New Delhi, Aug 10 (IANS) The delay in enacting the Banking Regulation (Amendment) Bill which seeks to empower the Reserve Bank of India to direct lenders to act against big defaulters is hindering the banks’ capacity to support growth, Finance Minister Arun Jaitley said on Thursday.
“You ask what is the urgency… it is already too late,” Jaitley said replying to a debate in the Rajya Sabha on the Banking Regulation (Amendment) Bill which seeks to allow the Centre to authorise the Reserve Bank of India (RBI) to direct banks to initiate recovery proceedings against loan defaulters.
“The delay in resolution of NPA (non-performing assets) is impacting the capacity of banks to lend to support growth and lend to small investors,” the Finance Minister said.
“Besides, these NPAs have been piling up. The interest is increasing so the bad debts are increasing,” he said in response to a member’s query on the urgency of bringing in the legislation that will replace an ordinance that enabled RBI earlier in the matter.
“The banks will slowly start realising the money, companies will continue to function, the jobs at the company will be saved, that’s why the urgency,” he added.
NPAs of banks have risen to over Rs 9 lakh crore and the RBI is now being given power to refer these cases to the Insolvency and Bankruptcy Board.
Under the bill, the central government may authorise the RBI to issue directions to any banking company to initiate insolvency in respect of a default under the provision of the Insolvency and Bankruptcy Code.
It also has provisions empowering the RBI to issue directions to banks for resolution of stressed assets.
The sectors most responsible for the accumulated NPAs are steel, power, textiles and infrastructure.
Last month, the RBI identified 12 large loan defaulters who account for 25 per cent of the total NPAs, or bad loans, in the banking sector.
Action has already begun under the Insolvency and Bankruptcy Code against some of these defaulters, including Essar Steel, Bhushan Steel and Bhushan Power and Steel.
Jaitley told the Lok Sabha last month that a company defaulting on loans cannot claim the right of equality in treatment as regards repaying the loans. He said defaulting companies cannot ask why it was being targeted when some other defaulters were being let free.
The Finance Minister requested all sections of the House to support the Bill.