Industry welcomes changes to Banking Regulation Act

Move towards NPA resolution: SBI chief

The government’s decision to amend the Banking Regulation Act has been welcomed by the industry stating that this shows the government’s will to deal with non-performing assets in a more effective manner.

“Amendments to the Banking Regulation Act indicate the government’s firm commitment to find a satisfactory solution to the NPA resolution problem. Empowering the RBI with an explicit mandate should reorient various stakeholders for effective NPA resolution. The country and its banking system need to move quickly and decisively to take benefits of these enabling provisions,” SBI chairman Arundhati Bhattacharya said.

 “With close oversight, if RBI can shepherd the process in a manner that will drive outcomes and speedier action on wilful defaulters, it will reduce the NPA overhang in the banking system...To my mind, the monitoring by RBI will result in a more responsible behaviour by both lenders and borrowers,”  Kotak Mahindra Bank corporate, institutional and investment banking president K V S Manian said.

“More importantly, it will offer the much-needed transparency to the commercial decisions required to be made for resolution,” he said.

 Rating agency Icra believes that the amendments will help create a common platform for borrowers and lenders and also help banks to accelerate resolution process.

 “Initiation of proceedings under the bankruptcy code may force borrowers and lenders to come on a common platform and accelerate the resolution, given the limited timeframe of 180 days  under the bankruptcy code, else face a liquidation process,” Icra financial sector ratings group head Karthik Srinivasan said.

“The larger question to be asked pertains to the independence of banks in making commercial lending decisions, making the regulator a part of this process does pose questions on the effectiveness of bank managements as a custodian of depositors hard earned money,” India Ratings and Research senior analyst – financial institutions ratings Udit Kariwala said.