Bank stocks remained in focus for yet another day after TV reports said that President Pranab Mukherjee has signed the ordinance that gives more power to the Reserve Bank of India (RBI) to tackle rising bad loans in the banking sector. The Cabinet on Wednesday had approved a proposal to amend Section 35 A of the Banking Regulation Act through the ordinance route.
Reacting to the news, shares of Indian Overseas Bank were trading 1.27 per cent up, Punjab National Bank was up 1.17 per cent up, Bank of Baroda was up 0.84 per cent at 10.14 am. These stocks were seen extending the gains of Thursday after the government decided to bring an ordinance to give greater powers to the Reserve Bank to tackle mounting bad loans. Stocks of ICICI Bank were trading 0.47 per cent up and State Bank of Indian were up 0.84 pe cent at 10.16 am.
The amendment to the Banking Regulation Act will give powers to the RBI to issue a direction to banks to recover non-performing assets (NPAs) from loan defaulters. According to sources, it will also make wilful default a criminal offence. The amended Act may also provide for overhauling of the joint lenders’ forum (JLF) guidelines to facilitate quick decision making as it has become a delaying tool for big defaulters instead of being a resolution mechanism.
The bad loan of public sector banks jumped by over Rs 1 lakh crore during the April-December period of 2016-17. The gross NPAs of PSU banks’ in the first nine months of the current fiscal increased to Rs 6.06 lakh crore by December 31, 2016, from Rs 5.02 lakh crore during 2015-16. For private sector banks, gross NPAs rose to Rs 70,321 crore by December 31, 2016, from Rs 48,380 crore as on March 31, 2016.