Page 33 - Banking Finance MAY 2017

ARTICLE

-- This capital injection has been made as an incen- minimize the delay in carrying out the processes involved in
tive to the better performing banks. resolving issues pertaining to NPA. The Enforcement of Se-
-- Govt. has announced to bring down its stake in some curity Interest and Recovery of Debts Laws and Miscella-
PSBs to 51% for generating necessary capital. neous Provisions (Amendment) Bill, 2016 is one such vital
reform measure initiated by our Government to resolve
2. Bankruptcy Code: some of the legal issues involved in various legal measures
-- This will supplement RBI's efforts by speeding legal of tackling NPA.
solutions
Origin of the Bill:
3. Granting more Autonomy:
X Bill was introduced by the Minister of Finance, Mr. Arun
-- The 7-point directive "Indradhanush" has been a
confidence building measure among the Govt, RBI Jaitley, in Lok Sabha on May 11, 2016.
and PSBs X Bill was passed in Lok Sabha on 1st Aug 2016
-- The setting up a "Bank Board Bureau" that will X Bill was passed in Rajya Sabha on 9th Aug 2016
help identify and appoint MDs and other senior X Notifications was passed to bring into force the provi-
executives of banks sions of Act on 1ST SEPT 2016 (VIDE NOTIFICATION NO
3/5/2016-DRT)
4. Split CMD post for PSBs:
-- For better allocation of tasks and management
Objective of the Bill:
-- Now, Chairman will be the "Custodian of Gover-
nance" and CEO/MD will be the "Custodian of as- Despite enactment of various laws enabling banks and FIs
sets and efficiency" to recover NPAs expeditiously, the NPAs are continuously
mounting and the clamour for stricter debt recovery laws is
Despite the many measures, the NPA problem remains un- ever increasing. The Bill seeks to Strengthen the debt re-
solved due to ample number of bottlenecks at different covery laws which will Improve financial health of the banks
stages and involvement of various interpretations in differ- and it will lead to ease of doing business in our country.
ent platforms. Delay in systems and procedures in all reform Ultimately this will facilitate investment leading to higher
measures are the major concerns for the financial sectors economic growth and development.
and regulators in our country. There is always debates and
discussions at different institutional levels to get rid of the Why is the Act important ?
delays involved in existing systems and processes to resolve This Amendment Act is important in present perspectives
the Bad debts menace. due to following reasons
X Mounting concerns over loan recovery in stressed as-
Though we are not able to completely avoid the delay but sets to the tune of over Rs.8 Lakh crore in banking sys-
due to various innovations and amendments we are able to tem.

X There are 70,000 cases involving more than Rs.5 Lakh
crore pending in various DRTs. The Act will facilitate ex-
peditious disposal of recovery applications.

X 27 PSUs which constitute 70 % of Indian banking sector
have written off Rs.59,547 Cr in financial year ended
March 2016 and in last 3 years (FY13,14&15) banks had
together written off 1.14 Lakh Crore.
X Banks have failed in most of the cases to make any re-
covery from the borrowers, mainly large corporate cli-
ents.
X The Act will help banks to step up their recovery efforts,
in turn saving taxpayers' money.

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