RBI

RBI issues revised Prudential Framework for Resolution of Stressed Assets

RBI issues revised Prudential Framework for Resolution of Stressed Assets

Hon’ble Supreme Court, vide its order dated April 2, 2019, had held the RBI circular dated February 12, 2018 on Resolution of Stressed Assets as ultra vires. In light of the same, the RBI Governor had clarified that the Reserve Bank of India will take necessary steps, including issuance of a revised circular, as may be necessary, for expeditious and effective resolution of stressed assets.

Accordingly, the Reserve Bank has revised the prudential framework for resolution of stressed assets by banks in the wake of the judgement of the Hon’ble Supreme Court of India.

The fundamental principles underlying the regulatory approach for resolution of stressed assets are as under:

1. Early recognition and reporting of default in respect of large borrowers by banks, FIs and NBFCs;

2. Complete discretion to lenders with regard to design and implementation of resolution plans, in supersession of earlier resolution schemes (S4A, SDR, 5/25 etc.), subject to the specified timeline and independent credit evaluation;

3. A system of disincentives in the form of additional provisioning for delay in implementation of resolution plan or initiation of insolvency proceedings;

4. Withdrawal of asset classification dispensations on restructuring. Future upgrades to be contingent on a meaningful demonstration of satisfactory performance for a reasonable period;

5. For the purpose of restructuring, the definition of ‘financial difficulty’ to be aligned with the guidelines issued by the Basel Committee on Banking Supervision; and,

6. Signing of inter-creditor agreement (ICA) by all lenders to be mandatory, which will provide for a majority decision making criteria.

It has been clarified that notwithstanding anything contained in the said framework, wherever necessary, RBI will issue directions to banks for initiation of insolvency proceedings against borrowers for specific defaults so that the momentum towards effective resolution remains uncompromised.

RBI has expressed hope that the current circular will sustain the improvements in credit culture that have been ushered in by the efforts of the Government and the Reserve Bank of India so far and that it will go a long way in promoting a strong and resilient financial system in India.

As per RBI, it stands committed to maintain and enhance the momentum of resolution of stressed assets and adherence to credit discipline.

Share

Recent Posts

  • Income Tax

Penalty u/s 271B for unfilled column 40 in Tax Audit Report Form 3CD deleted by ITAT

Penalty u/s 271B for unfilled column 40 in Form 3CD related to details regarding turnover, gross profit etc. for previous…

6 hours ago
  • Income Tax

Merely ex-parte rectifying computation without amending assessment order not make it nullity- ITAT

Merely rectifying computation without amending assessment order without notice to assessee does not nullify the entire assessment  - ITAT In…

4 days ago
  • Income Tax

Once assessee discharges primary onus, it shifts to AO to bring evidence to contrary – ITAT

Once assessee discharges primary onus of providing basic documents in support of the identity, genuineness and the creditworthiness it shifts…

5 days ago
  • Income Tax

Cost Inflation Index for FY/Tax Year 2026-27 notified by CBDT. See Up-to-date Table of CII

CBDT has notified Cost Inflation Index for Financial Year / Tax Year 2026-27 CBDT has notified "384" as Cost Inflation…

6 days ago
  • Income Tax

Power of CIT(A) u/s 251(1)(a) to remand case can be exercised only in best judgment assessment

Power of CIT(A) under section 251(1)(a) to remand case could be exercised only when the assessment is passed u/s 144…

6 days ago
  • ICAI

ICAI (Global Networking) Guidelines, 2025 kept in abeyance

ICAI (Global Networking) Guidelines, 2025 kept in abeyance In February 2026, ICAI had issued ICAI (Global Networking) Guidelines 2025 to…

6 days ago