In a surprise move, the Supreme Court struck down RBI's Feb 12 circular, which had required banks to treat a company as a defaulter even if it missed repayment schedule by a day, and refer any loan account over Rs 2,000 crore under the Insolvency and Bankruptcy Code (IBC) if not resolved within 180 days of default.
The Supreme Court ruling pushes debt resolution back under the purview of banks. Power companies in particular had argued in court that this created immense stress for their sector, where structural challenges forced healthy companies into bankruptcy resolution. Power company shares are rising today on the news.
