The NewsYet – RBI issues revised circular on stressed loans: Here are all the details – Economic Times
The NewsYet –
(RBI) today issued revised circular on resolution of stressed loans. The Supreme Court had on April 2 struck down
‘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 newRBI 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
* Changing its earlier norm of 100 percent approval from creditors, RBI has now allowed approval of 75 percent of creditors for the resolution.
* Mandatory to sign inter-creditor agreement (ICA) by all lenders, which will provide for a majority decision making criteria.
* Lenders must resolve over Rs 2000 crore NPA account within 180 days.
* Lenders to provide more provisioning for delay in resolution plan.
* The joint lenders’ forum (JLF) as mandatory institutional mechanism for resolution also stands discontinued.
* The accounts would be classified according to this time table:
|SMA Sub-categories||Basis for classification – Principal or interest payment or any other amount wholly or partly overdue between|
In the case of revolving credit facilities like cash credit, the SMA sub-categories will be as follows:
|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:|
* 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.