If empirical evidence were required to underscore emerging concerns about the phenomenon of loan defaults and the alarming prospects it portends for the banking industry, it would be found in the recent establishment, by the Central Bank, of a Committee on Distressed Banks.
The Committee has on its agenda (among other things) the mandate to explore aggressive methods for debt recoveries. Indeed, some banks have begun to pursue an aggres-sive debt recovery programme as a means of weathering the “liquidity squeeze” storm that followed the introduction of the Central Bank’s Open Market Operations (OMO). Liquid funds are scarce and banks have woken up to the need to call in outstanding debts.
But an aggressive debt recovery programme must be accompanied by a re-evaluation of existing debt recovery mechanisms. The core point in this paper is that we need to redefine our approach to the problem of debt recoveries. The present approach focuses on maximum use of ex-isting legal methods, viz; action for debt and enforcement of securities.