Mumbai: Bankers have opined that the Supreme Court quashing the February 12 circular on NPA recognition does not dilute credit discipline and that they will continue the resolution process under the bankruptcy code which was upheld by the apex court earlier.
While striking down the February 12, 2018 circular of the RBI on resolution of stressed assets, a single bench of the Supreme Court headed by justice RF Nariman declared the circular “ultra vires.”
The RBI had on Feb. 12, 2018 issued a revised framework on resolution of stressed assets which invalidated all other resolution mechanisms and asked banks to mandatorily recognise even one-day defaults and resolve the account in 180 days failing which take the borrower to NCLTs for bankruptcy proceedings for large account of Rs 2,000 crore and above.
Rajnish Kumar, the chairman of State Bank of India, told CNBC that banks have already put a resolution framework under bank-led resolution approach which is already functioning. “The Supreme Court has upheld the Constitutional validity of the Insolvency and Bankruptcy Code (IBC) in their previous judgement. So, the intent to bring discipline into the lending and borrowing market is not getting diluted in any manner with this judgement,” he said.
Kumar said SBI’s approach to resolution of stressed assets is proactive-recognising assets early and take corrective action, and there will be no change in that....