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With the National Company Law Appellate Tribunal (NCLAT) lifting the freeze on banks from declaring the accounts of debt-laden IL&FS and its group companies as non-performing, the Reserve Bank of India, on Wednesday, withdrew its April 24 circular that required them to make specific disclosures in this regard.
NCLAT order
In view of the NCLAT order dated May 2, the central bank, in a notification, said its instructions contained in the April 24 circular stand withdrawn.
“In view of the NCLAT judgment, the usual income recognition and asset classification norms will now be followed by banks.
“So, there is no need for making a special mention about it (IL&FS exposure) in their notes to accounts,” said BK Diwakara, former Executive Director, Central Bank of India.
Referring to the February 25 NCLAT order, which said that “no financial institution will declare the accounts of IL&FS or its entities as non-performing asset without prior permission”, Diwakara opined that it is in this context that the RBI had earlier insisted that the public should know the banks’ exposure and whether they have made appropriate provisions or not.
Now, there is no need to make a special mention.
Recovery proceedings
While the Tribunal lifted the freeze on banks from declaring defaulting accounts of IL&FS and its 300 entities as NPAs, it ruled that they cannot initiate recovery proceedings.
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