SC order on NPAs: Power firms body heaves a sigh of relief

SC order on NPAs: Power firms body heaves a sigh of relief

In February 2018, the RBI put out a circular on classification of non-performing assets that required banks to refer any account with a loan of more than Rs 2,000 crore to bankruptcy court if it is not resolved within 180 days of a default. The sector is likely to benefit the most from the Supreme Court action on Tuesday quashing the RBI circular on bad loans. "We will read it and I am sure the RBI will also decide what is to be done with the various aspects contained in the circular", Jaitley had said.

"The verdict along with recent CCEA and union power and commerce ministries' notifications implementing the recommendations of the empowered committee will provide the much- needed respite to all the affected parties and alleviate their stress", Khurana said. The circular introduced a new one-day default norm - "As soon as there is a default in the borrower entity's account with any lender, all lenders - singly or jointly - shall initiate steps to cure the default", it said.

Several companies had challenged the circular in court arguing the time given by the central bank was insufficient to tackle bad debt.

Power, shipping, sugar, infrastructure, telecom, and steel companies were particularly opposed to this notice.

Tuesday's ruling also raises questions around the validity of a debt resolution plan at beleaguered carrier Jet Airways as bankers said that a part of the resolution process was based on processes laid out in the RBI's february 12 circular that the court has now quashed in its entirety. The decision caused panic for many companies, in particular those in the power sector.

In the best interest of customers, banks will take a call on referring cases to National Company Law Tribunal (NCLT) on case by case basis, a top public sector bank official told PTI.

Kidnappers demand US$500000 ransom for US tourist snatched in Uganda
The victims have been identified as Kimbley Sue Endecott (American female tourist) aged 35 and Jean Paul, the driver. "They took all their possessions", Ugandan government spokesman Ofwono Opondo said , reported Reuters .

Srikanth Vadlamani, VP Financial Institutions Group, Moody's Investors Service, said voiding of the February 12 circular is credit negative for Indian banks.

Khurana said APP had also highlighted the circular would not help either the developers or the lenders or the sector at large, and instead it would lead to significant erosion of value as the assets were stressed due to factors which would be faced even by new promoters, in case of change in ownership as fallout of the impugned circular.

The clarity from the RBI Governor came as a relief as there was general apprehension about the fate of the ongoing insolvency cases.

The circular had mandated banks to take into account all stressed companies with loan exposure above Rs 2,000 crore even if the period of default was for one day. Moreover, they said that discretionary power was being taken away from banks.

"However, Crisil said: "... a return to the pre-IBC era is not expected".

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