It may be recalled that the central bank in its April 24 directive had asked banks to not treat their exposure to IL&FS and its 300 group entities as NPAs, following a circular by the NCLAT on February 25. It had said that “no financial institution will declare the accounts of ‘Infrastructure Leasing & Financial Services Limited’ or its entities as ‘NPA’ without prior permission of this Appellate Tribunal”. The Reserve Bank had then advised banks and financial institutions to disclose in their notes to accounts.
But an order by NCLAT on May 02, allowed the banks to declare the accounts of IL&FS and its group companies that have defaulted on repayments of loans as NPAs. A judicial bench then lifted the embargo on the banks to declare the accounts of the debt-ridden IL&FS and its 300 group entities, which could not repay their debt. “In view of NCLAT’s May 02, 2019 order… the instructions contained in the (April 24) circular stand withdrawn” RBI said in a notification posted on its web site on Wednesday.
IL&FS Group companies, with a collective debt of over Rs 90,000 crore, are going through resolution process.