Banks have sought freedom to restructure loan accounts on a case-to-case basis without going through a uniform restructuring framework, two people aware of the matter said. This is part of suggestions presented to the Reserve Bank of India (RBI) after the Supreme Court quashed the central bank’s 12 February, 2018, circular prescribing a one-day default rule and mandatory insolvency filing for large loan accounts.

“The February 12 circular replaced all the earlier schemes like the strategic debt restructuring (SDR) scheme for sustainable structuring of stressed assets (S4A) and the 5/25 refinance. Abolishing all other schemes it gave banks full freedom to the banks to restructure accounts. We would like the RBI to maintain status quo on that front," said a senior banker, one of the two quoted above?

The suggestions, presented to RBI through the Indian Banks’ Association (IBA), come after RBI governor Shaktikanta Das said after the first bi-monthly monetary policy of FY20 that the central bank will issue a revised circular for quick and effective resolution of stressed assets.

“The RBI stands committed to maintain and enhance the momentum of resolution of stressed assets and adherence to credit discipline," he said.

The IBA requested the central bank to change the requisite majority required to approve any resolution plan from 100% to 90%, and increase the default period from one day to 30 days before the resolution plan kicks in.

In its now-quashed circular, RBI had said a resolution plan involving restructuring or change in ownership must be implemented within 180-day period, and the account should not be in default during the “specified period", failing which the account will be referred for insolvency proceedings. This “specified period" was for the period from the date of implementation of the plan up to the date by which at least 20% of the outstanding principal debt as per the plan and interest capitalisation sanctioned as part of the restructuring, if any, is repaid. According to the people cited above, bankers have recommended that this 20% repayment requirement threshold be lowered to 10% of the sustainable debt.

Lenders have also said that refinance of good quality term loans should not be classified as restructured accounts and be considered as standard loans.

Last year, IBA had written to the central bank seeking similar relaxations in the 12 February circular ahead of its implementation. However, the regulator reiterated that there would be no dilution of norms despite pressures from several quarters.

Following these norms, several petitioners, including GMR Energy Ltd, RattanIndia Power Ltd, a Punjab-based textile company, Association of Power Producers (APP), Independent Power Producers Association of India, Sugar Manufacturing Association from Tamil Nadu and a shipbuilding association from Gujarat, had intervened in the matter in different courts.