Comments
Making an intervention during question hour in the Lok Sabha, Sitharaman indicated that the government does not for now see need to bring in a modified Financial Resolution and Deposit Insurance (FRDI ) Bill to set up a Resolution Corporation to deal with NBFC insolvency issues, given that the recent IBC amendment was working effectively and that RBI is monitoring the situation.
“Through amendments made to IBC, we have already brought in a formulation through which NBFCs and related issues of solvency can be addressed. That is one legislative amendment that was bought in the recent past. That the FRDI Bill is the only route is not the case”, Sitharaman said in the Lower House.
“We have already made a carve out sort of provision in IBC and is on course and many of NBFC actions are being taken under that”.
These remarks of Sitharaman came in response to a question raised by BJD MP Bhartruhari Mahtab on whether the government had sought views of RBI on drafting modified FRDI Bill in order to deal with insolvency of firms in financial sector and whether legislative backing would be given to Resolution Authority.
PCA framework
It has also in a way put paid to some speculation that government may come up with a modified FRDI Bill seeking to establish a resolution framework for a certain category of distressed financial institutions including systemically important ones.
The RBI had in December last year issued a Prompt Corrective Action (PCA) framework for non banking finance companies (NBFC). The PCA framework for NBFCs was put in place to further strengthen the supervisory tools applicable to NBFCs.
The decision on the PCA framework came after four big finance firms — IL&FS, DHFL, SREI and Reliance Capital— collapsed in the last three years after collecting public funds through fixed deposits and non convertible debentures besides huge exposure from the banking system.
Meanwhile, Sitharaman also said that First Information Reports ( FIRs) are being filed against App-based companies that are harassing depositors. “ Action is being taken across the country. FIRs are being filed across the country”, she added.
On non performing assets , which had crippled the banking sector in recent years, Sitharaman highlighted that “writing off” of loans by banks does not mean that they are being waived off. Provisioning is made for accounting purpose and banks continue to pursue the account for recovery, she added.
Without getting to the exact amount of recovery , she said that action is being taken and monies have gone back to bank after recovery.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.