RBI set to crack down on violators; will open ‘separate’ enforcement department on Monday

By: | Published: April 3, 2017 7:21 AM

With an aim to check possible breaches of rules, the Reserve Bank of India on Monday will open a separate enforcement department.

With an aim to check possible breaches of rules, the Reserve Bank of India on Monday will open a separate enforcement department. (Reuters)

With an aim to check possible breaches of rules, the Reserve Bank of India on Monday will open a separate enforcement department. The department will also take punitive actions against those who violate norms of the central banking institution of the country. The department will serve as a centralised wing to deal with banks only for enforcement action. “The Enforcement Department shall, inter alia, develop a broad policy for enforcement and initiate enforcement action against the regulated entities for violation consistent with such policy,” Minister of State for Finance Santosh Kumar Gangwar had said in a written reply to the Lok Sabha.

Gangwar said, RBI has informed that as part of the package of measures announced on August 25, 2016 for development of fixed income and currency markets, in connection with developing the market for rupee denominated bonds overseas, it has been decided to permit banks to issue Perpetual Debt Instruments (PDI) qualifying for inclusion as Additional Tier 1 capital and debt capital instruments. It was also decided to allow banks to issue rupee denominated bonds overseas under the extant framework of incentivising issuance of long term bonds by banks for financing infrastructure and affordable housing, he said. The RBI has taken various measures to deepen the corporate bond market, he had added.

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Meanwhile, an industry body has opined that the banking system in India is facing the challenge of bad loans and the RBI should focus on resolving it for the time being. Even though interest rates are benign, credit offtake has remained at historic lows, clearly pointing out that the biggest problem the economy is facing is stressed assets, Assocham said. The estimated bad and stressed assets are at around Rs 7 lakh crore, it said adding that the focus of the upcoming meeting of RBI’s Monetary Policy Committee (MPC) next week has to be on working closely with the government and banks to resolve the mounting non-performing assets (NPAs).

“Even though, it may not be politically easy to allow banks to take hair cuts along with promoters of the troubled projects, the fact of the matter is such hair cut is already being taken by way of huge provisioning in balance sheets of the banks quarter after quarter,” Assocham pointed out. Suggesting different solutions for different cases, the industry body said “there is no point to be in denial mode”.

“There would be cases where part of debt would have to be converted into equity, there could somewhere where ownership, if necessary, of the projects could be changed,” it said. “Irrespective of ownership, assets which are losing value in stalled projects, leveraged projects and non-functional firms belong to the nation. By delaying resolution of the problem, we should not allow this asset to further lose value,” Assocham Secretary General D S Rawat said.

(With agency inputs)

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