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Bankruptcy Board chief asks banks to initiate proceedings soon after NPA classification

Creditors, or banks, need to submit insolvency applications soon after a default occurs, says Insolvency and Bankruptcy Board of India chairperson Ravi Mital. Delays on this front lead to erosion in the value of assets, he says

November 17, 2022 / 02:15 PM IST
Representative Image

Representative Image

Banks should initiate the process of taking a defaulter to the bankruptcy court as soon as the loan account is classified as a non-performing asset (NPA), Insolvency and Bankruptcy Board of India (IBBI) chairperson Ravi Mital says.

According to Reserve Bank of India (RBI) norms, if the interest or principal is overdue for 90 days or three months and above, banks have to classify a loan account as NPA.

Lenders are required to implement a resolution plan in respect of the entities in default within 180 days from the end of the review period of 30 days.

“It is perhaps in the interest of banks to file CIRP (corporate insolvency resolution process) applications as soon as the default occurs,” Mital wrote in IBBI’s latest newsletter for July-September, published on November 12.