New Delhi: RBI Governor Shaktikanta Das said that the revised guidelines to deal with stressed assets retains the spirit of the February 12 circular as it will sustain improvement in credit culture because it provides for additional provisioning and a strong disincentive for a delay in starting resolution proceedings.
Speaking at the NIBM, at the 15th Annual Convocation of Post Graduate Diploma in Management, Das said, “It is expected that the revised prudential framework for resolution of stressed assets will sustain the improvements in credit culture that have been ushered in by the efforts of the Government and the Reserve Bank so far, and that, it will go a long way in promoting a strong and resilient financial system in India.”
The new framework
After the Supreme Court quashed the RBI’s February 12 circular for resolution of stressed assets, the Central bank came up with a revised ‘Prudential Framework for Resolution of Stressed Assets’ on Friday.
The revised framework has offered lenders a 30-day period to label an account an NPA but has withdrawn all other resolution methods. The new rulebook mandates higher provisioning and bankruptcy options but does not allow any other resolution methods outside the new norms.