Bank NPAs : Fight against NPAs

  • Indian banks have an estimated Rs 10 trillion as stressed assets.
  • Of this, gross bad loans amounts close to Rs 7.7 trillion and the rest constitutes the restructured loans
What is happening?
  • In May, the Union Cabinet had cleared an ordinance that amended the Banking Regulation Act and gave more powers to Reserve Bank of India to deal with non-performing assets (NPAs) in the banking sector.
  • The Amendments has empowered the RBI to act against loan defaulters and defaulting companies under the bankruptcy code.
  • These amendments would pave for faster resolution of the NPAs as the bankruptcy code provides for a time-bound winding up of companies and recovery of secured loans.
  • RBI’s Internal Advisory Committee (IAC) has identified 12 bank accounts constituting nearly 25% of the gross bad loans for immediate referral and resolution under the bankruptcy law.
  • Each of the 12 identified accounts was having more than 5,000 crore rupees of outstanding loans, of which at least 60% was classified as non-performing by banks as of March 31, 2016.
  • RBI’s internal advisory committee (IAC) mainly comprises of its independent board members.
  • Based upon the recommendations of the IAC, the RBI will issue directions to the banks to initiate insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC).
  • These cases will be accorded priority by the National Company Law Tribunal (NCLT)
  • The NCLT is the arbitration authority for cases filed under IBC.
  • For those loan accounts which do not meet the criterion recommended by the IAC, the concerned banks should finalise a resolution plan within six months. 

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top