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President Promulgates Banking Regulations Amendment Ordinance To Tackle NPAs [Read The Text]

Apoorva Mandhani
5 May 2017 1:33 PM GMT
President Promulgates Banking Regulations Amendment Ordinance To Tackle NPAs [Read The Text]
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President Pranab Mukherjee on Friday promulgated the Banking Regulations Amendment Ordinance, in a bid to tackle the NPA crisis facing public sector banks.

The Ordinance endows the Central Government with the power to authorize the RBI to issue directions to any banking company to initiate insolvency in respect of a default under the provisions of the Insolvency and Bankruptcy Code. 2016.

It further enables the RBI to issue directions to banking companies for resolution of stressed assets. The RBI may also specify one or more authorities or committees to which it will appoint members to advice banks on resolution of stressed assets.

The move comes after clarion calls from lenders who have been jostling with stressed assets mounting to about Rs 10 lakh crore, or close to 7% of India’s GDP, as of December-end. Accordingly, the Ordinance states that it is being enacted as stressed assets in the banking system have reached “unacceptably high levels”, and therefore, urgent measures were required for their resolution.

Speaking about the amendments and their effectiveness, Finance Secretary Ashok Lavasa was quoted as saying, “It is not possible for me to put down a number on how this (NPAs) will go down, but certainly we feel that these changes will make the system more effective in handling the bad loans.”

He further opined that the authorities would “be able to reach resolution in many of the cases” on the back of professionalism in the banking system, and with participation of promoters themselves.

Read the Full Text of Ordinance Here

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