RBI Overhauls Guidelines for cleanup of Loan Defaults

Mumbai Feb 15: In a move to ensure that NPA crisis is solved in a timebound manner the Reserve Bank of India RBI had overhauled the existing framework of dealing with NPA and stressed assets.

RBI in a Notification has said that "it is substituting the existing guidelines with a harmonised and simplified generic framework for asset resolution in view of the enactment of the Insolvency and Bankruptcy Code (IBC). The RBI has withdrawn existing norms such as Corporate Debt Restructuring Scheme, Joint Lenders Forum (JLF) and Strategic Debt Restructuring Scheme (SDR)."

The apex bank has also advised that "lenders must identify stress in loan accounts immediately on default and classifying stressed assets as special mention accounts (SMA). And once a lender identifies a default, all lenders singly or jointly will be initiating steps to cure the default."

The RBI has set a 180-day timeline for stressed asset resolution for all lenders for the accounts having exposure more than Rs 20 billion (Rs 2000 crore) beginning March 1, 2018 and if lenders fail to resolve the stressed account within the 180-day deadline, they will be required to file insolvency application, singly or jointly, under the IBC within 15 days of the deadline.

Finally, the central bank has said that it would take stringent action against banks if they fail to conceal the actual status of the accounts.