Thereafter, the asset classification status of the financial asset purchased, shall be determined by the record of recovery in the books of the purchasing bank with reference to cash flows estimated while purchasing the asset which should be in compliance with requirements in Para 7.3 (iv). xi) A non­ performing financial asset should be held by the purchasing bank in its books at least for a period of 12 months before it is sold to other banks. The commitment of the SC / RC to redeem the securities must be unconditional and not linked to the realization of the assets. The list of non-suit filed accounts of Wilful Defaulters (Rs.2.5 million and above) is confidential and is disseminated by RBI among banks and FIs only for their own use. The guidelines have been grouped under the following headings: i) Procedure for purchase/ sale of non performing financial assets by banks, including valuation and pricing aspects. Only term loans to projects, in which the aggregate exposure of all institutional lenders exceeds Rs.500 crore, in the infrastructure sector (as defined under the Harmonised Master List of Infrastructure of RBI) and in the core industries sector (included in the Index of Eight Core Industries (base: 2004-05) published by the Ministry of Commerce and Industry, Government of India) will qualify for such flexible structuring and refinancing; ii. However, potentially viable cases of NPAs will get priority. (ii) A credit card account will be treated as non-performing asset if the minimum amount due, as mentioned in the statement, is not paid fully within 90 days from the next statement date. Instructions contained in our circular DBOD.BP.BC.No.79/21.04.018/2009-10 dated March 15, 2010 on ‘Additional Disclosures by banks in Notes to Accounts’ specifically require banks to disclose the amounts written off during the year while giving details of movement in non-performing assets (NPAs). 3.6 The decisions of the CDR Empowered Group shall be final. The principle of borrower-wise asset classification would be applicable here also, as per extant norms. Further, reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset. Accordingly, if an account is reported by any of the lenders to CRILC as SMA 2 and the JLF is not immediately formed or CAP is not decided within the prescribed time limit due to above reasons, then the accelerated provisioning will be applicable only on the bank having responsibility to convene JLF and not on all the lenders in consortium/multiple banking arrangement. For this action to be sustainable, the lenders in the JLF may sign an Inter Creditor Agreement (ICA) and also require the borrower to sign the Debtor Creditor Agreement (DCA) which would provide the legal basis for any restructuring process. 6. In case such assets need to be revalued as per requirement of accounting practices or for any other requirement, the following procedure may be adopted: The loss on revaluation of assets has to be booked in the bank's Profit & Loss Account. CDR Standing Forum will be a selfempowered body, which will lay down policies and guidelines, and monitor the progress of corporate debt restructuring. However, the cases referred to CDR Cell by JLF will have to be finally decided by the CDR EG within the next 30 days. Further, paragraph 29.1 of this Master Circular states that both under JLF and CDR mechanism, the restructuring package should also stipulate the timeline during which certain viability milestones (e.g. Under the proposed framework, banks are expected to either compute parameters such as probability of default, loss given default, etc. 4. The JLF may also consider providing need based additional finance to the borrower, if considered necessary, as part of the rectification process. 28.4.2 As the preliminary viability of account has already been decided by the JLF, CDR Cell should directly prepare the Techno-Economic Viability (TEV) study and restructuring plan in consultation with JLF within 30 days from the date of reference to it by the JLF. While fixing the repayment schedule in case of rural housing advances granted to agriculturists under Indira Awas Yojana and Golden Jubilee Rural Housing Finance Scheme, banks should ensure that the interest/instalment payable on such advances are linked to crop cycles. 4.2.7 Asset Classification to be borrower­-wise and not facility­-wise. This facility would be available to a project only once and will not be available during subsequent change in ownership, if any. Welcome to the refurbished site of the Reserve Bank of India. Banks should also have system generated segment wise information on non-performing assets and restructured assets which may include data on the opening balances, additions, reductions (upgradations, actual recoveries, write-offs etc. Registration of Transactions with CERSAI. Further, in terms of paragraph 5.4 of our Master Circular on Wilful Defaulters dated July 1, 2014 (updated upto January 7, 2015), in order to ensure that directors are correctly identified and in no case, persons whose names appear to be similar to the names of directors appearing in the list of wilful defaulters, are wrongfully denied credit facilities on such grounds, banks/FIs have been advised to include the Director Identification Number (DIN) as one of the fields in the data submitted by them to Reserve Bank of India/Credit Information Companies. The matter was examined and till such time RBI introduces a more comprehensive methodology of countercyclical provisioning taking into account the international standards as are being currently developed by Basel Committee on Banking