The Reserve Bank of India (RBI) on Monday released an action plan to implement the Banking Regulation (Amendment) Ordinance 2017, which includes the option of rating assignments being determined by the RBI and increasing the size and scope of the oversight committee (OC).
The central bank sees an important role for the credit rating agencies and, with a view to preventing rating shopping or any conflict of interest, is exploring the feasibility of rating assignments being determined by the Reserve Bank itself and paid for from a fund to be created out of contribution from the banks and the RBI.
It has also decided to reconstitute the OC and enlarge it to include more members so that the OC can constitute requisite benches to deal with the volume of cases referred to it. It is also planning to expand the scope of cases to be referred to the OC beyond those under S4A as required currently.
At present, the Oversight Committee (OC) comprises of two Members. It has been constituted by the Indian Banks Association in consultation with the RBI.
The RBI is also working on a framework to facilitate an objective and consistent decision making process for cases that may be determined for reference for resolution under the Insolvency and Bankruptcy Code, 2016 (IBC). The Reserve Bank 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.
The central bank said the proper exercise of the enhanced empowerment would require coordination with and cooperation from several stakeholders including banks, ARCs, rating agencies, IBBI and PE firms, and it would hold meetings in the near future with these stakeholders. It will also publish further updates as necessary.