RBI Guidelines and Rules for DRT

RBI Guidelines and Rules for DRT

RBI Guidelines and Rules for DRT (Debt Recovery Tribunal):

1. Legal Framework and Purpose

• Debt Recovery Tribunals (DRTs) are established under the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) to provide expeditious adjudication and recovery of debts due to banks and financial institutions.

• DRTs are quasi-judicial bodies, and appeals against their orders are made to Debt Recovery Appellate Tribunals (DRATs).

2. Jurisdiction and Threshold

• As of 2020, only cases involving debts above ₹20 lakh can be filed before DRTs.

• Banks and financial institutions can file applications in the DRT having jurisdiction over the debtor’s residence or business location.

3. Procedure and Powers

• DRTs follow the Debts Recovery Tribunal (Procedure) Rules, 1993, which detail the filing, hearing, and execution process.

• The Tribunal has powers similar to those of a District Court for adjudication and can issue orders for recovery, which are executed by Recovery Officers.

• If a defendant admits full or part of the debt, the Tribunal orders payment within one month; failure to pay allows further recovery action.

• The DRT can make any orders necessary to give effect to its decisions as per Rule 18 of the Procedure Rules.

4. RBI Guidelines Relevant to DRT Proceedings

• Loan Classification: RBI issues guidelines for classifying loans as Non-Performing Assets (NPAs). Banks must follow these before initiating recovery proceedings.

• If a bank fails to comply with RBI’s NPA classification norms, a borrower can challenge the DRT proceedings on these grounds.

• Notice Requirements: Before taking recovery action, banks must serve proper demand notices (e.g., a 60-day notice under the SARFAESI Act).

• Restructuring and Rehabilitation: RBI’s guidelines on debt restructuring (such as the Corporate Debt Restructuring mechanism) may apply before a case is referred to DRT, especially for large exposures.

• Documentation: Banks must maintain proper records and evidence of debt and recovery steps as per RBI’s instructions.

5. Borrower’s Rights and Defenses

• Borrowers can defend themselves in DRT by:

  • Challenging the amount claimed.

  • Pointing out procedural lapses (such as non-service of notice or non-compliance with RBI guidelines).

  • Contesting wrongful NPA classification.

  • Providing evidence of payments or financial hardship.

6. Recent Amendments

• E-filing is mandatory for cases where the debt to be recovered is ₹100 crore and above, as per the Electronic Filing (Amendment) Rules, 2023.

Key RBI Guidelines and DRT Rules

Banks must comply with RBI’s guidelines on loan classification, notice, and documentation before initiating DRT proceedings. Borrowers can challenge DRT cases on grounds of non-compliance with these guidelines. The DRT operates under specific procedural rules and has the authority to adjudicate and recover debts efficiently.