RBI sets up 5-member team on big bank loan defaulters

The Reserve Bank of India (RBI) on Thursday expanded the Overseeing Committee (OC) that will get the banks rid of heavy bad debts from their books.

It said a separate circular will be issued advising the banks to the process to be followed for resolving the bad loans within six months.

Earlier, it was a 2-member committee of former Central Vigilance Commissioner Pradeeep Kumar as its chairman and former ex-vigilance commissioner Janaki Ballabh as its member. While retaining them, three other members added are MB N Rao, former CMD of Canara Bank and Indian Bank, S Raman, CMD of Canara Bank only from September 7 after he retires, and Y M Deosthalee, CMD of the L&T Finance Holding, as the private industry representative. The new committee to function under the RBI aegis has an expanded mandate to order sustainable re-structuring of the stressed assets to deal with the entities that have piled up the bank dues of more than Rs 500 crore.

Reconstitution of the Overseeing Committee was effected under the Banking Regulation (Amendment) Ordinance promulgated early May. A RBI press release said the OC will work through multiple benches as may be necessary. The public sector banks'' finances are badly stressed since they are saddled with the nonperforming assets (NPA) or bad loans of Rs 6 lakh crore that are called stressed assets under the RBI parlance.

Banks have been reluctant to work out settlement packages with the borrowers on their own to waive interest or restructure the loans to avoid being hauled up by the Central Vigilance Commission, Controller and Auditor General (CAG) and the CBI for corruption and hence the government had to intervene to let the RBI handle to problem of the bad loans.