Key highlights of RBI’s revised guidelines to deal with NPAs

The Reserve Bank of India has released a revised framework for expeditious resolution of non-performing assets (NPAs). In a notification issued late on Monday, the RBI said the new guidelines have specified a framework for early identification and reporting of banks' stressed assets. 

 

The Central bank also abolished half a dozen existing loan-restructuring mechanisms.

 

"In view of the enactment of the Insolvency and Bankruptcy Code (IBC), 2016, it has been decided to substitute the existing guidelines with a harmonised and simplified generic framework for resolution of stressed assets," the RBI notification said.

 

 

1. Under the new guidelines, banks will be required to identify initial stress in loan accounts, immediately on default, by classifying stressed assets as special mention accounts (SMA) depending upon the period of default. 

 

2. All lenders will be required to put in place Board-approved policies for resolution of stressed assets, including timelines for resolution.

 

3. As soon as there is a default in the borrower entity's account with any lender, all lenders - singly or jointly - shall initiate steps to cure the default.

 

4. The resolution plan (RP) may involve any actions/plans/reorganisation including, but not limited to, regularisation of the account by payment of all over dues by the borrower entity, sale of the exposures to other entities/investors, change in ownership, or restructuring.

 

5. If a resolution plan in respect of large accounts is not implemented as per the timelines specified, lenders will be required to file insolvency applications, singly or jointly, under the IBC within 15 days from the expiry of the specified timeline. 

 

6. All lenders will be required to submit a Central Repository of Information on Large Credits (CRILC) on all borrower entities in default with aggregate exposure of Rs 5 crore and above. The CRILC-Main Report is to be submitted on a monthly basis effective April 1, 2018.

 

7. Lenders shall report to CRILC all borrower entities in default, on a weekly basis, at the close of business on every Friday, or the preceding working day if Friday happens to be a holiday. The first such weekly report shall be submitted for the week ending February 23.

 

8. The RBI has also decided to do away with the Joint Lenders' Forum (JLF) as an institutional mechanism for resolution of stressed accounts.

 

9. All accounts, including those where any of the schemes have been invoked but not yet implemented, will be governed by the revised framework.