Abating devised threat to NPAs..? RBI norms give more headroom to lenders resolving big ticket NPAs

Mumbai, June 13: Moving to provide a framework for early recognition, reporting and time-bound resolution of stressed assets, the RBI framed new guidelines dealing with bad loans which are probably creating a threat to the Non-Performing Assets.

 

These unknowingly tend to provide lenders the headroom and flexibility for resolution of large ticket stressed asset cases under the Insolvency and Bankruptcy Code.

 

“The RBI came out with a revised prudential framework for resolution of stressed assets after its February 2018 circular in this regard that was struck down by the Supreme Court. The new prudential framework provides some leeway to lenders and encourages them to refer cases to IBC”, said SBI in its report.

 

The report further noted that under the current and revised dispensation, an additional provisioning of 20 per cent would have to be made in case resolution plan is not implemented within 180 days from the end of the review period, which is after 210 days of default.

 

“A better time frame and transition offered in the revised framework on this would allow the lenders the headroom and flexibility for resolution in large ticket cases. Also, noteworthy is the consensus among lenders in terms of value and also in terms of number,” the report said.

 

“Earlier, 100 per cent consensus was required there, but with new framework in place 75 per cent lenders by value and 60 per cent by numbers would be required for resolution”, it added.

 

The new directions issued by the RBI on June 7 retain the basic spirits of the February 12, 2018 circular as it mandates higher provisioning, bankruptcy options as well as do not allow any other resolution methods outside the new norms.