__________________RESERVE BANK OF INDIA _________________
www.rbi.org.in
RBI/2014-15/74
DBOD.No.BP.BC.9/21.04.048/2014-15 July 1, 2014
All Commercial Banks (excluding RRBs)
Dear Sir
Master Circular - Prudential norms on Income Recognition, Asset Classification and
Provisioning pertaining to Advances
Please refer to the Master Circular No. DBOD.No.BP.BC.1/21.04.048/2013-14 dated July 1,
2013 consolidating instructions / guidelines issued to banks till June 30, 2013 on matters
relating to prudential norms on income recognition, asset classification and provisioning
pertaining to advances.
2. The Master Circular has now been suitably updated by incorporating instructions issued
up to June 30, 2014 and is attached. It has also been placed on the RBI web-site
(http://www.rbi.org.in). We advise that this revised Master Circular consolidates the
instructions contained in the circulars listed in the Annex 7.
Yours faithfully
(Rajesh Verma)
Chief General Manager-in-Charge
Encl.: As above
,
, 12 , , 400001
Department of Banking Operations and Development, Central Office, 12th Floor, Central Office, Shahid Bhagat Singh Marg, Mumbai - 400001
Tel No: 22661602 Fax No: 22705691 Email ID: cgmicdbodco@rbi.org.in
,
MASTER CIRCULAR - PRUDENTIAL NORMS ON INCOME RECOGNITION, ASSET
CLASSIFICATION AND PROVISIONING PERTAINING TO ADVANCES
TABLE OF CONTENTS
Page
Para No. Particulars
No.
PART A
GENERAL
1 1
DEFINITIONS
2 1
2.1 Nonperforming assets 1
2.2 `Out of Order\' status 2
2.3 `Overdue\' 2
INCOME RECOGNITION
3 2
3.1 Income recognition policy 2
3.2 Reversal of income 3
3.3 Appropriation of recovery in NPAs 3
3.4 Interest Application 3
3.5 Computation of NPA levels 4
ASSET CLASSIFICATION
4 4
4.1 Categories of NPAs 4
4.1.1 Substandard Assets 4
4.1.2 Doubtful Assets 4
4.1.3 Loss Assets 4
4.2 Guidelines for classification of assets 4
Availability of security / net worth of borrower/
4.2.3 5
guarantor
4.2.4 Accounts with temporary deficiencies 5
4.2.5 Upgradation of loan accounts classified as NPAs 6
Accounts regularised near about the balance sheet
4.2.6 6
date
Asset Classification to be borrower wise and not
4.2.7 6
facility-wise
4.2.8 Advances under consortium arrangements 8
4.2.9 Accounts where there is erosion in the value of security
4.2.10 Advances to PACS/FSS ceded to Commercial Banks 9
4.2.11 Advances against Term Deposits, NSCs, KVP/IVP, etc 9
4.2.12 Loans with moratorium for payment of interest 9
4.2.13 Agricultural advances 9
4.2.14 Government guaranteed advances 10
4.2.15 Projects under implementation 10
4.2.16 Takeout Finance 18
4.2.17 Post-shipment Supplier\'s Credit 18
4.2.18 Export Project Finance 18
Advances under rehabilitation approved by BIFR/ TLI
4.2.19 19
Transactions Involving Transfer of Assets through
4.2.20 Direct Assignment of Cash Flows and the Underlying 19
Securities
4.2.21 Credit Card Accounts 21
PROVISIONING NORMS
5 21
5.1 General 21
5.2 Loss assets 21
5.3 Doubtful assets 22
5.4 Substandard assets 22
5.5 Standard assets 23
5.6 Floating provisions 25
5.7 Provisions for advances at higher than prescribed rates 26
5.8 Provisions on Leased Assets 26
5.9 Guidelines for Provisions under Special Circumstances 27
5.10 Provisioning Coverage Ratio 32
GUIDELINES ON SALE OF FINANCIAL ASSETS TO
SECURITISATION COMPANY (SC)/
6 33
RECONSTRUCTION COMPANY (RC)
6.1 Scope 33
6.2 Structure 33
6.3 Financial assets which can be sold 34
Procedure for sale of banks\'/ FIs\' financial assets to
6.4 34
SC/ RC, including valuation and pricing aspects
Prudential norms for banks/ FIs for the sale
6.5 36
transactions
6.6 Disclosure Requirements 38
6.7 Related Issues 38
GUIDELINES ON PURCHASE/SALE OF NON
7 PERFORMING ASSETS 38
7.1 Scope 39
7.2 Structure 39
Procedure for purchase/ sale of non performing
7.3 39
financial assets, including valuation and pricing aspects
Prudential norms for banks for the purchase/ sale
7.4 41
transactions
7.5 Disclosure Requirements 43
WRITING OFF OF NPAs
8 43
NPA Management Requirement of an Effective
9 44
Mechanism and Granular Data
PART B
Prudential guidelines on Restructuring of Advances
10 Background on Restructuring of advances 45
11 Key Concepts 46
General Principles and Prudential Norms for
12 46
Restructured Advances
12.1 Eligibility criteria for restructuring of advances 46
12.2 Asset classification norms 48
12.3 Income recognition norms 49
12.4 Provisioning norms 49
12.5 Risk Weights 52
Prudential Norms for Conversion of Principal into
13 52
Debt / Equity
13.1 Asset classification norms 52
13.2 Income recognition norms 53
13.3 Valuation and provisioning norms 53
Prudential Norms for Conversion of Unpaid Interest
14 into \'Funded Interest Term Loan\' (FITL), Debt or 53
Equity Instruments
14.1 Asset classification norms 53
14.2 Income recognition norms 53
14.3 Valuation and provisioning norms 54
Special Regulatory Treatment for Asset
15 54
Classification
15.1 Applicability of special regulatory treatment 54
15.2 Elements of special regulatory framework 55
16 Miscellaneous 57
17 Disclosures 58
18 Objective of Restructuring 59
Appendix to Part B 60
Part C
Early Recognition of Financial Distress, Prompt Steps for Resolution and Fair
Recovery for Lenders: Framework for Revitalising Distressed Assets in the
Economy
Part C1
Framework for Revitalising Distressed Assets in the Economy - Guidelines on
Joint Lenders\' Forum (JLF) and Corrective Action Plan (CAP)
19 Introduction 61
Guidelines on Joint Lenders\' Forum (JLF) and
20 61
Corrective Action Plan (CAP)
21 Formation of Joint Lenders\' Forum 61
22 Corrective Action by JLF 63
23 Restructuring Process 64
Other Issues / Conditions Relating to Restructuring
24 67
by JLF / CDR Cell
Prudential Norms on Asset Classification and
25 69
Provisioning
26 Accelerated Provisioning 69
27 Wilful Defaulters and Non-Cooperative Borrowers 71
28 Dissemination of Information 72
29 Effective Date of Implementation of the Framework 72
Appendix to Part C-1 73
Part C-2
C-2: Framework for Revitalising Distressed Assets in the Economy -
Refinancing of Project Loans, Sale of NPA and Other Regulatory Measures
30 Introduction 74
31 Refinancing of Project Loans 74
32 Bank Loans for Financing Promoters\' Contribution 75
33 Credit Risk Management 75
34 Reinforcement of Regulatory Instructions 77
