The Lok Sabha has passed the Banking Regulation (Amendment) Bill, 2017 by voice vote. The bill seeks to amend the Banking Regulation Act, 1949 to insert provisions for handling cases related to stressed assets of banks. Stressed assets are loans where the borrower has defaulted in repayment or where the loan has been restructured.
The bill will replace the Banking Regulation(Amendment) Ordinance, 2017 which was promulgated on 4th of May this year. The legislation will enable the Central government to authorize the Reserve Bank of India (RBI) to direct banking companies to resolve specific stressed assets by initiating insolvency resolution process. The RBI has also been empowered to issue other directions for resolution, and appoint or approve appointment, authorities or committees to advise banking companies for resolution of stressed assets.
Replying to a debate on the bill, Finance Minister Arun Jaitley said, the country needs a strong banking system to support the economic growth. He said, if the banking system is robust then it will have the capacity of lending money for the need of business and industry.
He said, the steel sector has owed to largest NPAs and the government has taken initiatives to revive the sector so that the steel companies can repay their debts to banks. Mr Jaitley said, for power sector, the government is implementing UDAY Scheme for State power distribution companies. He said, during 2001-2002, the total NPAs were over 13 per cent and it came down to 2.1 per cent in 2007-2008 because during the period the industrial growth was very good.
The Finance Minister said, the new legislation will help activate the Asset Reconstruction Companies (ARCs) which will take over the stressed assets of companies to make them turn around as performing assets. After the promulgation of an ordinance in this regard, the RBI identified 12 loan defaulters and started the process of resolution of stressed assets. He said, the government is also taking action against the loan defaulters.
On the issue of action against Chit-Fund companies, Mr Jaitley said, the government will soon bring a Central Law to regulate Chit Fund companies operating in various states and to protect the poor and gullible investors from unscrupulous players floating illegal deposit schemes.