What is the Banking Regulation (Amendment) Bill 2017?

The Banking Regulation (Amendment) Ordinance was promoted on May 4 to address the reportedly high levels of stress faced by the banking sector at the time.

The Rajya Sabha passed the Banking Regulation (Amendment) Bill 2017. The Bill is important as it gives the Reserve Bank of India directions to banks to act against loan defaulters.

What is the Banking Regulation (Amendment) Bill 2017:

The Bill empowers the Reserve Bank of India (RBI) to give directions to banks to act against loan defaulters. The Bill seeks to amend the Banking Regulation Act, 1949 by inserting provisions for handling cases related to stressed assets. Stressed assets are loans on which the borrower has defaulted or it has been restructured. The RBI may, from time to time, issue directions to banks for resolution of stressed assets. The Central Government can authorise the RBI to issue directions to banks for initiating proceedings in case of a default in loan repayment. These proceedings would be under the Insolvency and Bankruptcy Code, 2016.

Background:

The Banking Regulation (Amendment) Ordinance was promoted on May 4 to address the reportedly high levels of stress faced by the banking sector at the time.

The RBI had, in June, identified 12 'defaulters' who account for around 25% of India's non-performing assets (NPA) and informed banks to take up insolvency proceedings against them. A NPA is a loan or advance for which the borrower has failed to repay the principle or interest for a period of 90 days. Union Finance Minister Arun Jaitley told the Parliament earlier this month that the "proceedings had been initiated in the 12 cases" and the RBI is expected to refer more cases to the banks.

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