RBI to come up with a revised circular on NPA resolution

The Reserve Bank of India is in the process of amending its landmark February 12 circular which deals with the resolution process for stressed assets, according to sources quoted by news agencies and business dailies. It is expected that RBI will release this revised circular before the results of the ongoing Lok Sabha election are declared.
 
Even though the Model Code of Conduct is in place, the bank’s action is not likely to attract any unwarranted attention on that count because monetary policy is out of the code’s purview.
 
The revised circular regarding NPA resolution is in the advanced stage and would be released before the election results are out, PTI  reported. The counting of votes for the 2019 Lok Sabha election is scheduled for May 23.
 
This comes at the heels of Supreme Court recently giving RBI another 60 days’ time to make public the list of major wilful defaulters which the central bank has prepared. Earlier too, SC had ordered the same but RBI had defied the order and filed an appeal.
 
Recently, the SC also quashed the RBI circular on stressed asset loan recognition and resolution of large borrowers which mandated banks to refer an NPA account for insolvency proceedings in case a resolution was not found within 180 days. This applied to the accounts with dues of more than Rs 2,000 crore. The SC, however, called this circular ultra vires, or beyond the legal authority, to the provisions of the Banking Regulations Act as well as the RBI Act.
 
PTI reported that RBI is exploring various options for reforming the NPA framework including a possible increase in the 90-day window by 30-60 more day before an account is classified as an NPA.

 


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