News

RBI may shun sectoral exceptions

<p>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. <br><br>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. <br><br>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 categorized as stressed from one-day default in the previous circular to 30 days of default. <br><br>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 the February 12, 2018 notification. 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 <br><br>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. <br>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 authorization from the government. <br><br>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. <br><br>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. <br><br>A top official at a state-run bank said RBI may now look at incentivizing lenders through favorable provisioning norms for winding up resolution processes with new or existing promoters. </p>

Comments:

Archives