Moneycontrol
Jul 25, 2017 03:14 PM IST | Source: Moneycontrol.com

Everything you need to know about The Banking Regulation (Amendment) Bill 2017

Finance Minister Arun Jaitley on Monday introduced a Bill in parliament to replace the non-performing assets ordinance, which came into effect earlier this year.

Finance Minister Arun Jaitley on Monday introduced a Bill in parliament to replace the non-performing assets ordinance, which came into effect earlier this year.

The ordinance was promulgated in May as immediate action was required to combat the unacceptably high levels of stress in the banking system and Parliament was not in session at the time.

The introduction of the Bill faced its own share of controversy when Trinamool Congress member Sougata Ray opposed the action, calling it a “desperate step by a desperate government”. When Jaitley was asked to respond, he said that the issues raised do not pertain to the introduction of the Bill and therefore, will be discussed when the Bill hits the floor.

Detailed below is everything you need to know about The Banking Regulation (Amendment) Bill 2017.

What will the new Bill do?

The Banking Regulation (Amendment) Bill 2017 will amend The Banking Regulation Act 1949, giving the government power to authorise the Reserve Bank of India to issue directions to banks in order to initiate insolvency resolution in case of a default.

Under the provisions of the Bill, the government can also authorise the RBI to issue directions to banks with regard to resolution of stressed assets and allow it to name one or more committees to provide them with advice in order to do so.

Before the Bill was introduced in Parliament, the NPA ordinance amended The Banking Regulation Act 1949 in the same way. Ordinances, however, have to be approved by Parliament within six weeks of session following the introduction.

Apart from empowering the RBI in the above-mentioned ways, the Bill will also give RBI the authority to refer NPA cases to the Insolvency and Bankruptcy Board.

The Insolvency and Bankruptcy Code provides for a time-bound resolution of defaults and stressed assets, either by restructuring a loan or liquidating the borrower’s assets.

The RBI in June identified 12 defaulters all over the country, who accounted for 25 percent of all bad loans in the banking system and is currently focusing on resolving their cases.

Some cases like that of Essar Steel and Bhushan Steel have already been referred to the Insolvency and Bankruptcy Board and action has already been taken.
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