Context to the Supreme Court Order on stressed assets of banks
Distilled Policy Brief
- As of 2018, total NPAs in the economy stood at Rs 9.6 lakh crore, with public sector banks accounting for about 88% of these total stress assets.
- The Insolvency and Bankruptcy Code (IBC) was enacted in May 2016 to provide a time-bound 180-day recovery process for insolvent accounts, extendable by 90 days.
- The Banking Regulation (Amendment) Act, 2017 empowered the RBI to direct banks to initiate recovery proceedings for stressed assets under Section 35AA.
🎯 Prelims High-Yield Examination Points
Focus on the definition of NPAs (90-day default threshold), the timeline under IBC (180 days + 90 days extension), and statutory powers under Section 35AA of the Banking Regulation Act.
⚖️ Mains Analytical & Syllabus Linkages
Evaluate the evolution of non-legislative resolution frameworks versus legislative remedies under IBC for resolving twin balance sheet stress in India.
🎯 UPSC Prelims Practice Drill
With reference to Non-Performing Assets (NPAs) and the framework for their resolution in India, consider the following statements: 1. A loan or advance is classified as a Non-Performing Asset if the borrower fails to make interest or principal repayments for over 90 days. 2. The Insolvency and Bankruptcy Code (IBC), 2016 provides a time-bound resolution process of 180 days, which can be extended by 90 days. 3. The Banking Regulation (Amendment) Act, 2017 empowered the Reserve Bank of India (RBI) under Section 35AA to direct banks to initiate recovery proceedings for stressed assets. Which of the statements given above are correct?
- [A] 1 and 2 only
- [B] 2 and 3 only
- [C] 1 and 3 only
- [D] 1, 2 and 3
▶ Reveal Official Answer & Analytical Explanation
All three statements are correct based on the provided text. Statement 1 is correct as NPAs are defined as loans and advances where repayment has ceased for over 90 days. Statement 2 is correct because the IBC (2016) sets a time-bound recovery framework of 180 days, extendable by up to 90 days. Statement 3 is correct as the Banking Regulation (Amendment) Act, 2017 inserted Section 35AA authorizing the RBI to direct banking institutions to initiate recovery proceedings for stressed assets.
🏛️ Historical Twin PYQ Anchor (2021)
Consider the following statements regarding the "National Clean Air Programme (NCAP)": 1. It is implemented by the Ministry of Environment, Forest and Climate Change. 2. Central Pollution Control Board acts as the sole regulatory executive body.