RBI firm on new NPA rules, says cos should not take loan contract casually

The deputy governor said even some highly rated borrowers had failed on the one-day default norm

Reserve Bank of India (RBI) deputy governor N S Vishwanathan strongly defended its new rules on debt resolution, including the one-day default norm, stating that banks should get into action before any such default takes place and that companies should not take the covenants of a loan contract casually. 
 

“The debt contract embedded in bank loans has been continuously losing its sanctity, especially where the borrowing is large. There is a need to change this and restore sanctity of the debt contract, lest bank debt becomes subordinate even to equity,” said Vishwanathan at the National Institute of Bank Management, Pune.