An ordinance to further amend the Banking Regulation Act 1949 was issued by the President of India on 4th May 2017 related to managing the stressed assets in the banking system to produce better results.
This is a water shed moment in Indian banking when not a day passes without mentioning of how a few borrowers took the banks to unknown territory on non-recovery, reluctance on part of banking executives, particularly in nationalized banks, not to extend financing activities due to excessive zeal shown by parliament, central vigilance officials or the news writers who curse every one for the poor health of the banking system. It is also fashionable to blame the poor banking executives for all the evils of the economic scene.
Now, the real question arises, as to why this ordinance gets much importance particularly, when it is only a 2-page document which basically contains the following statements:
The following information cullied out from RBI / leading financial newspapers may also help us to understand the recent ordinance in a clearer manner.
Amendments to Banking Regulation Act coming on the heels of the enactments of Insolvency and Bankruptcy code and amendments to SARFAESI and Debt Recovery Tribunals show the real intentions of the central government to tackle the NPA issues which threaten the continued existence of nationalized banks and the ever-demanding equity demands from the central government. Bankers are wary of taking bold decisions to refer the borrowing units boldly to resolution since the vigilance departments of public sector banks doubt the intentions of bankers who want to take decisions. The lien on the provident funds of some of the senior bankers who retired recently by vigilance authorities did not portray their good intention towards reviving the health of the public-sector banks.
Many of the CEOs of the public-sector banks explained recently during their periodical meeting with Finance ministry/RBI officials the apprehension of bank executives towards finding resolution to NPA accounts.
What to expect further from the issue of the ordinance?
It is expected that the central government would also amend some section of Prevention of Corrupt Act to boost up the morale of banking executives who would boldly take decisions while dealing with NPA sectoral advances.
By empowering RBI to form new committees who would help the bankers to find immediate resolution of NPA sector and also make better coordination among the banks, the ordinance is really a sincere attempt by the Central government to uplift the health of the banking sector.
Being a retired banker from a leading nationalized bank, it is but natural for me to keep a tap on the latest development in banking sector which has been showing deteriorating results. I would venture to say that both the public and private sector banks contributed towards the increasing NPA scene. This prompted me to write this small write up on the issuance of The Banking Regulation (Amendment) Ordinance, 2017 which though small in pages but huge towards lifting the morale of the whole banking sector. Some of the facts have been quoted from leading financial newspapers of the nation who measure the real health of our economy. With the best working condition and adequate independency, they have reached world level excellence and are really respected in India and abroad.
I am confident that this ordinance measured from a year from today, would have lifted the banking scene and most of the banks would have started the process of reviving their health which would ultimately help good industrial units to get cheaper, timely and faster credit for industrial development.
Who does not want us, India, to be the fastest growing country in the world?
About the author : Subramanian Natarajan C.P.A. (USA), M.Sc., CAIIB took voluntary retirement in 2000 from Punjab National Bank after handling various facets of banking like deposit mobilization, foreign exchange, auditing and borrower accounts. After living in USA for 12 years during which period he worked in international auditing firms specializing in international tax, auditing, IFRS etc., he continues his practice in New Delhi, India. He can be reached at [email protected] Tel: 7503562701, 9015613229. He currently lives in Delhi. His name appears as tax consultant in web site of American embassy, New Delhi. He is thankful to various suggestions received from readers and is delighted to see the enormous enthusiasm of readers.