Asset reconstruction companies have pressed the government for a sharper intervention to accelerate debt recovery, arguing that the current pace of proceedings before Debt Recovery Tribunals is undermining the broader stressed-asset resolution framework. The call comes at a time when lenders continue to face long delays in enforcing security interests, even as the banking system seeks faster clean-up of legacy bad loans and more efficient recycling of capital.
The industry's central argument is straightforward: recovery mechanisms exist on paper, but procedural bottlenecks are diluting their impact. ARCs have recommended that interim stays granted by tribunals should lapse automatically after two months unless specifically extended, a move they say would prevent indefinite delays in enforcement actions. They have also sought improved notification systems for creditors, saying that weak or inconsistent service of notices often stalls proceedings and creates avoidable litigation risk.
Tribunal Delays
The push for reform reflects a wider frustration within the distressed-asset ecosystem. Debt Recovery Tribunals were created to provide a specialised forum for speedy adjudication of loan recovery disputes, yet industry participants say vacancies, adjournments and administrative inefficiencies have reduced their effectiveness. For ARCs, which buy stressed loans from banks and then attempt recovery through legal, operational and negotiated routes, every month of delay erodes asset value and weakens recovery prospects.
The request to fill DRT vacancies on a priority basis is therefore central to the industry's pitch. Without adequate judicial and administrative capacity, even strong cases can become stuck in procedural limbo. ARCs argue that the government's intervention is necessary not merely to improve convenience, but to preserve the credibility of the recovery architecture itself.
They have also called for stronger electronic services for litigation, including better digital filing, case tracking and notice management. Industry executives say digital systems can reduce manual errors, improve transparency and shorten the time between filing and hearing. In a system where multiple stakeholders are often involved — banks, ARCs, borrowers, guarantors and legal representatives — technology-enabled case management could materially improve efficiency.
Sarfaesi Still Central
The Sarfaesi Act remains at the heart of the discussion. Widely regarded as one of the most important enforcement tools available to banks and lenders, the law allows secured creditors to enforce security interests without first approaching a civil court in many cases. That speed is precisely why the statute is seen as indispensable in asset recovery.
However, the effectiveness of Sarfaesi is closely linked to the broader tribunal ecosystem. If borrowers can obtain repeated interim relief or if notices are delayed or contested on technical grounds, the intended speed advantage is lost. ARCs are therefore seeking not a replacement for the law, but a more disciplined procedural environment that allows it to function as intended.
The timing of the appeal is significant. India's banking sector has made substantial progress in reducing non-performing assets over the past several years, but stressed debt remains a structural issue, particularly in older accounts and in sectors where cash flows remain uneven. Faster recovery improves lender balance sheets, supports credit growth and reduces the cost of capital tied up in unresolved assets.
For ARCs, the stakes are especially high. Their business model depends on timely enforcement, realistic valuations and the ability to convert legal claims into recoveries. When tribunals move slowly, the gap between acquisition value and eventual recovery widens, making distressed-debt resolution less attractive and potentially reducing the appetite for future asset sales by banks.
The government's response will be closely watched by lenders, investors and insolvency professionals alike. Any move to tighten tribunal timelines, improve service of notices and expand digital processes would likely be welcomed by the market as a practical step toward faster resolution. For now, the message from the ARC industry is clear: recovery tools exist, but they need a more efficient judicial and administrative framework to deliver results at the speed the banking system requires.