The government will soon come out with an ordinance to empower the Reserve Bank of India to deal with the problem of mounting bad loans in India’s banking sector, PTI reported on Wednesday. The ordinance will be used to amend Section 35A of the Banking Regulation Act, 1949.
The amendment will empower the RBI to enable banks to quickly recover non-performing assets from loan defaulters. The decision to go the ordinance way was taken by the Union Cabinet headed by Prime Minister Narendra Modi on Wednesday. Briefing reporters on the meeting, Finance Minister Arun Jaitley said the government had taken some important decisions pertaining to the banking sector.
“There is a convention that when some proposal is referred to the president, details of it cannot be disclosed till it is approved,” he said. “As soon as approval comes, details will be shared.”
Public sector banks are grappling with non-performing assets or bad loans amounting to Rs 6 lakh crore. Bad loans rose by over Rs 1 lakh crore in the first nine months of the last fiscal to Rs 6.07 lakh crore by December 31, 2016. The gross non-performing assets of these banks stood at Rs 5.02 lakh crore at the end of March 2016, up from Rs 2.67 lakh crore at the end of March 2015.
Once the amendment kicks in, the RBI will be able to give specific solutions for specific cases and also, if required, provide relaxation in terms of current guidelines, an unidentified government official told the news agency.
On Monday, the United Nations Economic and Social Commission for Asia and the Pacific, in its annual flagship report titled “The Economic and Social Survey of Asia and the Pacific 2017”, said India was expected to record 7.1% economic growth this year before inching up to 7.5% in 2018, but added that the country faced immense risks from concentration of bad loans in public sector banks.