Banks can confiscate security in case of loan default as President Pranab Mukherjee has given assent to a law aimed at faster recovery and resolution of bad debts.

The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, has received nod from the President and it has been notified, officials said on Wednesday.

The Act amends four laws — the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, 2002, the Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act, 1993, the Indian Stamp Act, 1899, and the Depositories Act, 1996 — and simplifies the procedure to ensure quick disposal of pending cases of banks and financial institutions by the Debt Recovery Tribunal (DRT).

The new legislation is not applicable to loans for agricultural land as well as student loans, they said.

The Lok Sabha had passed the bill in this regard on August 1. The Rajya Sabha gave its nod to the proposed law on August 9.

The development assumes significance as it comes against the backdrop of the episode involving industrialist Vijay Mallya, who owes Rs 9,000 crore to banks, but has left the country to take refuge in England.

The changes in the Sarfaesi Act allows creditors to take possession over a collateral, against which a loan had been provided, upon default in repayment.

The amendments in the RDDBFI Act increases the retirement age of Presiding Officers of DRTs to 65 years from 62 years.

It also increases the retirement age of chairpersons of Appellate Tribunals to 67 years from 65 years. It also makes Presiding Officers and Chairpersons eligible for reappointments.

The Act has provision that stamp duty will not be charged on transactions undertaken for transfer of financial assets (loans and collaterals) in favour of asset reconstruction companies.

Replying to a debate in the Rajya Sabha on August 9, Finance Minister Arun Jaitley had emphasised the need for "firmness coupled with fairness" in recovering bad loans. If loan has been taken, it must be repaid, he said.