Pranab Mukherjee signs ordinance giving RBI more power to tackle NPAs

President Pranab Mukherjee has given a nod to an ordinance giving greater powers to the Reserve Bank of India to tackle mounting bad loans, a CNBC-TV18 report says.

Sources told the news channel that the ordinance on non-performing assets (NPAs) will be effectively immediately.

The government is likely to announce details of the ordinance shortly.

The Cabinet on Wednesday approved promulgation of an ordinance to amend the Banking Regulation Act for resolution of the non-performing asset (NPA) crisis.

The amendments to the Act will help in effectively resolving the bad loans problem, Finance Secretary Ashok Lavasa said on Thursday.

Also Watch: How Banking Regulation Act will clean up India’s bad loan mess

"It is not possible for me to put down a number on how this (NPAs) will go down, but certainly we feel that these changes will make the system more effective in handling the bad loans," he told reporters.

Speaking to CNBC-TV18, HR Khan, former Deputy Governor of RBI said the central bank should put in a process towards the resolution of NPAs but on principle, he was not comfortable with RBI directly deciding haircuts.

Following the economic slowdown in 2012-13, bad loans have ballooned in the system over the past few years, with gross NPAs for state-owned bank at Rs 6.07 lakh crore at the end of December 2016.

The Reserve Bank has introduced a number of steps previously, such as Strategic Debt Restructuring (SDR) and Scheme for Sustainable Structuring of Stressed Assets (S4A) to deal with the bad loans menace.

With inputs from PTI