RBI to get more power to deal with bad loans, NPAs as cabinet clears ordinance to amend Banking Regulation Act

The cabinet on Wednesday cleared the non-performing assets (NPAs) resolution package, which includes an ordinance that will give the Reserve Bank of India more power to deal with bad assets.

The ordinance could mean an amendment to the  Banking Regulation Act to make the RBI more effective in dealing with bad loans and will give them a way to deal with non-performing assets.

Also read: Not impossible for India to resolve 20 to 30 big accounts: Arun Jaitley on NPAs

The resolution has been sent to the President for approval after which the details will be made clear.

After a cabinet meeting chaired by Prime Minister Narendra Modi , Finance Minister Arun Jaitely declared that a major decision was taken related to the banking sector. However, he declined to comment on the contents of the resolution stating tradition.
 
"There is a convention that when some proposal is referred to the President then details of it cannot be disclosed till it is approved. As soon as approval comes, details will be shared," he said.

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According to data provided by the government, the gross bad loans in public sector banks rose by over Rs 1 lakh crore in the just the first nine months of the last fiscal year from Rs 5.02 lakh crore in March to Rs 6.07 lakh crore in December.

 In an event on April 24, speaking at the Council on Foreign Relations in New York, Finance Minister Arun Jaitley termed the resolution of the Non-Performing Assets (NPAs) as the "one very big challenge" going forward and the government's "top priority" at the moment.
 
Jaitley asserted that the government was giving top priority to addressing the issue of bad loans while acknowledging that the problem of non-performing assets was "adversely impacting" the Indian banking system.
 
He said the magnitude of the NPAs problem was that essentially it was about 20 to 30 big accounts.
 
"It's not a problem spread over hundreds of thousands of accounts...and it's not impossible for a large economy like India to resolve 20 to 30 accounts. So it's not an insurmountable problem. I think it's just persisted too long, but it's certainly adversely impacting us," he said.
 
"So if you were to ask me, there are a series of reforms and changes which we've successfully made. This is one hurdle which we are now required to jump, and that's where our current focus is," he said during the event on April 24.