We wrote an FAQ on the Lok Pal Bill for Rediff. http://www.rediff.com/news/special/special-parliamentary-committee-cannot-study-lokpal-bill-in-10-days/20110822.htm The Lok Pal Bill has been referred to the Standing Committee of Parliament on Personnel, Public Grievances, Law and Justice. In this FAQ, we explain the process of these Committees. What is the role of such standing committees? The system of departmentally related standing committees was instituted by Parliament in 1993. Currently, there are 24 such committees, organised on the lines of departments and ministries. For example, there are committees on finance, on home affairs, on defence etc. These standing committees examine Bills that are referred to them. They also examine the expenditure plans of ministries in the Union Budget. In addition, they may examine the working of the departments and various schemes of the government. How is the membership of these committees decided? Each committee has 31 members: 21 from Lok Sabha and 10 from Rajya Sabha. Parties are allocated seats based on their strength in Parliament. The final membership is decided based on the MP’s area of interest as well as their party’s decision on allocating the seats. Who chairs the committees? Of the 24 committees, 16 are administered by Lok Sabha and eight by Rajya Sabha. The Chairperson is from the respective House. Political parties are allocated the chairs based on their strength in Parliament. Some committees such as home affairs, finance and external affairs are customarily chaired by a senior member of an opposition party. What will the Standing Committee do with the Lok Pal Bill? The Committee has invited comments and suggestions from the public on the Bill. Comments can be sent to Mr. KP Singh, Director, Rajya Sabha Secretariat, 201, Second Floor, Parliament House Annexe, New Delhi -110001. These may also be emailed to kpsingh@sansad.nic.in or rs-cpers@sansad.nic.in. The Committee will examine the written memoranda. They will also invite some experts and stakeholders for oral evidence. Based on its examination, the committee will prepare a report with its recommendations on the various provisions of the Bill. This report will be tabled in Parliament. Is the report decided by voting? No. The committee tries to form a consensus while preparing the report. However, if some members do not agree on any point, they may add a dissent note. For example, the committee on the Civil Liability for Nuclear Damages Bill had dissent notes written by MPs from the left parties. The Women’s Reservation Bill also had dissent notes from a couple of members. Are the committee’s recommendations binding? No. The Committee system was formed recognising that Parliament does not have the time for detailed examination and public feedback on all bills. Parliament, therefore, delegates this task to the committee which reports back with its recommendations. It is the role of all MPs in each House of Parliament to examine the recommendations and move suitable amendments. Following this, Parliament can vote on these amendments, and finalise the Bill. Can you give examples when the Committee’s work has resulted in significant changes? There are many such instances. For example, the standing committee on science and technology examined the Civil Liability for Nuclear Damages Bill. The committee made several recommendations, some of which increased the potential liability of suppliers of nuclear equipment in case of an accident. All the recommendations were accepted. Similarly, the Seeds Bill, which is currently pending in Rajya Sabha has seen several major recommendations by the Committee on Agriculture. The government has agreed to move amendments that accept many of these recommendations. Are all Bills referred to Standing Committees? Most Bills are referred to such committees but this is not a mandatory requirement before passing a Bill. In some cases, if a Bill is not referred to a committee and passed by one House, the other House may constitute a select committee for detailed examination. Some recent examples include such select committees formed by the Rajya Sabha on the Prevention of Torture Bill, the Wakf Amendment Bill, and the Commercial Divisions of High Courts Bill. There are also some instances when a Bill may be passed without the committee process. Is it a good idea to bypass the committee process? In general, this process provides a platform for various stakeholders to provide their inputs. In the Lok Pal case, a few influential groups such as the India Against Corruption (IAC) and the National Campaign for People’s Right to Information (NCPRI) have voiced their views. However, there may be other points of views of persons who do not have similar access to the media. The Standing Committee provides equal opportunity to everyone to write in their memoranda. It also allows parliamentarians to devote a significant amount of time to understand the nuances of a Bill and make suitable modifications. Thus, the standing committee system is an opportunity to strengthen legislation in an informed and participatory manner. Is it feasible to compress this process within 10 days and get the Lok Pal Bill passed within the current session of Parliament? There should be sufficient time for citizens to provide inputs to the committee. The committee has to examine the different points of view and find suitable provisions to achieve the final objectives. For example, there are divergent views on the role of Lok Pal, its constitution, its jurisdiction etc. The Committee has to understand the implications of the various proposals and then make its recommendations. It has been given three months to do so. Typically, most committees ask for an extension and take six to eight months. It is not practical to expect this process to be over within 10 days. Should civil society demand that the government issue a whip and pass the Jan Lok Pal Bill? Everyone has the right to make any demand. However, the government is duty bound to follow the Constitution. Our Constitution has envisaged a Parliamentary system. Each MP is expected to make up their minds on each proposal based on their perception of national interest and people’s will. Indeed, one may say that the best way to ensure a representative system is to remove the anti-defection law, minimise the use of whips, and let MPs vote their conscience. That may give us a more accountable government.
