The Reserve Bank of India is planning to extend its February 12 circular dealing with resolution of stressed assets to Non Banking Financial Companies (NBFCs), the central bank said on Wednesday.
These guidelines, which specify the one-day default norm, are so far applicable on banks. The RBI, through a notification on February 12, has done away with all its earlier instructions dealing with resolution of stressed assets and replaced them with the revised framework for resolution of stressed assets. The circular requires banks to implement a resolution plan within 180 days and in case of non-implementation, lenders are required to file an insolvency application.
“The Reserve Bank is planning to extend the harmonised and simplified generic framework for resolution of stressed assets put in place for banks to NBFCs as well,” the RBI said in its annual report 2017-18 released on Wednesday. This means within a day of loan default, the NBFCs will have to initiate resolution measures for their clients. If the resolution is not approved with 180 days, they will have to initiate insolvency resolution under the Insolvency and Bankruptcy Code.
“If a RP (resolution plan) in respect of such large accounts is not implemented as per the timelines specified (in the circular), lenders shall file insolvency application, singly or jointly, under the Insolvency and Bankruptcy Code 2016 (IBC) within 15 days from the expiry of the said timeline,” the RBI mandated in its February 12 circular, which kicked in from March 1 with the 180 days deadline ending on August 27. As the deadline has ended, more than Rs 3 lakh crore worth of loan of around 70 companies are likely to be pushed for resolution under the IBC soon.
Inclusion of NBFCs within the new stressed asset resolution framework would increase the number of cases under the IBC. In the annual report, the RBI also said that the government-owned NBFCs will be subjected to on-site inspection from the inspection cycle 2018-19. An on-line portal for reporting of cyber security incidents of NBFCs will be put in place in the current financial year, the RBI said. Currently, there are 42 government-owned NBFCs registered with the RBI — 16 owned by the Central government and 26 by the state governments.