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The Debt Justice

Table of Contents

I. Abstract

The Debt Recovery Tribunal (DRT) system, introduced under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act), was seen as India’s institutional answer to the inefficiency of the civil courts in handling financial disputes. Three decades later, it stands at the crossroads of efficiency and equity. The whole structure is burdened with delays, deficits and low credibility. This blog argues for a paradigm shift from a bylane of recovery-centric approach to a debt justice approach that merges speed, fairness and transparency to strengthen its structure. Such a shift is important not only to restore the confidence of creditors and debtors, both, but also to ensure that India’s financial jurisprudence remains aligned with its macroeconomic stability and social equity.

II. Keywords

Debt Recovery Tribunals (DRTs), Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act), Financial disputes, Debt, Recovery, Creditors, Debtors and Financial jurisprudence

III. Introduction

The economic reforms in the early 1990s unleashed a flood of new financial opportunities and new risks. Rising non-performing assets (NPAs) soon highlighted the limitations of civil courts in handling complex financial disputes. Although the idea of specialised tribunals for debt recovery was initially proposed by the Tiwari Committee (1981), it was the Narasimham Committee Report that strongly recommended their establishment. Acting on it, Parliament enacted the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (now the Recovery of Debts and Bankruptcy Act), establishing the Debt Recovery Tribunals (DRTs) and Debt Recovery Appellate Tribunals (DRATs). These tribunals were designed to function as specialised quasi-judicial bodies adhering to statutory timelines, with the benefit of domain expertise and with minimal procedural rigour. The aim was to protect the financial system from paralysis. However, the reality is seemingly different. By 2025, there are more than 2.15 lakh cases pending in this tribunal nationwide, and the statutory 180-day disposal window remains more aspirational than real. According to the Ministry of Finance, there are currently 39 DRTs and five DRATs functioning across the country, with jurisdiction distributed zone-wise.The question, therefore, is not merely about improving procedural efficiency within the DRT framework, but about reexamining its performance and reform trajectory through the lens of debt justice, to determine whether it functions as a truly balanced adjudicatory system rather than merely a recovery-centric enforcement mechanism. Debt justice, in this context, means more than the mechanical enforcement of loan contracts, referring to a just system that is efficient without being coercive and fair without being indefinitely delayed. In practice, this means designing a recovery framework that balances speed with procedural fairness and institutional accountability, so that enforcement outcomes remain credible, proportionate and trusted by all stakeholders.

IV. Methodology

Why does all this matter?

The health of the DRT system directly affects the health of India’s credit market and economy. When recoveries are slow and unpredictable, creditors become more risk-averse, which ultimately hinders economic growth. This linkage is reflected in the Reserve Bank of India’s latest Systemic Risk Survey under the Financial Stability Report (June 2025), which records a moderation in overall systemic risk to (4.4) but flags a continued rise in operational risk (5.6) and profitability risk (5.4). Elevated operational risk indicates procedural inefficiencies, litigation delays and enforcement bottlenecks, factors that are particularly relevant to recovery mechanisms such as DRTs. At the same time, higher profitability risk indicates pressure on the bank’s earnings due to prolonged resolution timelines and delayed realisation of stressed assets. Together, these risks signal that even when macro financial conditions appear stable, delayed recoveries continue to strain effective credit circulation in the economy, discouraging lending and increasing the cost of capital. Conversely, a transparent and efficient debt recovery system encourages credit flow, supports new businesses and reduces the overall cost of capital. Additionally, if DRTs are efficient, litigants will not need to bypass them by approaching other forums. That, in turn, relieves pressure on high courts and strengthens the credibility of these tribunals. Ultimately, debt justice is all about restoring the equilibrium of demand and supply through a balanced mechanism of DRTs. When the system works well, it serves both ends, ensuring that creditors recover their legitimate dues and debtors are not denied a fair chance to defend themselves. For this balance to be achieved, the DRT framework must function efficiently, both in its design and in its day-to-day working.

What the Numbers Reveal About the Performance

When statistics related to recovery under the DRT framework are examined closely, a pattern of low recovery becomes evident. In 2021-22, although over (amounts in rupees) 1.37 lakh crore was referred to DRTs, less than one-sixth of that amount roughly 15.2 percent was actually recovered. A marginal improvement was seen in 2022-23, where recoveries rose slightly to about 16.1 percent, despite a fall in the total amount referred. However, this moderate gain did not sustain. In 2023-24, even as fresh references declined further, the recovery rate slipped again to just under 16 percent. According to the Economic Times report, banks are now facing an average delay of nearly seven years in obtaining recoveries through tribunal processes. These suggest that, at least in the most recent year, increased case volumes have not translated into proportionate recoveries, pointing to a structural constraint in the DRT recovery process.

