Asset reconstruction companies have called for a sharper policy push to accelerate debt recovery, pressing the government to tighten procedures at Debt Recovery Tribunals and improve the broader enforcement ecosystem around distressed assets. The appeal reflects a long-standing frustration in India's stressed-asset market: recovery timelines remain slow, tribunal capacity is uneven, and procedural adjournments can erode the value of collateral before lenders are able to enforce claims.
Recovery Bottlenecks
Industry participants are seeking reforms that would reduce the scope for prolonged litigation and procedural delay. Among the most significant suggestions is that interim stays granted in recovery matters should lapse automatically after two months unless specifically extended by a tribunal. The argument is that open-ended stays often freeze enforcement action for long periods, allowing borrowers to delay resolution while asset values deteriorate.
The companies have also asked for more robust notification processes for creditors, so that lenders and recovery professionals are informed in a timely and reliable manner about hearings, orders and procedural developments. In their view, better communication would reduce missed deadlines, improve case management and limit avoidable adjournments. They have further urged the government to fill vacancies in Debt Recovery Tribunals without delay, saying understaffed benches are a major reason cases pile up and recovery actions lose momentum.
Sarfaesi At Centre
The Sarfaesi Act remains central to the discussion. For banks and asset reconstruction companies, the law is one of the most important tools available for enforcing security interests without first going through the full civil court process. It allows lenders to take possession of secured assets and pursue recovery more directly, making it a critical instrument in India's bad-loan resolution architecture.
However, market participants say the effectiveness of the law depends heavily on the speed and predictability of the institutions that support it, especially the tribunals that hear challenges to enforcement actions. When those forums are slow or overburdened, the practical value of Sarfaesi weakens. That, in turn, can affect pricing in the distressed-asset market, reduce confidence among resolution buyers and prolong the balance-sheet strain on lenders.
The push for stronger electronic services also reflects a wider shift in financial-sector dispute resolution. Asset reconstruction companies want more litigation processes to move online, including filing, notices, case tracking and order access. Such digitisation, they argue, would not only improve transparency but also reduce administrative friction in a system that still relies heavily on manual processes in many jurisdictions.
Policy Pressure Builds
The latest demands underscore the pressure on policymakers to improve recovery infrastructure at a time when banks and lenders continue to rely on asset sales, enforcement actions and resolution mechanisms to clean up legacy stress. Faster recovery is not merely a legal issue; it directly affects capital recycling, provisioning costs and the willingness of lenders to extend fresh credit.
For asset reconstruction companies, the issue is especially acute because their business model depends on converting distressed loans into recoverable value within a reasonable time frame. Delays in tribunal proceedings can compress recovery rates, raise holding costs and complicate negotiations with borrowers and investors. In a market where timing often determines value, procedural efficiency can be as important as legal authority.
The government's response will be closely watched by banks, ARCs and investors in distressed debt. Any move to streamline tribunal processes, enforce stricter timelines on stays or improve digital case handling could materially strengthen the recovery framework. For now, the message from the sector is clear: India's bad-loan resolution system has the legal tools it needs, but it needs faster institutions to make those tools work at scale.