The Banks and Financial Institutions had been experiencing considerable difficulties in recovering loans and enforcement of securities charged with them. An urgent need was, therefore, felt to work out a suitable mechanism through which the dues to the Banks and Financial institutions could be recovered. In 1981, a Committee under the Chairmanship of Shri T. Tiwari, examined the legal and other difficulties faced by banks and financial institutions and suggested remedial measures including changes in law and for setting up of Special Tribunals for recovery of dues to Banks and Financial Institutions by following a summary procedure. Keeping in view the recommendations of the Committee, the Recovery of Dues to Banks and Financial Institutions Act, 1993 was enacted.

The Debts Recovery Tribunals (DRTs) and Debts Recovery Appellate Tribunal (DRATs) were established under the Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFI Act), 1993 with the specific objective of providing expeditious adjudication and recovery of debts due to Banks and Financial Institution. Prior to the establishment of the DRTs/DRATs, the process of recovery of debts used to be quite protracted and cumbersome. In the year 1990, more than 15 lakh cases filed by Banks and Financial Institutions were pending before various courts involving an amount of more than Rs. 6,000 crore. With the establishment of DRTs/DRATs, the recovery position has improved.