- The Reserve Bank of India(RBI) has issued a revised prudential framework for resolution of stressed assets.
- This revised circular was issued after Supreme Court had declared the RBI’s February 12 circular on the resolution of stressed loans as unconstitutional.
- The revised circular has given small and medium-sized defaulters enough time to come out from the stressed account books of banks and regularise their repayments while maintaining its tough stance over big defaulters.
- This framework will apply to big defaulters of Rs 2,000 crore and above with immediate effect.The review period for defaulters between Rs 1,500 crore and less than Rs 2,000 crore will start only from January 1,2020.
- However,the review period for loans below Rs 1,500 crore is yet to be announced by the RBI which indicates that the RBI is expected to take a lenient approach to small defaulters.
- Further,the intercreditor agreement sets the grounds for finalising and implementing a resolution plan.It spells out details such as the rights of the majority lenders, dissenting lenders, and treatment of lenders with priority in cash flows among others.
- Any decision taken by lenders representing 75% by value of total outstanding credit facilities and 60% by number will be binding on all the lenders that have signed the inter-credit agreement.
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