35 Registration of Transactions with CERSAI 77
36 Board Oversight 78
Appendix to Part C-2 79
ANNEXES
Details of Gross Advances, Gross NPAs, Net Advances and Net
Annex -1 80
NPA
Annex -2 List of relevant direct agricultural advances 82
Annex -3 Format for Computing Provisioning Coverage Ratio (PCR) 83
Organisational Framework for Restructuring of Advances Under
Annex -4 85
Consortium / Multiple Banking / Syndication Arrangements
Annex -5 Key Concepts in Restructuring 97
Annex -6 Particulars of Accounts Restructured 100
Annex - 7 List of circulars consolidated by the Master Circular 106
Master Circular - Prudential Norms on Income Recognition,
Asset Classification and Provisioning pertaining to Advances
Part A
1. GENERAL
1.1 In line with the international practices and as per the recommendations made by the
Committee on the Financial System (Chairman Shri M. Narasimham), the Reserve Bank of
India has introduced, in a phased manner, prudential norms for income recognition, asset
classification and provisioning for the advances portfolio of the banks so as to move
towards greater consistency and transparency in the published accounts.
1.2 The policy of income recognition should be objective and based on record of
recovery rather than on any subjective considerations. Likewise, the classification of
assets of banks has to be done on the basis of objective criteria which would ensure a
uniform and consistent application of the norms. Also, the provisioning should be made on
the basis of the classification of assets based on the period for which the asset
has remained non-performing and the availability of security and the realisable value thereof.
1.3 Banks are urged to ensure that while granting loans and advances, realistic
repayment schedules may be fixed on the basis of cash flows with borrowers. This would go
a long way to facilitate prompt repayment by the borrowers and thus improve the record of
recovery in advances.
2. DEFINITIONS
2.1 Non performing Assets
2.1.1 An asset, including a leased asset, becomes non performing when it ceases
to generate income for the bank.
2.1.2 A non performing asset (NPA) is a loan or an advance where;
i. interest and/ or instalment of principal remain overdue for a period of more
than 90 days in respect of a term loan,
ii. the account remains `out of order\' as indicated at paragraph 2.2 below, in
respect of an Overdraft/Cash Credit (OD/CC),
iii. the bill remains overdue for a period of more than 90 days in the case of
bills purchased and discounted,
iv. the instalment of principal or interest thereon remains overdue for two
crop seasons for short duration crops,
v. the instalment of principal or interest thereon remains overdue for one
crop season for long duration crops,
vi. the amount of liquidity facility remains outstanding for more than 90 days,
in respect of a securitisation transaction undertaken in terms of guidelines
on securitisation dated February 1, 2006.
vii. in respect of derivative transactions, the overdue receivables representing
positive mark-to-market value of a derivative contract, if these remain
unpaid for a period of 90 days from the specified due date for payment.
2.1.3 In case of interest payments, banks should, classify an account as NPA
only if the interest due and charged during any quarter is not serviced fully within 90
days from the end of the quarter.
2.1.4 In addition, an account may also be classified as NPA in terms of paragraph
4.2.4 of this Master Circular.
2.2 `Out of Order\' status
An account should be treated as \'out of order\' if the outstanding balance remains
continuously in excess of the sanctioned limit/drawing power. In cases where the
outstanding balance in the principal operating account is less than the sanctioned
limit/drawing power, but there are no credits continuously for 90 days as on the date of
Balance Sheet or credits are not enough to cover the interest debited during the same
period, these accounts should be treated as \'out of order\'.
2.3 `Overdue\'
Any amount due to the bank under any credit facility is `overdue\' if it is not paid on the due
date fixed by the bank.
3. INCOME RECOGNITION
3.1 Income Recognition Policy
3.1.1 The policy of income recognition has to be objective and based on the record
of recovery. Internationally income from non-performing assets (NPA) is not
recognised on accrual basis but is booked as income only when it is actually
received. Therefore, the banks should not charge and take to income account
interest on any NPA. This will apply to Government guaranteed accounts also.
3.1.2 However, interest on advances against Term Deposits, National Savings
Certificates (NSCs), Indira Vikas Patras (IVPs), Kisan Vikas Patras (KVPs) and Life
policies may be taken to income account on the due date, provided adequate margin
is available in the accounts.
3.1.3 Fees and commissions earned by the banks as a result of renegotiations or
2
DBOD-MC On IRAC Norms - 2014
rescheduling of outstanding debts should be recognised on an accrual basis over the
period of time covered by the renegotiated or rescheduled extension of credit.
3.2 Reversal of income
3.2.1 If any advance, including bills purchased and discounted, becomes NPA, the
entire interest accrued and credited to income account in the past periods, should be
reversed if the same is not realised. This will apply to Government guaranteed
accounts also.
3.2.2 In respect of NPAs, fees, commission and similar income that have accrued
should cease to accrue in the current period and should be reversed with respect to
past periods, if uncollected.
3.2.3 Leased Assets
The finance charge component of finance income [as defined in `AS 19 Leases\'
issued by the Council of the Institute of Chartered Accountants of India (ICAI)] on the
leased asset which has accrued and was credited to income account before the
asset became nonperforming, and remaining unrealised, should be reversed or
provided for in the current accounting period.
3.3 Appropriation of recovery in NPAs
3.3.1 Interest realised on NPAs may be taken to income account provided the
credits in the accounts towards interest are not out of fresh/ additional credit facilities
sanctioned to the borrower concerned.
