Industry And Cluster | News & Insights

RBI may shun sectoral exceptions, ease timelines for stressed assets

Published: June 7, 2019

The Reserve Bank of India is unlikely to announce special sectoral exceptions in its new
circular on stressed assets, contrary to demands of power, sugar, shipping and textile
industries. The banking regulator may also seek resolution plans for stressed assets to
be approved by 90% lenders in a consortium, as against 100% in the previous
notification that Supreme Court had quashed. Industries have sought base at 66%, in
line with provisions of the Insolvency and Bankruptcy Code.
RBI is also expected to raise the timeline for a project to be categorised as stressed from
one-day default in the previous circular to 30 days of default.
The new circular will probably be issued in the next 15-20 days as the regulator has
started informal consultations with the finance ministry. The circular is likely to provide
certain relaxations on timelines vis-à-vis the February 12, 2018 notification, sources “It
will be difficult to give special treatment to one sector against the other, as it may lead to
discontent and legal challenges. So far, there is no such consideration,” said a
government official in know of the development. “Senior RBI officials had met former
finance minister Arun Jaitley and senior finance ministry officials soon after the election
results. The regulator was waiting for the new government as it is keen to have all
stakeholders on board before coming out with a new notification,” the official said. The
Supreme Court had on April 2 struck down the controversial circular as ‘ultra vires’ on
the premise that the regulator can issue directions to lenders to approach the insolvency
court only for specific assets and with authorisation from the government. Most plans
are stuck for want of 100% consent from lenders. This was considered the most
stringent requirement as it wasn’t possible to get all lenders on board for a resolution
scheme. It also required banks to classify projects as stressed assets upon single day of
default and mandated them to refer such plants to bankruptcy court in case a resolution
was not arrived at in 180 days. A top official at a state-run bank said RBI may now look
at incentivising lenders through favourable provisioning norms for winding up
resolution processes with new or existing promoters. RBI will announce its second
bimonthly monetary policy for 2019-20 on Thursday and is expected to cut benchmark
interest rate by about 25 basis points. A statement on the stressed assets circular is also
likely to be made. said.

Related Posts

Impact of COVID-19 on Denim Jeans Market Latest trending report is booming globally by Top Leading players

Last week’s Intertextile Shanghai Home Textiles revealed strong promise in the domestic market