Asset reconstruction companies have called on the government to step up intervention to accelerate debt recovery through Debt Recovery Tribunals, arguing that procedural delays continue to weaken the effectiveness of India's stressed-asset resolution system. The industry has pressed for a set of reforms aimed at reducing litigation bottlenecks, including automatic lapse of interim stays after two months, stronger notice mechanisms for creditors and faster filling of vacancies in the tribunal system.
Recovery Bottlenecks
The appeal reflects a long-running concern among lenders and asset managers that recovery proceedings often lose momentum once disputes enter the tribunal stage. According to the industry's view, delays in hearings, adjournments and incomplete bench strength can materially erode the value of recoverable assets, especially in cases where collateral is deteriorating or borrowers are already under financial stress. Asset reconstruction companies, which acquire distressed loans from banks and financial institutions, depend on a predictable enforcement process to realise value and return cash to lenders.
The proposed automatic expiry of interim stays after two months is intended to prevent recovery actions from being stalled indefinitely by temporary court protection. Industry participants argue that such stays, while sometimes necessary to preserve legal rights, can become a major obstacle when they remain in place for extended periods without substantive progress. A time-bound framework, they contend, would restore urgency to proceedings and reduce the scope for tactical delays by borrowers.
Tribunal Capacity Push
A second major demand is the timely filling of vacancies in Debt Recovery Tribunals. The sector has repeatedly flagged that understaffed tribunals contribute to mounting case backlogs and slower disposal of applications. In a system built around speed and enforcement, even modest staffing gaps can have outsized consequences, particularly when recovery depends on swift orders against defaulting borrowers or the enforcement of security interests.
The call for improved electronic services also points to the growing expectation that litigation infrastructure should match the scale of modern finance. Asset reconstruction companies want more reliable digital filing, tracking and notification systems so that creditors receive timely updates and can respond without avoidable procedural friction. Better electronic services, they say, would not only improve efficiency but also enhance transparency in a process that often involves multiple lenders, borrowers and legal representatives.
The emphasis on notifications is significant because recovery cases frequently involve complex creditor structures and multiple rounds of communication. Where notices are delayed or improperly served, proceedings can be challenged, adding further delay and uncertainty. Industry representatives believe that stronger notification protocols would reduce avoidable disputes and help tribunals focus on substantive issues rather than procedural defects.
Sarfaesi Still Central
The Sarfaesi Act remains at the centre of the recovery framework and continues to be viewed by banks and asset reconstruction companies as a critical tool for asset enforcement. The law allows secured creditors to take possession of assets and recover dues without first approaching civil courts, making it one of the most important instruments in India's bad-loan resolution architecture. However, its effectiveness depends heavily on the speed and consistency of the wider adjudication ecosystem, including tribunal support and enforcement follow-through.
The latest push from asset reconstruction companies comes at a time when lenders remain under pressure to clean up balance sheets and improve recovery rates from legacy stressed accounts. Faster resolution is especially important in an environment where asset values can decline quickly and prolonged litigation can sharply reduce eventual realisation. For banks, stronger recovery mechanisms can improve capital efficiency and free up resources for fresh lending.
The industry's message is clear: legal tools already exist, but their impact is being diluted by procedural drag. By tightening stay orders, strengthening tribunal capacity and modernising electronic processes, asset reconstruction companies believe the government can make the recovery system more decisive and more credible. The broader implication is that India's bad-loan resolution framework may need not just stronger laws, but faster institutions to make those laws work in practice.