RBI to expand oversight panel for stressed assets

The Reserve Bank of India (RBI) will add more members to a panel to deal with the large volume of cases involving stressed assets which are referred to it, highlighting its resolve to fight bad debt in Asia's third-largest economy.

The two members of the Oversight Committee will continue to be a part of the panel, while the names of new members will be announced soon, the RBI said in a statement on Monday.

The central bank is also planning to expand the scope of cases to be referred to the committee beyond those under the Scheme for Sustainable Structuring of Stressed Assets (S4A).

The RBI is working on a framework to facilitate an "objective and consistent decision-making process" with regard to cases that are referred for resolution under the Insolvency and Bankruptcy code (IBC).

"Reserve Bank has already sought information on the current status of the large stressed assets from the banks. The RBI would also be constituting a Committee comprised majorly of its independent Board Members to advise it in this matter," the central bank said.

Indian banks have accumulated $133 billion in stressed assets after years of reckless lending.

The central bank is working towards ensuring an objective decision-making process on cases under the Insolvency and Bankruptcy Code, 2016 (IBC) and will form a separate panel, comprised mainly of its independent board members, to advise it in this regard, the RBI said.

Rating issues

The  Reserve  Bank  envisages  an  important  role  for  the  credit  rating  agencies  in  the scheme of things. With a view to prevent rating-shopping or any conflict of interest, the RBI is exploring the feasibility of rating assignments being determined by the Reserve Bank itself and paid for from a fund to be created out of contribution from the banks and the Reserve Bank.

"The Reserve Bank notes that the proper exercise of the enhanced empowerment would require coordination with and cooperation from several stakeholders including banks, ARCs, rating agencies, IBBI and PE firms, to which end the Reserve Bank would be holding meetings in the near future with these stakeholders," the statement said.