Lok Sabha Question No. 3122 (UNSTARRED), answered on 2023-03-20
Subject: Unfair Loan Recovery Practices
Ministry: FINANCE
Asked by: Prajwal Revanna

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA UNSTARRED QUESTION NO. 3122

TO BE ANSWERED ON Monday, March, 20, 2023/Phalguna 29, 1944 (Saka)

## Unfair Loan Recovery Practices

## 3122. SHRI PRAJWAL REVANNA

Will the Minister of FINANCE be pleased to state:

- (a)  whether it has come to the notice of Ministry that the increasing unethical, unfair loan  recovery  practice  by  the  ARCIL,  Mumbai,  a  private  loan  recovery  company, selling the mortgaged property of borrowers/guarantors less than the guidance value in total violation of the SARFAESI Act;
- (b)  the details of provisions in SARFAESI Act and instances where loan recovery companies found to be violating and misusing SAFAESI Act;
- (c) whether the Government has conducted any inquiry and taken action against the loan recovery companies so far against the misuse of SARFAESI Act particularly ARCIL and if so the details thereof;
- (d)  whether it has also come to notice of the ministry that the inflated, false, fictitious claims of notices repeatedly sent by ARCIL, Bangalore unit even after recovery of outstanding loan amount from the borrowers/guarantors particularly with reference to recovery of loan from U and I system; and
- (e)  if so, the details thereof along with the corrective steps taken by the Government in this regard?

## ANSWER

The Minister of State in the Ministry of Finance (Dr. Bhagwat Karad)

- (a):  As  per  information  received  from  RBI,  Asset  Reconstruction  Company  (India) Limited (ARCIL) is an asset reconstruction company (ARC) registered with Reserve Bank of India (RBI) under Securitisation and Reconstruction of Financial Asset and Enforcement of Security Interest (SARFAESI) Act, 2002. RBI has further informed that as per the existing provision of SARFAESI Act/RBI guidelines for ARCs, there is no prescription regarding any 'guidance value' for loan assets.
- (b) & (c) RBI has informed that information regarding specific instances of violation and  misuse of  provisions  of  SARFAESI  Act  is  not  maintained  with  Department  of Supervision in RBI. However, ARCs are required to comply with the guidelines issued by  RBI  from  time  to  time.  Compliance  to  RBI  guidelines  issued  to  ARCs  and

adherence to provisions of the SARFAESI Act is examined on sample basis by RBI during the Supervisory Assessment and any non-compliance observed are taken up with  concerned ARC for rectification apart from initiating supervisory/ enforcement action against the concerned ARC, as deemed fit.

(d)    As  per  inputs  received  from  RBI,  no  such  instance  has  been  reported  to Supervision Department of RBI against ARCIL Bangalore unit pertaining to the U and I system.

(e)  As  already  mentioned  in  reply  to  part  (c)  of  the  question,  any  noncompliance observed  by  RBI  is  taken  up  with  the  respective  ARC  for  rectification  apart  from initiating supervisory/enforcement action against the concerned ARC. Further, in order to  address  any  concerns  regarding  misuse  of  powers  under  SARFAESI  by  any secured creditor (Banks/Financial Institutions/ARCs), there are adequate provisions under Section 17 and 18 of the SARFAESI Act,2002 wherein any person including borrower  aggrieved  has  recourse  to  filing  of  Securitisation  Application  (SA)  in  the Debts Recovery Tribunal (DRT) against action of secured creditor/financial institution under the SARFAESI Act. The decision of DRT can be challenged before the Debts Recovery Appellate Tribunal (DRAT).

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