The Reserve Bank of India (RBI) is not in favor of a fresh suspension of the Insolvency and Individual Bankruptcy Code (IBC) caused by the COVID-19 pandemic since March this year, said a report in The Times of India, quoting unnamed RBI officials. Though the apex bank regulator has turned down the recommendations, it has however stated that banks can restructure distressed but viable loans so that their balance sheets remain transparent.

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If the suspension is implemented, it would be the third extension since the outbreak of the pandemic last year.

RBI officials told the Times of India that that extending the suspension won’t help anyone in the long run. Though the RBI has turned down the suggestions, it is up to the Government to finally decide on the next step forward after consulting with RBI officials on the same.

The RBI, as recommended by the government, last year suspended the IBC proceedings first for six months and later extended it to a year amid the COVID-19 pandemic.

The RBI officials said that any extension will allow the existing promoters to stay put and run the company. Whereas, if the case is referred to the NCLT, the promoters will have to step aside and a team of insolvency professionals with a committee of creditors will run the company till the case is resolved, the TOI report mentioned.

With the corporate sector and the RBI at loggerheads, the former clamoring for an extension of the suspension, bankers say many companies were already under stress much before the pandemic and the promoters are just buying time.

Meanwhile, the Finance Ministry along with state lenders are working out how best the loan restructuring scheme announced by RBI can be implemented as many are unable to visit the branches due to the lockdown and restricted bank timings in the states.

The RBI in turn has permitted a one-time restructuring window for small business and banks till June end. For the larger corporates, as per the RBI issued June 2019 circular, banks have the option of restructuring the loans provided the funds are set aside and NPA classifications against them remain unchanged.