RBI seeks Election Commission okay on notification for bad debt |
After long and hard considerations, the Reserve Bank of India is expected to approach the Election Commission to put in place a new circular on bad debt resolution, paving the way for smooth implementation of the Insolvency & Bankruptcy Code and Loan restructuring by banks. The move is crucial after the Supreme Court set aside the controversial February 12 circular issued by then governor Urjit Patel. The RBI, was initially planning to issue the revised circular that is expected to give more flexibility in restructuring stressed loans as against the rigid timelines for initiating bankruptcy under the older directive. It is now coming to the view that an explicit approval from the Election Commission is required as it is a new policy decision. The Election Commission code of conduct specifically exempted the conduct of monetary policy, which is considered crucial for the economy. The circular issued in February 2018 had caused consternation among banks and corporates for three reasons. 1st, it did away with all the debt restructuring scheme. 2nd, it forced lenders to arrive at a resolution acceptable to 100% of creditors within 180 days of a default failing which they had to initiate bankruptcy proceedings.
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