In an attempt recover Rs 6 lakh crore worth of non-performing assets (NPAs) in the banking system Union Cabinet, led by Prime Minister Narendra Modi approved a Ordinance on Wednesday.

The ordinance may enable RBI to direct banks on how to deal with stressed assets. Moving an amendment to the banking regulation act may take time as the next session of parliament starts sometime after second week of July.

The amended law will also empower RBI to set up oversight panels that will shield bankers from later action by probe agencies looking into loan recasts as a lot of discretion will be involved in the process.

By December 2016, Non-performing assets (NPAs) or bad loans with Indian banks rose to Rs. 6.07 lakh crore, of which the share of Public sector banks was Rs. 5.02 lakh crore.

Sources in the Finance Ministry say the huge pile-up of bad loans have been blocking the lending process critical in kickstarting the economy. This has also prevented banks from lowering interest rates thus making investments not so lucrative.