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The Reserve Bank of India (RBI) released a ‘Framework for Revitalising Distressed Assets in the Economy’ on 21 March 2014 which sets out guidelines for the early recognition of financial distress, taking prompt steps for resolution and ensuring fair recovery for NBFCs. The new framework continues to emphasise the RBI’s focus on putting assets to work and incentivising the speedy resolution of NPA or NPA like exposures in the banking system. The set of structural reforms set up earlier for banks such as the Central Repository of Information on Large Credits (CRILC) to facilitate and dissemination of information on large credits and co-ordination of lender actions through the establishment of Joint Lenders’ Forums within the lending system, would also encompass NBFCs and would be available to them.
Our First Notes provides an overview of the salient features of the new framework, the potential implications and areas for action.