The High Court of Gujarat on 2 April 2014 restored the power of the Reserve Bank of India to decide the period after which the bad loan can be called as a non-performing asset (NPA). The bench of the High Court of Chief Justice Bhaskar Bhattachrya and Justice J B Pardiwala said that the Section 2(1)(o) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest(SARFAESI) Act is held unconstitutional. The decision of the Parliament to take away the power from RBI to decide NPA guidelines was termed wrong by the High Court. RBI was the regulator for the banking, non-banking institutions and securitization agencies for deciding the period after which the loans can be treated as the NPA till the amendment in 2004 to the Act. After the amendment, the financial institutions were freed to decide their own regulations for NPA, which was decided separately by each firm. RBI in 2004 set the NPA period • For banks – 90 days • For Non Banking Financial Companies – 180 days The ruling of the High Court came on the petitions filed by several defaulters of banks and NBFCs questioning every institution deciding its own NPA period. They claimed it a violation of right to equality.
Posted on: Sat, 26 Apr 2014 05:42:32 +0000
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