Government, RBI to work together on stressed assets circular, no change in IBC needed: CEA

NEW DELHI: Chief Economic Advisor Krishnamurthy Subramanian on Thursday said the government and the Reserve Bank of India (RBI) will work together to ensure smooth implementation of the Supreme Court’s recent ruling on the central bank’s stressed assets circular but ruled out changes in the Insolvency and Bankruptcy Code (IBC) due to the ruling.

“The government and RBI will be working together on this matter. I don’t think changes in IBC law should be necessitated, it will be early to comment,” he said at the sidelines of the Confederation of Indian Industry’s Annual Session here.

The Supreme Court had declared the RBI's February 12 circular as ultra vires of section 35AA of the Banking Regulation Act. The circular revoked all previous restructuring schemes approved by the RBI and allowed borrowers a window of 180 days to resolve their stressed accounts.


“It’s a technical aspect that has changed and does not impact fundamentals so much,” he added.

Rate cut, credit
Subramanian also supported the RBI governor led Monetary Policy Committee’s decision to cut the benchmark interest rate repo rate by 25 basis points or 0.25% to 6% saying it is good for the economy.

“The RBI rate cut is consistent with RBI’s policy stance, I think it will be good for growth,” he said.

The chief economic advisor also said that credit has picked up significantly and capital formation is up from its trough.

“When all the numbers are put in together, there isn’t anything to be concerned about,” he said.