The Indian Government has said that RBI has tightened rules to make banks identify and tackle any non-payment of loan rapidly in a bid to hasten the resolution of bad loans. According to the Government, this move should act as a wake-up call for defaulters.

The Reserve Bank of India abolished half a dozen existing loan-restructuring mechanisms late last night, and instead provided for a strict 180-day timeline for banks to agree on a resolution plan in case of a default or else refer the account for bankruptcy. Commenting on the issue, Financial Services Secretary Rajiv Kumar told the media, “The new rules are a wake up call for defaulters.”

"The government is determined to clean up things in one go and not defer it. It is a more transparent system for resolution," he said. Under the new rules, insolvency proceedings would have to be initiated in case of a loan of Rs 2,000 crore or more if a resolution plan is not implemented within 180 days of the default.