12

lenders

to

resolution

lenders

to

NPA.





new

retain

12

resolution

new

norms

lenders

lenders

lenders

resolution

enders

to

resolution

RBI releases prudential framework for resolution of stressed assets The Reserve Bank of India (RBI) today issued revised circular on resolution of stressed loans. The Supreme Court had on April 2 struck down RBI's February 12 circular whereby the central bank had mandated lenders to initiate resolution or restructuring of loans worth Rs 2,000 crore or more even if the default was recorded for a single day.

SMA Sub-categories Basis for classification – Principal or interest payment or any other amount wholly or partly overdue between SMA-0 1-30 days SMA-1 31-60 days SMA-2 61-90 days

SMA Sub-categories Basis for classification – Outstanding balance remains continuously in excess of the sanctioned limit or drawing power, whichever is lower, for a period of: SMA-1 31-60 days SMA-2 61-90 days

borrowers

new

norms

to

lenders

to

to

Two months after the Supreme Court quashed Reserve Bank of India 's ( RBI ) Februarycircular, which had mandated thestarteven in case of one-day default, the RBI today issued a revised circular for resolving stressed assets by offeringa 30-day periodlabel an account anThedirections, however,the basic spirits of the Februarycircular as it mandates higher provisioning, bankruptcy options as well as do not allow any othermethods outside theThe Supreme Court had on April 2 struck down RBI's February 12 circular whereby the central bank had mandated lenders to initiate resolution or restructuring of loans even if the default was recorded for a single day. Revising its 1-day default norm, RBI has now said that the lenders should now review the accounts within 30 days of default and initiate a resolution plan before the default.Here are all the key details of the new RBI circular * Under the new 'Prudential framework for resolution of stressed assets', lenders will have complete discretion to design, implement resolution plan.* Banks may start resolution, IBC process within 30 days of default.* Once a borrower is reported to be in default by any lenders, they may review of the borrower account within 30 days from the day of default.* Lenders should follow a board-approved policy for resolution of bad loans * Mandatory to sign inter-creditor agreement (ICA) by all lenders, which will provide for a majority decision making criteria.* RBI changed its earlier norm of 100 percent approval from creditors. ICA shall now provide any decision agreed byrepresenting 75 percent by value of total outstanding credit facilities and 60 percent ofby number shall be binding upon all the, helping speed up theprocess.* Lenders must resolve over Rs 2000 crore NPA account within 180 days.* Higher provisioning for delay in resolution. Lwill havemake 35 percent provisions--first 20 percent for 180 days and then an additional 15 percent if nois found within 365 days.* The joint lenders' forum (JLF) as mandatory institutional mechanism for resolution also stands discontinued.* The accounts would be classified according to this time table:In the case of revolving credit facilities like cash credit, the SMA sub-categories will be as follows:* In addition, the lenders shall submit a weekly report of instances of default by all borrowers (with aggregate exposure of Rs 50 million and above) by close of business on every Friday, or the preceding working day if Friday happens to be a holiday," RBI said in its circular.* Forwith exposure between Rs 1,500 crore and Rs 2,000 crore, thewill be applicable from January 1, 2020, while for loans upRs 1,500 crore will be announced in due course.* RBI also warned that any action byconceal the actual status of accounts or evergreening the stressed accounts, will be subjectedstringent supervisory/enforcement actions.(Inputs from PTI)