India's Central Bank Relaxes Stressed Asset Guidelines for Lenders

The Reserve Bank of India diluted its guidelines on stressed assets and has now mandated banks to undertake a review of a borrower’s accounts within 30 days of default, according to a circular issued on Friday, Reuters reported. A circular issued in February last year required banks to initiate a resolution process as soon as a default took place. Banks unable to agree upon a resolution plan with the defaulter within 180 days were mandated to force them into a time-bound insolvency process. But that instruction was struck down by the Supreme Court of India in April after several companies challenged the guidelines in court, arguing that the time given by the regulator was insufficient to tackle bad debt issues. In Friday’s circular, the RBI said lenders should work on a resolution plan based on the financial health of borrowers even before a default. Read more

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