The Centre on Friday authorised the Reserve Bank of India to take tough and decisive actions to crack down on the rising bad loans on the books of public sector banks, after President Pranab Mukherjee signed off on an ordinance late on Thursday night to amend the Banking Regulation Act of 1949, empowering the central bank to deal with the menace more effectively.
“ While over the last three years, we have been able to bring several structural reforms in the economy, one of the key problems remained of stressed assets. Banks necessarily need to be in a robust position to support growth and if banks have an unacceptably high level of Non-Performing Assets (NPAs), it hinders their capacity,” Union Minister for Finance and Corporate Affairs Arun Jaitley said.
The RBI is expected to issue issue guidelines within a week to banks on resolving their bad loan accounts in a specified time frame through various strategies including asset sales, and where no breakthrough is imminent, invocation of insolvency and bankruptcy proceedings against the borrowers.
The total stressed assets in the banking system are estimated to be ₹14 lakh crore. Explaining the ordinance route to enhance the central bank’s powers, the Minister said the existing provisions were not clear enough for the RBI to act on specific stressed assets. He took a dig at previous governments, saying, “Whenever North Block without power has interfered in the banking system, it hasn’t done good.”
