Credit negative for banks, says Moody’s

  1. According to credit rating agency Moody,Supreme Court’s decision to strike down the February 12,2018 circular of the Reserve Bank of India (RBI) will be credit negative for Indian banks.
  2. They said that the circular had significantly tightened stressed loan recognition and resolution for large borrowers.But,with the Supreme court order,resolution of stressed loans impacted by the circular will be further delayed as the process may have to be started afresh.
  3. Further,since the circular stands withdrawn,the earlier restructuring schemes of RBI may get restored.So,restructuring will be permitted.
  4. In the February 12 circular,the RBI had withdrawn all the existing loan restructuring facilities like corporate debt mechanism and strategic debt restructuring and had left the Insolvency and Bankruptcy Code (IBC) as the only means for resolution of stressed assets.