MPs' panel for dilution of default definition, but RBI flags concerns

The commercial or debt paper is the favourite route of corporates to raise funds when compared with loans from banks. They help meet short-term working capital requirements.

The Reserve Bank of India (RBI) has shown its reservation on reviewing the definition of default. This is a key parameter for credit rating agencies (CRAs) to assign ratings to commercial papers of corporates, even as a parliamentary panel insisted on relaxing the norms. 

The parliamentary committee on subordinate legislation, in a meeting held on Monday, had raised the issue with regulators and the ministry of finance. It sought to soften stance on default criteria which restrict banks to finance low-rated firms. 

Further, such classification of firms into the default category also prohibits them from coming out with debt papers.

The commercial or