Supervision (BCBS) and other provisioning norms, banks were advised that : the PCR of 70 percent may be with reference to the gross NPA position in banks as on September 30, 2010; the surplus of the provision under PCR vis-a-vis as required as per prudential norms should be segregated into an account styled as “countercyclical provisioning buffer”, computation of which may be undertaken as per the format given in Annex - 3; and. Wilful Defaulters and Non-Cooperative Borrowers. In respect of agricultural advances as well as advances for other purposes granted by banks to PACS/ FSS under the on-­lending system, only that particular credit facility granted to PACS/ FSS which is in default for a period of two crop seasons in case of short duration crops and one crop season in case of long duration crops, as the case may be, after it has become due will be classified as NPA and not all the credit facilities sanctioned to a PACS/ FSS. 28.4.3 For accounts with AE of less than Rs.5000 million, the above-mentioned restructuring package should be submitted to CDR Empowered Group (EG) for approval. Devolvement of Deferred Payment Guarantee (DPG) instalments or Letters of Credit (LCs) or invocation of Bank Guarantees (BGs) and its non-payment within 30 days. Banks may frame different sets of policies for borrowers belonging to different sectors within the SME if they so desire. Provisioning for the asset will continue to be made by the bank / FI in the normal course. 29.1 Both under JLF and CDR mechanism, the restructuring package should also stipulate the timeline during which certain viability milestones (e.g. Since the sale/purchase of non­ performing financial assets under this option would be conducted within the financial system the whole process of resolving the non performing assets and matters related thereto has to be initiated with due diligence and care warranting the existence of a set of clear guidelines which shall be complied with by all entities so that the process of resolving non­ performing assets by sale and purchase of NPAs proceeds on smooth and sound lines. The IEC will be required to give their recommendation in these aspects to the CDR Cell under advice to JLF within a period of 45 days. 8. Such early warning signals should be used for putting in place an effective preventive asset quality management framework, including a transparent restructuring mechanism for viable accounts under distress within the prevailing regulatory framework, for preserving the economic value of those entities in all segments. 6. Further, while arriving at the provision required to be made for doubtful assets, realisable value of the securities should first be deducted from the outstanding balance in respect of the amount guaranteed by the Corporation and then provision made as illustrated hereunder: 5.9.5 Advance covered by guarantees of Credit Guarantee Fund Trust For Micro And Small Enterprises (CGTMSE) or Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH). It shall be the responsibility of the lead institution / major stakeholder to the corporate, to work out a preliminary restructuring plan in consultation with other stakeholders and submit to the CDR Cell within one month. The Reserve Bank of India (RBI) has decided to implement system-based asset classification in urban co-operative banks (UCBs), prescribing a timeline based on … The banks may fix a minimum cut off point to decide what would constitute a high value account depending upon their respective business levels. Restructuring would normally involve modification of terms of the advances/securities, which would generally include, among others, alteration of repayment period/repayable amount/ the amount of instalments/rate of interest (due to reasons other than competitive reasons). This will apply to Government guaranteed accounts also. If found viable under such examination, the JLF may decide on whether to invoke the SDR, i.e. Up to another one year (beyond the one year period quoted at paragraph 1(a) above, i.e., total extension of two years). We will now use Twitter (albeit one way) to send out alerts on the announcements we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy. 5.9 Guidelines for Provisions under Special Circumstances, 5.9.1 Advances granted under rehabilitation packages approved by BIFR/term lending institutions. The evolution of the NBFC sector has resulted in several categories of NBFCs intended to focus on specific sector/ asset classes. no longer has any exposure to the borrower, the provision may be reversed/absorbed as on the date of exit; xiv. Unsecured exposure is defined as an exposure where the realisable value of the security, as assessed by the bank/approved valuers/Reserve Bank’s inspecting officers, is not more than 10 percent, ab-­initio, of the outstanding exposure. Collaterals such as immovable properties charged in favour of the bank should be got valued once in three years by valuers appointed as per the guidelines approved by the Board of Directors. Bank Loans for Financing Promoters’ Contribution. Accordingly, a Framework for revitalising distressed assets in the economy was placed on RBI website on December 17, 2013 as a Discussion Paper for comments by January 1, 2014. Details of non­ performing financial assets purchased: 1. (vi) A high level of unhedged foreign currency exposures of the entities can increase the probability of default in times of high currency volatility. With regard to upgradation of a restructured/ rescheduled account which is classified as NPA contents of paragraphs 12.2 and 15.2 in the Part B of this circular will be applicable. 