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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