Kerala Coop Banks to be Exempted From SARFAESI Act: Pinarayi Vijayan
Image Courtesy: New Indian Express
New Delhi: In a big relief to people who are struggling to repay existing loans, Kerala Chief Minister Pinarayi Vijayan has said that cooperative banks and societies that come under the purview of the Reserve Bank of India Act would be exempted from the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act, 2002. As per the new exemption, cooperative banks would have no power to seize property in case of loan default.
Though the state government had continuously been seeking exemption from the SARFAESI Act for those who have a maximum of five cents of land and a house in it, the Centre hasn’t done anything so far in this regard.
On August 21, 2017, the state government had passed a resolution in the Assembly on this matter, which was forwarded to the Union Ministry of Finance on November 20, 2017, but nothing turned up from the Centre’s side. Following this, in December 2018, an 11-member panel was constituted by the Kerala government to study the problems faced by those who have taken bank loans.
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The Central government is the authority with powers to grant exemption from the SARFAESI Act. But, in the case of cooperative banks, which are under state governments, the state can take the call.
This was confirmed by Thomas Franco, General Secretary of All India Bank Officers’ Confederation (AIBOC), who said: “the state governments can decide, except in case of some of the central Acts, for their cooperative banks.”
When asked about any other state apart from Kerala had given any exemption to cooperative banks from the SARFAESI Act, Franco said: “No, I don’t think so.”
On Monday, responding to the notice on an adjournment motion by IC Balakrishnan (Congress) on farmer suicides in the Assembly, the chief minister said that steps for exempting the sector would be expedited. Agriculture minister VS Sunil Kumar also informed the Assembly that farm loan waivers up to Rs 2 lakh would be completed within few months.
According to the agriculture minister, talks with the State Level Bankers Committee had already been held and cooperative and commercial banks have also been brought under the Farmers Debt Relief Commission which has been set up to implement loan waivers.
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The SARFAESI Act allows banks and financial institutions to auction residential or commercial properties of the defaulter to recover the loans. The Act mainly empowers banks and financial institutions to recover their non-performing assets without the intervention of courts.
According to the RBI’s Report on Trend and Progress of Banking in India- 2017-2018, Scheduled Commercial Banks recovered NPAs worth Rs 265 billion through the SARFAESI Act.
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