Even as Supreme Court struck down RBI’s February 12 circular, Chief Economic Advisor (CEA) Krishnamurthy Subramanian said that the issue can be fixed as RBI and government will work on it. The court’s order won’t affect the credit culture or ongoing cases, TV news channels also reported him as saying. On possible revisions in IBC, Krishnamurthy Subramanian said that there is no need to change the insolvency law as just small tweaking would fix the issue.
Last week, CEA had said at an event that the Bankruptcy code is an important reform wherein borrowers are facing the heat. He had also said that the country has taken an unprecedented step by introducing Bankruptcy Code thereby ensuring smaller and larger borrowers were brought under it.
He also called today’s rate cut by the RBI in line with the policy stance, adding that the 25 basis points rate cut will fuel growth.
Earlier today, RBI Governor Shaktikanta Das had said that a revised circular on bad loan resolution would be issued soon. No undue delay will be made in issuance of the same, as necessary, he added. The Supreme Court recently quashed the central bank’s February 12, 2018, circular that gave defaulting companies 180 days to agree on a resolution plan with creditors or be taken to bankruptcy court to recover debt of Rs 2,000 crore or more.
“We remain committed to not only maintain but also speed up resolution of stressed assets in the banking sector…,” he noted. RBI wants faster resolution of bad loans and will come out with all possible steps to maintain pace of the same, he noted.
He had also said that the apex court didn’t take away any powers from the central bank but said that these have to be exercised in a certain manner.
“The court has said that power of RBI under Section 35AA has to be exercised in certain manner. The validity of section 35AA of the Banking Regulation Act 1949 stands and henceforth we have to comply with the direction of Supreme Court and act accordingly,” he added.
via CEA Subramanian on Feb 12 circular: Govt, RBI can fix issue; don’t think IBC needs changes – The Financial Express