Supreme Court rejects RBI's circular on resolution of stressed assets

The Supreme Court on April 2 strikes down the Reserve Bank of India's circular on resolution of stressed assets. In a big win for sugar, power,  textile, and shipyard sector, the apex court struck down RBI circular dated February 12, 2018 that mandated banks to initiate resolution of bad debts over Rs 2000 crore. 

The circular was seen as a stringent measure to curb accumulation of bad loans.  It required banks to initiate resolution proceedings with defaulting companies in order to restructure loans within 180 days from the day they default.  If the same could not be resolved,  the banks were to initiate insolvency proceedings against the company in question within two weeks  of the 180 day period expiring. 

A two-judge bench of justice Rohinton Fali Nariman and justice Vineet Saran has pronounced the judgement.

The RBI, however, in defense said that 157 companies stood to be affected by the circular and not one company has been resolved in the given period or comply with the August 31, 2018 deadline.

Meanwhile, the pace of growth for most retail loans like education loans, car loans, credit cards, personal loans has come down sharply, according to monthly data provided by Reserve Bank of India (RBI). On the other hand, demand for industrial loans, especially large corporate loans, have picked up momentum owing to a continuous rise in bond market rates.

Mortgage loans witnessed a year-on-year growth of 18.8% in February 2019. In the same month last year, home loans were growing at 16.5% over the preceding year. However, personal loans reported the sharpest decline, growing only at 22.2% to Rs 5,94,600 crore as against 40.8% growth the segment reported at the same time last year.