State Banks (Repeal and Amendment) Bill, 2017 and Banking Regulation (Amendment) Bill, 2017 Passed (Download PDF)

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Parliament passed Banking Regulation (Amendment) Bill, 2017 replacing the Banking Regulation (Amendment) Ordinance, 2017 promulgated by President in May 2017. Many bank associates with SBI:

Merger of SBI Associates

Key Features of the Bill

  • Amends Banking Regulation Act, 1949- provisions for handling stressed assets or non-performing assets (NPAs) of banks.
  • Stressed assets (NPAs) are loans defaulted in repayment or those restructured by changing the repayment schedule.
  • Enables insolvency proceedings by the Central government- authorizing RBI to direct banking companies to resolve specific stressed assets by insolvency resolution proceedings under the Insolvency and Bankruptcy Code, 2016.
  • Empowers RBI to issue directions to banks for resolution of stressed assets.
  • Enables RBI to specify committees or authorities to banks on resolution of stressed assets.
  • Inserts provision to make provisions applicable to the SBI and its subsidiaries and also Regional Rural Banks (RRBs) .

Need for Amendment

  • Bank NPAs stand at ₹ 6.41 lakh crore in the public sector banks with stressed assets at ₹ 8.02 lakh crore.
  • This is way more than comfort zone of RBI and hence RBI intervened to take urgent measures for their speedy resolution.
  • In addition, infrastructures in Debt Recovery Tribunal, National Company Law Tribunal expanding to deal with stressed assets.

Lok Sabha Passes State Banks (Repeal and Amendment) Bill, 2017

  • Lok Sabha passed the State Banks (Repeal and Amendment) Bill, 2017 to repeal the two Acts namely State Bank of India (Subsidiary Banks) Act, 1959, and State Bank of Hyderabad Act, 1956.
  • Amends State Bank of India (SBI) Act, 1955 removing references to subsidiary banks and powers of SBI to act as an agent of the RBI.
  • Two repealed acts had established the State Bank of Bikaner, State Bank of Patiala, State Bank of Mysore, State Bank of Hyderabad and State Bank of Travancore as subsidiaries of the SBI- now merged into SBI.

Background

  • Union Cabinet had previously approved merger of five banks along with Bharatiya Mahila Bank with SBI- State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Mysore and State Bank of Patiala.
  • After acquisition by SBI, subsidiaries ceased to exist and hence the repeal of two Acts.
  • Merger makes State Bank of India one of the 50 biggest banks of the world- Merger increases the capital base of the SBI enabling it to disburse more loans.

- Published/Last Modified on: September 2, 2017

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