RBI expands overseeing committee membership to five for bad loan resolution

The five-member committee has mandate to vet restructuring proposals for big-ticket stressed loans

The Reserve Bank of India (RBI) on Thursday reconstituted the oversight committee (OC) mechanism and increased the number of members to five from the earlier two. 

The panel has mandate to vet restructuring proposals for big-ticket stressed loans. Besides taking up cases under the scheme for sustainable structuring of stressed assets (S4A), it would also consider recast proposals for entities with borrowings above Rs 500 crore.

There would be more members in the future, the central bank said.

The new OC will be under the chairmanship of former chief vigilance commissioner Pradeep Kumar. Other members included will be former State Bank of India chairman Janki Ballabh, former Canara Bank chairman and managing director (CMD) M B N Rao, L&T Finance Holdings non-executive chairman Y M Deosthalee and Securities Exchange Board of India (Sebi) whole-time member S Raman. Raman was earlier CMD, Canara Bank. 

Earlier, the two-member OC constituted of Pradeep Kumar and Janki Ballabh. The OC, in its earlier form, was constituted by the Indian Banks’ Association in consultation with the RBI. The reason for enlarging the membership was so that the “OC can constitute requisite benches to deal with the volume of cases referred to it.” 

The five-member OC “will work through multiple benches as may be necessary and constituted by the chairman to opine on cases referred to it by the banks,” the RBI said in a statement on its website. 

According to the original mandate, once a plan is cleared by the OC, bankers could not be held responsible in the future, should a business decision go wrong. This will protect bankers from unnecessary hassles by the investigative agencies, which is common now well after the retirement of a banker. 

“The reconstituted OC will work with an expanded mandate to review, in addition to cases being restructured under the S4A, resolution of other cases where the aggregate exposure of the banking sector to the borrowing entity is greater than Rs 500 crore,” it said.