No more waiting period for banks to start loan recovery

Earlier, banks had to wait for 90 days before starting loan recovery proceedings. However, Reserve Bank of India (RBI) has now ruled that for an account to be formally classified as non-performing, banks don’t have to wait for a deadline to start loan recovery.


"Under the ordinance, we have clarified that the default will be considered as per bankruptcy laws, which means if the payment is missed it turns into a default the next day," a senior government official told ET.

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This would prompt banks to plan their recovery strategies in advance.

India's banks, especially the ones run by the state, have a lot of bad debts to take care of, which directly impacts their financial performance, lending ability and the economy as a whole.

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Some industry experts, however, think that RBI should be more clear with its order.

"The Reserve Bank should clarify what should be the provisioning requirement for companies going under bankruptcy in the first day of default, in the event a bank decides to file it the same day," said Sapan Gupta, partner at law firm Shardul Amarchand Mangaldas & Co.