Rajya Sabha passes Bill to resolve NPAs

Sanjeev Sharma

Tribune News Service

New Delhi, August 10

The Rajya Sabha today passed the Banking Regulation (Amendment) Bill 2017 which aims to empower the Reserve Bank to direct banks to initiate insolvency proceedings in large NPA cases.

The Bill, which amends the Banking Regulation Act, 1949, will replace the Banking Regulation (Amendment) Ordinance, 2017. The Lok Sabha had passed the Bill earlier.

Speaking in the debate on the Bill, Finance Minister Arun Jaitley said the banking system is being impacted by the rising non-performing assets (NPAs) and its capacity to lend to small investors and support growth and jobs is being impacted.

He said the amendment to the Banking Regulation will address the issue of big defaulters who are leaning on the argument that where are the takers for the assets and treat it as a compulsion for the banks.

He said as insolvency proceedings are initiated in large projects, management can change hands and investments will be made which will ensure that the asset does not get rusted, the company continues to function and jobs and the bank loan is protected.

As of March this year, the total NPAs of public sector banks is to the tune of Rs 6.41 lakh crore and if the stressed assets are added, the figure is Rs 8.28 lakh crore.

The Finance Minister said the government had even explored the option of asking PSU companies to takeover some of the NPA assets in various sectors which the companies declined.

He added that this is one move that has shaken the defaulters. Some defaulters are now running after the banks to reach some compromise.

Jaitley said the initiation of insolvency proceedings in big cases will lead to an administrator being appointed following which asset reconstruction companies, fund and even domestic companies may be willing to take over the management which will ensure that the banks are paid. This measure is bound to lead to displacement of managements in defaulting companies, he added.

Total bad debts are worth Rs 6.41 lakh crore

As of March this year, the total NPAs of public sector banks is to the tune of Rs 6.41 lakh crore and if the stressed assets are added, the figure is Rs 8.28 lakh crore.