( like the 2008 financial crisis ) requiring both the government and regulatory intervention. the framework should also broadly indicate the fiscal and regulatory measures to be taken under such conditions in the phases of ( i ) crisis containment and ( ii ) debt restructuring. the rationale for this recommendation was that any regulatory forbearance should be used as a special tool only in the times of crisis. such phases were clearly seen in india during the 2008 financial crisis, when government and rbi both intervened in the real and financial markets with incentives and regulatory forbearance. the working group also observed that the requests for special dispensations and one - time measures are frequently made to rbi for restructuring of a particular sector of economy or industry on the basis that such sectors were facing extraordinary stress or unprecedented adverse conditions. in view of such frequent requests, the one - time measures lose their meaning and these also have adverse impact on the regulatory safeguards of the banking system. in view of this the working group felt that the requests for such regulatory forbearance should not be made a regular feature and any such forbearance should be accompanied with fiscal incentives to ensure the viability of the sector after restructuring. up - gradation of restructured npa accounts the issue of up - gradation of an account downgraded on restructuring arises with the first recommendation of the working group of withdrawal of regulatory forbearance in asset classification. the extant rbi guidelines prescribe that all restructured accounts which have been classified as non - performing assets upon restructuring, would be eligible for up - gradation to the “ standard ” category after observation of “ satisfactory performance ” during the “ specified period ”. further, “ specified period ” is defined as a period of one year from the date when the first payment of interest or instalment of principal falls due under the terms of restructuring package. it was observed by the working group that in some cases of restructuring of multiple credit facilities with moratorium on payment of principal as well as major portion of interest, accounts were upgraded on the basis of payment of interest on a small portion of the debt, say funded interest term loan ( fitl ), for the specified period. the working group further noticed that the account may still have its inherent credit weakness as payment of a small portion of interest does not show the “ satisfactory performance ”. therefore, it was felt that the specified period should be redefined by taking this aspect into consideration. the working group studied the international

##rated bis central bankers ’ speeches transition within a two - year period. the working group has also tried to harmonise some of the procedures applied to cdr restructuring to non - cdr restructuring. the reserve bank will take appropriate decision on the recommendations based on the comments received. i sincerely hope that i have done a good job if i have clarified the rationale and philosophy behind the recommendations of the working group. i value your feedback and wish the round table all success. bis central bankers ’ speeches