The Reserve Bank of India (RBI) late on Monday tightened its rules around bank loan defaults, seeking to push more large loan defaulters toward bankruptcy courts and abolishing half a dozen existing loan-restructuring mechanisms, in its latest bid to accelerate resolution of the bad loans problem at Indian banks.
The new set of rules are aimed at creating a “harmonised and simplified generic framework” for resolution of stressed assets in view of new bankruptcy regulations, the RBI said late on Monday.
After enacting its first comprehensive bankruptcy regime in 2016, India last year gave the central bank more powers to push lenders to deal with the nearly $150 billion in troubled debt at banks, which has stymied new lending and slowed economic growth.
Last year, the RBI ordered banks to force roughly 40 of the biggest corporate loan defaulters into bankruptcy proceedings.
The new system will force lenders to identify and tackle any stressed-asset accounts more rapidly, the regulator said.
Under the new rules, banks will have to file for insolvency proceedings against loan defaulters with 20 billion rupees ($311 million) or more if a resolution plan is not implemented within 180 days of the initial occurrence of default, the RBI said.
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