New Delhi, May 4: The Union Cabinet headed by Prime Minister Narendra Modi on Wednesday has cleared an ordinance empowering RBI to deal with the problems of mounting bad loans in banking sector. It can now order banks to recover non-performing assets (NPAs) from loan defaulters.
Finance Minister, Arun Jaitley said that the ordinance is currently awaiting President Pranab Mukherjee's approval. "As soon as approval comes, details will be shared," he said.
The set of measures includes the promulgation of an Ordinance to amend the Banking Regulation Act to give more powers to Reserve Bank and its committees to act on behalf of banks while deciding on NPAs.
The amended law will also empower RBI to set up oversight panels that will shield bankers from later action by probe agencies looking into loan recasts. Once the law is amended, RBI will be able to give specific solutions for specific cases and also, if required, look at providing relaxation in terms of current guidelines, said a senior government official aware of the deliberations.
Meanwhile, Public sector banks’ NPAs surged by over Rs 1 lakh crore during the April-December period of 2016-17. PSU banks’ gross NPAs in the first nine months of the current fiscal rose to Rs 6.06 lakh crore by December 31, 2016, from Rs 5.02 lakh crore during 2015-16. For private sector banks, gross NPAs grew to Rs 70,321 crore by December 31, 2016, from Rs 48,380 crore as on March 31, 2016.