Asset reconstruction companies have asked the government to intervene more decisively to speed up debt recovery, pressing for procedural reforms at Debt Recovery Tribunals that they say would improve enforcement, reduce litigation delays and strengthen the broader resolution ecosystem. The industry's appeal comes at a time when lenders continue to face long timelines in recovering dues from stressed borrowers, even as the banking system seeks faster clean-up of legacy bad loans.
Recovery Bottlenecks
The core concern raised by asset reconstruction companies is that the present recovery process remains too slow and too vulnerable to procedural interruptions. According to the industry's representations, interim stays granted by tribunals often remain in place for extended periods, effectively freezing recovery action and eroding the value of underlying assets. The companies have proposed that such interim stays should lapse automatically after two months unless specifically extended, a change they believe would prevent indefinite delays and force quicker judicial scrutiny.
They have also sought better notification mechanisms for creditors, arguing that recovery proceedings are frequently slowed by gaps in communication and service of notices. In their view, more reliable and transparent notice processes would reduce avoidable adjournments, improve participation by lenders and other stakeholders, and make tribunal proceedings more efficient. The proposals reflect a broader frustration within the distressed asset market that procedural inefficiencies can undermine even otherwise viable recovery efforts.
Tribunal Capacity Gaps
Another major demand is the timely filling of vacancies in Debt Recovery Tribunals. Industry participants argue that staffing shortages have become a structural obstacle to faster adjudication, adding to case backlogs and prolonging uncertainty for lenders. With fewer presiding officers and supporting personnel available, hearings are often delayed and orders take longer to be issued, compounding the stress on recovery timelines.
The call for stronger tribunal capacity is significant because the DRT system sits at the centre of India's debt enforcement architecture. When tribunals are understaffed, the entire recovery chain slows down, from admission of cases to final enforcement. For asset reconstruction companies, which depend on timely legal remedies to preserve value in acquired stressed assets, such delays can sharply reduce the prospects of meaningful recovery.
The companies have also pressed for enhanced electronic services for litigation, including more robust digital filing, case tracking and hearing-related processes. They argue that greater use of technology would reduce administrative friction, improve transparency and cut the time and cost involved in pursuing recovery cases. The push for digitalisation is in line with wider efforts across India's financial sector to modernise legal and compliance workflows.
Sarfaesi's Role
At the centre of the industry's argument is the Sarfaesi Act, which asset reconstruction companies and lenders view as a critical tool for asset recovery. The law allows secured creditors to enforce security interests without first approaching a court in many cases, making it one of the most important mechanisms for resolving stressed loans. ARCs say its effectiveness depends heavily on how quickly supporting institutions, especially tribunals, can act when disputes arise.
The industry's position underscores a familiar tension in India's bad-loan resolution framework: while the legal architecture for enforcement exists, execution often lags because of procedural delays, vacancies and litigation bottlenecks. For banks and ARCs, that gap can mean lower recoveries, higher carrying costs and prolonged uncertainty over asset values.
The appeal for government intervention also reflects the broader policy importance of recovery efficiency. Faster resolution of stressed assets helps banks recycle capital, improves credit discipline and supports healthier lending. For ARCs, which buy distressed loans and attempt to recover value through restructuring or enforcement, the speed of the legal process is often as important as the quality of the underlying asset.
The latest industry push suggests that ARCs are seeking not just incremental fixes but a more decisive overhaul of the recovery process. Their message to policymakers is clear: without faster tribunals, tighter procedural timelines and stronger digital support, the system will continue to favour delay over resolution. In a stressed asset market where time directly affects value, that is a cost the industry says India can no longer afford.