RBI takes measures to tackle huge NPAs with the banks

Earlier this month, after identifying 12 accounts for isolvency proceedings with each of them having over Rs 5000 crore of outstanding loan, RBI has asked banks to resolve 55 high value cases of bad loans within the next 6 months. In case the banks are non-compliant, they would face the prospect of being directed to go in for the new insolvency resolution mechanism as part of the strategy to rein in unacceptable level of non-performing assets (NPAs).
 
RBI is of the view that banks should expedite the NPA resolution process for these cases as soon as possible or else central bank would examine those cases and refer for resolution under the Insolvency and Bankruptcy Code (IBC).
The banking sector is saddled with NPAs of over Rs 10 lakh crore, of which Rs 6 lakh crore is with public sector banks (PSBs). The 12 identified cases account for about 25 per cent of NPAs.
IBC has defined a time-frame for the resolution and there is a 14-day time period for admission or rejection of a case by National Company Law Tribunal.

After NCLT acceptance, the creditor would get 30 days to hire insolvency practitioners’ and the entire process to be completed in 180 days which will look at various possibilities including revival of projects or liquidation.
RBI has also set up an Internal Advisory Committee (IAC) for such cases that may be considered for reference for resolution under the IBC.

These measures were announced by RBI following an ordinance which authorises it to issue directions to banks to take action in any case of default under the provisions of IBC.