RBI outlines broad plans on $150 billion bank bad loan resolution
Mumbai: The Reserve Bank of India (RBI) on Monday outlined the outline of a plan to solve the problem of $ 150 billion of bad debt that plagues banks.
The move comes two weeks after the Indian government changed the rules, giving the central bank more power to deal with deteriorating loans.
Among plans announced Monday night, the RBI said it revised and revised the current guidelines for the restructuring of stressed loans. He is also working on a framework to help “facilitate objective and coherent decision making” for cases that may be subject to insolvency courts.
In order to prevent borrowers from seeking credit ratings, the RBI said that it “explored the possibility that the assessment scores are determined by the Reserve Bank itself and paid for by a fund created from the banks And the Reserve Bank “.
The RBI did not explain how the new system would work, but some have tentatively welcomed the move as a positive step.
“So far we have ignored a company if its rating was made by a rating agency considers less. But now, the RBI’s criteria in the assignment of ratings should help us to better clarify how we evaluate the odds,” said a major treasury Of a private sector bank.
The slowdown in economic growth and, in some cases, impaired lending practices were attributed to deteriorated loans higher, more than 20 majority-owned government banks that have the most poor resources.
The resolution of the problem loans problem is the centerpiece of the economic policy of the government of Prime Minister Narendra Modi and has issued an executive mandate earlier this month to change the rules of the country’s banking regulatory law.
In the expected increase in bankruptcy under the Bankruptcy and Insolvency Code, the RBI said it had already requested information from banks on the current state of their large stressed assets. The regulator said he plans to form a separate panel, which consists mainly of independent members, to advise on this.
The central bank said in the near future will also meet with stakeholders, including banks, asset reconstruction companies, rating agencies, and private equity firms, among others, for their cooperation and coordination.
In addition, the RBI said it would expand a follow-up committee to guide banks in restructuring the deteriorating loans.
In addition to the new members, the scope of the panel will be expanded to go beyond the limited mandate of the cases currently handled, the regulator said.