NPA Mechanism to Get Revised Soon, RBI & FinMin to Work Together

NPA Mechanism to Get Revised Soon, RBI & FinMin to Work Together

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The Finance Ministry and the Reserve Bank of India (RBI) may soon start consultations with each other to find out a revised mechanism on non-performing asset (NPA) resolution.

The report came on the heels of the Supreme Court’s striking down as ultra vires of the controversial February 12, 2018 RBI circular that mandated lenders to initiate resolution or restructuring of loans of Rs 2,000 crore and above within six months from the date of default.

NPA resolution will be sought on sector-specific lines, informed sources said.

The process will be gradual, however, as was done under the February 12, 2018 RBI circular, the sources added.

After the expiry of 180 days, the defaulting borrowers, under the now struck down circular, had to mandatorily face proceedings under the Insolvency and Bankruptcy Code (IBC).

“The government does not want to get involved in actions which are under the realms of the lenders and the regulator. The banks have to take these decisions on loan recovery for NPA accounts.

“The Finance Ministry would like new and revised sector specific mechanisms for NPA recovery to be formulated by the RBI in consultation with the lenders and the industry so that the general rule for every sector is not brought upon which can prove disastrous as was seen in the power sector due to the February 12 RBI circular”, the sources said.

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