The Rajya Sabha on Thursday passed the Banking Regulation (Amendment) Bill, 2017, which will enable the government to empower the RBI to direct lender banks to act against big loan defaulters.
The bill, which amends the Banking Regulation Act, 1949, will replace the Banking Regulation (Amendment) Ordinance, 2017.
The Lok Sabha had passed the bill earlier.
Introducing the bill in the Rajya Sabha, Union Finance Minister Arun Jaitley said the delay in the legislation to empower the Reserve Bank of India (RBI) to direct lenders to act against big defaulters was hindering the banks' capacity to support growth.
Once it becomes a law, the central government may authorise the RBI to issue directions to the banks to initiate proceedings in case of loan repayment default. These proceedings would be under the Insolvency and Bankruptcy Code, 2016.
The RBI may, from time to time, issue directions to banks for resolution of stressed assets and may specify authorities or committees to advise banks on resolution of stressed assets.
Stressed assets are loans where the borrower has defaulted in repayment or where the loan has been restructured (such as by changing the repayment schedule).
The bill inserts a provision to state that it will also be applicable to the State Bank of India, its subsidiaries, and Regional Rural Banks.