The Banking Regulation Bill amends banking Regulation Act 1949 for the speedy redressal of stressed assets of banks or better say Banks NPA.
Key Features of the Bill
1.The government can authorise RBI to direct Banks to initiate recovery proceedings of outstanding or default loans under the ambit of Insolvency and Bankruptcy Code 2016. Currently, the RBI may issue directions to banks on grounds such as ‘public interest’ and ‘in the interest of banking policy’.
- the government can also authorise the RBI to issue directions to banks with regard to the resolution of stressed assets
3.The government may also allow RBI to make one or more committees to provide banks with advice in order to do so.Members of these committees are appointed by or approved by RBI.
The Bill tries to solve the mounting issues of Non-Performing Assets(NPA) in banking sector specially Public Sector Banks.However, there is some concern about why the Government do not directly initiate proceedings against the defaulter (being a major shareholder in public sector banks) rather than opting this route of Bill.Moreover appropriateness of RBI to direct banks on default, which is primarily a business decision, also need proper examination.Moreover, the Bill do not address some key issue with PSB’s like lack of incentive to recognise losses, fear to the investigation in case of low recovery, insufficient capital to absorb losses.
In spite of the above concern, this Bill is a genuine step in the direction to free the economy from the menace of NPA so that Banking sector may rejuvenate again and banks assets may increase which is extremely urgent to make our economy robust by capital formation and building infrastructure.
Related Article-NPA &Non Performing Assets