RBI circular on bad loans: Govt to study SC judgement

RBI circular on bad loans: Govt to study SC judgement

Agency News

New Delhi, Apr 2 : The Government on Tuesday said it will examine the judgement of the Supreme Court that struck down the controversial RBI circular that mandated banks to immediately resolve all bad loans above Rs 2000 crore.

“We will read the judgement and I am sure the RBI will also now decide on the present condition of the market as to what is to be done with the various aspects contained in it,” Finance Minister Arun Jaitley told reporters here.

The February 12 RBI circular had directed the banks to either resolve or file for insolvency taking away their discretion to not to act on bad loans. The apex court in its ruling today held that in light of section 35AA of the Banking Regulation Act, RBI could not have issued a generic circular mandating reference under the Insolvency and Bankruptcy Code (IBC).

According to analysts, several sectors such as power, sugar and fertiliser especially the unregulated sectors challenged the RBI circular on the ground that it wrongly classified them as wilful defaulters.

They have argued that they were stressed because of extraneous reasons beyond their control and cannot be treated as wilful defaulters. (UNI)