In order to resolve the bad loan problem plaguing the banking sector, the Reserve Bank of India (RBI) has said that it will reconstitute the oversight committee (OC) under its aegis and also expand the committee to include more members so that requisite benches could be created to deal with the mounting volume of cases. The existing OC, which has two members, was constituted by the Indian Banks Association (IBA) in consultation with the RBI.
Outlining the action plan to implement the Banking Regulation (Amendment) Ordinance, 2017, the RBI has said that it is also working on a framework to facilitate an objective and consistent decision-making process for cases that may be referenced for resolution under the Insolvency and Bankruptcy Code, 2016 (IBC). It also said that it has already sought information on the current status of the large stressed assets from the banks. In addition, it would also be constituting a committee comprised majority of its independent board members to advise it in this matter.
The RBI further said that it envisages an important role for the credit rating agencies in the resolution of stressed assets. Therefore, to prevent rating-shopping or any conflict of interest, the central bank has said that it is exploring the feasibility of rating assignments being determined by the RBI itself and also plans to create a pool out of contributions from banks, which would be used to pay rating agencies for their services.
