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RBI issues new framework for resolution of bad loans

RBI sets up 3-member panel for DHFL

The Reserve Bank has issued a new framework for resolution of bad loans, offering a 30-day gap for stress recognition instead of the one-day default earlier. In a notification issued from Mumbai yesterday, RBI has said that lenders will have complete discretion with regard to the design and implementation of resolution plans, subject to the specified timeline and independent credit evaluation.

The apex bank has said that lenders may recognise incipient stress in loan accounts, immediately on default, by classifying such assets as special mention accounts (SMA). In case a borrower is reported to be in default, the lenders should undertake a prima facie review of the account within 30 days from the day of default. The new norms state that lenders are free to initiate legal proceedings for insolvency or recovery. These directions have come into force with immediate effect.

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