Skip to main content

Debtors can´t be allowed to paralyse banking system, says Jaitley

By

Finance Minister Arun Jaitley on Thursday said public sector banks needed the Banking Regulations Ordinance in order to be able to take decisions without fear of being subjected to investigation later.
Replying to a debate on amendments to the Banking Regulations Act, Jaitley, who also holds the defence and corporate affairs portfolios, said the decision to take defaulters through the bankruptcy process was not a political one, and that such a move was necessary to start clearing the Rs 7 lakh crore toxic assets in the banking system.
The amendments were passed by Lok Sabha and the Bill will now move to the Upper House of Parliament.
The Insolvency and Bankruptcy Code (IBC) allows creditors to file insolvency cases against defaulters, which are given 180 days for restructuring.
The National Company Law Tribunal (NCLT) can offer a company an extension of 90 days but if are solution plan is not finalised by then, its assets will be liquidated.
All financial creditors will receive their shares first and then claims of operational creditors will be settled.
Jaitley said the reason why banks did not take their biggest defaulters through the insolvency process before the ordinance was issued was fear among bankers of being probed later under the Prevention of Corruption Act.
A Reserve Bank of India (RBI) oversight committee was keeping an eye on the recovery process, he added.
In the last few months, few banks have filed insolvency petitions.
Mostly, companies themselves have filed petitions to restructure themselves.
The other category of petitioners are operational creditors, like service providers, flat owners and employees, who would have otherwise not have had the chance to claim their dues from defaulting companies.
Till July 10, 112 such announcements have been made, of which banks account for 17 announcements.
State Bank of India (SBI) and Punjab National Bank (PNB) are applicants in three cases each, and Bank of India (BoI), IDBI Bank and ICICI Bank account for two cases each.
Edelweiss Asset Reconstruction has initiated three cases.
“Adebtor cannot paralyse the banking system by not paying up debts for years.
At the same time, we need to ensure these companies are saved as running companies mean jobs,” Jaitley said.
The Business Standard, New Delhi, 04th July 2017

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more