'RBI examining licence framework for banks'

MUMBAI: Reserve Bank of India is "examining" the licensing framework for banks to align it with the evolving needs of the economy and is also reviewing the role of lenders in distributing insurance products, amid complaints of mis-selling.

In an exclusive interview to TOI, his first since taking charge in Dec, RBI governor Sanjay Malhotra said the regulator places "great importance on fair practice codes, consumer protection, and customer service," and that mis-selling of investment-linked insurance products is a valid ground for escalating complaints under the banking ombudsman scheme .

"We are reviewing the situation and if required, we will consider additional measures to tackle this issue," Malhotra said.

On the question of scaling up Indian banks, Malhotra said RBI is reviewing policies to ensure an adequate number of strong and trustworthy institutions. The central bank is also "examining" foreign shareholding norms and licensing rules as part of a broader review.

Addressing recent governance concerns, including those at IndusInd Bank, Malhotra assured that the banking system "is very robust and strong" and there are "no systemic risks or concerns."

The governor emphasised the need to improve KYC processes by making customer data available across financial institutions and promised that guidelines on re-KYC simplification would be issued "shortly".



India, he said, is well-positioned to retain its status as the world's fastest-growing major economy for the next decade, thanks to strong fundamentals, political stability, sound macroeconomic policies, and a favourable demographic profile.

Malhotra dismissed fears of fiscal slippage due to higher defence spending or trade-related concessions, citing the Centre's fiscal track record. "Even if there are minor slippages in some heads, they will be made good in others," he said.

On interest rates, he confirmed the central bank's pivot to an accommodative stance, but added, "The pace of any future cuts will be determined by the MPC."

Malhotra also said RBI has injected Rs 9 lakh crore of durable liquidity to support credit growth and aid transmission. "We will continue to provide liquidity to ensure monetary transmission," he said.

Now, insolvency resolutions exceed liquidations

The Insolvency & Bankruptcy Code (IBC) has resulted in two cases being resolved under the new law for every one that goes into liquidation. This is a sharp contrast to 2017-18, when for every one resolution, five companies went into liquidation, latest data showed.

This improvement is partly because the legacy cases related to liquidation have come down and also due to better quality of assets when they are admitted for corporate insolvency resolution.

A number of initiatives are being taken to improve the outcomes of the Code (IBC). These include monitoring of cases pending for admission and ongoing CIRPs (corporate insolvency resolution processes). Further, the Insolvency & Bankruptcy Board of India (IBBI) revised its mechanisms for real-time sharing of information, regarding applications for the initiation of CIRP with the information utility (IU), IBBI said.

Besides, according to the latest numbers, nearly 25 times more cases are being settled even before they are admitted, as the promoters are keen to settle the dues, fearing losing control over their companies. Since the law was enacted, 30,310 cases with underlying default of Rs 13.8 lakh crore were settled pre-admission. Post-admission, IBC resolved 1,194 cases through resolution plans, 2,430 cases were closed through settlement, withdrawals and appeal, and 878 liquidations have closed, IBBI said.

So far, 8,308 cases have been admitted for resolution, with decision pending in case of 1,926 companies. Separate data released in a study showed that there is a marked improvement in borrower behaviour, resulting in fewer delays in repayment of loans availed from banks. In fact, the number of days for which a loan remained overdue has come down significantly between 2018 and 2024, the study said.

In recent years, there is also a marked improvement in the number of cases being disposed of as resolution plans have been approved. The big worry, however, is the time taken in completing the resolution process. The latest data pegs the time taken at 597 days - more than twice the extended deadline of 270 days provided under IBC. In fact, 78% of the cases that are pending have dragged on for over 270 days. Another 9% have been going on for 180-270 days. The law provides for deciding cases in NCLT within 180 days, with an extension of 90 days allowed, but extensions have now become the norm.