In wake of the ordinance promulgated on Friday empowering the Reserve Bank of India (RBI) to tackle bad loans, the central bank revised the guidelines in this regard and warned banks of monetary penalty if they fail to meet the timelines.
"The Framework aims at early identification of stressed assets and timely implementation of a corrective action plan (CAP) to preserve the economic value of stressed assets. In order to ensure that the CAP is finalised and formulated in an expeditious manner, the Framework specifies various timelines within which lenders have to decide and implement the CAP," said an RBI notification.
"Any non-adherence to these instructions and timelines specified under the Framework shall attract monetary penalties on the concerned banks under the provisions of the Banking Regulation Act 1949," it added.
The Framework also contains disincentives, in the form of asset classification and accelerated provisioning where lenders fail to adhere to its provisions. Despite this, delays have been observed in finalising and implementation of the CAP, leading to delays in resolution of stressed assets in the banking system, it added.
To facilitate timely decision making, it has been decided that, henceforth, the decisions agreed upon by a minimum of 60 per cent of creditors by value and 50 per cent of creditors by number in the Joint Lenders' Forum would be considered as the basis for deciding the CAP, and will be binding on all lenders, subject to the exit (by substitution) option available in the Framework, RBI said.
Lenders shall ensure that their representatives in the JLF are equipped with appropriate mandates, and that decisions taken at the JLF are implemented by the lenders within the timelines, it noted.
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