3.3.2 In the absence of a clear agreement between the bank and the borrower for
the purpose of appropriation of recoveries in NPAs (i.e. towards principal or interest
due), banks should adopt an accounting principle and exercise the right of
appropriation of recoveries in a uniform and consistent manner.
3.4 Interest Application
On an account turning NPA, banks should reverse the interest already charged and not
collected by debiting Profit and Loss account, and stop further application of interest.
However, banks may continue to record such accrued interest in a Memorandum account in
their books. For the purpose of computing Gross Advances, interest recorded in the
Memorandum account should not be taken into account.
3.5 Computation of NPA levels
3
DBOD-MC On IRAC Norms - 2014
Banks are advised to compute their Gross Advances, Net Advances, Gross NPAs and Net
NPAs, as per the format in Annex -1.
4. ASSET CLASSIFICATION
4.1 Categories of NPAs
Banks are required to classify nonperforming assets further into the following three
categories based on the period for which the asset has remained nonperforming and the
realisability of the dues:
i. Substandard Assets
ii. Doubtful Assets
iii. Loss Assets
4.1.1 Substandard Assets
With effect from March 31, 2005, a substandard asset would be one, which has
remained NPA for a period less than or equal to 12 months. Such an asset will have
well defined credit weaknesses that jeopardise the liquidation of the debt and are
characterised by the distinct possibility that the banks will sustain some loss, if
deficiencies are not corrected.
4.1.2 Doubtful Assets
With effect from March 31, 2005, an asset would be classified as doubtful if it has
remained in the substandard category for a period of 12 months. A loan classified
as doubtful has all the weaknesses inherent in assets that were classified as sub-
standard, with the added characteristic that the weaknesses make collection or
liquidation in full, on the basis of currently known facts, conditions and values
highly questionable and improbable.
4.1.3 Loss Assets
A loss asset is one where loss has been identified by the bank or internal or external
auditors or the RBI inspection but the amount has not been written off wholly. In other
words, such an asset is considered uncollectible and of such little value that its
continuance as a bankable asset is not warranted although there may be some
salvage or recovery value.
4.2 Guidelines for classification of assets
4.2.1 Broadly speaking, classification of assets into above categories should be
done taking into account the degree of well-defined credit weaknesses and the extent
of dependence on collateral security for realisation of dues.
4
DBOD-MC On IRAC Norms - 2014
4.2.2 Banks should establish appropriate internal systems (including technology
enabled processes) for proper and timely identification of NPAs, especially in respect
of high value accounts. The banks may fix a minimum cut off point to decide what
would constitute a high value account depending upon their respective
business levels. The cutoff point should be valid for the entire accounting year.
Responsibility and validation levels for ensuring proper asset classification may be
fixed by the banks. The system should ensure that doubts in asset classification due
to any reason are settled through specified internal channels within one month from
the date on which the account would have been classified as NPA as per extant
guidelines.
4.2.3 Availability of security / net worth of borrower/ guarantor
The availability of security or net worth of borrower/ guarantor should not be taken
into account for the purpose of treating an advance as NPA or otherwise, except to
the extent provided in Para 4.2.9.
4.2.4 Accounts with temporary deficiencies
The classification of an asset as NPA should be based on the record of recovery.
Bank should not classify an advance account as NPA merely due to the existence of
some deficiencies which are temporary in nature such as non-availability of adequate
drawing power based on the latest available stock statement, balance outstanding
exceeding the limit temporarily, non-submission of stock statements and non-
renewal of the limits on the due date, etc. In the matter of classification of
accounts with such deficiencies banks may follow the following guidelines:
i) Banks should ensure that drawings in the working capital accounts are
covered by the adequacy of current assets, since current assets are first
appropriated in times of distress. Drawing power is required to be arrived at
based on the stock statement which is current. However, considering the
difficulties of large borrowers, stock statements relied upon by the banks for
determining drawing power should not be older than three months. The
outstanding in the account based on drawing power calculated from
stock statements older than three months, would be deemed as irregular.
A working capital borrowal account will become NPA if such irregular
drawings are permitted in the account for a continuous period of 90 days even
though the unit may be working or the borrower\'s financial position
is satisfactory.
ii) Regular and ad hoc credit limits need to be reviewed/ regularised not
later than three months from the due date/date of ad hoc sanction. In case of
constraints such as non-availability of financial statements and other data
from the borrowers, the branch should furnish evidence to show that renewal/
review of credit limits is already on and would be completed soon. In
5
DBOD-MC On IRAC Norms - 2014
any case, delay beyond six months is not considered desirable as a general
discipline. Hence, an account where the regular/ ad hoc credit limits have not
been reviewed/ renewed within 180 days from the due date/ date of ad
hoc sanction will be treated as NPA.
4.2.5 Upgradation of loan accounts classified as NPAs
If arrears of interest and principal are paid by the borrower in the case of loan
accounts classified as NPAs, the account should no longer be treated as non-
performing and may be classified as `standard\' accounts. With regard to upgradation
of a restructured/ rescheduled account which is classified as NPA contents of
paragraphs 12.2 and 15.2 in the Part B of this circular will be applicable.
4.2.6 Accounts regularised near about the balance sheet date
The asset classification of borrowal accounts where a solitary or a few credits are
recorded before the balance sheet date should be handled with care and without
scope for subjectivity. Where the account indicates inherent weakness on the basis
of the data available, the account should be deemed as a NPA. In other genuine
cases, the banks must furnish satisfactory evidence to the Statutory
Auditors/Inspecting Officers about the manner of regularisation of the account to
eliminate doubts on their performing status.
