While experts have hailed the government's decision to issue a new ordinance on tackle bad loans, the Supreme Court has raised concerns over it.
Hearing a case related to non-performing assets in the economy, the apex court said that defaulters could be exonerated via insolvency proceedings. The court has also directed the government and the Reserve Bank of India (RBI) to clarify on disclosure of names of big defaulters.
The RBI told the SC that the new ordinance is a ‘revolutionary legislation’ as it arms the Centre and RBI with the powers of the Bankruptcy Code.
The apex court will hear the case on July 17.
The government on Friday notified the ordinance to amend the Banking Regulations Act that will empower the RBI and banks to initiate bankruptcy proceedings against loan defaulters.
Watch: How Banking Regulation Act will clean up India’s bad loan mess
The central bank will look at bad loans on case-to-case basis and can form committees to advise banks on non-performing assets.
The RBI has proposed to resolve top 50 NPA cases by December 31 and in cases where no resolution happens, it has proposed banks to take 100 percent haircut.
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