President Pranab Mukherjee on 5 May 2017 gave his assent to an ordinance to amend the Banking Regulation Act for resolution of the non-performing asset (NPA) crisis in banking system.
The Ordinance, which is an amendment in the Banking Regulation Act and sent to the President for an approval, was earlier approved by the Union Cabinet chaired by Prime Minister Narendra Modi.
The new ordinance passed by the President Mukherjee will be known as Banking Regulation (Amendment) Ordinance, 2017. The ordinance amends the Section 35A of the Banking Regulation Act 1949 and provides greater powers to the Reserve Bank to tackle mounting bad loans. The amendments to the Act will help in effectively resolving the bad loans problem.
Key Facts of the Ordinance
• Section 35AA of the Banking Regulation Act 1949: As per the new rules RBI is entitled to issue directions to any banking company or banking companies to initiate insolvency resolution process in respect of a default under the provisions of the Insolvency and Bankruptcy Code.
• Section 35AB: As per the new rules, the RBI can issue directions to the banking companies for resolution of stressed assets.
Bad loans have ballooned in the system over the past few years, with gross NPAs for state-owned banks at 6.07 lakh crore rupees at the end of December 2016.
The Finance Minister Arun Jaitley said, in the last few years, the government has taken several structural reforms towards the economy but the stressed assets remains a challenge. He said, the government and RBI will work together on expeditious resolution of stressed assets.
The government has enacted insolvency and Bankruptcy Code to consolidate and amend the laws relating to reorganization and insolvency resolution of companies, partnerships firms and individual.
When: 5 May 2017