RBI in advanced stages of making list of bad loan cases, says Jaitley
NEW DELHI : The Reserve Bank of India (RBI) is in advanced stages of drawing up a list of bad loan cases to be referred to the National Company Law Tribunal (NCLT) for bankruptcy proceedings, using powers granted to the central bank under a May 5 ordinance amending the Banking Regulation Act, union finance minister Arun Jaitley said on Monday.
Jaitley told reporters after reviewing the performance of state-owned banks with their chiefs in the capital that the number of cases going for bankruptcy resolution will rise once the RBI draws up the list.
So far 81 cases of bad loans have been referred to NCLT, which was given the powers to administer the insolvency and bankruptcy code (IBC) in June 2016. Out of the 81 cases, 18 were referred for bankruptcy by their creditors, the minister said.
Under this process, lenders will refrain from taking possession of the physical assets of a defaulter for a specified period while the borrower tries to regain financial health and pay off loans. If turnaround efforts including management change does not help, the debtor goes for liquidation. Secured creditors get priority in the appropriation of proceeds from liquidation. “Bulk of the non-perform- ing assets (NPAs) are loans granted by consortiums of lenders. Their speedy resolution is required and RBI is at a fairly advanced stage of listing out those cases where resolution is required through the IBC,” the minister said.
“I am sure that over the next few months, pursuant to the new ordinance, effective action is taken and we move forward on the resolution of NPAs,” the finance minister said without giving the total amount that will come under the process.
The ordinance amending the banking law empowers the RBI to deal with specific bad loans and gives the government powers to authorise the RBI to invoke the IBC against defaulters. RBI can also direct banks on its own to settle bad loans with defaulters.