The government has notified the Banking Regulation (Amendment) Act under which it can authorise the RBI to issue directions to banks to initiate insolvency resolution process to recover bad loans.
Earlier, the parliament had approved the Banking Regulation (Amendment) Bill, 2017, seeking to amend the Banking Regulation Act, 1949 and replace the Banking Regulation (Amendment) Ordinance, 2017, which was promulgated in May this year, authorising the Reserve Bank of India (RBI) to issue directions to banks to initiate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.
Under the Banking Regulation (Amendment) Act, 2017, the RBI can issue directions to banks for resolution of stressed assets. The RBI can specify authorities or committees to advise banks on resolution of stressed assets. The members on the committees will be appointed or approved by the RBI. Moving on fast-track, the RBI had in June identified 12 large loan defaulters who account for 25 per cent of the total bad loans in the banking sector.