Asset reconstruction companies have called for stronger government intervention to accelerate debt recovery, arguing that delays in the Debt Recovery Tribunal system continue to weaken enforcement and prolong stress in the banking sector. The industry's pitch comes at a time when lenders remain under pressure to clean up balance sheets, improve cash recovery from legacy bad loans, and move distressed assets through a legal process that many participants say is still too slow for the scale of the problem.
The companies have urged policymakers to introduce procedural changes that would make recovery actions more predictable and less vulnerable to prolonged litigation. Among the most significant proposals is a demand that interim stays granted by tribunals should automatically lapse after two months unless specifically extended. According to the industry view, open-ended or repeatedly extended stays often stall enforcement for long periods, allowing borrowers to delay resolution while asset values erode.
Faster Tribunal Action
The request reflects a broader frustration among lenders and asset reconstruction firms over the pace of adjudication in debt recovery cases. DRTs were created to provide a specialised forum for financial claims, but backlogs, vacancies and procedural delays have often undermined that purpose. ARCs argue that if tribunals are not staffed adequately and hearings are not scheduled efficiently, even strong legal claims can become commercially ineffective.
They have also sought better notification processes for creditors, saying that lenders and recovery institutions should receive timely and reliable updates on hearings, orders and procedural developments. In their view, poor communication in litigation not only slows recovery but also increases the risk of missed deadlines and avoidable adjournments. Improved electronic services for litigation, including digital filing and case tracking, were also flagged as necessary to modernise the process and reduce friction.
The industry's message is that recovery law is only as effective as the institutions that enforce it. Without faster tribunal action, asset reconstruction firms say, the value of distressed collateral can deteriorate, borrowers can exploit procedural gaps, and lenders may be forced into deeper haircuts. That, in turn, can reduce confidence in the secondary market for stressed assets and make banks more cautious in recognising and resolving non-performing exposures.
Sarfaesi At Centre
The Sarfaesi Act remains central to this debate. The law is widely regarded by banks and recovery specialists as one of the most important tools for enforcing security interests without first going through a full civil court process. It allows lenders to take possession of secured assets and pursue recovery measures more directly, making it a cornerstone of India's bad-loan resolution framework.
ARCs have highlighted the Act as essential for asset recovery, but they argue that its effectiveness depends on the speed and consistency of the surrounding legal ecosystem. If tribunal proceedings drag on, the practical benefits of Sarfaesi are diluted. In that sense, the industry's appeal is not for a new recovery law, but for a more disciplined and time-bound implementation of the existing framework.
The call for timely filling of DRT vacancies is particularly significant. Empty benches and stretched judicial capacity have long been cited as a bottleneck in financial dispute resolution. For lenders, every month of delay can mean lower asset realisation, higher carrying costs and weaker recovery rates. For borrowers, prolonged uncertainty can also prevent viable restructuring or settlement. The industry is therefore pressing for a system that can distinguish between genuine legal contest and tactical delay.
Recovery Needs Reform
The push from asset reconstruction companies comes at a sensitive moment for India's credit system, where the quality of recovery mechanisms has direct implications for lending discipline. Banks and other financial institutions rely on the certainty of enforcement to price risk, extend credit and resolve stressed accounts. If recovery remains slow, the cost is ultimately borne across the system through lower recoveries and tighter credit conditions.
The proposals also underline a broader shift in expectations around financial litigation. Market participants increasingly want digital processes, shorter timelines and clearer accountability from institutions that handle distressed debt. In that context, the ARCs' demands are likely to resonate with lenders seeking faster resolution, even if some procedural changes would require administrative coordination and legal refinement.
For now, the industry's message is straightforward: India's recovery architecture needs to move faster if it is to keep pace with the scale and complexity of stressed assets. The government's response, and whether it acts on tribunal capacity, notice procedures and interim stay rules, will be closely watched by banks, ARCs and borrowers alike.