RBI Withdraws Circular Asking Banks To Declare IL&FS Exposure

IANS 09 May 2019

Economy & Nation

The Reserve Bank of India (RBI), on Wednesday, withdrew its earlier circular which mandated banks and financial institutions to disclose their outstanding to Infrastructure Leasing and Financial Services (IL&FS) and its group companies including provisioning required as per income recognition and asset classification (IRAC) and actual provisioning made against non-performing assets (NPAs).

According to RBI, its circular dated 24 April 2019 stands withdrawn.

"In view of the National Company Law Appellate Tribunal (NCLAT)'s order dated May 2, 2019 in respect of company appeal...the instructions contained in the above mentioned circular stand withdrawn," RBI said in a notification.

On 24th April, RBI had asked banks and financial institutions to disclose their outstanding to IL&FS and its group companies.

NCLAT's order, dated 25th February said: "No financial institution will declare the accounts of 'Infrastructure Leasing & Financial Services Ltd' or its entities as 'NPA' without prior permission of this Appellate Tribunal."

The RBI, however, has since then contested the view and said that banks should classify the accounts of IL&FS and its companies as NPAs.

The central bank also asked the banks to declare the "position of provisions which are required to be made as per IRAC norms" and the "position of provisions actually held."

In April, during a hearing in the NCLAT, RBI's counsel Gopal Jain said that true reflection in the books of the banks is important for fair accounting because it has early warning signals.

It is the obligation of banks to mark any loan as NPA after a default of 90 days, and they cannot be relieved from doing that, said RBI, adding that it is a process which every bank has to follow.

Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

Comments

User

Madhur Agarwal

6 years ago

The author obviously has no idea about how effective the IBC has been in the last 2 years! Don't understand how such uninformed articles can be written!

Vijay Chandar

Replied to Madhur Agarwal comment 6 years ago

I also thought that IBC was an effective resolution process for stressed loans. But this MoneyLife article gives information, which, if true, throws a completely different light on the IBC.
https://www.moneylife.in/article/the-ibc-is-going-the-way-of-previous-failed-laws-on-bad-loan/57121.html

AAR

6 years ago

Whats wrong in revealing the exposure?
In fact, all Public Sector Banks should disclose all their defaulting loan details.

ramchandran vishwanathan

6 years ago

Is the Central bank supposed to be pro investor or Pro sinking corporates. This is really sad , we as investors in banks through FDs have a right to know which Bank has what exposure to this colossal failure called IL&FS

6 years ago

Systemic attempt to hide the actual default figure ?