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                                                                        Sitharaman. As part of its resolve to
                                                                        bring  down  burgeoning  NPAs,  the
                                                                        government issued two ordinances —
                                                                        Banking  Regulation  (Amendment)
             Govt to Push ahead with                                    Ordinance, 2017 and Insolvency and
                                                                        Bankruptcy  Code  (Amendment)
                    Banking Reforms                                     Ordinance, 2017 — during the year. The
                                                                        Banking  Regulation  (Amendment)
                                                                        Ordinance, 2017 gave way to the Act
                                                                        permitting the Reserve Bank of India
       The central bank advised banks to set aside 50 per cent provisioning against  (RBI)  to  direct  any  bank  to initiate
       secured exposure and 100 per cent against unsecured exposure in all cases  insolvency  proceedings  and  give
       referred for bankruptcy                   —By  Kumar  Dipankar   directions for resolution of stressed
                                                                        assets.
       The government is likely to push ahead  Cabinet  in  August  gave in-principle  REQUISITE ORDINANCES
       with banking sector reforms alongside  approval  for  PSBs  to  amalgamate  The RBI’s internal advisory committee
       infusion of fresh capital in state-owned  through  an  Alternative  Mechanism  identified  12  large  stressed  cases
       lenders in the New Year as it looks to  (AM). Subsequently last month, the  worth over Rs 5,000 crore, accounting
       lift banks out of NPA crisis and revive  panel  under  the  chairmanship  of  to 25 per cent (Rs 1.75 lakh crore) of
       lending growth from a 25-year low.                               total gross non-performing assets, for
       LOOKING FORWARD TO REFORMS                                       proceedings under the insolvency and
       The government in October announced       In Brief               bankruptcy code.  Subsequently, the
       infusion of an unprecedented Rs 2.11                             central bank advised banks to set aside
                                          The government is likely to
       lakh crore capital  over  two years  in                          50  per  cent  provisioning  against
       public  sector banks that are  reeling  push  ahead  with  banking  secured exposure and 100  per  cent
       under  high  non-performing  assets  sector reforms in the New Year.  against unsecured exposure in all cases
       (NPAs). Their NPAs have  increased   The government looks to lift  referred for bankruptcy. In a blow to
       more than two-and-a-half times to Rs  banks out of NPA crisis and  defaulting  promoters  seeking  to
       7.33 lakh crore as of June 2017, from  revive lending growth from a  reclaim  their  firms  that  are  under
       Rs 2.75 lakh crore in March 2015. Of  25-year low.               insolvency   proceedings,   the
       the  Rs 2.11 lakh  crore package,  Rs   The RBI’s internal advisory  government last month promulgated
       1.35  lakh  crore  would  be  infused                            an ordinance to bar wilful bank loan
                                            committee identified 12 large
       through recapitalisation  bonds.  The                            defaulters as well as those with NPA
                                            stressed cases worth over Rs
       Finance Ministry would soon announce                             accounts  from  bidding  in  auctions
                                            5,000 crore.
       contours of the recapitalisation bonds                           being  done  to  recover  loans.  The
                                          This accounts to 25% of total
       and the  amount  to  be  front  loaded                           ordinance,  which  is  yet  to  be
                                            gross non-performing assets,
       during the current fiscal.                                       considered  by Parliament, aimed at
          The capital infusion in banks is not  for  proceedings  under  the  putting in place safeguards to prevent
       going to be an easy affair as it has to  insolvency  and  bankruptcy  unscrupulous persons from misusing
       be  backed  by  string  of  reforms  code.                       or  vitiating  the  provisions  of  the
       including  strengthening  of  bank   The government in October  Insolvency and Bankruptcy Code (IBC).
       boards, resolution of non-performing  announced  infusion  of  an  The  amendments  would  be
       assets and HR issues so that they do  unprecedented Rs 2.11 lakh  applicable  to  cases  where  the
       responsive and responsible banking in                            resolutions are yet to be approved. The
                                            crore capital over two years
       future. “Reform agenda is the highest                            changes essentially mean that certain
                                            in public sector banks.
       priority which has to be implemented                             promoters would not be allowed to bid
       along with capitalisation. A whole lot                           for  their  own  assets  under  the
       of reforms will come so that genuine  Finance and Corporate Affairs Minister  insolvency  proceedings  initiated  to
       borrowers don’t suffer and get hassle-  Arun Jaitley  was  set  up  to examine  recover overdue loans. The RBI in its
       free,  need  based  credit,”  Financial  proposals from banks for in-principle  second list of big defaulters released
       Services Secretary Rajiv Kumar said.  approval  to  formulate  schemes  of  in August asked banks to resolve 28
       Special focus would be on micro, small  amalgamation.  A  report  on  the  large  accounts  till December  13  or
       and  medium  enterprises  (MSME),  proposals cleared by it will be sent to  report them by December 31 to NCLT
       financial inclusion and job creation, he  the Cabinet every three months. Two  for insolvency proceedings. Of these,
       said.                           other  Members  of  the  panel  are  banks are set to refer as many as 23
          To  facilitate consolidation  in  the  Railways  and  Coal  Minister  Piyush  accounts for insolvency proceedings.
       public  sector  banking  space,  the  Goyal, and Defence Minister Nirmala  These 28 accounts together account
       March 2018                                                                  Competition  Wizard  63
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