MUMBAI: The National Company Law Appellate Tribunal (NCLAT) on Thursday modified its order in the IL&FS case, allowing banks to classify non-performing assets as per the Reserve Bank guidelines. RBI had moved NCLAT asking for a modification of its order. NCLAT’s blanket ban on classifying NPAs without its prior approval went against the RBI guidelines, which requires all loans that are in default for over 90 days to be classified so and appropriate provisions made for the same.
Some banks had classified NPAs and provided for bad loans before the NCLAT ban was imposed. As per Thursday’s order, banks are only allowed to classify the loans as NPAs, but cannot initiate a recovery process, reaffirming the moratorium granted for IL&FS and group entities to make the resolution easier.
With banks in the process of declaring their March quarter results, RBI had last week issued circular asking banks to disclose in their notes to accounts details of defaults and provisions that need to be made for the same in case of IL&FS entities. Of the group’s debt of Rs 94,216 crore, public sector banks have an exposure of Rs 35,382 crore, other banks Rs 9,436 crore, foreign banks Rs 6,031 crore, and other financial institutions Rs 9,138 crore.