Section 35AA of the Banking Regulation Act, 1949, inserted by the Banking Regulation (Amendment) Act, 2017, empowers the Central Government to authorise the Reserve Bank to issue directions to banking companies to initiate insolvency resolution processes. The authority so authorised acts in respect of a “default” as defined in:

Section 35AA, inserted by the Banking Regulation (Amendment) Act, 2017 (Act 30 of 2017) with effect from 4 May 2017, empowers the Central Government to authorise the Reserve Bank by order 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. The Explanation to Section 35AA expressly provides that “default” has the same meaning assigned to it in clause (12) of Section 3 of the Insolvency and Bankruptcy Code, 2016, which defines “default” as non-payment of debt when it has become due and payable. This section enabled the RBI to direct banks to refer large non-performing assets to the IBC process.