The Lok Sabha has passed the Banking Regulation (Amendment) Bill, 2017, which gives RBI the power to direct banking companies to resolve specific stressed assets by initiating insolvency resolution process. The bill, introduced by Finance Minister Arun Jaitley, replaces Banking Regulation (Amendment) Ordinance, 2017 promulgated in May this year in the absence of an ongoing Parliament session.
The RBI would also be empowered to issue other directions for resolution, appoint or approve for appointment, authorities or committees to advise the banking companies for stressed asset resolution. Moving on fast-track, the RBI in June had identified 12 large loan defaulters who account for 25 percent of the total bad loans in the banking sector and started the process of resolution of stressed assets. Non-performing assets (NPAs) of banks have risen to over Rs 9 lakh crore and so it had become necessary for the RBI to intervene.
Besides, Finance Minister Arun Jaitley has said that the new legislation will help activate the Asset Reconstruction Companies (ARCs) which will take over the stressed assets of companies to make them turn around as performing assets. He also said that the government is also taking action against the loan defaulters.