RBI to reconstitute oversight committee to deal with bad loans

New Delhi: After central government armed it with additional powers to resolve bad loans with banks that have crossed Rs 8 lakh crore, the RBI on Monday decided to reconstitute the oversight committee with more members.

Outlining the action plan to implement the Banking Regulation (Amendment) Ordinance, 2017, the RBI said credit rating agencies will be given greater role in dealing with large amount of stressed assets in banks.

The ordinance, promulgated earlier this month, authorises the RBI to issue directions to any banking company or banking companies to initiate insolvency resolution process in respect of a default under the provisions of the IBC.

It has also empowered RBI to issue directions to banks for resolution of stressed assets.

In a statement, the RBI said it will reconstitute oversight committee under its aegis and include more members so that requisite number of benches could be created to deal with increasing volume of cases.

"While the current members will continue in the reconstituted OC, names of a few more will be announced soon. The RBI is planning to expand the scope of cases to be referred to the OC beyond those under S4A (Scheme for Sustainable Structuring of Stressed Assets) as required currently," it said.

The current OC constituted by the Indian Banks' Association has two members. The OC oversees the way banks resolve the non-performing assets, including the haircut they take while doing so.

Sources said the RBI has identified about 50 cases for NPA resolution. About 10-12 cases like Bhushan Steel and GVK Power will be taken up in the first go.

The RBI further said it envisages an important role for the credit rating agencies in the scheme of things.

With a view to prevent rating-shopping or any conflict of interest, the RBI is also exploring the feasibility of rating assignments being determined by the central bank itself and paid from a fund to be created out of contribution from the banks and the RBI.

The statement further said the apex bank is working on a framework to facilitate an objective and consistent decision making process with regard to cases that may be determined for reference for resolution under the Insolvency and Bankruptcy Code, 2016 (IBC).

"Reserve Bank has already sought information on the current status of the large stressed assets from the banks. The RBI would also be constituting a Committee comprised majorly of its independent Board Members to advise it in this matter" the statement said.

With PTI Inputs