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India’s Central Bank to Issue New Rules on Cleaning Up Bad Debt

India’s Central Bank to Issue New Rules on Cleaning Up Bad Debt

(Bloomberg) -- The Reserve Bank of India will issue new rules for resolving bad debts after the nation’s top court struck down an earlier directive that tightened rules for stressed asset resolution.

The central bank “will take necessary steps including issuance of a revised circular as may be necessary for expeditious resolution of stressed assets,” RBI Governor Shaktikanta Das told reporters in Mumbai on Thursday. “RBI stands committed to maintain and enhance the momentum of resolution of stressed assets and adherence to credit discipline.”

Earlier this week, the nation’s Supreme Court had quashed RBI’s directive that introduced strict time lines to recast bad loans, failing which stressed borrowers had to face bankruptcy. The verdict delays the clean-up of $190 billion bad-loan pile as lenders will need to re-examine many cases.

The lack of an immediate directive from the RBI puts borrowers in the driver’s seat allowing them breathing space and saving them from having to submit to a time-bound insolvency process. The top court ruling may aid about 70 borrowers with outstanding loans worth about 3.8 trillion rupees ($55 billion), according to ICRA Ltd., the local unit of Moody’s Investors Service.

“We will bring a circular soon. There won’t be undue delay in that,” Das said while declining to provide further details.

To contact the reporter on this story: Saloni Shukla in Mumbai at sshukla72@bloomberg.net

To contact the editors responsible for this story: Arijit Ghosh at aghosh@bloomberg.net, Anto Antony

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