RBI overhauls stressed asset framework, gives 180 days for NPA resolution

The Reserve Bank of India (RBI) on 12 February 2018 precluded chances of banks reporting divergent asset classification norms on the same account by stating that if in a consortium a bank faced default, others must start taking action to recover the dues.

The framework did away with many existing guidelines on stressed accounts while simplifying them under a single code. This means the RBI’s existing norms on Scheme for Sustainable Structuring of Stressed Assets (S4A), ownership norms on stressed accounts, guidelines on Joint Lenders’ Forum (JLF) and Corrective Action Plan (CAP), Strategic Debt Restructuring Scheme (SDR) and such myriad of schemes are now part of a simpler, easy to reference, scheme.

The extant instructions on resolution of stressed assets such as Framework for Revitalising Distressed Assets, Corporate Debt Restructuring Scheme, Flexible Structuring of Existing Long-Term Project Loans, SDR, change in ownership outside SDR, and S4A stand withdrawn with immediate effect.

The new guidelines will not impact the existing loan resolution cases as the RBI said the “said transition arrangement shall not be available for borrower entities in respect of which specific instructions have already been issued by the central bank to the banks for reference under the Insolvency and Bankruptcy Code.

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