27 February 2019: The Reserve Bank of India (RBI) is considering moving the National Company Law Appellate Tribunal (NCLAT) over its order directing lenders to refrain from classifying crisis-hit IL&FS-owned companies’ loans as non-performing assets (NPA) without its approval.
On February 22, PTC Financial Services had filed an application with the NCLAT seeking a temporary dispensation for IL&FS firms that would have been classified as NPAs. Though the case pertained to one category of the IL&FS entities tagged “Amber”, the tribunal passed a blanket order for all the group firms. NCLAT directed financial services firms and banks to seek approval before terming IL&FS group loans as NPAs.
As per RBI regulations, loans whose principal and interests are overdue for more than 90 days as per the terms, have to be classified as NPAs and appropriate provisioning made. The NCLAT order goes against the RBI regulations, and would force banks to go against the norms. Earlier, the RBI had instructed banks to declare some accounts of the group as NPAs in line with its guidelines.
This impasse has resulted in the central bank seriously considering an appeal on the NCLAT order restraining the classification of these firms as NPAs. “The RBI has expressed its disagreement with the NCLAT order. It is considering moving against the NCLAT order as it is not in lines with the RBI guidelines,” a senior official in the Ministry of Corporate Affairs said.
However, Corporate Affairs Secretary Injeti Srinivas justified the NCLAT’s ruling, pointing out that it was a one-off order and made keeping in mind the “national interest”.
Speaking on the sidelines of a CII event, Srinivas went on to add that out of the 100 IL&FS companies that need classification based on the risk, every single one would be saddled with high risk or medium risk profiles. About 22 entities of the debt-ridden group are currently servicing their payment obligations.
“I think a lot of headway is being made and… in the next few months, the first phase of resolution should be completed,” Srinivas observed. So far, the outstanding loans of the IL&FS group stand at about Rs 60,000 crore, while its overall debt is over Rs 91,000 crore.