Lok Sabha Question No. 3044 (UNSTARRED), answered on 2018-01-05
Subject: Amendment in Banking Regulation Act
Ministry: FINANCE
Asked by: R. VANAROJA

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA

## UNSTARRED QUESTION NO.3044

TO BE ANSWERED ON THE 5 TH  JANUARY 2018/ PAUSHA 15, 1939 (SAKA)

## Amendment in Banking Regulation Act

## 3044. SHRIMATI VANAROJA R.:

Will the Minister of FINANCE be pleased to state:

(a) whether the Reserve Bank of India (RBI) has outlined a broad plan to resolve stressed assets of lenders in the wake of the amendment of the Banking Regulation Act, if so, the details thereof;

(b) whether  the  RBI  is  considering  to  constitute  a  panel  comprised  majorly  of  its  independent board members to advise it in this matter, if so, the details thereof;

(c) whether the RBI is working on a framework to facilitate the objective and consistent decision making process with regard to cases that may be determined for resolution under the Insolvency and Bankruptcy Code, 2016; and

(d) if so, the details thereof?

## ANSWER

## The Minister of State in the Ministry of Finance (SHRI SHIV PRATAP SHUKLA)

(a): The Reserve Bank of India (RBI) has issued a Framework for Revitalised Distressed Assets in the Economy,  which  outlined  a  corrective  action  plan  for  incentivising  early  identification  of  problem accounts, timely restructuring of viable accounts, and taking prompt steps by lenders for recovery or sale  of  unviable  accounts.  Immediately  upon  promulgation  of the  Banking  Regulation  (Amendment) Ordinance,  2017,  RBI  issued  directives  bringing  clarity  that  the  corrective  action  plan  could  include flexible  structuring  for  long-term  project  loans  (5/25  scheme),  Strategic  Debt  Restructuring  and Sustainable Structuring of Stressed Assets for faster resolution of stressed assets. Suitable modifications were also made in RBI's guidelines on Joint Lending Forum to ensure fast decision-making.

(b)  to  (d):    RBI  has  constituted  an  Internal  Advisory  Committee  (IAC),  comprising  majorly  of independent  Board  Members  of  RBI,  to  advise  RBI  in  regard  to  cases  that  may  be  considered  for reference for resolution under the Insolvency and Bankruptcy Code, 2016 (IBC). RBI has apprised that the  IAC  recommended  for  reference  under  IBC  all  accounts  with  fund,  and  non-fund  based outstanding amount greater than Rs. 5,000 crore, with 60% or more classified as non-performing by banks as of March 31, 2016. In accordance with this recommendation, RBI has issued directions to certain  banks  referring  12  accounts,  qualifying  under  the  aforesaid  criteria,  to  initiate  the  insolvency process under IBC.

As  regards  other  non-performing  accounts  that  do  not  qualify  under  the  said  criteria,  the  IAC recommended  that  banks  should  finalise  a  resolution  plan  within  six  months,  and  in  cases  where  a viable  resolution  plan  is  not  agreed  upon  within  six  months,  banks  should  be  required  to  file  for insolvency proceedings under IBC. In accordance with this recommendation, RBI has issued directions to banks to resolve certain accounts within six months, failing which insolvency proceedings under IBC will need to be initiated.

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