Asset reconstruction companies have asked the government to intervene more decisively to improve the pace of debt recovery, arguing that the current tribunal-led process remains too slow to support effective resolution of stressed assets. The industry's appeal centres on Debt Recovery Tribunals, or DRTs, where prolonged hearings, procedural bottlenecks and vacant judicial posts have often delayed enforcement action for lenders and asset buyers.
The companies have proposed a series of operational and legal changes aimed at reducing friction in recovery proceedings. Among the most significant is a request that interim stays granted by tribunals should automatically lapse after two months unless specifically extended. Industry participants say such a rule would prevent borrowers from using interim relief as a long-term shield against recovery action, a tactic they argue has become a major source of delay in the system.
Tribunal Delays
The call for reform reflects a broader frustration within the distressed debt market, where recovery timelines often stretch far beyond what lenders consider commercially viable. For asset reconstruction companies, speed is not merely a procedural preference; it is central to the economics of the business. The longer a case remains stuck in litigation, the lower the chances of recovering value from the underlying collateral, especially in sectors where asset quality deteriorates quickly.
The companies have also sought better notification mechanisms for creditors, saying that timely and reliable communication from tribunals is essential for meaningful participation in recovery proceedings. In their view, weak notice systems can leave lenders and other stakeholders unaware of critical hearings or orders, undermining due process and adding another layer of delay to already congested dockets.
Another key demand is the prompt filling of vacancies in DRTs. Industry executives have repeatedly pointed out that understaffed tribunals struggle to handle the volume of pending cases, creating a backlog that slows enforcement across the banking system. They argue that tribunal capacity is now a structural issue, not an administrative inconvenience, and that recovery outcomes will remain constrained unless the government prioritises appointments.
Digital Recovery Push
Alongside staffing and procedural reforms, ARCs have called for stronger electronic services in litigation. They want more robust digital filing, case tracking and hearing-related services to reduce dependence on manual processes, which they say are prone to delay and inconsistency. The push for digitisation is in line with broader efforts across India's financial sector to modernise dispute resolution and improve transparency in enforcement.
The appeal comes at a time when the Sarfaesi Act continues to be viewed by lenders as one of the most important tools for asset recovery. The law allows secured creditors to enforce security interests without first approaching civil courts, giving banks and ARCs a faster route to possession and sale of assets in default cases. However, industry participants say the practical value of Sarfaesi is diluted when recovery actions are repeatedly stalled in tribunals.
That concern is especially relevant for ARCs, which purchase distressed loans from banks and then attempt to recover value through restructuring, enforcement or asset sale. Their business model depends on a credible and timely recovery framework. If legal remedies become too slow, the price of stressed assets falls, investor confidence weakens and banks may recover less from bad loans transferred off their books.
The government has in recent years sought to strengthen India's insolvency and recovery architecture, but the ARC industry's latest intervention suggests that execution gaps remain. The sector's message is clear: legal tools exist, but their effectiveness depends on speed, capacity and administrative discipline. Without those, even strong statutes can lose force in practice.
For banks, the stakes are broader than one segment of the distressed debt market. Faster recovery improves balance-sheet clean-up, supports credit discipline and frees capital for fresh lending. For ARCs, it determines whether the market for stressed assets can function with predictability. The industry's request is therefore not just about easing litigation; it is about restoring confidence in the enforcement chain that underpins India's credit system.