NEW DELHI: The Supreme Court on Tuesday dismissed a Reserve Bank of India (RBI) circular, dated February 12, which gave firms 180 days for debt resolution.

As per the RBI circular, banks had to classify a loan account as stressed if there was even a day of default. It also directed lenders to mandatorily refer all accounts with over Rs 2,000 crore loans to the National Company Law Tribunal (NCLT) or the bankruptcy court if they failed to resolve the problem within 180 days of default.

Several companies, especially power firms, had sought intervention of the SC saying the time given by the central bank was not enough time to tackle the debt issue.

The top court’s decision will give major relief to more than 75 companies + (with a total debt of Rs 2.2 lakh crore) which are facing insolvency proceedings due to default of payment.