The Supreme Court Tuesday struck down the Reserve Bank of India’s ‘February 12 order’ that dealt with resolution of stressed assets in the economy. The top court termed the February 12, 2018 order as unconstitutional.
Through its order, the RBI had issued various instructions aimed at resolution of stressed assets in the economy, including introduction of certain specific schemes at different points of time.
In view of the enactment of the Insolvency and Bankruptcy Code, 2016, the Reserve Bank had decided to substitute the existing guidelines with a harmonised and simplified generic framework for resolution of stressed assets. The circular stipulated a one-day default rule on term loans.
As per the order, a borrower missing repayment even for a day would be treated as a defaulter; banks needed to finalise a resolution plan for defaults of over Rs 2,000 crore within the next 180 days, failing which the insolvency process would be initiated.
In March this year, the central bank had reiterated that it maintains its stand on all aspects of the revised framework on resolution of stressed assets issued via the February 12, 2018 order.