4.2.7 Asset Classification to be borrower-wise and not facility-wise
i) It is difficult to envisage a situation when only one facility to a
borrower/one investment in any of the securities issued by the borrower
becomes a problem credit/investment and not others. Therefore, all the
facilities granted by a bank to a borrower and investment in all the
securities issued by the borrower will have to be treated as NPA/NPI and not
the particular facility/investment or part thereof which has become irregular.
ii) If the debits arising out of devolvement of letters of credit or invoked
guarantees are parked in a separate account, the balance outstanding in that
account also should be treated as a part of the borrower\'s principal operating
account for the purpose of application of prudential norms on income
recognition, asset classification and provisioning.
iii) The bills discounted under LC favouring a borrower may not be
classified as a Non-performing advance (NPA), when any other facility
granted to the borrower is classified as NPA. However, in case documents
under LC are not accepted on presentation or the payment under the LC is
not made on the due date by the LC issuing bank for any reason and the
borrower does not immediately make good the amount disbursed as a result
of discounting of concerned bills, the outstanding bills discounted will
immediately be classified as NPA with effect from the date when the other
facilities had been classified as NPA.
iv) Derivative Contracts
a) The overdue receivables representing positive mark-to-market value of a
6
DBOD-MC On IRAC Norms - 2014
derivative contract will be treated as a non-performing asset, if these remain
unpaid for 90 days or more. In case the overdues arising from forward
contracts and plain vanilla swaps and options become NPAs, all other funded
facilities granted to the client shall also be classified as non-performing asset
following the principle of borrower-wise classification as per the existing asset
classification norms. However, any amount, representing positive mark-to-
market value of the foreign exchange derivative contracts (other than forward
contract and plain vanilla swaps and options) that were entered into during the
period April 2007 to June 2008, which has already crystallised or might
crystallise in future and is / becomes receivable from the client, should be
parked in a separate account maintained in the name of the client /
counterparty. This amount, even if overdue for a period of 90 days or more,
will not make other funded facilities provided to the client, NPA on account of
the principle of borrower-wise asset classification, though such receivable
overdue for 90 days or more shall itself be classified as NPA, as per the
extant Income Recognition and Asset Classification (IRAC) norms. The
classification of all other assets of such clients will, however, continue to be
governed by the extant IRAC norms.
b) If the client concerned is also a borrower of the bank enjoying a Cash
Credit or Overdraft facility from the bank, the receivables mentioned at item
(iv) (a) above may be debited to that account on due date and the impact of
its non-payment would be reflected in the cash credit / overdraft facility
account. The principle of borrower-wise asset classification would be
applicable here also, as per extant norms.
c) In cases where the contract provides for settlement of the current mark-to-
market value of a derivative contract before its maturity, only the current credit
exposure (not the potential future exposure) will be classified as a non-
performing asset after an overdue period of 90 days.
d) As the overdue receivables mentioned above would represent unrealised
income already booked by the bank on accrual basis, after 90 days of
overdue period, the amount already taken to \'Profit and Loss a/c\' should be
reversed, and held in a `Suspense Account-Crystalised Receivables\' in the
same manner as done in the case of overdue advances.
e) Further, in cases where the derivative contracts provides for more
settlements in future, the MTM value will comprise of (a) crystallised
receivables and (b) positive or negative MTM in respect of future receivables.
If the derivative contract is not terminated on the overdue receivable
remaining unpaid for 90 days, in addition to reversing the crystallised
receivable from Profit and Loss Account as stipulated in para (d) above, the
positive MTM pertaining to future receivables may also be reversed from
Profit and Loss Account to another account styled as `Suspense Account
Positive MTM\'. The subsequent positive changes in the MTM value may be
credited to the `Suspense Account Positive MTM\', not to P&L Account. The
subsequent decline in MTM value may be adjusted against the balance in
`Suspense Account Positive MTM\'. If the balance in this account is not
sufficient, the remaining amount may be debited to the P&L Account. On
payment of the overdues in cash, the balance in the `Suspense Account-
Crystalised Receivables\' may be transferred to the `Profit and Loss Account\',
to the extent payment is received.
f) If the bank has other derivative exposures on the borrower, it follows that
the MTMs of other derivative exposures should also be dealt with / accounted
7
DBOD-MC On IRAC Norms - 2014
for in the manner as described in para (e) above, subsequent to the
crystalised/settlement amount in respect of a particular derivative transaction
being treated as NPA.
g) Since the legal position regarding bilateral netting is not unambiguously
clear, receivables and payables from/to the same counterparty including that
relating to a single derivative contract should not be netted.
h) Similarly, in case a fund-based credit facility extended to a borrower is
classified as NPA, the MTMs of all the derivative exposures should be treated
in the manner discussed above.
4.2.8 Advances under consortium arrangements
Asset classification of accounts under consortium should be based on the record of
recovery of the individual member banks and other aspects having a bearing on
the recoverability of the advances. Where the remittances by the borrower under
consortium lending arrangements are pooled with one bank and/or where the bank
receiving remittances is not parting with the share of other member banks, the
account will be treated as not serviced in the books of the other member banks and
therefore, be treated as NPA. The banks participating in the consortium should,
therefore, arrange to get their share of recovery transferred from the lead bank or get
an express consent from the lead bank for the transfer of their share of recovery, to
ensure proper asset classification in their respective books.
4.2.9 Accounts where there is erosion in the value of security/frauds committed by
borrowers
In respect of accounts where there are potential threats for recovery on account of
erosion in the value of security or non-availability of security and existence of other
factors such as frauds committed by borrowers it will not be prudent that such
accounts should go through various stages of asset classification. In cases of such
serious credit impairment the asset should be straightaway classified as doubtful or
loss asset as appropriate:
i. Erosion in the value of security can be reckoned as significant when
the realisable value of the security is less than 50 per cent of the value
assessed by the bank or accepted by RBI at the time of last inspection, as the
case may be. Such NPAs may be straightaway classified under doubtful
category and provisioning should be made as applicable to doubtful assets.
ii. If the realisable value of the security, as assessed by the bank/
approved valuers/ RBI is less than 10 per cent of the outstanding in the
borrowal accounts, the existence of security should be ignored and the
asset should be straightaway classified as loss asset. It may be either written
off or fully provided for by the bank.
4.2.10 Advances to Primary Agricultural Credit Societies (PACS)/Farmers\' Service
8
DBOD-MC On IRAC Norms - 2014
Societies (FSS) ceded to Commercial Banks
In respect of agricultural advances as well as advances for other purposes granted
by banks to PACS/ FSS under the on-lending system, only that particular credit
facility granted to PACS/ FSS which is in default for a period of two crop seasons in
case of short duration crops and one crop season in case of long duration crops, as
the case may be, after it has become due will be classified as NPA and not all the
credit facilities sanctioned to a PACS/ FSS. The other direct loans & advances, if
any, granted by the bank to the member borrower of a PACS/ FSS outside the on-
lending arrangement will become NPA even if one of the credit facilities granted to
the same borrower becomes NPA.
4.2.11 Advances against Term Deposits, NSCs, KVPs/IVPs, etc.
Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs and life
policies need not be treated as NPAs, provided adequate margin is available in the
accounts. Advances against gold ornaments, government securities and all other
securities are not covered by this exemption.
