RBI's New Bad Debt Norms Boost Stressed Asset Buyers

Asset reconstruction firms welcome central bank's faster settlement rules for small bad loans

- Shayan Ghosh

A central bank decision to ease the bad loan settlement process for loans of up to ₹1 crore by asset reconstruction companies has come as a relief for these firms scrambling to secure multiple approvals under the erstwhile guidelines.

Given that many of these turnaround companies have started to buy more bad loans in retail and microfinance portfolios, the revised regulations would mean faster resolution of stress, experts said. Settlement is a process of bad debt resolution that allows lenders or asset reconstruction companies to close the account once and for all against a lump-sum payment or in parts.

Asset reconstruction companies are seeing a spike in the sale of bad debt in the unsecured retail loan portfolios of banks and non-banks, Mint reported on 6 December.