Bankruptcy law: key to tackling the burgeoning NPA issue
Reforms in bankruptcy laws can play a crucial role in economic growth and financial stability
The Reserve Bank of India (RBI) started a process whereby all new restructured loans are classified as bad loans. A restructured loan is one for which the borrower has renegotiated the terms of repayment, while a bad loan is where the borrower has not made payments for a certain period and there is risk of default. Effective 1 April 2015, all restructured loans have to be classified as non-performing assets (NPAs), with provisioning of 15% of the outstanding versus the earlier requirement of 5% for restructured loans.