4.2.12 Loans with moratorium for payment of interest
i. In the case of bank finance given for industrial projects or for
agricultural plantations etc. where moratorium is available for payment of
interest, payment of interest becomes \'due\' only after the moratorium or
gestation period is over. Therefore, such amounts of interest do not become
overdue and hence do not become NPA, with reference to the date of debit of
interest. They become overdue after due date for payment of interest, if
uncollected.
ii. In the case of housing loan or similar advances granted to staff
members where interest is payable after recovery of principal, interest need
not be considered as overdue from the first quarter onwards. Such
loans/advances should be classified as NPA only when there is a default in
repayment of instalment of principal or payment of interest on the respective
due dates.
4.2.13 Agricultural advances
i. A loan granted for short duration crops will be treated as NPA, if the
instalment of principal or interest thereon remains overdue for two crop
seasons. A loan granted for long duration crops will be treated as NPA, if the
instalment of principal or interest thereon remains overdue for one crop
season. For the purpose of these guidelines, \"long duration\" crops would be
crops with crop season longer than one year and crops, which are not \"long
duration\" crops, would be treated as \"short duration\" crops. The crop season
for each crop, which means the period up to harvesting of the crops raised,
would be as determined by the State Level Bankers\' Committee in each
State. Depending upon the duration of crops raised by an agriculturist, the
above NPA norms would also be made applicable to agricultural term
loans availed of by him.
The above norms should be made applicable to all direct agricultural
9
DBOD-MC On IRAC Norms - 2014
advances as listed at paragraph III (1.1) of the Circular on Priority Sector
Lending Targets and Classification RPCD.CO.Plan.BC.9/04.09.01/2013-14
dated July 1, 2013. An extract of the list of these items is furnished in the
Annex - 2. In respect of agricultural loans, other than those specified in the
Annex - 2 and term loans given to non-agriculturists, identification of
NPAs would be done on the same basis as non-agricultural advances, which,
at present, is the 90 days delinquency norm.
ii. Where natural calamities impair the repaying capacity of agricultural
borrowers, banks may decide on their own as a relief measure conversion of
the short-term production loan into a term loan or re-schedulement of the
repayment period; and the sanctioning of fresh short-term loan, subject to
guidelines contained in RBI circular RPCD. No.PLFS.BC.6/05.04.02/2013-14
dated July 1, 2013.
iii. In such cases of conversion or re-schedulement, the term loan as well
as fresh short-term loan may be treated as current dues and need not be
classified as NPA. The asset classification of these loans would thereafter be
governed by the revised terms & conditions and would be treated as NPA if
interest and/or instalment of principal remains overdue for two crop
seasons for short duration crops and for one crop season for long duration
crops. For the purpose of these guidelines, \"long duration\" crops would be
crops with crop season longer than one year and crops, which are not \'long
duration\" would be treated as \"short duration\" crops.
iv. While fixing the repayment schedule in case of rural housing
advances granted to agriculturists under Indira Awas Yojana and Golden
Jubilee Rural Housing Finance Scheme, banks should ensure that the
interest/instalment payable on such advances are linked to crop cycles.
4.2.14 Government guaranteed advances
The credit facilities backed by guarantee of the Central Government though overdue
may be treated as NPA only when the Government repudiates its guarantee when
invoked. This exemption from classification of Government guaranteed advances as
NPA is not for the purpose of recognition of income. The requirement of invocation of
guarantee has been delinked for deciding the asset classification and provisioning
requirements in respect of State Government guaranteed exposures. With effect from
the year ending March 31, 2006 State Government guaranteed advances and
investments in State Government guaranteed securities would attract asset
classification and provisioning norms if interest and/or principal or any other amount
due to the bank remains overdue for more than 90 days.
4.2.15 Projects under implementation
4.2.15.1 For all projects financed by the FIs/ banks after May 28, 2002, the `Date of
Completion\' and the `Date of Commencement of Commercial Operations\' (DCCO),
of the project should be clearly spelt out at the time of financial closure of the project
and the same should be formally documented. These should also be documented in
the appraisal note by the bank during sanction of the loan.
10
DBOD-MC On IRAC Norms - 2014
4.2.15.2 Project Loans
There are occasions when the completion of projects is delayed for legal and
other extraneous reasons like delays in Government approvals etc. All these
factors, which are beyond the control of the promoters, may lead to delay in
project implementation and involve restructuring / reschedulement of loans by
banks. Accordingly, the following asset classification norms would apply to
the project loans before commencement of commercial operations.
For this purpose, all project loans have been divided into the following two
categories:
(a) Project Loans for infrastructure sector
(b) Project Loans for non-infrastructure sector
For the purpose of these guidelines, \'Project Loan\' would mean any term loan which
has been extended for the purpose of setting up of an economic venture. Further,
Infrastructure Sector is a sector as defined in extant RBI circular on \'Definition of
Infrastructure Lending\'.
4.2.15.3 Project Loans for Infrastructure Sector
(i) A loan for an infrastructure project will be classified as NPA during any
time before commencement of commercial operations as per record of recovery
(90 days overdue), unless it is restructured and becomes eligible for classification
as \'standard asset\' in terms of paras (iii) to (v) below.
(ii) A loan for an infrastructure project will be classified as NPA if it fails to
commence commercial operations within two years from the original DCCO, even
if it is regular as per record of recovery, unless it is restructured and becomes
eligible for classification as \'standard asset\' in terms of paras (iii) to (v) below.
(iii) If a project loan classified as \'standard asset\' is restructured any time
during the period up to two years from the original date of commencement of
commercial operations (DCCO), in accordance with the provisions of Part B of this
Master Circular, it can be retained as a standard asset if the fresh DCCO is fixed
within the following limits, and further provided the account continues to be
serviced as per the restructured terms.
(a) Infrastructure Projects involving court cases
Up to another 2 years (beyond the existing extended period of 2 years,
as prescribed in para 4.2.15.3 (ii), i.e., total extension of 4 years), in case
the reason for extension of date of commencement of production is
arbitration proceedings or a court case.
11
DBOD-MC On IRAC Norms - 2014
(b) Infrastructure Projects delayed for other reasons beyond the control of
promoters
Up to another 1 year (beyond the existing extended period of 2 years, as
prescribed in para 4.2.15.3 (ii), i.e., total extension of 3 years), in other
than court cases.
