Focus on bank governance: Pain points & what's on offer in Budget

Pain points
 

> A move to the stricter expected credit loss model in accounting for bad loans is on the cards for banks. This is not expected to affect large private players. But many smaller ones may have to make additional provisions.

> The economic survey pointed out that new bankruptcy law in the form of the Insolvency and Bankruptcy Code changed the debtor-creditor relationship. This helped in disposing of over Rs 7 trillion of corporate defaults. But recovery rates are coming down, of late.

What’s on offer

> It is proposed to allow carry forward of accumulated losses and unabsorbed depreciation allowance when a banking company is being amalgamated with any other banking institution or company, in the event of a strategic disinvestment. This has to take place within five years of the disinvestment.  

> Changes are proposed to the Banking Regulation Act, the Banking Companies Act and the Reserve Bank of India Act. These are expected to help with bank governance as well as improve investor protection.