India’s apex court rejected RBI’s ‘February 12 Order’ on Tuesday. The order outlined new instructions for the resolution of stressed assets in the economy
On February 12, 2018, the Reserve Bank of India (RBI) issued new guidelines for resolution of stressed assets in the economy. On Tuesday the Supreme Court of Indian termed the order unconstitutional.
The February 12 Order aimed at replacing the existing guidelines for resolution of stressed assets with a more generic and simplified framework, keeping in mind the enactment of the 2016 Insolvency and Bankruptcy Code.
The quashed order included implementation of specific schemes across different stages in time. The RBI also issued several new instructions for stressed asset resolution.
Under the February Order, if a borrower missed the repayment date even by a day, s/he would be deemed as a defaulter. Additionally, all banks were expected to establish a resolution plan for defaults over Rs 2000 crore.
The insolvency process was to be initiated if banks fail to finalise the resolution plan within the next 180 days.