At noon today, the Finance Minister introduced a Bill in Parliament to address the issue of delayed debt recovery. The Bill amends four laws including the SARFAESI Act and the DRT Act, which are primarily used for recovery of outstanding loans. In this context, we examine the rise in NPAs in India and ways in which this may be dealt with.
I. An overview of Non-Performing Assets in India
Banks give loans and advances to borrowers which may be categorised as: (i) standard asset (any loan which has not defaulted in repayment) or (ii) non-performing asset (NPA), based on their performance. NPAs are loans and advances given by banks, on which the borrower has ceased to pay interest and principal repayments. 
In recent years, the gross NPAs of banks have increased from 2.3% of total loans in 2008 to 4.3% in 2015 (see Figure 1 alongside*). The increase in NPAs may be due to various reasons, including slow growth in domestic market and drop in prices of commodities in the global markets. In addition, exports of products such as steel, textiles, leather and gems have slowed down.[i] The increase in NPAs affects the credit market in the country. This is due to the impact that non-repayment of loans has on the cash flow of banks and the availability of funds with them.[ii] Additionally, a rising trend in NPAs may also make banks unwilling to lend. This could be because there are lesser chances of debt recovery due to prevailing market conditions.[iii] For example, banks may be unwilling to lend to the steel sector if companies in this sector are making losses and defaulting on current loans. There are various legislative mechanisms available with banks for debt recovery. These include: (i) Recovery of Debt Due to Banks and Financial Institutions Act, 1993 (DRT Act) and (ii) Securitisation and Reconstruction of Financial Assets and Security Interest Act, 2002 (SARFAESI Act). The Debt Recovery Tribunals established under DRT Act allow banks to recover outstanding loans. The SARFAESI Act allows a secured creditor to enforce his security interest without the intervention of courts or tribunals. In addition to these, there are voluntary mechanisms such as Corporate Debt Restructuring and Strategic Debt Restructuring, which These mechanisms allow banks to collectively restructure debt of borrowers (which includes changing repayment schedule of loans) and take over the management of a company.
II. Challenges and recommendations for reform
In recent years, several committees have given recommendations on NPAs. We discuss these below.
Action against defaulters: Wilful default refers to a situation where a borrower defaults on the repayment of a loan, despite having adequate resources. As of December 2015, the public sector banks had 7,686 wilful defaulters, which accounted for Rs 66,000 crore of outstanding loans.[iv] The Standing Committee of Finance, in February 2016, observed that 21% of the total NPAs of banks were from wilful defaulters. It recommended that the names of top 30 wilful defaulters of every bank be made public. It noted that making such information publicly available would act as a deterrent for others.
Asset Reconstruction Companies (ARCs): ARCs purchase stressed assets from banks, and try to recover them. The ARCs buy NPAs from banks at a discount and try to recover the money. The Standing Committee observed that the prolonged slowdown in the economy had made it difficult for ARCs to absorb NPAs. Therefore, it recommended that the RBI should allow banks to absorb their written-off assets in a staggered manner. This would help them in gradually restoring their balance sheets to normal health.
Improved recovery: The process of recovering outstanding loans is time consuming. This includes time taken to resolve insolvency, which is a situation where a borrower is unable to repay his outstanding debt. The inability to resolve insolvency is one of the factors that impacts NPAS, the credit market, and affects the flow of money in the country.[v] As of 2015, it took over four years to resolve insolvency in India. This was higher than other countries such as the UK (1 year) and USA (1.5 years). The Insolvency and Bankruptcy Code seeks to address this situation. The Code, which was passed by Lok Sabha on May 5, 2016, is currently pending in Rajya Sabha. It provides a 180-day period to resolve insolvency (which includes change in repayment schedule of loans to recover outstanding loans.) If insolvency is not resolved within this time period, the company will go in for liquidation of its assets, and the creditors will be repaid from these sale proceeds.
[i] ‘Non-Performing Assets of Financial Institutions’, 27th Report of the Department-related Standing Committee on Finance, http://164.100.47.134/lsscommittee/Finance/16_Finance_27.pdf. [ii] Bankruptcy Law Reforms Committee, November 2015, http://finmin.nic.in/reports/BLRCReportVol1_04112015.pdf. [iii] Volume 2, Economic Survey 2015-16, http://indiabudget.nic.in/es2015-16/echapter-vol2.pdf. [iv] Starred Question No. 17, Rajya Sabha, Answered on April 26, Ministry of Finance. [v] Report of the Bankruptcy Law Reforms Committee, Ministry of Finance, November 2015, http://finmin.nic.in/reports/BLRCReportVol1_04112015.pdf. *Source: ‘Non-Performing Assets of Financial Institutions’, 27th Report of the Department-related Standing Committee on Finance, http://164.100.47.134/lsscommittee/Finance/16_Finance_27.pdf; PRS.
