The bill seeks to replace the NPA Ordinance promulgated on May 7.The government is also in the process of drafting a national chit fund law to save poor people from dubious schemes.
Replying to the discussion on the bill in the Lok Sabha, Finance Minister Arun Jaitley said, “In the first round, the RBI had referred 12 cases to banks to be taken up for insolvency proceedings. In all the 12 cases, the insolvency process has been initiated. Shortly, we expect to see the process of resolution in these cases”.
Later, the House passed the bill by a voice vote. The bill will amend the Banking Regulation Act 1949.
He said that most of the NPAs were built up due to stress in steel, road, power and infrastructure sectors. The government is trying to solve them through multiple mechanisms.
The Centre has also authorised the Reserve Bank of India through the NPA Ordinance to asks banks to take insolvency resolution in respect of defaults, he said adding several laws such Sarfaesi Act and Insolvency and Bankruptcy Code have helped in resolving stressed asset problems to an extent.
Replying to a query on chit funds, Jaitley said there was a need for a pan-India law to deal with chit fund schemes in addition to the existing state laws. He said that Sebi was looking into it.
Defends SBI rate cut
Jaitley also defended the State Bank of India’s decision to cut interest rate on savings accounts saying high interest rates were prevalent when inflation too was very high.
“High interest rate on savings and fix deposits was during a time when inflation was 10-11% and sluggishness was setting in the economy. So when the lending rate came down, so did savings account,” Jaitley said, replying to a Zero Hour mention.
SBI had earlier this week cut interest rate on savings bank account deposits up to Rs 1 crore by 0.5% to 3.5%, the lowest in six years.
Jaitley said at a time when inflation was running as high as 10%, bank deposit rates were at 9%. But loans were extended by banks at 14%-15% interest rate and with such high interest rates, global industrial investments will not come in.
Jaitley, however, said that to protect the interests of senior citizens, the government has already floated a deposit scheme that guarantees 8-plus % interest rate.
Trinmool Congress leader Derek O’Brien had raised the issue of SBI slashing interest rates. He said 90% of savings bank deposits were of less than Rs 1 crore and the move to cut interest rate will affect small depositors, senior citizens and pensioners the most. Fixed deposit rate three years ago was 9%-10%, which has now fallen below 6%.