New Delhi: The Reserve Bank of India (RBI) on Friday allowed lenders complete discretion to design and implement bankruptcy resolution plans in its revised guidelines for stressed assets after the Supreme Court scrapped previous norms.
The central bank said in a statement that it will also put in place a system of disincentives in the form of additional provisioning for any delay in implementation of the resolution plans or the initiation of insolvency proceedings.
The Supreme Court in April struck down the RBI’s February 12, 2018 circular on bad loans after several companies argued that the time period allowed for bankruptcy resolution wasn’t enough.
The February circular directed banks to file for insolvency proceedings against loan defaulters with Rs 2,000 crore or more if a resolution plan was not implemented within 180 days of the initial occurrence of default. The central bank had also abolished half a dozen loan-restructuring mechanisms to expedite the clean-up of banks’ books.
The new circular is applicable to resolve loan accounts with exposure of Rs 2,000 crore and above. For loan accounts of Rs 1,500 crore and up to Rs 2,000 crore, the revised norms will be applicable from January 1, 2020. The RBI said it will announce the applicability date for loan accounts below Rs 1,500 crore in due course.
RBI also warned that any action by lenders with an intent to conceal the actual status of accounts or evergreen the stressed accounts will be subjected to stringent supervisory or enforcement actions, including higher provisioning on such accounts and monetary penalties.
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