DFS Secretary Reviews Public Sector Banks’ Efforts to Clear NCLT Backlogs

In a high-level review meeting held today, Shri M. Nagaraju, Secretary of the Department of Financial Services (DFS), took stock of the performance of Public Sector Banks (PSBs) in tackling the backlog of cases awaiting admission at the National Company Law Tribunal (NCLT). The gathering underscored the government’s continued commitment to strengthening the insolvency resolution ecosystem under the Insolvency and Bankruptcy Code (IBC), while urging financial institutions to accelerate their efforts in resolving non-performing assets (NPAs).

Comprehensive Review of NCLT Admissions

The core agenda of the meeting centered around a detailed analysis of cases that are currently pending for admission under the Corporate Insolvency Resolution Process (CIRP) at various NCLT benches across the country. Senior officials from the DFS, the Ministry of Corporate Affairs (MCA), the Insolvency and Bankruptcy Board of India (IBBI), and top executives of major PSBs participated in the discussion, reflecting the significance attached to expediting the resolution of stressed assets.

Officials observed that undue delays in CIRP filings and avoidable adjournments were hampering the pace of the resolution process. In response, banks were strongly urged to minimize procedural lags, especially at the initial admission stage. They were advised to ensure their legal representatives act diligently and counter any frivolous objections raised by defaulting parties to stall proceedings.

Call for Efficiency and Coordination

Secretary Nagaraju emphasized the importance of coordinated efforts between the legal teams of banks and their operational staff to enhance the overall efficiency of the resolution framework. He reiterated that banks must not solely rely on the NCLT route, but should also pursue alternate recovery channels under SARFAESI, Debt Recovery Tribunals (DRTs), and other legal mechanisms.

Banks were instructed to adopt a proactive approach in regularly reviewing their top twenty stressed accounts. These high-value cases, often involving large corporate borrowers, hold the key to substantial recoveries and reducing the overall burden of NPAs. In particular, attention was drawn to accounts where Resolution Plans are pending with the Committee of Creditors (CoC) for more than three months — indicating bottlenecks in the decision-making process that need immediate redressal.

Progress and Actionable Directives

While there has been notable progress in resolving a handful of accounts since the last review meeting, the DFS expressed concern over the overall pace of recovery. Banks were directed to expedite follow-ups on stay orders and explore legal remedies to vacate such orders swiftly. This would allow resumption of resolution proceedings and help avoid erosion in asset value over time.

Furthermore, Shri Nagaraju highlighted the need for a cultural shift within banks to treat asset resolution as a time-sensitive priority. He advised management teams to conduct internal audits of their insolvency cases and identify procedural gaps or lapses that may be impeding swift admission or resolution.

Way Forward: Strengthening the Insolvency Framework

The review concluded with a strong message from the DFS: Public Sector Banks must adopt a disciplined, time-bound, and coordinated approach to asset recovery. The effectiveness of India’s insolvency regime depends significantly on the active and timely participation of banks, and on reducing the litigation burden clogging the NCLT.

With ongoing reforms and oversight mechanisms in place, the government is hopeful that PSBs will rise to the occasion and play a pivotal role in enhancing the robustness of the IBC ecosystem. The collective focus will remain on removing inefficiencies, reducing resolution timelines, and ultimately fostering a healthier credit environment for the Indian economy.