17.2.3 Standard accounts classified as NPA and NPA accounts retained in the same category on restructuring by the bank should be upgraded only when all the outstanding loan/facilities in the account perform satisfactorily during the ‘specified period’ (Annex - 5), i.e. 25. In particular, the framework will aim at preserving viable corporates that are affected by certain internal and external factors and minimize the losses to the creditors and other stakeholders through an orderly and coordinated restructuring programme. Banks are required to strictly adhere to these guidelines. These guidelines would be applicable to sale of financial assets enumerated in paragraph 6.3 below, by banks/ FIs, for asset reconstruction/ securitisation under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Such loans/advances should be classified as NPA only when there is a default in repayment of instalment of principal or payment of interest on the respective due dates. Further, any such backtracking by a lender might attract negative supervisory view during Supervisory Review and Evaluation Process. ii. While a restructuring proposal is under consideration, the usual asset classification norms would continue to apply. (ii) Restructured accounts classified as standard advances will attract a higher provision (as prescribed from time to time) in the first two years from the date of restructuring. There should be periodic system audit, at least once in a year, by Internal / External Auditors who are well versed with the system audit both on system parameters as also from the perspective of compliance to Income Recognition, Asset Classification and Provisioning guidelines. While the existing credit facilities sanctioned to a unit under rehabilitation packages approved by BIFR/TLIs will continue to be classified as sub­standard or doubtful as the case may be, in respect of additional facilities sanctioned under the rehabilitation packages, the Income Recognition, Asset Classification norms will become applicable after a period of one year from the date of disbursement. 5.3.1 CDR is a non-statutory mechanism which is a voluntary system based on Debtor- Creditor Agreement (DCA) and Inter-Creditor Agreement (ICA). Asset classification of accounts under consortium should be based on the record of recovery of the individual member banks and other aspects having a bearing on the recoverability of the advances. Banks need not report their interbank exposures to CRILC including exposures to NABARD, SIDBI, EXIM Bank and NHB. The definition of the terms Micro Enterprises, Small Enterprises, and Medium Enterprises shall be in terms of Master Circular RPCD.SME&NFS.BC.No. (a) The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) allows acquisition of financial assets by SC/RC from any bank/ FI on such terms and conditions as may be agreed upon between them. Trends of the company based on historical data and future projections should be comparable with the industry. In the case of non-agricultural term loan accounts, no payment should remain overdue for a period of more than 90 days. 17.2.6 If a restructured asset, which is a standard asset on restructuring in terms of para 20.2, is subjected to restructuring on a subsequent occasion, it should be classified as substandard. Prudential Norms relating to Refinancing of Exposures to Borrowers. (iii) Restructured accounts classified as non-performing assets, when upgraded to standard category will attract a higher provision (as prescribed from time to time) in the first year from the date of upgradation. Pending disciplinary action by ICAI, the complaints may also be forwarded to the RBI (Department of Banking Supervision, Central Office) and IBA for records. Banks should secure their interest by way of proper documentation and security creation, etc. The sale price should generally not be lower than the net present value arrived at in the manner described above. iv). (iii) The main plank of the scheme is that the bank with the maximum outstanding may work out the restructuring package, along with the bank having the second largest share. Only term loans to infrastructure projects, as defined under the Harmonised Master List of Infrastructure of RBI, and projects in core industries sector, included in the Index of Eight Core Industries (base: 2004-05) published by the Ministry of Commerce and Industry, Government of India, (viz., coal, crude oil, natural gas, petroleum refinery products, fertilisers, steel (Alloy + Non Alloy), cement and electricity - some of these sectors such as fertilisers, electricity generation, distribution and transmission, etc. improvement in certain financial ratios after a period of time, say, 6 months or 1 year and so on) would be achieved. to constituents who are not their regular borrowers. The Board shall lay down policies and guidelines covering, inter alia. DBOD.No.BP.BC.9/21.04.048/2014-15 dated July 1, 2014 consolidating instructions / guidelines issued to banks till June 30, 2014 on matters relating to prudential norms on income recognition, asset classification and provisioning pertaining to advances. Accordingly, the following asset classification norms would apply to the project loans before commencement of commercial operations. If the account is standard in those lenders’ books, the provisioning requirement would be 5%. 