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FICCI for structural changes in RBI June 7 circular

FICCI’s Secretary Dilip Chenoy has said that the new framework very aptly balances the interest of all stakeholders in the eco-system.

, ET Bureau|
Jun 13, 2019, 07.35 PM IST
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One of the suggestions is to future shift from lending by commercial banks to infrastructure, pension and insurance funds to handle asset-liability mismatch to be a long term view.
NEW DELHI: Federation of Indian Chambers of Commerce and Industry (FICCI) has suggested structural changes in revised stressed asset framework issued by the Reserve Bank of India on June 7.

In a letter to the RBI governor Shaktikanta Das, the industry association has recommended a few structural changes to prevent build-up of future stress and proposed that these be taken up at the appropriate policy level for further consultations.

FICCI’s Secretary Dilip Chenoy has said that the new framework very aptly balances the interest of all stakeholders in the eco-system.

The industry association has further offered suggestions taking into account that power sector is besieged with problems arising out of unanticipated events and circumstances not within its control and considering also the present-day energy dynamics and demand uncertainties.

One of the suggestions is to future shift from lending by commercial banks to infrastructure, pension and insurance funds to handle asset-liability mismatch to be a long term view.

Chenoy has also suggested deepening of short term markets enabling capacities to participate and meet demand in forecastable periods based on flexible trade with progressive introduction of derivatives as risk management tool. “Purpose is to avoid idling of capacities in absence of long term contracts because of demand uncertainties,” he noted in his letter.

Another suggestion is configuring a liquid fuel market which can align with the power market and facilitate supply of coal and gas, as the case may be, to power plants wanting to enter into flexible and shorter duration contracts.

On June 7, RBI had issued revised guidelines for resolution of stressed assets. Under the new framework, it is a mandatory requirement for lenders to enter into an Inter-Creditor Agreement (ICA) during the review of the borrower account within 30 days from date of first default to any lender.

The New Framework further lays down some parameters to be included in the Inter-Creditor Agreement including decision-making by lenders holding 75% (by value of total outstanding facilities) and 60% by number and protection of dissenting lenders. The Inter-Creditor Agreement is required to be executed by all lenders covered under the New Framework and asset reconstruction companies.

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