Lok Sabha passes Banking Regulation (Amendment) Bill for resolution of non-performing assets
After being enacted, the bill will empower RBI to direct banks to resolve specific stressed assets under the Insolvency and Bankruptcy Code, 2016 (IBC).
The Lok Sabha on 3 August 2017 passed the Banking Regulation (Amendment) Bill, 2017 by voice vote. The Banking Regulation Bill 2017 seeks to amend the Banking Regulation Act, 1949 and replace the Banking Regulation (Amendment) Ordinance, 2017, which was promulgated on 4 May 2017.
The bill seeks to empower the Reserve Bank of India (RBI) to issue directions to the banking companies to resolve specific stressed assets by initiating the recently enacted Insolvency and Bankruptcy Code, 2016 (IBC).
Key Highlights of the Banking Regulation (Amendment) Bill, 2017
• The bill seeks to insert provisions for handling cases related to stressed assets of banks. Stressed assets are loans where the borrower has defaulted in repayment or where the loan has been restructured.
• It enables union government to authorize RBI to direct banks to resolve specific stressed assets by initiating insolvency resolution process.
• The RBI has also been empowered to issue other directions for resolution, and appoint or approve appointment, authorities or committees to advise banking companies for resolution of stressed assets.
Replying to a debate on the bill, Finance Minister Arun Jaitley said, the country needs a strong banking system to support the economic growth. He said, if the banking system is robust then it will have the capacity of lending money for the need of business and industry.
The Finance Minister said 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.
After the promulgation of an ordinance in this regard, the RBI identified 12 loan defaulters and started the process of resolution of stressed assets. He said the government is also taking action against the loan defaulters.