The RBI governor said that the central bank will come up a revised circular to continue its battle against the menace of stressed assets within India's banking system.The RBI governor said that the central bank will come up a revised circular to continue its battle against the menace of stressed assets within India's banking system."The court has said that power of RBI under Section 35AA has to be exercised in certain manner. The validity of section 35AA of the Banking Regulation Act 1949 stands and henceforth we have to comply with the direction of Supreme Court and act accordingly," Das said."In the light of the Supreme Court order, the RBI will take necessary steps, including issuance of revised circular as may be necessary for expeditious and effective resolution of stressed assets," he added.
He further elaborated that the RBI will issue a revised circular under section 35 AA which authorises the central bank to authorise initiation of insolvency in respect of a default.Section 35AA and Section 35AB of the Banking & Regulation Act were introduced in May 2017 to add more teeth to the RBI's fight to tackle the issue of bad loans in the system. Section 35AA authorises the RBI to issue directions on initiation of insolvency in case of a default while section 35AB deals with RBI's powers with respect to the issue of resolution of stressed assets. The Supreme Court had declared the RBI's February 12 circular as ultra vires of section 35AA of the BR Act. The circular revoked all previous restructuring schemes approved by the RBI and allowed borrowers a window of 180 days to resolve their stressed accounts.