(iv) It is re-iterated that the dispensation in para 4.2.15.3 (iii) is subject
to adherence to the provisions regarding restructuring of accounts as contained in
the Master Circular which would inter alia require that the application for
restructuring should be received before the expiry of period of two years from the
original DCCO and when the account is still standard as per record of recovery.
The other conditions applicable would be:
a. In cases where there is moratorium for payment of interest, banks should
not book income on accrual basis beyond two years from the original DCCO,
considering the high risk involved in such restructured accounts.
b. Banks should maintain following provisions on such accounts as long as
these are classified as standard assets in addition to provision for diminution
in fair value due to extension of DCCO:
Particulars Provisioning Requirement
If the revised DCCO is within two years
from the original DCCO prescribed at the 0.40 per cent
time of financial closure
Project loans restructured with effect
from June 1, 2013:
5.00 per cent From the date of such
restructuring till the revised DCCO or 2
years from the date of restructuring,
If the DCCO is extended beyond two
whichever is later
years and upto four years or three years
from the original DCCO, as the case may Stock of project loans classified as
be, depending upon the reasons for such restructured as on June 1, 2013:
delay * 3.50 per cent - with effect
from March 31, 2014 (spread
over the four quarters of 2013-
14)
* 4.25 per cent - with effect
from March 31, 2015 (spread
over the four quarters of 2014-
12
DBOD-MC On IRAC Norms - 2014
15)
* 5.00 per cent - - with effect
from March 31, 2016 (spread
over the four quarters of 2015-
16)
The above provisions will be applicable
from the date of restructuring till the
revised DCCO or 2 years from the date
of restructuring, whichever is later.
(v) For the purpose of these guidelines, mere extension of DCCO would not be
considered as restructuring, if the revised DCCO falls within the period of two
years from the original DCCO. In such cases the consequential shift in repayment
period by equal or shorter duration (including the start date and end date of
revised repayment schedule) than the extension of DCCO would also not be
considered as restructuring provided all other terms and conditions of the loan
remain unchanged. As such project loans will be treated as standard assets in all
respects, they will attract standard asset provision of 0.40 per cent..
(vi) In case of infrastructure projects under implementation, where Appointed Date
(as defined in the concession agreement) is shifted due to the inability of the
Concession Authority to comply with the requisite conditions, change in date of
commencement of commercial operations (DCCO) need not be treated as
`restructuring\', subject to following conditions:
a) The project is an infrastructure project under public private partnership
model awarded by a public authority;
b) The loan disbursement is yet to begin;
c) The revised date of commencement of commercial operations is
documented by way of a supplementary agreement between the borrower
and lender and;
d) Project viability has been reassessed and sanction from appropriate
authority has been obtained at the time of supplementary agreement.
4.2.15.4 Project Loans for Non-Infrastructure Sector (Other than Commercial
Real Estate Exposures)
(i) A loan for a non-infrastructure project will be classified as NPA during
any time before commencement of commercial operations as per record of
13
DBOD-MC On IRAC Norms - 2014
recovery (90 days overdue), unless it is restructured and becomes eligible for
classification as \'standard asset\' in terms of paras (iii) to (iv) below.
(ii) A loan for a non-infrastructure project will be classified as NPA if it
fails to commence commercial operations within one year from the original DCCO,
even if is regular as per record of recovery, unless it is restructured and becomes
eligible for classification as \'standard asset\' in terms of paras (iii) to (iv) below.
(iii) In case of non-infrastructure projects, if the delay in commencement
of commercial operations extends beyond the period of one year from the date of
completion as determined at the time of financial closure, banks can prescribe a
fresh DCCO, and retain the \"standard\" classification by undertaking restructuring
of accounts in accordance with the provisions contained in this Master Circular,
provided the fresh DCCO does not extend beyond a period of two years from the
original DCCO. This would among others also imply that the restructuring
application is received before the expiry of one year from the original DCCO, and
when the account is still \"standard\" as per the record of recovery.
The other conditions applicable would be:
a. In cases where there is moratorium for payment of interest, banks should
not book income on accrual basis beyond one year from the original DCCO,
considering the high risk involved in such restructured accounts.
b. Banks should maintain following provisions on such accounts as long as
these are classified as standard assets apart from provision for diminution in
fair value due to extension of DCCO:
Particulars Provisioning Requirement
If the revised DCCO is within one year 0.40 per cent
from the original DCCO prescribed at the
time of financial closure
Project loans restructured with effect
from June 1, 2013:
If the DCCO is extended beyond one
year and upto two years from the original 5.00 per cent From the date of
restructuring for 2 years
DCCO prescribed at the time of financial
closure Stock of Project loans classified as
restructured before June 01, 2013:
* 3.50 per cent - with effect
14
DBOD-MC On IRAC Norms - 2014
from March 31, 2014
(spread over the four
quarters of 2013-14)
* 4.25 per cent - with effect
from March 31, 2015
(spread over the four
quarters of 2014-15)
* 5.00 per cent - with effect
from March 31, 2016
(spread over the four
quarters of 2015-16)
The above provisions will be
applicable from the date of
restructuring for 2 years.
(iv) For the purpose of these guidelines, mere extension of DCCO would not be
considered as restructuring, if the revised DCCO falls within the period of one year
from the original DCCO. In such cases the consequential shift in repayment period
by equal or shorter duration (including the start date and end date of revised
repayment schedule) than the extension of DCCO would also not be considered
as restructuring provided all other terms and conditions of the loan remain
unchanged. As such project loans will be treated as standard assets in all
respects, they will attract standard asset provision of 0.40 per cent.
4.2.15.5 Other Issues
(i) All other aspects of restructuring of project loans before
commencement of commercial operations would be governed by the provisions of
Part B of this Master Circular on Prudential norms on Income Recognition, Asset
Classification and Provisioning Pertaining to Advances. Restructuring of project
loans after commencement of commercial operations will also be governed by
these instructions.
(ii) Any change in the repayment schedule of a project loan caused due
to an increase in the project outlay on account of increase in scope and size of the
project, would not be treated as restructuring if:
(a) The increase in scope and size of the project takes place before
commencement of commercial operations of the existing project.
(b) The rise in cost excluding any cost-overrun in respect of the original
project is 25% or more of the original outlay.
15
DBOD-MC On IRAC Norms - 2014
(c) The bank re-assesses the viability of the project before approving the
enhancement of scope and fixing a fresh DCCO.
