New Delhi: The  ordinance  amending the Banking Regulation Act and providing more powers to the Reserve Bank of India to deal with cases of  stressed assets has provided relief to five public sector banks which  were facing the worst situation as far as the Non-productive Asset or NPA is  concerned.

One of these banks,  Indian Overseas Bank, had as much as 22 per cent of advances as NPA causing much discomfort to it. The other banks which had more than 16 per cent of advances as bad loan are:  Uco Banik, Bank of Maharashtra, United  Bank of India and IDBI Bank.

After Indian Overseas Bank, the bank which suffered  the most was Uco Bank. The Bank of Maharashtra  was placesd third in this regard. Taking all public sector banks together the NPA accounted for nine per cent of total loan.

The ordinance which was promulgated last week provides for initiation of insolvency process for recovery of advances .This will provide  relief to these banks.

It also provides powers to the RBI to oversee loans provided by public sector banks and  to guide them in case of defaults.

It is because of these provisions that the move has been appreciated by most of the newspapers. In an editorial which appeared on Monday a prominent English daily said,”  it is a welcome move”.

The paper has , however,  cautioned against imputing bad motive behind all the bad loans . Some times decisions  may wrong even though they were taken  with good intention and without  any financial or other gains.

The RBI should act against the bank after proper investigation and due diligence. Quit pro quo may not be the reason for every bad loan deal.

The ordinance is likely to be  replaced by an Act  after passage of  a  bill by parliament in the forthcoming monsoon session.