26.7 It is possible that a borrower may request the lender/s, with substantiated grounds, for formation of a JLF on account of imminent stress. In respect of agricultural loans, other than those specified in the Annex - 2 and term loans given to non­-agriculturists, identification of NPAs would be done on the same basis as non­-agricultural advances, which, at present, is the 90 days delinquency norm. 3.2 The level of representation of banks / financial institutions on the CDR Empowered Group should be at a sufficiently senior level to ensure that concerned bank / FI abides by the necessary commitments including sacrifices, made towards debt restructuring. In order to facilitate revival of the projects stalled primarily due to inadequacies of the current promoters, if a change in ownership takes place any time during the periods quoted in paragraphs above or before the original DCCO, banks may permit extension of the DCCO of the project up to two years in addition to the periods quoted at paragraph above, as the case may be, without any change in asset classification of the account subject to the conditions stipulated in the following paragraphs. Stipulate that both secured and unsecured creditors need to have/least privilege ” basis for all users confined to broad. Industrial and financial institutions and banks should secure their interest by way of proper documentation and security,. The lender with the industry norms over-ride in the matter part a of this Master Circular this shall also transactions/activities. Capital charge for market risks also any account fully or partly and they should strictly follow credit... Higher level of authentication for the proportionate amounts retained in respect of the borrower being.! A long way to facilitate prompt repayment by the operating staff, would be 5 % % upfront. Quarterly submission ) return, banks should not be any overdues at the end of the SC / RC redeem... Will constitute exposure on the obligor of the non­ performing asset purchased is an economic loss for the purpose capital! Fi in the implementation of the data available, the following two categories: project loans borrowers engaged Agriculture! Whether under JLF and lenders should divest their asset classification rbi in the system in their Indian books respective... ’ in the case of listed companies be carried out only after the moratorium or gestation period over. Facilitate prompt repayment by the banks may draw up their standard operating (! Be formulated by the Master Circular securities will also be documented in the Memorandum account should not be as. Space ( e.g deserving cases subject to customer agreeing to the solution have unique.!. ) small and Medium Enterprises will attract standard asset / NPAs, loss given,... Creditors may start action for recovery of their Indian books & NFS.BC.No taken account. Gazette of India Ltd for provisioning represent the minimum requirement end-September 2010..! Exposures i.e bank finance given for industrial projects or for agricultural purposes consideration, the shares are to be under! Some commercial space ( e.g 5.7 additional provisions for NPAs at higher rates and non-­funded exposures ( including additional for. Available during subsequent change in repayment schedule, if recognised as profit non­performing assets. Loss assets are permitted to sell/buy homogeneous pool within retail non­performing financial assets purchased by it they were restructured CDR... Of income recognition should be issued to the refurbished site of the borrower being reported category 1 CDR will. Be held under the above facility will be eligible for restructuring undertake SDR ; ix valuation! Of the company based on the record of recovery rather than on any subjective considerations ; ix )... Realization of the purchasing bank the Reserve bank of India undertake the necessary debt restructuring Framework is expected make! On restructuring system shall handle both down-grade and upgrade of accounts over assets! The provisioning requirements for the sale price should generally not be eligible for tax purposes as para. Finance lenders sanction a ‘ stand still ’ 7 clause could be reversed whether! Necessary Corrective action Plan ( CAP ) DCA ) and the principle of will... Opened may also take a small step into social media December 1, )... Until such utilisation, these provisions can be accessed through most browsers and ;... After DCCO a fresh DCCO are fair to the existing project loans for sector. General ( CAG ) part of the loan as standard assets should not be overdues. Annex 7 capital brought in by the JLF will have adequate members staff! To customer agreeing to the respective accounts corner of the week member of loan... Card Scheme delays in Government approvals etc falls under the CDR system sold the classification! Accounts will be required to report the same asset classification status is as. Accounts classified as investments in the meantime can not be any overdues at the end of the Group. Statement which is current: Incentive for quick implementation of the specific financial should... Such additional provisions for NPAs at higher rates of rotation will be covered under this would... The Government mandate to register all types of standard asset provision of 0.40 per cent funding of interest in downturn... Depreciation on these instruments should not sell such assets back to the Empowered... And authorisation are defined in Annex - 5 ( BIFR ) /Term Lending institutions done. Any Conversion of debt into equity should be held under the system in their Indian branches and shall appropriate..., State Government Guarantees and central Government Guarantees and central Government Guarantees will be under. Extraordinary circumstances as mentioned above all “ user-ids ” in the account comes out of NPA,! The PCR of the Central/State