RBI outlines action plan to tackle bad debt mess
MUMBAI: Weeks after the amending the Banking Regulation Act, 1949, the Reserve Bank of India on Monday has come out with an action-plan to expedite the recovery of bad loans which have crossed `8 lakh crore in the sector.
In a notification issued on Monday, the central bank said it will reconstitute the Oversight Committee (OC), add more members and increase the scope of its work.
Currently, OC comprises of two members, constituted by the Indian Banks’ Association in consultation with RBI. While more members will be appointed, RBI didn’t stop short of putting a number.
RBI, however, said the OC will constitute requisite benches to deal with the volume of cases. The scope of cases will go beyond those under S4A as required currently, it added.
“The Reserve Bank is working on a framework to facilitate an objective and consistent decision making process with regard to cases that may be determined for reference for resolution under the IBC,” the notification said.
According to sources, RBI has identified about 50 cases for NPA resolution after it was empowered by the government to ask banks to initiate insolvency proceedings, they added. The central bank sought status report from banks pertaining to large stressed assets and will constitute another committee comprising largely its independent Board Members to advise on how to go about solving the excess stockpiles.
Banks who were in the minority on the proposal approved by the Joint Lenders’ Forum are
required to either exit by complying with the substitution rules within the stipulated time or adhere to the decision of the JLF.
“The current guidelines on restructuring are under examination for such modifications as may be necessary to resolve the large stressed assets in the banking system in a value optimising manner,” it said.
Meanwhile, to prevent rating-shopping or conflict of interest, the central bank is exploring the feasibility of rating assignments, currently determined internally. A fund is in the offing with contribution from banks and RBI for the purpose.
RBI will also hold meetings to coordinate with all stakeholders including banks, ARCs, rating agencies, IBBI and PE firms.