RBI’s New Debt Resolution Framework Too Stringent, Bankers Tell Parliamentary Panel
Bankers say the central bank’s Feb. 12 circular revising the debt restructuring framework is too stringent.
Bankers told a parliamentary panel that the central bank’s Feb. 12 circular revising the debt restructuring framework is too stringent as it triggers a resolution plan within a day of default, a person present at the meeting told BloombergQuint.
The Standing Committee on Subordinate Legislation headed by T Subbarami Reddy met officials from the Reserve Bank of India, the finance ministry and Indian Banks’ Association to discuss mounting bad loans.
The bankers said they were also concerned about the RBI’s decision to do away with all previous mechanisms on bad loan management. The central bank ended the Joint Lenders’ Forum, Strategic Debt Restructuring and Scheme for Sustainable Structuring of Stressed Assets.
Bankers said the sudden discontinuation of the restructuring schemes is an issue and requested that the joint lenders’ forum should continue, the person quoted above said. They said the JLF allowed lenders to manage stress better by providing a forum for discussing possible resolution plans, the person said.
Representatives of banks also told the panel that the 180-day period for a resolution plan is too short, the person said. According to the RBI’s circular, banks have to ensure that a plan is in place within 180 days after a default for accounts with an exposure of Rs 2,000 crore or more. If the plan is not implemented within 180 days, the account must be referred to the Insolvency Bankruptcy Code within 15 days.