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NPA resolution framework
February 20 , 2018
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- The Reserve Bank of India (RBI) has tightened norms for bad loan resolution by setting timelines for resolving large NPAs and withdrawing existing debt restructuring schemes such as SDR and S4A.
- For this reason, RBI has withdrawn the
- Corporate Debt Restructuring Scheme (CDR),
- Joint Lenders’ Forum (JLF),
- Strategic Debt Restructuring Scheme (SDR),
- Sustainable Structuring of Stressed Assets (S4A),
and placed them under the new framework.
- According to the new rules,
- Banks have to start insolvency proceedings against accounts with Rs. 2,000 crore or more loan default if a resolution plan is not implemented within 180 days of the initial occurrence of default.
- Failing which the account would be referred to the bankruptcy courts.
- Further, banks have to report defaults to the Central Repository of Information on Large Credits (CRILC) on a weekly basis in the case of borrowers with more than Rs.5 crore of loan.
- As per the revised guidelines, Banks will now have to begin the resolution process on an account as soon as it is classified as a Separately Managed Account (SMA-0).
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