Setback for RBI

Central bank's role in IBC must not be curtailed

Prima facie, the Supreme Court’s judgment quashing the Reserve Bank of India’s (RBI’s) February 12, 2018, circular, mandating banks to recognise one-day defaults and invoke the insolvency process for such defaulters, is strictly in tune with the law. The apex court held that in the light of Section 35AA of the Banking Regulation Act, the RBI could not have issued a generic circular mandating reference under the Insolvency and Bankruptcy Code (IBC). The court also held that references under the IBC have to be on case-specific basis and with authorisation of the Central government under the Act. Thankfully, the court