Framework Harmonized For Resolution Of Stressed Assets

The Reserve Bank of India (RBI) offers an array of mechanisms for dealing with stressed assets. At last count, these included corporate debt restructuring, strategic debt restructuring, the scheme for sustainable structuring of stressed assets, and joint lenders forums with corrective action plans. Added to this are the various classifications of "special mention accounts" (SMAs) and the various stages of non-performing assets. The absence of a statute-driven insolvency apparatus justified the need for these mechanisms, but the enactment of the Insolvency and Bankruptcy Code (IBC) rendered their utility moot. Indeed, these mechanisms were unintendedly in conflict with the IBC.

On 12 February, the RBI moved decisively to resolve the inconsistency between the existing mechanisms and the IBC, by withdrawing the instructions for the mechanisms and replacing these with a harmonized instruction. This regulatory development, although not mentioned in the RBI's statement on