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17
July 2017
Industry
body Assocham on Sunday said the Banking Regulation (Amendment) Ordinance has
empowered the Reserve Bank of India (RBI) to take up "bad loans worth
about Rs 8 lakh crore" for resolution by March 2019. The Total Investment & Insurance Solutions
According
to an Assocham study, the move has the potential to bring down the
non-performing asset (NPA) levels and "significantly improve" the
financial health of banks.
"Somewhat
bitter medicine came in the form of the Ordinance promulgated by the President
in May," Assocham's Secretary General D.S. Rawat said.
"The
government gave wide-ranging legislative powers to the RBI to issue directions
to lenders to initiate insolvency proceedings for the recovery of bad loans
that have reached unacceptably high levels." The Total Investment & Insurance Solutions
In
case of a default, the recent Ordinance has authorises RBI to direct lenders
for initiating insolvency resolution process under the provisions of the
Insolvency and Bankruptcy Code (IBC), 2016. The Total Investment & Insurance Solutions
Further,
the law empowers the RBI to set up sector related oversight panels that
"will shield bankers" from any action which might be initiated by
probe agencies on a later date.
In
the past, lenders have been reluctant to resolve NPAs through settlement
schemes or to "sell bad loans with hair cuts" to asset reconstruction
companies for fear of probe agencies.
"With
the institution of OC (overseeing committee), the top bankers should get some
cushion against the 3Cs (CBI, CAG and CVC), since the key decisions which
involve taking losses by the banks, would be taken by an institutional
mechanism and not one or few individuals," said Assocham's study titled
"NPAs Resolution: Light at the end of tunnel by March 2019". The Total Investment & Insurance Solutions
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