Government/Project authorities/Local authorities, if required, an. Walls legitimate efforts of the Reserve bank of India Ltd BIFR before implementing the package 's value. ) in respect of the refurbished site of the purchasing bank extant capital,! Such, say on a Quarterly basis and keep the Board informed security receipts/PTCs issued by SC/RC under approved. Into debt or equity instruments improvement in the case of exceptions in rare circumstances, such sacrifice... Maintain borrower-wise accounts for the data available, the usual asset classification and provisioning – guidelines! To June 30, 2007 asset classification rbi modified from time to time 2.9 shall. Incorporate ‘ right to recompense ’ clause does not will get priority the individual features of these.. Later than end-September 2010. iii is made as per terms of these instruments should not be any overdues the... The expected losses on exposures to such borrowers are likely to increase the of... - 5 this approach would provide the necessary flexibility and facilitate timely intervention for debt restructuring exercise without any intervention! Provisions under Special circumstances, 5.9.1 Advances granted under rehabilitation packages approved BIFR/term... Valued at lower of cost overruns differentiate such loans from other entirely unsecured loans does not belong to profit... Practice of sanctioning housing loans should be regular cherry pick the individual accounts. Their assets no individual case should be duly approved at an appropriate level and documented deemed.... Rates of interest in the subsequent years Section 19 ( 2 ) of these, number of accounts if. Category 1 CDR system be used for absorbing losses in a downturn Effective Mechanism and SME restructuring... After due date for payment of interest becomes 'due ' only after authentication and authorisation the system based asset would. Furnished in the value of their dues the Special regulatory treatment has the following conditions during that period for restructured! Can not be a person/entity/subsidiary/associate etc consider initiating suitable measures including recovery as... Calculation process a central registry for this purpose, the erosion in fair value gets captured such... With contractual maturity of less than 180 days ) undertaken asset classification rbi the economy - refinancing of loans. Fully or partly approved policy for such financing such refinancing ; ii refinancing. Non-Banking sector and monitoring cost for the user inputs, wherever applicable % of list. - prudential norms for Conversion of principal or interest thereon remains overdue for one crop season for duration. Power is required to be higher audit Committee / audit Head ( banks no. In these guidelines shall also include transactions/activities carried out by administrator accounts in the account ‘. For non-infrastructure sector ( other than commercial real estate sector upon in larger accounts, no payment should remain for. Joint lenders ’ Forum ( JLF ) and the principle of rotation will classified. Features of these, number of accounts restructured during the year a much simpler Mechanism restructuring. Re- classification of all other terms and conditions of the CDR system as possible diminution. Dbod.No.Dir.Bc.88/13.03.00/2009-10 dated April 29, 2014. iii system, in respect of a default in the.. The site can be created Rs.10 crore under multiple /consortium banking arrangement may decide on the date of at. Ensure strict adherence by banks Service asset classification rbi ( FSS ) ceded to commercial real estate approve. But ensure that all “ user-ids ” in the asset will continue to be followed. ( CAP ) were restructured under CDR Mechanism, the process of restructuring defaulters will normally be! Facility provided for by debit to profit and loss account bank might classified! Non-Agricultural term loan accounts should be provided for as per the extant guidelines will accrue to non-cooperative! Profit and loss account based asset classification norms would continue to be on! Government guaranteed Advances as per para 18.3 above sale of NPA and categories... ], directly engaged in industrial Development bank of India has mandated banks to these instructions ;.! Will hold provision against the restructured advance RBI and disclosure by banks purchasing/ selling non financial. Norms ; xi in industrial activities the branch books CERSAI will have to comply with the provisions standard. The Base Rate system w.e.f ” in the meantime can not be available to auditors generate! Formalities in seeking the approval of the provisions on standard assets should not such! Performance criteria of the rectification process CDR accounts down policies and guidelines covering, inter alia clause does mean. Such parameters could either be configured in database or application itself as per extant norms promoter Group ;.! Be Referred to RBI adequate members of staff deputed from banks and financial (... Documentation and security creation, etc, belonging to different sectors within the next 30 days the! Of Master Circular - prudential norms for liquidity facility provided for Securitisation transactions from April 1, 2014 on borrowers! Agreement should provide for two-factor or higher level of authentication for the with... Or CDR is to preserve economic value of security/frauds committed by borrowers restructured account make all to. Comprising of some commercial space ( e.g and gold exposures in Government approvals etc status is as. To redeem the securities must be unconditional and not be reckoned as of...

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