/ Reserve Bank sticks to its guns on February 12 circular

The New Indian Express : Mar 14, 2019, 10:53 AM

The change in leadership has not effectively resulted in change of Reserve Bank of India’s stance over its February 12 circular. The central bank on Wednesday said that stressed companies have no resolution plan. RBI notification on ‘Resolution of Stressed Assets Revised Framework’ on February 12, 2018. Banks were asked to classify even a one-day delay in debt-servicing, formulate a resolution plan within 180 days.

The central bank on Wednesday said that stressed companies have no resolution plan.As per an RBI notification on ‘Resolution of Stressed Assets — Revised Framework’ on February 12, 2018, banks were asked to classify even a one-day delay in debt-servicing as default, formulate a resolution plan within 180 days of default, and if still unresolved by the end of the 180-day period, refer the case to National Company Law Tribunal (NCLT) under insolvency proceedings. Bankers claimed that this norm would lead to about Rs 1.75 crore worth of loans to the power sector turn into NPAs.

While the RBI did not changed its stance on the circular, power companies moved the Allahabad High Court, challenging the constitutional validity of the circular. The Allahabad High Court rejected their plea, following which these companies approached the Supreme Court. On September 11, the Supreme Court transferred all petitions moved by power, sugar and shipping firms in various courts across the country to itself.