Mumbai, June 8
The Reserve Bank on Friday issued a new framework for resolution of bad loans, replacing the previous norms quashed by the Supreme Court in April, offering a 30-day gap for stress recognition instead of the one-day default earlier.
The new norms replaces all the earlier resolution plans such as the framework for revitalising distressed assets, corporate debt restructuring scheme, flexible structuring of existing long-term project loans, strategic debt restructuring scheme (SDR), change in ownership outside SDR, and scheme for sustainable structuring of stressed assets (S4A), and the joint lenders’ forum with immediate effect.
The apex court had on April 2 struck down the stringent RBI circular, issued on February 12, 2018, for resolving bad loans under which a company could be labeled an NPA if it missed repayment for a day banks were asked to find a resolution within 180 days or else it should be sent to bankruptcy courts.
The new circular provides for a framework for early recognition, reporting and time-bound resolution of bad loans.
The central banks said lenders shall recognise incipient stress in loan accounts, immediately on default, by classifying such assets as special mention accounts (SMA).
