Greedy banks put small borrowers at risk!

Banks that grew too fast to be normal are at highest risk of going bust. These banks promised high returns on the premise of extracting more from the newer suckers coming their way in future. Now that the fabled suckers have become wiser the banks appear to squeeze the small borrower to stay afloat.

We all saw how some banks grew by leaps and bounds drawings gasps of admiration and praise from al the quarters. The share holders demanded more. The bank executives promised the moon and the investors swooned with greed. Huge dreams were spun out of thin air and nothing more. Instead of doing the business of banking these banks banked upon circus antics curiously termed as hedging others called dollar parking. Now that the bubble is all there to see these turned out to be fudging and barking up the wrong the tree!!!

Some Indian banks strongly aligned with these international banks and lost huge sums. Immediately banks lost faith amongst each other and inter bank call market suddenly dried. RBI steps in and infuses huge amount of liquidity to keep the cash market afloat. Despite all these steps credit crisis is there for all of us to see.

The Governments all over the world are doing every thing possible to keep the banks afloat. While in the USA the big ones have been nationalized in the case of some others huge cheap loans are being offered. In all these melee the small borrower is the worst off. He has no where to go for succor. With falling real estate prices banks are eager to get what ever they can from securities through the SRFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests) Act route and go behind the borrower before the Debts Recovery Tribunal (DRT) route for the balance money.

The Government and the RBI should join hands and put a moratorium on debt recovery till the credit crisis and recessionary trends reverses. If huge sums of money can be released to keep the banks afloat, if schemes can be devised to keep the ailing airline industry afloat then why not devise scheme for small borrowers to tide over the present crisis. After all they paid the highest taxes when the going was good.

Financial jurisdiction of DRT does not change with the change of amount adjudicated.

The Debts Recovery Tribunals (DRT) can hear claims of Banks only if the amount claimed is Rs. 10 lakhs and above.  However the DRT will not loose jurisdiction of a case,  if after adjudication the DRT decrees for a amount lesser than Rs. 10 lakhs.

As per the RDB Act DRTs can hear cases where the Bank's claim is Rs. 10 lakhs or above.  This is apart from other conditions, including that of territorial jurisdiction as well the claim being within the meaning "debt" as defined in the Act.  Therefore the DRTs have an elaborate mechanism for "scrutiny" of the applications before they are registered as an "Original Applicaiton".  Once the application filed by the Bank is found to be in accordance with the Act and within the jurisdiction of the DRT, then, and only then  the Registrar  orders the case to be registered.

[To read full text of this article log on to bankdrt.com]