RBI circular provides more freedom to bankers: IBA

Team Udayavani, Jun 8, 2019, 5:34 PM IST

New Delhi: The Reserve Bank’s new circular for resolution of stressed assets is propelled by provisioning requirements and gives more freedom to bankers in taking decisions, Indian Banks’ Association (IBA) Chairman Sunil Mehta said on Saturday.

Two months after the Supreme Court struck down its February 12 circular, the Reserve Bank of India (RBI) on  Friday came out with a revised framework for resolving stressed assets wherein lenders have been given a 30-day period on whether to label an account as a non-performing asset.

Corporate Affairs Secretary Injeti Srinivas said in terms of the spirit and rigour, the latest circular is identical to the February 12 guidelines.

“Only thing is that now banks have more delegation (power) and there will be board level resolution policy and the discretion on whether you would like to take it (the case) to insolvency and bankruptcy proceedings or like to settle it outside that… (now) that decision is with the banks,” he said.

He also noted that it is a very good replacement circular and given the Supreme Court’s judgement that the RBI is not authorised to give a general circular, this is the best replacement circular we could have had.

The latest directions from the RBI retain the basic spirit 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.

The new norms provide a framework for early recognition, reporting and time-bound resolution of stressed assets, the central bank said in a notification on Friday.