With sweeping powers, central bank can now give ditections to banks to resolve huge bad loans issue.
Mumbai: The Reserve Bank of India (RBI) has now got sweeping powers to cleanse India's banking sector of huge stockpile of stressed assets after President Pranab Mukherjee has given clearance to ordinance related to non-performing assets of 'banking companies'.
According to a report in The Economic Times, the central bank can now give directions to banks to resolve the vexed issue of bad loans that amount to over Rs 6 lakh crore. "Bank can now initiate (on RBI's instructions) insolvency resolution process with respect to a defualt under the provisions of the Insolvancy and Bankruptcy Code, 2016," it said.
Reports also said that a large chunk of these bad assets was due on some 50 or 60 entities or individuals which the RBI will focus in its initial probe. The central bank will, as per the reports, constitute special panels or committees and take up the cases of stressed assets in groups.
Credit growth will see an upsurge if the RBI managed to eliminate bad loans from the balance sheets of 'banking companies' and it will also create more number of jobs in the $2.2 trillion economy. Central bank's earlier efforts to resolve has failed to bear any fruit.