RBI rolls out new stressed assets framework to tackle bad loan problem

The Reserve Bank of India (RBI) scrapped numerous loan restructuring programmes, asking banks to immediately identify defaults and make disclosures every Friday to the RBI credit registry, starting from February 23.

The apex bank has also warned banks of monetary penalties and higher provisions if they are found to have violated the stringent new norms.

According to moneycontrol, the central bank has withdrawn the existing resolution frameworks and the Joint Lenders' Forum (JLF) with immediate effect.

"The extant instructions on resolution of stressed assets such as Framework for Revitalising Distressed Assets, Corporate Debt Restructuring Scheme, Flexible Structuring of Existing Long Term Project Loans, Strategic Debt Restructuring Scheme (SDR), Change in Ownership outside SDR, and Scheme for Sustainable Structuring of Stressed Assets (S4A) stand withdrawn with immediate effect," moneycontrol quoted the bank as saying.

Further, lenders shall identify incipient stress in loan accounts, immediately on default, by classifying stressed assets As Special Mention Accounts (SMA).

The SMA sub-categories are classified as principal or interest payment or any other amount wholly or partly overdue between 1-30 days as SMA-0, between 31-60 days as SMA-1 and between 61-90 days as SMA-2.

"Lenders shall report credit information, including classification of an account as SMA to Central Repository of Information on Large Credits (CRILC) on all borrower entities having aggregate exposure of Rs 50 million (Rs 5 crore) and above with them," the bank said.

The CRILC-Main Report will be required to be submitted on a monthly basis, from April 1.

In addition, the lenders shall report to CRILC, all borrower entities in default (with aggregate exposure of Rs 5 crore and above), 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.

However, in respect of accounts with aggregate exposure of the lenders at Rs 2,000 crore and above, on or after March 1, including accounts where resolution may have been initiated under any of the existing schemes as well as accounts classified as restructured standard assets which are currently in respective specified periods, the resolution professional (RP) shall implement as per following timelines.

- If in default as on the reference date, then 180 days from the reference date.

- If in default after the reference date, then 180 days from the date of first such default.

RBI has asked all lenders to put in place board-approved policies for resolution of stressed assets under this framework, including the timelines for resolution.

"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," RBI said.