22.14 ndian onom
in it) while in the latter contributors of funds get
Debt recovery tribunAl (Drt)
financial returns (from the project set up with the
fund). In the financial model of crowdfunding, Banks and financial institutions have often faced
contributors might be given equity/share in the a tough time in recovering loans, on which
upcoming project. the borrowers have defaulted. To expedite the
recovery process, the Committee on the Financial
crowDing-out effect System, headed by Mr. Narasimham considered
the setting up of special tribunals, with special
A concept of public finance which means an
adjudicator powers. This was felt to be necessary
increase in the government expenditure which has
to carry through financial sector reforms. Since
an effect of reducing the private sector expenditure.
there is an immense overload on the Indian legal
system at present, recovery of many unpaid debts,
due to banks or financial institutions, are held up,
The concept of corporate social responsibility indefinitely. This affects the balance sheets of the
(CSR) is fast gaining popularity among the banks as the amounts involved are very large.
corporate sector of the world. As per the experts, the It was thought that an independent forum
CSR is qualitatively different from the traditional was needed to deal with debts of these types. Thus,
concept of passive philanthropy by the corporate in 1993 the Recovery of Debts Due to Banks and
houses. Basically, the CSR acknowledges the debt Financial Institutions Act’ was passed. The Act,
that the corporates owe to the community within however, imposes a limitation and states that only
which they operate. It defines the corporates’ those debts which are in excess of Rs. 10 lakhs (or
partnership with social action groups (i.e., the upto Rs. 1 lakh, where the Central government
NGOs) in providing financial and other resources specified certain types of debts) would come
to support development plans, especially among under its purview.
disadvantaged communities. There is stress
on long-term sustainability of business and Decoupling theory
environment and the distribution of well-being.
Decoupling theory holds that Asian economies,
Debenture especially emerging ones, no longer depend on
the United States economy for growth, leaving
An instrument of raising long-term loan by them insulated from a severe slowdown there, even
companies, having a maturity period bearing an recession—looked true for some time as Asian
interest (coupon rate). Theoretically they may be stocks rose while socks in the US fell - however,
secured or unsecured by assets such as land and as fears of recession mounted in the US, stocks
buildings of the issuing company (known as declined heavily. Looking this happen in late
collateral). 2008 the decoupling theory regarding the Asian as
Debenture holders are provided with a prior well as the EU economies have now lost ground.
claim on the earnings (by interest) and assets of But still the emerging economies are able to have
the company in the situation of liquidation of the higher growth rates and exports in comparision to
company over the preference and equity shareholders the US – that is why the theory is still debated by
of the company. the experts.