) must agree in consortium cases.
• Asset Reconstruction Companies (ARCs) registered with RBI buy NPAs and resolve them; NARCL (bad bank) set up in 2021.
• Central Registry (CERSAI) records security interests.

• Banking Ombudsman: now the RBI Integrated Ombudsman Scheme, 2021 — free, online, for deficiencies in service; award up to ₹20 lakh plus ₹1 lakh for harassment.
• Lok Adalats (Legal Services Authorities Act, 1987): settle disputes by compromise; banks use them for small NPAs (up to ₹20 lakh); awards are final and binding and treated as a civil court decree; no appeal; no court fees.
• Lender's liability: the responsibility of lenders towards borrowers for wrongful acts — breach of loan commitments, delays in sanction or disbursement, unfair practices, coercive recovery, breach of confidentiality. A Lender's Liability Bill was considered (2000s, not enacted); RBI's Fair Practices Code and lender's liability guidelines (2003) require transparency, timely decisions, reasons for rejection and fair recovery practices.