Bank NPAS : New Steps Taken

  • Ordinance: Union Cabinet has passed an Ordinance to amend the Banking Regulation Act for the sake of giving more powers to Reserve Bank of India for effectively dealing with non-performing assets (NPAs) in the banking sector.
  • More power to RBI: Union cabinet had authorised the RBI to issue directions to any banking company or banking companies to initiate insolvency resolution process under the provisions of the Insolvency and Bankruptcy Code, 2016. 
  • Action against defaulters: The ordinance also empowered the RBI to act against loan defaulters and defaulting companies under the bankruptcy code.
  • Oversight Committees:
    • Amendments will enable RBI to set up multiple oversight committees to deal with NPAs.
    • To operationalise the ordinance, RBI is set to reconstitute Oversight Committee
    • The existing Oversight Committee was constituted by the Indian Banks’ Association (IBA).
    • RBI has also proposed to include some more members so that it can constitute requisite benches to deal with the volume of cases referred to the committee. The existing OC constituted by the IBA has only two members.
  • Consistent Decision Making: RBI is also working on a framework to facilitate consistent decision making in those cases which are referred for resolution under the Insolvency and Bankruptcy Code, 2016
  • Greater role of Credit Rating Agencies: RBI envisages a vital role for the credit rating agencies and is exploring the feasibility of rating assignments being determined by the RBI itself. The agencies would be paid out of a fund constituted out of contributions from the banks and the Reserve Banks
  • Coordination Envisaged: RBI envisages coordination among various stakeholders including banks, ARCs, rating agencies, IBBI and PE firms. The apex bank has already sought information on the present status of the large stressed assets from the banks

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