MUMBAI/NEW DELHI: After its controversial February 12, 2018 circular on stressed assets backfired after the Supreme Court struck it down following borrowers’ request for more time to tackle debt in sectors such as power, RBI on Friday tweaked the guidelines.
Under the revised framework, banks will get a 30-day window to classify a loan account as NPA. Earlier, the NPA label had to be given the next day of default.
During this 30-day period, banks must decide on the resolution strategy and come up with a full-fledged resolution plan.
The resolution plan itself should be implemented by the lenders within 180 days after the initial review period.
The new norms are applicable to borrowers with exposure of Rs 2,000 crore and above to commercial banks, small finance banks and NBFCs
.“Once a borrower is reported to be in default by any lender, others should undertake a review of the borrower account within 30 days from such default, to be called as ‘review period’,” RBI said in the circular issued on Friday.
Welcoming the move, former SBI managing director Sanjay Bhattacharyya said, “It will mean relief for banks as the average provisioning will be lower; it will also give them more time to come up with a resolution plan.”
The new norms will kick in immediately for loan accounts of Rs 2,000 crore and above.
For loans worth more than Rs 1,500 crore but less than Rs 2,000 crore, the norms will come into effect from January 1, 2020.
“The new RBI circular Resolution of Stressed Assets will be a relief to businesses facing temporary financial issues, empower lenders to take decisions, improve credit availability in the economy and protect jobs, thereby boosting the economy,” said Commerce Minister Piyush Goyal.