Banking ordinance: Sound step or halfway measure?

By Sawant Singh, Aditya Bhargava and Sriram Ramachandran, Phoenix Legal

The Banking Regulation (Amendment) Ordinance, 2017, was promulgated on 4 May to amend the Banking Regulation Act to give the Reserve Bank of India (RBI) powers to direct banks to refer certain borrowers into bankruptcy resolution under the Insolvency and Bankruptcy Code, 2016 (IBC). This step follows the failure of numerous efforts by the government to raise India’s sovereign credit rating. Coupled with the rolling out of the goods and services tax, this is another step to burnish the government’s reformist credentials and to show domestic and foreign investors that “it means business”.

Sawant Singh Partner Phoenix Legal
Sawant Singh
Phoenix Legal

Declaring that the ordinance was necessitated by the “unacceptably high levels” of stressed assets in the Indian banking system, preamble to the ordinance suggested that the mechanism introduced would enable the use of the IBC to resolve stressed assets while balancing the interests of all stakeholders.

The ordinance inserts new sections 35A and 35AA in the Banking Regulation Act. Section 35A enables the RBI to specify committees with members appointed or approved by the RBI to advise banks on resolution of stressed assets. Section 35AA enables the central government to authorize the RBI to issue directions to any bank to commence proceedings under the IBC. Pursuant to section 35AA, the government issued an order on 5 May authorizing the RBI to issue directions to banks to initiate resolution under the IBC.

You must be a subscribersubscribersubscribersubscriber to read this content, please subscribesubscribesubscribesubscribe today.

For group subscribers, please click here to access.
Interested in group subscription? Please contact us.



Sawant Singh, Aditya Bhargava and Sriram Ramachandran are partners at the Mumbai office of Phoenix Legal.


Second Floor

254, Okhla Industrial
Estate Phase III

New Delhi – 110 020

Vaswani Mansion, 3/F

120 Dinshaw Vachha Road, Churchgate

Mumbai – 400 020

Contact details:

Tel +91 11 4983 0000 / +91 22 4340 8500

Fax: +91 11 4983 0099 / +91 22 4340 8501