Asset reconstruction companies have asked the government to tighten the recovery framework around Debt Recovery Tribunals, arguing that procedural delays are undermining the speed and certainty needed to resolve bad loans. The appeal comes at a time when lenders remain under pressure to clean up balance sheets, recover value from stressed accounts, and reduce the drag of long-running litigation.
Recovery Bottlenecks
The industry's central concern is that debt recovery proceedings often move too slowly once cases enter the tribunal system. According to the companies, interim stays granted during litigation can effectively freeze recovery action for extended periods, even when the underlying dispute does not justify prolonged delay. They have proposed that such stays should lapse automatically after two months unless specifically extended by a reasoned order, a change they believe would reduce tactical litigation and force faster adjudication.
The request reflects a broader frustration within the asset resolution ecosystem: while India has built a more robust legal architecture for stressed assets over the past decade, execution remains uneven. Recovery value is often eroded by procedural adjournments, vacancy-driven backlogs, and inconsistent service of notices to borrowers and creditors. For asset reconstruction companies, which buy distressed loans and attempt to recover value through enforcement and restructuring, time is a critical variable. The longer a case remains stuck, the lower the eventual recovery.
Tribunal Capacity Gaps
Another key demand is the timely filling of vacancies in Debt Recovery Tribunals. Industry participants say understaffed tribunals are a major source of delay, creating a bottleneck that affects not only asset reconstruction companies but also banks and other secured creditors. When benches are short of presiding officers or supporting staff, hearings are postponed, orders are delayed, and enforcement timelines stretch further.
The companies have also sought better notification processes for creditors, arguing that recovery proceedings should not be derailed by avoidable lapses in communication. In their view, clearer and more reliable service mechanisms would reduce disputes over procedural compliance and help ensure that all parties receive timely information about hearings, orders, and enforcement steps. That, they say, would improve transparency while reducing opportunities for delay.
The push for enhanced electronic services is equally significant. Asset reconstruction companies want more of the litigation process to move online, including filing, tracking, and service-related functions. Digital systems, they argue, would make proceedings more efficient, improve record-keeping, and reduce the administrative friction that often slows recovery cases. The request aligns with a wider shift across India's financial-sector dispute resolution framework toward digitisation and paperless processing.
Sarfaesi's Core Role
At the centre of the industry's argument is the Sarfaesi Act, which remains one of the most important tools available to banks and lenders for asset recovery. The law allows secured creditors to enforce security interests without first going through a lengthy civil court process, making it a cornerstone of India's stressed-asset resolution regime. Asset reconstruction companies have highlighted that the effectiveness of Sarfaesi depends not only on the statute itself but also on the speed and predictability of the institutions that support it.
Their intervention underscores a familiar tension in India's credit system: legal remedies exist on paper, but recovery outcomes depend heavily on how quickly those remedies can be executed. For banks, faster enforcement can improve recoveries and free up capital for fresh lending. For asset reconstruction companies, it can determine whether a distressed portfolio yields a meaningful return or becomes trapped in years of litigation.
The latest demands are therefore less about expanding legal powers than about making existing ones work more efficiently. If accepted, the proposed changes could strengthen creditor confidence, reduce litigation-induced delays, and improve the overall pace of bad-loan resolution. But they would also require administrative coordination, tribunal capacity, and a stronger digital backbone to deliver the intended effect.
For now, the message from the asset reconstruction industry is clear: India's recovery framework needs not just laws, but faster institutions to match them.