Debt Recovery in India: A Comparative Analysis of the Recovery of Debts and Bankruptcy Act, 1993 and the SARFAESI Act, 2002

The stability of the banking and financial sector largely depends upon an efficient debt recovery mechanism. In India, the increasing burden of non-performing assets and delays in traditional civil court procedures created the need for specialized legislation for debt recovery. Consequently, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, now known as the Recovery of Debts and Bankruptcy Act, 1993 was enacted to establish Debt Recovery Tribunals for speedy adjudication and recovery of debts. However, persistent delays and procedural difficulties led to the enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, which empowered secured creditors to enforce security interests without court intervention. This paper critically examines the objectives, framework, and functioning of both statutes. It compares their mechanisms, powers, effectiveness, and limitations in addressing debt recovery challenges. The study also analyzes important judicial interpretations and the impact of these laws on the banking sector. The paper concludes that while both Acts have strengthened the recovery framework in India, issues relating to procedural delays, tribunal infrastructure, borrower protection, and implementation continue to affect their effectiveness.