Banking Regulation (Amendment) Act, 2017
The Banking Regulation (Amendment) Act, 2017 amended the Banking Regulation Act, 1949 by inserting Sections 35AA and 35AB, strengthening the statutory framework for Reserve Bank of India directions concerning insolvency resolution and stressed assets.
Purpose of the 2017 Amendment
The Act was enacted to further amend the Banking Regulation Act, 1949. Its principal change was the insertion of Sections 35AA and 35AB after Section 35A, dealing respectively with Central Government authorisation for RBI directions to initiate insolvency resolution and RBI directions concerning resolution of stressed assets.
Section 1 - Short title and commencement
1. (1) This Act may be called the Banking Regulation (Amendment) Act, 2017.
(2) It shall be deemed to have come into force on the 4th day of May, 2017.
Section 2 - Insertion of Sections 35AA and 35AB
Section 35AA - Power of Central Government to authorise RBI
The Central Government may, by order, authorise the Reserve Bank to issue directions to any banking company or banking companies to initiate insolvency resolution process in respect of a default under the provisions of the Insolvency and Bankruptcy Code, 2016.
Explanation: For this provision, "default" has the same meaning assigned to it in clause (12) of Section 3 of the Insolvency and Bankruptcy Code, 2016.
Section 35AB - RBI directions concerning stressed assets
35AB. (1) Without prejudice to Section 35A, the Reserve Bank may, from time to time, issue directions to any banking company or banking companies for resolution of stressed assets.
(2) The Reserve Bank may specify one or more authorities or committees, with members appointed or approved by the Reserve Bank, to advise any banking company or banking companies on resolution of stressed assets.
Section 3 - Amendment of Section 51
In Section 51 of the principal Act, in sub-section (1), after the reference to "35A," the references to "35AA, 35AB," were inserted.
Section 4 - Repeal and savings
4. (1) The Banking Regulation (Amendment) Ordinance, 2017 was repealed.
(2) Anything done or any action taken under the Banking Regulation Act, 1949 as amended by that Ordinance is deemed to have been done or taken under the corresponding provisions of the Act as amended by the Banking Regulation (Amendment) Act, 2017.
Relationship with the Insolvency and Bankruptcy Code, 2016
Section 35AA expressly connects the Banking Regulation Act framework with the Insolvency and Bankruptcy Code, 2016 by permitting the Central Government to authorise RBI to direct banking companies to initiate an insolvency resolution process in respect of a default. Section 35AB separately empowers RBI to issue directions concerning resolution of stressed assets.