The Reserve Bank of India on Monday announced several steps, including the reconstitution of oversight committee (OC), bigger role for credit rating agencies and formation of a committee of its independent board members, to bring down the ballooning non-performing assets (NPAs) in the system.

Outlining the steps taken and those on the anvil post the promulgation of the Banking Regulation (Amendment) Ordinance, 2017, the RBI said it has already sought information on the current status of the large stressed assets from the banks. The RBI would also be constituting a committee comprised majorly of its independent board members to advise it in this matter. It’s working on a framework to facilitate an objective and consistent decision making process with regard to cases that may be determined for reference for resolution under the Insolvency and Bankruptcy Code, 2016 (IBC), the RBI said.

Currently, the oversight committee (OC) comprises of two members. It has been constituted by the Indian Banks Association in consultation with the RBI. “It has been decided to reconstitute the OC under the aegis of RBI and also enlarge it to include more members so that the OC can constitute requisite benches to deal with the volume of cases referred to it. While the current members will continue in the reconstituted OC, names of a few more will be announced soon,” it said.

The RBI is planning to expand the scope of cases to be referred to the OC beyond those under the Scheme for Sustainable Structuring of Stressed Assets as required currently, it said.

According to the RBI, the current guidelines on restructuring are under examination for such modifications as may be necessary to resolve the large stressed assets in the banking system in a value optimising manner. “The RBI envisages an important role for the credit rating agencies in the scheme of things and, with a view to preventing rating-shopping or any conflict of interest, is exploring the feasibility of rating assignments being determined by the RBI itself and paid for from a fund to be created out of contribution from the banks and the RBI,” it said.

The central bank noted that the proper exercise of the enhanced empowerment would require coordination with and cooperation from several stakeholders including banks, asset reconstruction firms, rating agencies, IBBI and private equity firms, to which end the RBI would be holding meetings in the near future with these stakeholders. Banks have accumulated NPAs of close to Rs 7 lakh crore in their books as of December 2016.

RBI, reserve bank of India, urjit Patel, Oversight committee, RBI Oversight panel, NPAs, RBC, banking, Indian epxress newsSoon after the passage of the ordinance, the RBI recently made substantial changes in the norms for dealing with stressed loans and warned banks that they will be penalised for missing NPA resolution timeline. The number of creditors by value for consent for NPA resolution has been brought down to 60 per cent from the earlier 75 per cent. The ordinance has given wide-ranging legislative powers to the RBI to issue directions to lenders to initiate insolvency proceedings for the recovery of bad loans.

The RBI had said that a corrective action plan could include flexible restructuring, strategic debt restructuring (SDR) and S4A. With a view to facilitating decision making in the Joint Lenders Forum (JLF), consent required for approval of a proposal was changed to 60 per cent by value instead of 75 per cent earlier, while keeping that by number at 50 per cent.

“Banks who were in the minority on the proposal approved by the JLF are required to either exit by complying with the substitution rules within the stipulated time or adhere to the decision of the JLF. Participating banks have been mandated to implement the decision of JLF without any additional conditionality,” the RBI said. The boards of banks were advised to empower their executives to implement JLF decisions without further reference to them.