Rising Backlogs and Administrative Bottlenecks

As of January 2024, more than two lakh cases were pending across 39 DRT benches. Original applications under Section 19(24) of the RDB Act, 1993, are meant to be decided within 180 days, while securitisation matters under the SARFAESI Act, 2002, are expected to conclude within 120 days. However, these cases are taking more than six months to be resolved. One reason for these delays is the limited number of benches and vacancies in key posts, including presiding officers (against a sanctioned strength of 39 only 35 presiding officers are in place) and recovery officers. Many tribunals function with skeletal administrative support and several operate without adequate digital infrastructure. The Centre for Public Policy Research’s study of the Ernakulam DRT found that long adjournments, inconsistent scheduling and lack of technological support significantly slowed down proceedings. Procedural challenges compound the problem. Adjournments are frequently granted and procedural uniformity is missing across DRTs in aspects such as scheduling of hearings, issuance of notices and timelines followed at the appellate stage. Appeals to DRATs often take as long as the original hearings. Borrowers complain that notices sometimes arrive late or that hearings are listed without giving adequate preparation time. Meanwhile, the statutory rule under Section 21 of the RDB Act, 1993, requires that an appellant must deposit at least 50 percent of the amount due before the appeal acts as a barrier for smaller borrowers who really want to contest unfair recovery claims. The result is a system that neither satisfies the creditor’s expectation of speedy recovery nor ensures the debtor’s right to a fair process.

Structural and Governance Fault Lines

There are also structural and governance-related issues that affect the credibility of these tribunals. The tribunals are administered by the Department of Financial Services, which is also the parent ministry of public sector banks, that is a frequent litigant before these very tribunals. Furthermore, the absence of regular publication of performance data, such as disposal rates or recovery ratios, prevents scrutiny and reduces the scope for corrective action. In comparison, the judiciary’s e-Courts and National Judicial Data Grid portals offer a transparent view of case status and pendency data.

Reform: Capacity and Infrastructure

Reforms, therefore, need to focus simultaneously on capacity, process and governance. The first priority must be to fill vacancies and modernise infrastructure. Each tribunal should have adequate staff, trained recovery officers and access to digital case management systems. Virtual hearings and e-filing, which became common in regular courts after the pandemic, should be made standard practice in DRTs as well. The Ministry of Finance could create a national dashboard similar to the National Judicial Data Grid used for courts, that would display pendency, average disposal time and recovery performance of each DRT.

Strengthening Procedural Fairness

Second, procedural fairness must be built into the system. These tribunals should ensure that both parties, creditors and debtors, have equal opportunity to present their case. A pre-hearing orientation or simplified procedural note in simple language could help debtors understand their rights and obligations. Reasoned orders that being delivered in clear and concise language should become the norm rather than the exception, and it would surely strengthen public trust.

Institutional Independence

Third, governance reforms must insulate the tribunal structure from excessive executive control. The Supreme Court in Madras Bar Association vs. Union of India (2021) underscored that tribunals must enjoy both functional and administrative independence. A body at the national level that is possibly modelled on a National Tribunal Commission has been repeatedly proposed in Indian tribunal reform discourse as a means to address chronic issues of executive control, delayed appointments and uneven administrative support across tribunals and by centralising appointments, infrastructure and performance, a National Tribunal Commission intended to strengthen institutional independence and ensure uniform functioning across forums such as DRTs

V. Conclusion

In conclusion, the story of India’s Debt Recovery Tribunal is not one of failure but of incompleteness. This tribunal was created with a clear economic rationale and has delivered results in several instances, yet its promise remains only partially fulfilled. Strengthening DRTs is not just about clearing backlogs but is about embedding justice into the structure of financial recovery. In the words of former Chief Justice M.C. Chagla (Bombay High Court), “Justice is not a cloistered virtue; it must be seen and felt to be done.” As India’s credit economy becomes increasingly complex, the DRT framework must evolve from a narrow recovery arm into a robust institution delivering outcomes that are fast, fair, and trusted, and that occur only when the principles of debt justice guide its performance and reform.

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