Old debt restructuring schemes like S4A may be brought back: Govt official

The apex court's order quashing RBI's circular will not impact the government's power to resolve the bad loan crisis, a senior government official said on April 3.

"Supreme Court order on RBI's circular does not limit govt powers to give directions to PSU (public-sector undertaking) banks in resolving NPAs (non-performing assets)," the official told Moneycontrol.

In the absence of the February 12 circular, previous restructuring programmes like Sustainable Structuring of Stressed Assets or S4A may be brought back.

"Restructuring schemes like S4A may come back after SC's order," the official said.

The RBI's February 12 circular had asked lenders to institute a board-approved policy for the resolution of stressed assets. Banks were told to start the resolution process as soon as a borrower defaulted on a term loan and were given 180 days to cure it, failing which the account would have to be referred to the National Company Law Tribunal (NCLT).

Following this, the RBI scrapped numerous loan restructuring programmes prevalent among banks to restructure defaulted loans and made resolution of defaults time bound with the Insolvency and Bankruptcy Code becoming the main tool to deal with defaulters.

Schemes like Corporate Debt Restructuring, Sustainable Structuring of Stressed Assets or S4A, Strategic Debt Restructuring and Flexible Structuring of Existing Long Term Project Loans were abolished. The Joint Lenders Forum designed to resolve potential bad debts was also disbanded.