Parliament has passed the Banking Regulation (Amendment) Bill, 2017 with the Rajya Sabha approving it. The Lok Sabha has already passed it. The bill will replace the Banking Regulation (Amendment) Ordinance, 2017 promulgated by President in May 2017.
The bill seeks to amend the Banking Regulation Act, 1949 to insert provisions for handling cases related to stressed assets or non-performing assets (NPAs) of banks. Stressed assets (NPAs) are loans defaulted by borrower in repayment or the loan which has been restructured by changing the repayment schedule.
Key Features of the Bill
Initiating insolvency proceedings: It will enable the Central government to authorize the RBI to direct banking companies to resolve specific stressed assets by initiating insolvency resolution proceedings under the Insolvency and Bankruptcy Code, 2016.
Issuing directions on stressed assets: It empowers RBI to issue directions to banks for resolution of stressed assets from time to time.
Committee to Advise banks: It enables RBI to specify committees or authorities to advise banks on resolution of stressed assets. RBI will appoint or approve members on such committees.
Applicability to State Bank of India (SBI): It inserts provision to make above provisions applicable to the SBI and its subsidiaries and also Regional Rural Banks (RRBs).
Need for Amendment
NPAs in the banks stand at Rs. 6.41 lakh crore in the public sector banks while total stressed assets are at Rs. 8.02 lakh crore. It has resulted in choking the banking system. So it had become necessary for the RBI to intervene in order to take urgent measures for their speedy resolution. Government is also expanding infrastructures in Debt Recovery Tribunal, National Company Law Tribunal to deal with stressed assets.