The central bank said so in response to a Center for Public Interest Litigation (CPIL) PIL seeking guidance on preventing NPAs, bank fraud and prosecuting willful debtors.

At PIL’s hearing on Wednesday, a bench of judges SK Kaul and AS Oka asked the CBI to provide guidance on what can be done to implement the January 2017 recommendations made by a committee appointed under its direction in the case .

RBI noted that in a previous affidavit dated July 17, 2017, it said it agreed in principle with seven of the committee’s 23 recommendations

It went on to say that recourse to the Insolvency and Bankruptcy Act (IBC) 2016 and the amended provisions of the Banking Regulation Act 1949 introduced by the Banking Regulation (Amendment) Order 2017 “enabled the Reserve Bank to take effective action to be introduced to address the resolution of strained assets”.

Subsequently, an internal advisory committee set up by the RBI recommended all accounts with fund and non-fund based outstandings in excess of Rs 5000 crores, with 60% or more from banks at 31 IBC, it said, adding that the central bank issued guidance in June 2017 to certain banks to refer 12 accounts, which at the time accounted for about 25% of the banking system’s gross NPAs.

RBI issued another directive advising banks to finalize and implement a viable resolution plan for an additional 29 borrowers by December 13, 2017. A viable resolution plan could only be implemented in relation to one borrower, however. Applications for bankruptcy resolution proceedings under IBC had been filed by the banks in relation to the remaining 28 borrowers, the affidavit said.

RBI said that “regulatory experience in this regard enabled it” “to envisage a generic framework issued on February 12, 2018 under “Resolution of Stressed Assets – Revised Framework” … the framework prohibits restructuring of borrowers.” who have favourited fraud/misconduct/willful omission. However, in cases where the existing Promoters are replaced by new Promoters and the Borrower’s business is completely separated from these former Promoters/Management, without prejudice to the continuation of criminal proceedings, Lenders may consider restructuring such accounts on the basis of their viability versus the organizers/management at the time. This effectively prevents any form of malicious intent from the borrowers by preventing any kind of concessions from the banks.”

The affidavit said that “various other measures have also been taken in the recent past by the Reserve Bank to ensure prudent bank lending,” including ensuring credit discipline among borrowers and facilitating better oversight by the Bank lenders and preventing diversion of funds.

It pointed out that “the Reserve Bank’s recently released Financial Stability Report, dated December 29, 2022, indicates that banks’ gross non-performing asset ratio (GNPA) has declined steadily to a seven-year low of 5.0 percent in September 2022, while net non-performing Assets (NNPA) have fallen to a 10-year low of 1.3 percent of total loans. The Reserve Bank continues to monitor the situation and pledges to take prudent action, in fulfillment of its statutory mandate, to ensure a sound and resilient financial system in the interest of all concerned.”

The plea against Anil Dhirubhai Ambani Group (ADAG) ABOUT bank defaults stated that “the classification of the accounts of Reliance ADAG companies as fraud is the subject of litigation”.