President Promulgates A New Ordinance To Recover Bad Loans

President Pranab Mukherjee promulgated an ordinance empowering Reserve Bank of India (RBI) to act directly against any major loan defaulters.

New Delhi: President Pranab Mukherjee promulgated an ordinance empowering Reserve Bank of India (RBI) to act directly against major loan defaulters on Friday.

The Banking Regulation (Amendment) Ordinance will allow government agencies to chase major bank loan defaulters without any hurdle.  It authorizes the Reserve Bank to direct banks to start insolvency procedures in case of a loan default.

With this, the central bank can set up panels to advise banks on their best way to rid themselves of piling bad loans.

The new law comes into effect immediately. It covers companies, partnership firms as well as individual defaulters. Highlighting the mounting stressed assets in the banking system, the ordinance said, as they have reached unacceptably high levels and urgent measures are needed for their resolution.

Bad bank loans decrease profits, choke credit flow and prevent lenders from lowering interest rates at a faster pace and hurt the economic growth of the country.

The Cabinet on Wednesday approved promulgation of an ordinance to amend the Banking Regulation Act to recover bad loans speedily. The move comes after clarion calls from lenders who have been jostling with stressed assets amounting to about Rs 10 lakh crore, or close to 7% of India’s GDP, as of December-end.

Leave a Reply

Your email address will not be published.