Supreme Court had on Tuesday quashed RBI circular that pertains to provisions for referring the defaulter to NCLT.
Mumbai: Reserve Bank Governor Shaktikanta Das on Thursday said the central bank will soon come out with revised circular for effective resolution of stressed assets in the backdrop of the Supreme Court order.
Supreme Court had on Tuesday quashed the RBI circular of last year that pertains to the provisions for referring the defaulter to the National Company Law Tribunal (NCLT) even on a one-day overdue. "The court has said that power of RBI under Section 35AA has to be exercised in certain manner. The validity of section 35AA of the Banking Regulation Act 1949 stands and henceforth we have to comply with the direction of Supreme Court and act accordingly," Das said.
Section 35AA empowers the central government to authorise the RBI to issue directions to any banking company or companies to initiate insolvency resolution process in respect of a default under the provisions of the IBC. "In the light of the Supreme Court order, the RBI will take necessary steps, including issuance of revised circular as may be necessary for expeditious and effective resolution of stressed assets," he said.
Revised framework for resolution of stressed assets issued on February 12, 2018, invited criticism from various quarters, including a parliamentary panel. The RBI substituted the previous guidelines with a harmonised and simplified generic framework for resolution of stressed assets in view of the enactment of the Insolvency and Bankruptcy Code.
"Although the new guidelines have been termed as harmonised and simplified generic framework, yet they are far from being so," Standing Committee on Energy in its report tabled in Parliament last year said. "The Committee is 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 (the) RBI in understanding and appreciating the problems. The Committee expects that clarity of thought and transparency in approach should be the guiding factor to streamline and strengthen the sector squirming under ineluctable hardships," it had said.