India: RBI unlikely to challenge SC order, may revise circular

  • The Reserve Bank of India (RBI) could revise its bankruptcy circular to ensure that an amended version of the directive complies with norms, although the regulator cannot dictate a blanket order for taking all companies above a threshold to insolvency courts, lawyers said.
  • On 2 Apr 19, the Supreme Court quashed the RBI’s 12 Feb 18 circular, putting a 180-day deadline to refer bad loan accounts over INR?20bn to the Insolvency and Bankruptcy Code (IBC). The apex court order was in response to a petition filed by power producers in Aug 18, challenging the constitutional validity of the RBI circular.
  • The central bank is unlikely to challenge the SC order. The RBI has to come up with specific guidelines for industries and not a general direction. RBI will announce its monetary policy decision on 4 Apr 19.
  • Lawyers, however, believe that SC’s judgement will not affect cases filed before the 12 Feb 19 circular was announced.
  • In other words, this ruling will not affect the 12 cases, such as those of Essar Steel.

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