RBI
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.
ITAT dismisses claim of Leave Encashment exemption u/s 10(10AA)(ii) beyond Rs. 3 lakhs In a recent judgment, ITAT Ahmedabad has…
Assessing Officer had taken a reasonable stand that 25 kg written in WhatsApp chat/text message was 25 lakh - ITAT…
Shareholders are only owners of the shares of the company therefore, income from properties earned by the company cannot be…
When approval for reassessment was granted by unauthorised authority, such jurisdictional error cannot be shielded by the law of limitation…
ITAT on presumption of bogus purchases ought to have remanded case to AO to reconsider the whole matter instead of…
Where proceedings u/s 153C are barred by limitation, AO can not reopen the case invoking section 148 and 148A of…