The Reserve Bank of India diluted its guidelines on stressed assets and has now mandated banks to undertake a review of a borrower's accounts within 30 days of default, according to a circular issued on Friday. A circular issued in February last year required banks to initiate a resolution process as soon as a default took place. Banks unable to agree upon a resolution plan with the defaulter within 180 days were mandated to force them into a time-bound insolvency process. But that instruction was struck down by the Supreme Court of India in April after several companies challenged the guidelines in court, arguing that the time given by the regulator was insufficient to tackle bad debt issues. In Friday's circular, the RBI said lenders should work on a resolution plan based on the financial health of borrowers even before a default. In the case of a default by a borrower with even a single lender, all lenders should review the borrower's accounts within 30 days. "This now puts more responsibility on the bankers. They are now supposed to take timely decisions," said Ramnath Pradeep, the former chairman of Corporation Bank. Lenders are expected to devise a resolution plan within the 30-day period and also enter into an Inter-Creditor Agreement during this period. The resolution plan should be implemented by the lenders within 180 days after the initial review period, the central bank said. "The new circular is more pragmatic," said Rupa Rege Nitsure, chief economist at L&T Financial Holdings. "This is more reasonable as defaults could happen due to unpredictable events and things generally don't change within just one day. On balance, the new circular appears to be more practical without diluting the "spirit" of the earlier circular". The central bank said now approval of lenders representing 75% of outstanding loans and 60% of number of lenders would be required for the sake of resolution, versus 100% earlier which is expected to speed up the process, Nitsure said. However, in case of delays in implementing a resolution plan, the RBI has instituted additional provisioning norms. Failure to implement the resolution plan within 180 days of the end of the review period will require banks to make additional provisioning of 20%, while banks would need to set aside an additional 15% on top of this after one year. "That I think creates the right environment for finding a resolution. There is some balance and counter balance for all stakeholders," said L. Viswanathan, Partner at legal firm Cyril Amarchand Mangaldas.