NEW DELHI: The government will shortly come out with an Ordinance to empower the Reserve Bank of India to effectively deal with the problem of mounting non-performing assets in the banking sector.
The Union Cabinet headed by Prime Minister Narendra Modi, on Wednesday cleared a proposal to amend a key banking law – Section 35 A of the Banking Regulation Act – through the Ordinance route.
The amendment will empower RBI to issue direction to banks to recover dues from loan defaulters.
Section 35A empowers RBI to issue directions to the banks in the public interest and depositors.
Public-sector banks are saddled with non-performing assets (NPA) or bad loans to the tune of a staggering Rs 6 lakh crore.
Bad loans rose by Rs 1 lakh crore in the first nine months of last fiscal to Rs 6.07 lakh crore by December 31, 2016.
Gross NPA of PSBs stood at Rs 5.02 lakh crore at the end of March 2016, up from Rs 2.67 lakh crore in March 2015.
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. RBI will also be able to give specific solutions for specific cases.