RECOVERY OF DEBTS AND THE ROLE OF RECOVERY TRIBUNALS

Abstract

A financial institution is a company engaged in the business of dealing with monetary transactions, such as deposits, loans, investments and currency exchange. Banks are one of the forms of financial institution falling under the category of depository institutions. The banking regulation act 1949 defines a banks as  “banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. Banks provide for Loans which are often money lend by these institutions at a higher interest. This in turn gives rise to debts .“debt” means any liability inclusive of interest which is claimed as due from any person by a bank of a financial institution.

There exists a thin line of demarcation between ‘recovery of debts’ and ‘collection of debts’. The primary difference is that in case of collection of debts the creditor confronts the borrower directly or through a third party agency like a collection agency or a firm to recover the debts while debts recovery indicates the expensive process by which the creditor approaches the court. 

Banks are huge financial institutions that provide loans for individuals, companies, partnership firms etc. In the event of the default of the debtor the banks rely on the recovery of debts through courts. But the courts having the need to tend to the immense piling cases were underhanded and this caused the lagging of cases and in turn increased the non performing assets of the banks (NPAs).