No Changes to Circular on Bad Loan Recognition Rules, Says RBI Governor
Governor of the Reserve Bank of India (RBI) Shaktikanta Das announced that no modifications would be made to the previous year’s RBI circular that introduced strict rules for bad loan recognition rules. Various companies and others had been seeking relaxation on the grounds that the new regulations are very strict.
Refuting claims that the government had made recommendations to ease the rules for companies, Das asserted, “There is no proposal on the table seeking modifications to the February 12 circular.”
The circular instructed the lenders to refer to any loan account amounting over Rs 2,000 crore within the Insolvency and Bankruptcy Code (IBC) if in case it is not settled within default days of 180. It also highlighted the status of IBC’s as the foundation of the bad loan resolution framework, by eliminating all previous processes. One day default rule has also been imposed by the circular. Banks must consider the company as a defaulter if the company misses the repayment time even by a day.
This statement has disturbed even the most prominent borrowers and perhaps many of them within the government, further leading to a demand that it should be diluted.
On Thursday, the governor remark while addressing his press conferences soon after the policy declaration put a full stop over the speculation of the matter. Under the leadership of Governor Das, the circular was the most important step taken by the regulator after the predecessor Urjit Patel resigned even before his tenure completion over a conflict with the government regarding various issues which also included autonomy.
The notification of the RBI has been legally opposed, along with various borrowers namely the association of Power Producers labeling it as unrealistic and too rough. Meanwhile, they have asked for more time to settle the unpaid loans.
The NPA (non-performing assets) threat is fought by RBI with confidence. It is determining that the Central Bank is not reflecting over the dilution in spite of pressure. Better credit performance to be driven by the circular, we are predicting, a legal expert on banking MR Umarji stated.