The Reserve Bank of India has expanded the overseeing committee (OC) by appointing three more members to the high-level panel which will vet stressed assets for resolution under the Insolvency and Bankruptcy Code, 2016 (IBC).
The new members are: Former Canara Bank chairman and managing director MBN Rao, former chairman and managing director of L&T Finance Y M Deosthalee and S Raman, whole-time member, Sebi. Former chief vigilance commissioner Pradeep Kumar will head the five-member panel that will work through multiple benches, RBI said. “The OC will, for the present, have five members, including a chairman, and will work through multiple benches as may be necessary and constituted by the chairman to opine on the cases referred to it by the banks,” the RBI said.
The overseeing panel will vet the decisions taken by bankers to ensure that due process was followed, providing some comfort to bankers, who have been worried about undue scrutiny from investigative agencies. Pradeep Kumar, chairman of the panel, and former SBI chairman Janki Ballabh who were appointed to the committee in July last year will continue in the OC.
The reconstituted OC will work with an expanded mandate to review, in addition to cases being restructured under the Scheme for Sustainable Structuring of Stressed Assets (S4A), resolution of other cases where the aggregate exposure of the banking sector to the borrowing entity is greater than Rs 500 crore, the RBI said. “The circular advising the banks of the above changes and other details of the process to be followed by banks for resolution of identified stressed assets within six months will be issued separately,” it said.
The expansion follows promulgation of the Banking Regulation (Amendment) Ordinance, 2017 last month. The ordinance had outlined the reconstitution of the OC with an expanded mandate. The OC was originally constituted by the Indian Banks Association in consultation with the RBI. The central bank then decided to reconstitute the OC under the aegis of Reserve Bank and also enlarge it to include more members so that the OC can constitute requisite benches to deal with the volume of cases referred to it.
Earlier this month, the Internal Advisory Committee of the RBI asked banks to refer 12 large account for resolution to IBC. The composition of this committee is yet to be announced although the RBI has said that it comprises ‘majorly’ of its independent board members.
The RBI is planning to expand the scope of cases to be referred to the OC beyond those under S4A as required at present. According to the RBI, the current norms on restructuring are under examination for such modifications as may be necessary to resolve the large stressed assets in a value optimising manner.
The RBI is also planning to give an important role for the credit rating agencies in the scheme of things and, with a view to preventing rating-shopping or any conflict of interest, is exploring the feasibility of rating assignments being determined by the RBI itself and paid for from a fund to be created out of contribution from the banks and the RBI.