Government planning to empower RBI to deal with stressed assets

The government is considering legislation to empower the Reserve Bank of India (RBI) in effective handling of stressed assets, in tandem with its broader plan to resolve banks' bad loans, the Economic Times reported on Tuesday, citing sources.

The government could issue an ordinance enabling the central bank to direct banks on dealing with stressed assets as amending the Banking Regulation Act could take time, the newspaper added.

Indian banks had stressed loans of 9.64 trillion rupees ($148.40 billion) as of end-December, Santosh Gangwar, minister of state for finance, said last month.

Banks continue to see sour loans growing, although the pace has slowed. Stressed loans include bad loans and restructured or rolled over loans.

Banks currently face vigilance from investigating agencies over stressed assets and the directions issued by the central bank could also look into that, the report added.

RBI Deputy Governor Viral Acharya had earlier this year proposed the creation of a private-based agency or a government asset management entity to buy and restructure the soured loans. Bankers, however, were sceptical as they felt the plan would add more complexity and delay restructuring.