(NDTV)
Facing criticism on slow progress in acting against those who figure in the non-performing assets of banks list, the union cabinet today cleared an ordinance empowering the Reserve Bank of India (RBI) to act against wilful defaulters. The ordinance has been sent to the president for approval. The ordinance is aimed at empowering RBI to deal more effectively with stressed assets than earlier. A senior finance ministry official said “Its part of a broader plan to resolve bad loans with banks’ issue that has been a major hurdle in the economy from achieving its full potential.”
The ordinance may enable RBI to direct banks on how to deal with stressed assets. Moving an amendment to the banking regulation act may take time as the next session of parliament starts sometime after second week of July.
The amended law will also empower RBI to set up oversight panels that will shield bankers from later action by probe agencies looking into loan recasts as a lot of discretion will be involved in the process. By December 2016, Non-performing assets (NPAs) or bad loans with Indian banks rose to Rs. 6.07 lakh crore, of which the share of Public sector banks was Rs. 5.02 lakh crore. Sources in the Finance Ministry say the huge pile-up of bad loans have been blocking the lending process critical in kickstarting the economy. This has also prevented banks from lowering interest rates thus making investments not so lucrative.
