Reprieve for banks and NBFCs

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One-time restructuring of stressed MSME accounts

By Simran Jalan (simran@vinodkothari.com)

Introduction

The Non-Performing Asset (NPA) rates in the Micro, Small and Medium Enterprises (MSMEs) segment have remained stable and range bound. In the Micro segment the NPA rate has moved from 8.9%[1] in March, 2017 to 8.8% in March, 2018. In SME segment, the NPA rate hovered between 11.4% in march, 2017 to 11.2% in March, 2018. Recognised NPA exposure for MSMEs is Rs. 81,000 crores as on March, 2018. While the growth in the NPA rate has moderated, it is too early to conclude that the NPA problem is close to bottoming out.

The RBI, in its board meeting held on November 19, 2018[2], was advised by the Board to consider a scheme of restructuring of stressed standard assets of MSME borrowers with aggregate credit facilities of up to Rs. 25 crores, subject to such conditions as are necessary for ensuring financial stability.

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Debut of Section 130 of the Companies Act, 2013

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-NCLT orders recasting of financial statements of ILFS

By Smriti Wadehra (smriti@vinodkothari.com)

Introduction

As the first instance of regulatory recasting of financial statements, the National Company Law Tribunal, Mumbai has directed the reopening of the books of accounts of IL&FS Group (‘Company’) and some of its subsidiaries. The rationale behind such direction is that the Tribunal considers that the accounts of the Company and its specific subsidiaries are fraudulently prepared in the last five years and are not reliable.

The ruling[1] may be a trailblazer as there may be several instances in future of either voluntary recasting or regulatory recasting of financial statement. This article is a general discussion of the law and the global practice in this regard.

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