The Union Cabinet on Wednesday approved a set of key measures to tackle the non-performing assets (NPA) mess in the banking system.
Briefing newspersons on the key decisions, Finance Minister Arun Jaitley said the measures would be sent to President Pranab Mukherhee for approval.
Indications are that the measures — widely expected as a new NPA resolution policy — may involve amendment to the Banking Regulation Act. The amendment is being made through an ordinance route.
The Prime Minister’s Office, the Finance Ministry and the Reserve Bank of India had recently arrived at a consensus on a new NPA resolution policy.
Under the agreed policy, the oversight committee (OC) will have special powers to resolve NPAs.
The RBI had set up an oversight committee under the Scheme for Sustainable Structuring of Stressed Assets (S4A).
It was primarily tasked with overseeing the loan restructuring process in a transparent manner.
Indications are that the new policy will allow banks to take a haircut within permissible limit. A new formula to give effect to this is being put in place.
The OC will recommend the extent of haircuts that banks can take using this formula.