RBI's stand on IL&FS exposure spells trouble for banks, NBFCs

Firms that provided for exposure on a voluntary basis may now have to mark the same as NPAs

In an explanation to the ongoing dispute on whether or not loan exposures to stressed infrastructure major IL&FS are to be classified as non-performing assets (NPA), the Reserve Bank of India (RBI) clarified to the National Company Law Appellate Tribunal or NCLAT that it is the obligation of banks to mark any loan as such after a default of 90 days. Banks cannot be relieved of their obligations to classify bad loans in their account books, the RBI added.

While this is a part of the RBI’s argument in the ongoing litigation, for banks and non-banking finance companies (NBFCs), its