Banking and debt recovery : a comparative study of the law and practice in India, Sri Lanka and Malaysia
Current economic development law theories and technical assistance practices of international financial institutions emphasise the critical importance for an emerging or transitioning economy in moving towards a market orientated system, to have in place a modem commercial law infrastructure so that the economy can develop robust credit and other financial markets and can attract internal and external capital investments. One essential element of this desired commercial law infrastructure is a legal and judicial framework that provides for an efficient and prompt debt recovery process. Unfortunately, recent studies indicate that, in most developing countries debt recovery is in crisis. The subject matter of this volume will be debt recovery in South Asia countries of India, Sri Lanka and Malaysia. These countries have been chosen for different reasons: India because it represents one of the largest emerging economies; Sri Lanka because its relevant legal system is a mix of English Common Law and Roman Dutch Law concepts; and Malaysia because it has achieved significant economic and financial modernisation through a rather special governmental-societal approach. Hopefully such a comparative analysis will shed some light on how to improve debt recovery laws in emerging economies in a manner conducive to sustainable economic and social development. The ultimate thesis of this manuscript is that a suitable debt recovery system for an emerging economy requires, not simply suitable laws and judicial remedies, but also appropriate financial industry practices as to credit allocation and loan supervision; a broad range of fair and effective enforcement mechanisms; and an independent, commercial trained and responsive judiciary. The conclusion looks at the present state of the development of the banking sector in the selected three countries, with special attention being given to the apparent tensions between the market orientated policies that are being ambitiously pursued and the laws that govern credit, security and debt recovery.