RBI Withdraws Old Debt Restructuring Schemes, Sets Stricter Norms for NPAs

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In a move to speed up recognition of NPAs, Reserve Bank of India (RBI) on Feb 12, 2018 has withdrawn existing Debt Restructuring Schemes and set new norms for restructuring debts. RBI has made tighter norms for bad loans resolution that requires lenders to classify a loan as a Non-performing Asset (NPA) directly upon restructuring.

According to the new rules, for loans that are larger than Rs.2,000 Crores, the lenders must complete resolution plans within 180 days and if the resolution plan is not implemented within 180 days, the account must be referred to the Insolvency and Bankruptcy Code.

The new restructuring scheme would put pressure on stressed borrowers. Now if the borrowers do not pay on time, they would be categorized as classified defaulters while earlier they were merely classified as stressed and given more time to repay.

The RBI withdrew Corporate Debt Restructuring Scheme (CDR), Strategic Debt Restructuring Scheme (SDR) and scheme for Sustainable Structuring of Stressed Assets (S4A).

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