It is a pity that the country\u2019s top courts, from the NCLAT to the Supreme Court (SC), are passing orders that will hit RBI\u2019s ability to ensure the country\u2019s banking system remains as healthy as possible. The NCLAT continues to insist that the Committee of Creditors (CoC) ensures that operational creditors get a larger share of the money that ArcelorMittal is willing to pay for Essar Steel; the process of taking a defaulter to the NCLT is being driven by RBI. Right now, while financial creditors will get Rs 41,987 crore as against their loans of Rs 49,395 crore, operational creditors are to get Rs 214 crore against their claims of Rs 4,976 crore. While that sounds unfair, the Insolvency and Bankruptcy Code is clear that the CoC takes the final decision on any bids and, second, after the costs of the bankruptcy process are met and workers\u2019 dues for the last two years are paid, it is financial creditors that get the first priority. Also read:\u00a0Smart farming: Agriculture data can reap a bumper harvest While the State Bank of India (SBI) has done well to approach the SC to challenge this view of the NCLAT, the SC itself has passed some unfortunate orders on RBI\u2019s powers; to the extent the central bank\u2019s powers have been curtailed, SBI and other banks are also affected. By striking down RBI\u2019s February 12 circular recently, for instance, SC has ensured that the central bank can no longer force banks to declare an account as an NPA after even one day of default and to, second, take this account to the NCLT if a solution to the problem is not found within 180 days. While forcing banks to declare an account an NPA at the earliest sign of default is good practice since banks will have to do provisioning immediately, the automatic reference to NCLT is critical since it means that defaulters can no longer use political or other influence to get respite from banks; if they don\u2019t make good their loan payments, they can lose their company. Indeed, several defaulters started repaying loans to ensure their firms don\u2019t go to the NCLT. In a similar move, NCLAT has ruled that RBI cannot force banks to declare their loans to IL&FS as NPAs unless this is cleared by NCLAT. While the SC bought the argument\u2014that is why it struck down the February 12 circular\u2014that not all defaults were the fault of the entrepreneur, it seems to be applying the same logic in the case of Reliance Infrastructure\u2019s Delhi Airport Metro Express (DAMEPL) and has said that RBI cannot insist the account is classified as an NPA till further orders. In this case, DAMEPL pulled out after it had concerns over the safety to the line and Delhi Metro Rail Corporation (DMRC) took over operations. DAMEPL also won an arbitration case against DMRC on this matter, for rS 4,500 crore, but the award was set aside by a division bench of the Delhi High Court. It is possible to argue that DAMEPL is not liable to pay the banks once it left the project or that, even if it is, it cannot do this until its gets the arbitration award. The point, however, is that this is not RBI\u2019s concern. If the loan is not serviced, for whatever reason, the bank has to declare it an NPA if the banking system is to remain healthy. Doing so will hurt banks since they will have to provision for the NPA, but once they get the money back\u2014say, after DAMEPL gets the arbitration award\u2014the banks can write this back into their accounts and declare higher profits (or lower losses) in that quarter. If the courts take over RBI\u2019s power to force banks to classify loans as NPAs, the central bank may as well give up its role as the regulator, in charge of ensuring banks don\u2019t go bankrupt.