Business Today

Wrong Regulation

It is the Reserve Bank of India that makes guidelines for classifying NPAs, and banks are supposed to follow those orders.
twitter-logo Prosenjit Datta   New Delhi     Print Edition: March 24, 2019
Wrong Regulation

While it is easy to understand the sentiment behind the National Company Law Appellate Tribunals (NCLAT) order not to treat any entity of IL&FS as a non-performing asset (NPA) until its consent is taken, this is clearly wrong.

First, it is the Reserve Bank of India that makes guidelines for classifying NPAs, and banks are supposed to follow those orders. Two, while NCLAT's intention may be to sort out the IL&FS mess without that company's creditors dragging it to bankruptcy court, this is not the right way to go about it. If the government wants to save IL&FS entities from the bankruptcy court, it needs to find a solution.

Perhaps ask the newly constituted board to talk to creditors for a standstill agreement. Or, work out a scheme for orderly deleveraging and sale of the entities. The NCLAT's role is to judge on appeals against NCLT orders against any company or management, and it should not overstep its authority to infringe on what is another regulator's domain.

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close