(d) On re-rating, (if already rated) the new rating is not below the previous
rating by more than one notch.
(iii) Project Loans for Commercial Real Estate
It has been represented that commercial real estate (CRE) projects also face
problems of delays in achieving the DCCO for extraneous reasons. Therefore, it has
been decided that for CRE projects mere extension of DCCO would not be
considered as restructuring, if the revised DCCO falls within the period of one year
from the original DCCO and there is no change in other terms and conditions except
possible shift of the repayment schedule and servicing of the loan by equal or shorter
duration compared to the period by which DCCO has been extended. Such CRE
project loans will be treated as standard assets in all respects for this purpose without
attracting the higher provisioning applicable for restructured standard assets.
However, as stated in paragraph 15.1 of this circular, the asset classification benefit
would not be available to CRE projects if they are restructured.
(iv) Multiple revisions of the DCCO and consequential shift in repayment schedule
for equal or shorter duration (including the start date and end date of revised
repayment schedule) will be treated as a single event of restructuring provided that
the revised DCCO is fixed within the respective time limits stipulated at paragraphs
4.2.15.3 (iii) and 4.2.15.4 (iii) above, and all other terms and conditions of the loan
remained unchanged.
(v) Banks, if deemed fit, may extend DCCO beyond the respective time limits
stipulated at paragraphs 4.2.15.3 (iii) and 4.2.15.4 (iii) above; however, in that case,
banks will not be able to retain the `standard\' asset classification status of such loan
accounts.
(vi) In all the above cases of restructuring where regulatory forbearance has been
extended, the Boards of banks should satisfy themselves about the viability of the
project and the restructuring plan.
4.2.15.6 Income recognition
(i) Banks may recognise income on accrual basis in respect of the
projects under implementation, which are classified as `standard\'.
(ii) Banks should not recognise income on accrual basis in respect of the
16
DBOD-MC On IRAC Norms - 2014
projects under implementation which are classified as a `substandard\' asset.
Banks may recognise income in such accounts only on realisation on cash basis.
Consequently, banks which have wrongly recognised income in the past should
reverse the interest if it was recognised as income during the current year or
make a provision for an equivalent amount if it was recognised as income in the
previous year(s). As regards the regulatory treatment of `funded interest\'
recognised as income and `conversion into equity, debentures or any other
instrument\' banks should adopt the following:
a) Funded Interest: Income recognition in respect of the NPAs,
regardless of whether these are or are not subjected to restructuring/
rescheduling/ renegotiation of terms of the loan agreement, should be done
strictly on cash basis, only on realisation and not if the amount of interest
overdue has been funded. If, however, the amount of funded interest
is recognised as income, a provision for an equal amount should also be
made simultaneously. In other words, any funding of interest in respect of
NPAs, if recognised as income, should be fully provided for.
b) Conversion into equity, debentures or any other instrument: The
amount outstanding converted into other instruments would
normally comprise principal and the interest components. If the amount of
interest dues is converted into equity or any other instrument, and income
is recognised in consequence, full provision should be made for the amount
of income so recognised to offset the effect of such income recognition. Such
provision would be in addition to the amount of provision that may be
necessary for the depreciation in the value of the equity or other instruments,
as per the investment valuation norms. However, if the conversion of interest
is into equity which is quoted, interest income can be recognised at market
value of equity, as on the date of conversion, not exceeding the amount of
interest converted to equity. Such equity must thereafter be classified in the
\"available for sale\" category and valued at lower of cost or market value. In
case of conversion of principal and /or interest in respect of NPAs into
debentures, such debentures should be treated as NPA, ab initio, in the same
asset classification as was applicable to loan just before conversion and
provision made as per norms. This norm would also apply to zero coupon
bonds or other instruments which seek to defer the liability of the issuer. On
such debentures, income should be recognised only on realisation basis. The
income in respect of unrealised interest which is converted into debentures or
17
DBOD-MC On IRAC Norms - 2014
any other fixed maturity instrument should be recognised only on redemption
of such instrument. Subject to the above, the equity shares or other
instruments arising from conversion of the principal amount of loan would also
be subject to the usual prudential valuation norms as applicable to such
instruments.
4.2.16 Takeout Finance
Takeout finance is the product emerging in the context of the funding of long-term
infrastructure projects. Under this arrangement, the institution/the bank financing
infrastructure projects will have an arrangement with any financial institution for
transferring to the latter the outstanding in respect of such financing in their books on
a predetermined basis. In view of the time-lag involved in taking-over, the possibility
of a default in the meantime cannot be ruled out. The norms of asset classification
will have to be followed by the concerned bank/financial institution in whose books
the account stands as balance sheet item as on the relevant date. If the lending
institution observes that the asset has turned NPA on the basis of the record of
recovery, it should be classified accordingly. The lending institution should not
recognise income on accrual basis and account for the same only when it is paid by
the borrower/ taking over institution (if the arrangement so provides). However, the
taking over institution, on taking over such assets, should make provisions treating
the account as NPA from the actual date of it becoming NPA even though the
account was not in its books as on that date.
4.2.17 Post-shipment Supplier\'s Credit
i. In respect of post-shipment credit extended by the banks covering export of
goods to countries for which the Export Credit Guarantee Corporation\'s
(ECGC) cover is available, EXIM Bank has introduced a guarantee-cum--
refinance programme whereby, in the event of default, EXIM Bank will pay the
guaranteed amount to the bank within a period of 30 days from the day the
bank invokes the guarantee after the exporter has filed claim with ECGC.
ii. Accordingly, to the extent payment has been received from the EXIM Bank,
the advance may not be treated as a nonperforming asset for asset
classification and provisioning purposes.
4.2.18 Export Project Finance
i. In respect of export project finance, there could be instances where the actual
importer has paid the dues to the bank abroad but the bank in turn is unable
to remit the amount due to political developments such as war, strife, UN
embargo, etc.
18
DBOD-MC On IRAC Norms - 2014
ii. In such cases, where the lending bank is able to establish through
documentary evidence that the importer has cleared the dues in full
by depositing the amount in the bank abroad before it turned into NPA in the
books of the bank, but the importer\'s country is not allowing the funds to be
remitted due to political or other reasons, the asset classification may be
made after a period of one year from the date the amount was deposited
by the importer in the bank abroad.
