RBI asks NCLAT to alter IL&FS loan order

RBI asks NCLAT to alter IL&FS loan order

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NEW DELHI: The RBI has asked the National Company Law Appellate Tribunal (NCLAT) to clarify or modify its order asking banks not to classify loans to IL&FS group entities as nonperforming assets (NPAs) without its permission.

In the petition, which is expected to be heard by the Tribunal on Tuesday, the regulator has sought to be a respondent in the case and argued that as the regulator for banks and financial institutions it has issued guidelines for declaring a loan as a NPA and “as part of its duty” is also “bound to monitor” its implementation.

The regulator has argued that its prudential norms are “constitutionally as well as legally valid” and no order or direction can be passed restraining the financial institutions from complying with these norms provided for under the RBI Act and the Banking Regulation Act as it will have “far-reaching overall repercussions and cascading effect in the banking sector and the interests of the depositors would be jeopardised”.

“If the banks and financial institutions implement the orders of the Tribunal, it would lead to a situation where the statutory instructions/guidelines/ circulars issued by the RBI become infructuous,” the petition said.

NCLAT’s February 11 and 25 orders to banks, which asked them not to declare the accounts as NPAs, are seen to be affecting the functioning of lenders, which have dues of around Rs 50,000 crore from the IL&FS group, which had total loans of around Rs 91,000 crore.

The RBI said that due to non-recovery of dues, banks can run out of financial resources to carry on further activities and meet the needs of its depositors and customers.

Source- Times of India.