In an unprecedented move, the Modi government has granted
the Reserve Bank of India (RBI) power to force banks to file
insolvency proceedings against defaulters under the
country’s new bankruptcy regime, but no
provisioning benefits apply.
The Indian banking economy has been struggling with NPLs for
the last few years and lenders have not been active in taking
enforcement action against many Indian borrowers. With the new
power, it is expected that the RBI can require the banks, who
so far were disinclined to take action, to start insolvency
resolution proceedings under the country’s
Insolvency and Bankruptcy Code.
Public lenders have been wary of taking action as they have
come under the increased scrutiny of various vigilance
agencies, which are averse to investigative action commencing
due to any inaction or late action.
But counsel in India point to the absence of provisioning
benefits in proceedings filed under...