oppn parties RBI's "One-Size-Fits-All" Circular Quashed By The Supreme Court

News Snippets

  • The Army conducts an operational alert exercise in eastern Ladakh
  • The IAF reopened the Vijaynagar advance landing ground, an airstrip in Arunachal Pradesh near the Chinese border
  • Amit Shah says he never sought to impose Hindi
  • Government bans the manufacture and sale of e-cigarettes in India
  • Mamata Banerjee seeks an appointment with Home Minister Amit Shah today
  • Bengal CM Mamata Banerjee meets PM Modi in what she later described as a government-to-government meeting
  • Supreme Court sets a deadline of October 18 for completing the hearings in the Ayodhya case
  • Pakistan rejects India's request for use of its airspace when PM Modi flies to the US later this week
  • Crude prices fall sharply as Saudi Arabia assures normal production in a few weeks. Prices fall by 5.4% to $65.30 per barrel
  • Sensex tumbles 700 points over fears that rising crude prices will deal a body blow to the tottering Indian economy
  • As Rajeev Kumar fails to appear before the CBI despite several notices, the agency forms a special team to locate and apprehend him
  • S Jaishankar says Pakistan is not a normal neighbour and its behaviour is a "set of aberrations"
  • External Affairs Minister S Jaishankar says PoK in Indian territory and the country hopes to have physical jurisdiction over it one day
  • Barasat Sessions court near Kolkata rejects Rajeev Kumar anticipatory bail application citing lack of jurisdiction as the reason
  • PM Modi celebrates his birthday with Narmada aarti and later has lunch with his mother.
Sunni Wakf Board and Nirvani Akhara write to the Supreme Court for a negotiated settlement to the Ayodhya dispute
oppn parties
RBI's "One-Size-Fits-All" Circular Quashed By The Supreme Court

By Sunil Garodia

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Writes for a number of publications.
The RBI circular of February 12, 2018, that was also opposed by the government and which was the main reason that led to the then governor Urijit Patel’s resignation, has been struck down by the Supreme Court. The circular had tried to speed up bankruptcy proceedings by allowing banks to refer to the NCLT cases over Rs 2000cr which defaulted even by a day in repayments.

But where the RBI erred was by treating all borrowers equally. Its circular showed that it thought one size would fit all and it did not take the peculiarities of different sectors into consideration. It did not revise the circular even when representations were made from several borrowers, especially from the power sector, highlighting the external factors – like non-availability of coal and non-payments of dues from state power utilities, among others – that prevented them from making timely payments. Finally, it was inflexible even when the government tried to show it reason. Although the insolvency process has been speeded up after the circular was issued – as data available with the RBI shows – it comes to naught as the Supreme Court has now struck it down.

The repercussions will be disastrous for the economy in general and lending banks in particular. Already, the international credit ratings agency Moody’s has termed the SC order as being “credit negative” for banks. The least the RBI can now do is to study the Supreme Court order with a fine toothcomb and issue a new circular that takes everything – the law and the concerns of the borrowers – into consideration to come out with a new circular that does not spare willful defaulters but remains on the right side of the law. It is imperative that there is no let up in the fledgling insolvency process in the country while at the same time borrowers who have genuine concerns are allowed more time to pay up.