Likely to get President’s nod, official announcement expected today
AGENCIES
NEW DELHI
“It is an amendment in the Banking Regulation Act. Since Parliament is not in session, it will be issued as an ordinance which needs the President’s approval,” official sources said.
PSBs are saddled with non-performing assets or bad loans to the tune of a staggering Rs 6 lakh crore.
According to a report, the gross NPAs of state owned banks alone soared as much as 56.4 per cent to Rs 614,872 crore in the 12-month period that ended December 2016. However, there was more bad news on the way as they were expected to rise over the next two quarters.
This setback was likely to stem from small and medium sectors (SMEs) that have been struggling for a while now.
Without giving details, Finance Minister Arun Jaitley said the Cabinet has taken some important decisions in respect of the banking sector. “There is a convention that when some proposal is referred to the President, then details of it cannot be disclosed till it is approved. As soon as approval comes, details will be shared,” he said, adding, a NPA resolution mechanism was being worked out with the RBI which will put enough pressure on borrowers to settle dues.
“You see, the amounts are large, but the amounts are restricted. It’s not that hundreds and thousands of businesses have created this problem. The problem of big NPA is confined essentially to 30-40, at best 50 companies, and therefore, those 40-50 accounts need to be resolved,” he had said.
During resolution of NPAs, several issues like finding buyers and strategic partners come up, the minister had said. “...I think you wait for a few days... There is some policy decision between the RBI and the government which we will implement, which will put adequate pressure on people to settle...,” he had said.
Jaitley had gone on to say that “if you look at the whole structure, there are enough instruments available for settlements as far as the banking system is concerned. There are different legislations where action can be taken”.
The Reserve Bank of India (RBI) on its part also came up with what is being interpreted as a veiled threat to banks to shape up. It unveiled stricter rules for complying with covenants. If banks breach these limits, RBI will impose restrictions on them including capping the amount of dividend paid out by them.
