The government has notified the Banking Regulation (Amendment) Act. The Act authorises the Reserve Bank of India, RBI to issue directions to banks to initiate insolvency resolution process to recover bad loans.
The banking sector is saddled with non-performing assets, NPAs of over 8 lakh crore rupees, of which, 6 lakh crore rupees are with public sector banks. Earlier this month, Parliament had approved the Bill, which replaced an ordinance in this regard.
The government in May had promulgated an ordinance authorising the RBI to issue directions to banks to initiate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.
The RBI had identified 12 accounts each having more than five thousand crore of outstanding loans and accounting for 25 per cent of total NPAs of banks for immediate referral for resolution under the bankruptcy law.
The loan defaulters identified by the RBI include, Essar Steel, Bhushan Steel, ABG Shipyard, Electrosteel and Alok Industries. The bulk of the NPAs are in various sectors including power, steel, road infrastructure and textiles.