RBI releases prudential framework for stressed asset resolution

The Reserve Bank of India (RBI) has released the prudential framework for resolution of stressed assets. The framework provides a 30-day grace period to lenders and borrowers to recognise and resolve default. During this period, lenders may decide on the resolution strategy, including the nature of the resolution plan and the approach for its implementation. The fundamental principles outlined in the framework include an early recognition and reporting of default, discretion to lenders with regard to design and implementation of resolution plans, and system of disincentives in the form of additional provisioning for delay in resolution plan implementation. Earlier, the Supreme Court had quashed RBI’s circular dated February 12, 2018, which mandated lenders to start resolution even if there was a one-day default.