New bad loan norm to add Rs 2L cr stress on banks

Debt heavy corporates and highly leveraged borrowers need to be vigilant | PTI

Debt heavy corporates and highly leveraged borrowers need to be vigilant | PTI

The Reserve Bank of India (RBI) has turned up the heat on banks and companies defaulting on loans by coming out with a leaner framework for the resolution of non-performing assets (NPA).

Total deposit of the bank stood at Rs 2.11 lakh crore by the end of December 2017 and gross credit was Rs 1.62 lakh crore.

Classification of SMA would depend on the number of days (1- 90) for which principal or interest have remained overdue.

With new norms, all regulatory guidelines pertaining to restructuring of loans under different schemes of the central bank such as strategic debt restricting (SDR), 5/25 refinancing, and Scheme for Sustainable Structuring of Stressed Assets (S4A), among others, stand withdrawn with immediate effect, RBI said.

Mumbai: Just when many Indian banks thought the worst of their bad debt woes were behind them, new central bank rules are stoking fears that the worst of the soured-loans buildup is yet to come.

In case of accounts where the lenders have aggregate exposure of Rs 2,000 crore or more on after March 1, 2018, which will be the reference date, including accounts where resolution may have been initiated under any of the existing schemes, the resolution plan has to be implemented in 180 days from the reference date.

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The Reserve Bank of India has tightened and streamlined its requirements in regard to stressed assets and told banks to make weekly disclosures.

The Joint Lenders Forum (JLF) as an institutional mechanism for resolution of stressed accounts has also been discontinued. "The resolution plan (RP) may involve any actions, plans, reorganization 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".

This circular comes at a time when banks are finalizing resolution plans for 11 of the 12 accounts in RBI's first defaulter list under the insolvency and bankruptcy code. All borrower entities in default with an exposure of more than Rs. 5 crores have to be reported on weekly basis. They are also not sure whether the new rules require them to get external ratings for all restructured loans.

Banks that do not adhere to the timelines will face action, the central bank warned in its notification. "It is a more transparent system for resolution", he said", he said here.

"Lenders shall continue to pursue such cases as per the earlier instructions".

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