Madhukar R. Umarji retired as an executive director of the Reserve Bank of India (RBI). After his retirement, he worked as the legal chief for the Indian Banks Association for 14 years.
An acknowledged authority on secured transaction laws, Umarji began his career as a legal assistant in the Law and Judiciary Department, Maharashtra government, pursuing a master’s degree in law simultaneously. He then joined the Bank of Baroda as a law officer, later shifting to Dena Bank as chief manager, legal, where he rose to the position of general manger. He later became the executive director of Corporation Bank. On account of his extensive experience in financial sector laws, including operational banking, he was appointed executive director, Department of Non-banking Supervision, RBI.
In an article published in 1991 in the Economic Times, Umarji had suggested the enactment of a special law to empower banks and financial institutions to enforce securities without the intervention of courts. He made the same suggestion to the Narasimhan Committee which was considering reforms for the financial sector. On acceptance of his suggestion, Umarji was later appointed a member of the expert group under the chairmanship of T.R. Andhyarujina. The Securitisation and Asset Reconstruction and Enforcement of Security Interest Act, 2002, was drafted by a special working group set up under the chairmanship of Umarji by the Ministry of Finance. As a result of this, Umarji represented the country at the United Nations Commission on International Trade Law, which was involved in the process of drafting a legislative guide on model secured transaction laws.
Umarji is of the view that entrusting infrastructure projects to the private sector and allowing banks to finance construction of such projects has created the problem of the high level of non-performing assets. “As a matter of standard practice, it should be ensured that payments are made on time for the work completed by the company entrusted with the infrastructure project. It should also be ensured that as few disputes as possible be raised with regard to the payment liability and referred for arbitration. If the work is of substandard quality, a certain portion of the payment could be retained for rectifying the defects, while the balance money due should be paid. Such practices will ensure that the construction of the project is not stalled, the arbitration award is given and the final liability is determined,” says Umarji.