New Delhi– Banks may be authorised to initiate insolvency resolution process in respect of loan default under the Bankruptcy Code with the promulgation of the ordinance on Friday amending the Banking Regulation Act.
The ordinance, signed by President Pranab Mukherjee on Friday, has a provision under which the central government may authorise the Reserve Bank of India to issue directions to any banking company to initiate insolvency in respect of a default under the provision of the Insolvency and Bankruptcy Code. 2016.
It also has provisions to empowering the RBI to issue directions to banking companies for resolution of stressed assets.
The ordinance says that the stressed assets in the banking system has reached unacceptably high levels and urgent measures were required for their resolutions.
The ordinance refers to Insolvency and Bankruptcy Code which was enacted to consolidate and amend laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets and said its provisions can be effectively used to address problems of non-performing assets by empowering the banking regulator to issue directions in specific cases.
The ordinance was sent to the President after it was cleared by the Union Cabinet on Wednesday.
“This ordinance will enhance the power of RBI to manage bad loans,” Minister of State for Finance Santosh Kumar Gangwar said. (IANS)