New Delhi, Apr 4 (IANS): The Finance Ministry and the Reserve Bank of India (RBI) may soon start consultations with each other for working out a revised mechanism on non-performing asset (NPA) resolution on sector specific lines, informed sources said.

However, it is not going to be an overnight process as was done under the February 12, 2018 RBI circular, the sources said, adding that the interim government may issue directions to the banks over sector specific NPA resolutions so that there is no lag in the NPA checking mechanism.

The Supreme Court on Tuesday struck down as ultra vires the controversial February 12, 2018 RBI circular that mandated lenders to initiate resolution or restructuring of loans of Rs 2,000 crore and above within six months from the date of default.

After the expiry of 180 days, the defaulting borrowers, under the now struck down circular, had to mandatorily face proceedings under the Insolvency and Bankruptcy Code (IBC).

"The government does not want to get involved in actions which are under the realms of the lenders and the regulator. The banks have to take these decisions on loan recovery for NPA accounts.

"The Finance Ministry would like new and revised sector specific mechanisms for NPA recovery to be formulated by the RBI in consultation with the lenders and the industry so that the general rule for every sector is not brought upon which can prove disastrous as was seen in the power sector due to the February 12 RBI circular", the sources said.

But till a valid framework is chalked out, the Finance Ministry could explore ways such as issuing directions to the banks so that bad assets resolutions do not suffer, the sources said, adding that it will be the RBI, the lenders and the industry who will be the ecosystem.

On Monday, Finance Minister Arun Jaitley had said as much at a press conference.

"The RBI will now decide with the present condition of the market as to what's to be done in the absence of the February 12 circular. We will read it and I am sure the RBI will also decide what is to be done with the various aspects contained in the circular," Jaitley had said.

Sources in the government are of the view that the central bank would take appropriate actions following Tuesday's apex court ruling. They also added that the new rules would be based out of consultations with the banks, the government and the industry.

Amitabh Kant, Chief Executive Officer (CEO), NITI Aayog, said on Wednesday that with the Supreme Court striking down the February 12, 2018 RBI circular on NPAs as ultra vires, the issue needs to be relooked at by both the RBI and the government to arrive at a new regulation that will ensure financial discipline of the borrowers.