Revised circular for stressed assets to be out soon: Shaktikanta Das

Revised circular for stressed assets to be out soon: Shaktikanta Das

AgenciesUpdated: Wednesday, May 29, 2019, 12:15 AM IST
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Mumbai: To set the record straight about the recent Supreme Court order, Reserve Bank of India (RBI), Governor, Shaktikanta Das said that the apex court has not curtailed their powers but quashed the(February) circular on stressed asset resolution. He also revealed that the apex bank is also working on a circular which will be out soon. Speaking to the reporters at the first bi-monthly monetary policy statement 2019-20, Das said, “The orders of the Supreme Court mandate RBI to exercise its powers under section 35 (a) (a) in respect of specific defaults by specific debtors.

The powers of RBI under section 35 (a) (a) and under sections of Banking Regulations Act 1949 are at no doubt.” He went on to explain that the court has ordered the RBI to exercise the powers of RBI under section 35 35 (a) (a) in a particular manner. Commenting on the future course of actions, Das, said, “In the light of Supreme Court’s order, RBI will take necessary steps including the issuance of a revised circular which will be necessary for effective resolution of stressed assets.” The former economic secretary reiterated RBI’s commitment to maintain and enhance the momentum of resolution of stress assets and adherence to credit discipline.

The famed-February circular ordered banks to recognise even a day delay in repayment of loans as defaults. In the past, RBI claimed this stringent circular has been working in favour of banks. The circular had insisted on finding a resolution within 180 days to a stressed account, failing which the account has to be sent to National Company Law Appellate Tribunal (NCLAT) if it is Rs 2,000 crore and above. This petition in the apex court has been filed by around 70 stressed companies from the power, shipping, textiles industry among others. According to RBI data, the top 100 large borrowers accounted for 16 per cent of gross loans at the end of the September quarter of FY19.

When quizzed about the IL&FS case, Das revealed that a petition had been filed in NCLAT, “We have filed a petition in the NCLAT seeking a modification of their order of IL&FS. They will have to hear our case and then will take a call.” In the case of IL&FS, NCLAT had ruled that accounts of the company and its group companies should not be declared non-performing assets by financial institutions without its prior approval.

Jalan panel report
The Bimal Jalan committee, set up to decide the appropriate capital reserves for the Reserve Bank, is in advanced stages of deliberations and will shortly submit its report, governor Shaktikanta Das said. The six-member Jalan panel was appointed on December 26, 2018 to review the economic capital framework for the RBI. “I had a discussion with Jalan and I think they require a few days more to finalise the report. The deliberations are in advanced stage,” Das told reporters.

The Jalan committee was to submit its report in 90 days from the first day of its meeting, which was held on January 8. The committee would “review global best practices followed by the central banks in making assessment and provisions for risks which central bank balance sheets are subject to.” The government and the RBI under the previous governor Urjit Patel were at loggerheads over the Rs 9.6-lakh crore surplus capital that the central bank holds over the government demand to part with a good portion from it.

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