Reacting to the Supreme Court judgment, the prestigious cooperative institution Vamnicom Director K K Tripathy said that It’s great news for all Cooperative financial institutions/ banks as the coverage under Sarfaesi Act would allow these banks to auction residential or commercial properties of any defaulter by invoking provisions.
In his WhatsApp reaction Tripathy wrote, “As financial institutions, the Cooperatives can enjoy the rights and powers to handle different varieties of bad asset issues they are facing right now. Fortunately, another recent court judgment on the ownership issue has already stated that the first charge on the borrowers’ asset would be the creditors”.
Now cooperatives as Financial Institutions can have the legal power to determine the asset quality, identify and rectify problems of NPA through multiple mechanisms, as appropriate. Cooperatives are suffering a lot from over dues. Many such loans and advances are classified as substandard or doubtful assets under NPA classifications, he wrote.
High volumes of such types of over dues at all levels of cooperatives show minimal credit discipline of the borrowers. Hence, the present pronouncement will bring in credit discipline amongst the borrowers and will empower the cooperative creditors to take action as per the classification of their assets, he added.
In its judgment, the apex court allowed cooperative banks to act against the defaulting borrowers under Securitization Act-a provision availed by commercial banks so far only.