The Reserve Bank of India (RBI) on Friday issued a new framework for resolution of bad loans, replacing the previous norms quashed by the Supreme Court in April, offering a 30-day gap for stress recognition instead of the one-day default earlier.

The apex court had on April 2 struck down the stringent RBI circular, issued on February 12, 2018, for resolving bad loans under which a company could be labelled an NPA if it missed repayment for a day banks were asked to find a resolution within 180 days or else it should be sent to bankruptcy courts.

Here are the key highlights of RBI's new circular

The new circular allows banks 30-days ‘review period’ to firm up resolution strategy.

Under the new 'prudential framework for resolution of stressed assets', lenders will have complete discretion to design, implement the resolution plan.

All lenders must put in place board-approved policies for resolution of stressed assets, including the timelines for resolution.

The Resolution Plan (RP) will be implemented under ICA (Inter-Creditor Agreement) by all lenders.

Instead of 100 percent approval from creditors, RBI has now allowed approval of 75 percent of creditors for resolution plan.

Lenders should resolve over Rs 2,000 crore NPA account within 180 days.

The new norms replaced strategic debt restructuring scheme (SDR), change in ownership outside SDR, and scheme for sustainable structuring of stressed assets (S4A), and the joint lenders' forum with immediate effect.

The new circular removes one-day default rule.

First Published:Jun 7, 2019 7:26 PM IST