Source: dnaindia.com<\/p>\n\n\n\n
The Reserve Bank’s new circular for resolution of stressed assets is \npropelled by provisioning requirements and gives more freedom to bankers\n in taking decisions, Indian Banks’ Association (IBA) Chairman Sunil \nMehta said Saturday.<\/p>\n\n\n\n
Two months after the Supreme Court struck down its February 12 \ncircular, the Reserve Bank of India (RBI) Friday came out with a revised\n framework for resolving stressed assets wherein lenders have been given\n a 30-day period on whether to label an account as a non-performing \nasset.<\/p>\n\n\n\n
“The RBI circular is a very welcome step. It has given more freedom \nto bankers to bring their own resolve and instead of directions, it \n(circular) has been propelled by provisioning requirements which will \npropel lenders to take timely decisions.<\/p>\n\n\n\n
“… it has created a lot of clarity for various stakeholders,” \nMehta said on the sidelines of a seminar here.Corporate Affairs \nSecretary Injeti Srinivas said in terms of the spirit and rigour, the \nlatest circular is identical to the February 12 guidelines.<\/p>\n\n\n\n
“Only thing is that now banks have more delegation (power) and there\n will be board level resolution policy and the discretion on whether you\n would like to take it (the case) to insolvency and bankruptcy \nproceedings or like to settle it outside that… (now) that decision is \nwith the banks,” he said.<\/p>\n\n\n\n
He also noted that it is a very good replacement circular and given \nthe Supreme Court’s judgement that the RBI is not authorised to give a \ngeneral circular, this is the best replacement circular we could have \nhad.<\/p>\n\n\n\n
The latest directions from the RBI retain the basic spirit of the \nFebruary 12, 2018 circular as it mandates higher provisioning, \nbankruptcy options as well as do not allow any other resolution methods \noutside the new norms.<\/p>\n\n\n\n
The new norms provide a framework for early recognition, reporting \nand time-bound resolution of stressed assets, the central bank said in a\n notification on Friday.<\/p>\n\n\n\n
In April, the Supreme Court struck down the RBI’s February 12 \ncircular for resolving bad loans under which a company could be labelled\n as a non-performing asset if it missed repayment even by a day, and \nbanks were to find a resolution within 180 days or else the case had to \nbe sent to bankruptcy courts.<\/p>\n\n\n\n
The RBI circular, issued on Friday, would be applicable to all \nborrowers with exposure of Rs 2,000 crore and above to banks, financial \ninstitutions like Nabard, Exim Bank, Sidbi, small finance banks and \nNBFCs, with immediate effect.<\/p>\n\n\n\n
To a query on whether the number of cases referred under the \nInsolvency and Bankruptcy Code (IBC) might come down with the issuance \nof the RBI circular, Srinivas said the Code has always been the last \nresort and not the first.<\/p>\n\n\n\n
“If you can have a resolution outside the IBC framework, you should \ntry that first… Empirical evidence show even today, 6,500 cases got \nresolved before admission. That means some sort of informal mediation \nhas taken place and they have got resolved,” he said.<\/p>\n\n\n\n
According to him, even now people prefer to resolve it outside the \nIBC and only in cases where there is no other option but \ncourt-supervised process, then it would come to the IBC and that is a \ngood development.<\/p>\n\n\n\n
“Now, it is left to the banks. You will have an inter-creditor agreement and if 75 per cent of banks in terms of voting share or 60 per cent of banks in terms of numbers, they come to some sort of consensus then you can push through the resolution plan… It is a very good solution and we could not have asked for anything better,” he noted.<\/p>\n\n\n\n
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