With the National Company Law Appellate Tribunal (NCLAT) allowing banks to declare the defaulting accounts of Infrastructure Leasing & Financial Services (IL&FS) group as non-performing assets (NPAs), the Reserve Bank of India (RBI) on Wednesday withdrew its previous circular asking banks, financial institutions to declare details of their exposure to the group that are bad loans.
According to the NCLAT order, banks can declare the defaulting accounts of the beleaguered group as NPAs but they cannot start the recovery process and debit money until a resolution for the group is found.
Group entities of IL&FS began to default because of asset liability mismatch in the second quarter of 2018-19. Its payment obligations on maturing loans were far more than its cash flows.
