President Pranab Mukherjee today gave his assent to an ordinance to amend the Banking Regulation Act for resolution of the non-performing asset (NPA) crisis.
This ordinance will give greater powers to the Reserve Bank to tackle mounting bad loans. The amendments to the Act will help in effectively resolving the bad loans problem.
Bad loans have ballooned in the system over the past few years, with gross NPAs for state-owned bank at 6.07 lakh crore rupees at the end of December 2016.
The Reserve Bank had introduced a number of steps previously, such as Strategic Debt Restructuring and Scheme for Sustainable Structuring of Stressed Assets to deal with the bad loans menace.
The central bank can effectively ask banks to sit down with defaulters and reach a settlement as part of the package. This will involve amending Section 35 of the Banking Regulation Act, which currently deals with powers of inspection for RBI.
The government is expected to announce details of the ordinance in the evening. The Cabinet on Wednesday had approved promulgation of the ordinance in this regard.
