Let's find a new way to deal with bad loans

The Supreme Court ruling on the February 2018 RBI directive creates an opportunity to take a fresh look at India's bad asset resolution process

The Reserve Bank of India (RBI) will issue a revised circular on stressed assets resolution in the wake of the nation’s apex court striking down the contentious February 12, 2018, directive to clean up the bad loan mess in Asia’s third largest economy.

The regulator had issued the directive, armed with the Section 35AA of India’s Banking Act. The new Section empowered the Union government to authorise the RBI to direct banks to resolve specific stressed assets by initiating the insolvency resolution process. The court has not questioned the validity of this Section introduced in May 2017 through an amendment,