With the Supreme Court quashing the February 12 circular of the Reserve Bank of India (RBI) on stressed asset resolution, its governor Shaktikanta Das said on Thursday that the the central bank would come up with revised norms.
At the post-monetary policy press conference, Mr. Das said, “In light of the Hon’ble Supreme Court’s order, the Reserve Bank of India will take necessary steps, including issuance of a revised circular, as may be necessary, for expeditious and effective resolution of stressed assets.”
‘Not under doubt’
At the same time, he clarified that the powers of RBI under Section 35AA and other sections of the Banking Regulation Act, 1949, were not under doubt.
“The court has held that RBI’s directions under Section 35AA of the Banking Regulation Act, 1949, which are in respect of debtors generally would be ultra vires of that section. Thus, the order of the Supreme Court mandates RBI to exercise its powers under Section 35AA in respect of specific defaults by specific debtors. The powers of RBI under Section 35AA and other sections of the Banking Regulation Act, 1949 are, therefore, not under doubt,” he said.
Section 35AA allows the RBI to issue directions on initiation of insolvency in case of a default. “The RBI stands committed to maintaining and enhancing the momentum of resolution of stressed assets and adherence to credit discipline,” Mr. Das said.
The February 2018 circular directed lenders to classify a loan account stressed and start the resolution process even for a day’s default.
Asked by when the new circular on stressed asset resolution would be released, Mr. Das said, “We will get the circular soon, there will not be any undue delay.”