Supreme Court rejects RBI's circular on resolution of stressed assets

Supreme Court rejects RBI's circular on resolution of stressed assets

Supreme Court rejects RBI's circular on resolution of stressed assets

The parliamentary committee analysed 34 stressed power projects with total debt exposure of over Rs 1.74 lakh crore to the Indian banking system. Power companies, however, had sought temporary relief from the circular only for themselves.

The RBI, through this circular, had directed the Banks to declare a borrowing Company a defaulter if a resolution plan was not arrived at within a period of 180 days.

The bankers had asked some relaxation in the one-day default norms of the February 12 circular but without any success. Since banks have already provisioned for likely loan losses, that process was unlikely to be reversed, a top banker with a public sector bank said.

If the verdict had gone against them, then banks would have had to provision assets against these loans. "But you can't do a generic across the board cookie-cutter approach", said Amit Kapur, of law firm J. Sagar Associates, which represented several power companies in the court. "The committee are of the opinion that the coinage of restructuring in resolution plan is hollow without having any serious meaning or business which only reflects the blurred vision of RBI in understanding and appreciating the problems".

But some bankers fear the ruling may result in increased wrangling between banks and borrowers around soured loans and dent bankruptcy reforms. "There has to be some mechanism to ensure that big companies pay to their creditors as well as the bankers". "The resolution of stressed loans impacted by the circular will be further delayed as the process may have to be started afresh", Srikanth Vadlamani, vice-president, Financial Institutions Group, Moody's Investors Service, said.

It said that if a resolution was not found by August 27, Non Performing Asset (NPA) accounts should be sent to bankruptcy courts.

Neil Warnock's conduct was wrong but his message was not
"We got the three points but we have to look at ourselves, and if we want to achieve our targets we have to improve". Furthermore, both Bayern and Liverpool can offer him more playing time than he is now being afforded in London .

Global rating agency Moody's in a note Tuesday said voiding of the circular is credit negative for banks.

Tuesday's ruling also raises questions around the validity of a debt resolution plan here at beleaguered carrier Jet Airways as bankers said that a part of the resolution process was based on processes laid out in the RBI's February 12 circular that the court has now quashed in its entirety.

The power sector that has been grappling with huge debts scored a victory against the banking regulator in the country's highest court of law on April 2.

"It is only the punitive action or coercive action under the circular which will get affected by this", the lawyer said.

Within hours of the Supreme Court voiding the RBI's timebound debt resolution circular of last February, a cautious government said on Tuesday that, on the nullifying of this directive, the central bank would have to decide on what is required to be done for recovery of banks' bad loans.

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