4.2.19 Advances under rehabilitation approved by Board for Industrial and Financial
Reconstruction (BIFR)/Term Lending Institutions (TLIs)
Banks are not permitted to upgrade the classification of any advance in respect of
which the terms have been renegotiated unless the package of renegotiated terms
has worked satisfactorily for a period of one year. While the existing credit facilities
sanctioned to a unit under rehabilitation packages approved by BIFR/TLIs will
continue to be classified as substandard or doubtful as the case may be, in respect of
additional facilities sanctioned under the rehabilitation packages, the Income
Recognition, Asset Classification norms will become applicable after a period of one
year from the date of disbursement.
4.2.20 Transactions Involving Transfer of Assets through Direct Assignment of Cash
Flows and the Underlying Securities
i) Originating Bank: The asset classification and provisioning rules in respect of
the exposure representing the Minimum Retention Requirement (MRR) of the
Originator of the asset would be as under:
a) The originating bank may maintain a consolidated account of the
amount representing MRR if the loans transferred are retail loans. In
such a case, the consolidated amount receivable in amortisation of the
MRR and its periodicity should be clearly established and the overdue
status of the MRR should be determined with reference to repayment
of such amount. Alternatively, the originating bank may continue to
maintain borrower-wise accounts for the proportionate amounts
retained in respect of those accounts. In such a case, the overdue
status of the individual loan accounts should be determined with
reference to repayment received in each account.
b) In the case of transfer of a pool of loans other than retail loans, the
originator should maintain borrower-wise accounts for the
proportionate amounts retained in respect of each loan. In such a
case, the overdue status of the individual loan accounts should be
determined with reference to repayment received in each account.
c) If the originating bank acts as a servicing agent of the assignee
bank for the loans transferred, it would know the overdue status of
19
DBOD-MC On IRAC Norms - 2014
loans transferred which should form the basis of classification of the
entire MRR/individual loans representing MRR as NPA in the books of
the originating bank, depending upon the method of accounting
followed as explained in para (a) and (b) above.
ii) Purchasing Bank: In purchase of pools of both retail and non-retail loans,
income recognition, asset classification and provisioning norms for the
purchasing bank will be applicable based on individual obligors and not based
on portfolio. Banks should not apply the asset classification, income
recognition and provisioning norms at portfolio level, as such treatment is
likely to weaken the credit supervision due to its inability to detect and
address weaknesses in individual accounts in a timely manner. If the
purchasing bank is not maintaining the individual obligor-wise accounts for
the portfolio of loans purchased, it should have an alternative mechanism to
ensure application of prudential norms on individual obligor basis, especially
the classification of the amounts corresponding to the obligors which need to
be treated as NPAs as per existing prudential norms. One such mechanism
could be to seek monthly statements containing account-wise details from the
servicing agent to facilitate classification of the portfolio into different asset
classification categories. Such details should be certified by the authorized
officials of the servicing agent. Bank\'s concurrent auditors, internal auditors
and statutory auditors should also conduct checks of these portfolios with
reference to the basic records maintained by the servicing agent. The
servicing agreement should provide for such verifications by the auditors of
the purchasing bank. All relevant information and audit reports should be
available for verification by the Inspecting Officials of RBI during the Annual
Financial Inspections of the purchasing banks.
iii) The guidelines prescribed above at 4.2.20 (i) & (ii) do not apply to
(a) Transfer of loan accounts of borrowers by a bank to other
bank/FIs/NBFCs and vice versa, at the request/instance of borrower;
(b) Inter-bank participations;
(c) Trading in bonds;
(d) Sale of entire portfolio of assets consequent upon a decision to exit the
line of business completely. Such a decision should have the approval of
Board of Directors of the bank;
(e) Consortium and syndication arrangements and arrangement under
Corporate Debt Restructuring mechanism;
20
DBOD-MC On IRAC Norms - 2014
(f) Any other arrangement/transactions, specifically exempted by the Reserve
Bank of India.
4.2.21 Credit Card Accounts
(i) In credit card accounts, the amount spent is billed to the card users through a
monthly statement with a definite due date for repayment. Banks give an option to
the card users to pay either the full amount or a fraction of it, i.e., minimum amount
due, on the due date and roll-over the balance amount to the subsequent months\'
billing cycle.
(ii) A credit card account will be treated as non-performing asset if the minimum
amount due, as mentioned in the statement, is not paid fully within 90 days from the
next statement date. The gap between two statements should not be more than a
month.
(iii) Banks should follow this uniform method of determining over-due status for credit
card accounts while reporting to credit information companies and for the purpose of
levying of penal charges, viz. late payment charges, etc., if any.
5 PROVISIONING NORMS
5.1 General
5.1.1 The primary responsibility for making adequate provisions for any diminution
in the value of loan assets, investment or other assets is that of the
bank managements and the statutory auditors. The assessment made by the
inspecting officer of the RBI is furnished to the bank to assist the bank management
and the statutory auditors in taking a decision in regard to making adequate and
necessary provisions in terms of prudential guidelines.
5.1.2 In conformity with the prudential norms, provisions should be made on the
nonperforming assets on the basis of classification of assets into prescribed
categories as detailed in paragraphs 4 supra. Taking into account the time lag
between an account becoming doubtful of recovery, its recognition as such, the
realisation of the security and the erosion over time in the value of security charged
to the bank, the banks should make provision against substandard assets, doubtful
assets and loss assets as below:
5.2 Loss assets
Loss assets should be written off. If loss assets are permitted to remain in the books
for any reason, 100 percent of the outstanding should be provided for.
5.3 Doubtful assets
i. 100 percent of the extent to which the advance is not covered by the
realisable value of the security to which the bank has a valid recourse and the
realisable value is estimated on a realistic basis.
21
DBOD-MC On IRAC Norms - 2014
ii. In regard to the secured portion, provision may be made on the following
basis, at the rates ranging from 25 percent to 100 percent of the secured portion
depending upon the period for which the asset has remained doubtful:
Period for which the advance has Provision requirement
remained in `doubtful\' category (%)
Up to one year 25
One to three years 40
More than three years 100
Note: Valuation of Security for provisioning purposes
With a view to bringing down divergence arising out of difference in assessment of
the value of security, in cases of NPAs with balance of Rs. 5 crore and above
stock audit at annual intervals by external agencies appointed as per the
guidelines approved by the Board would be mandatory in order to enhance the
reliability on stock valuation. Collaterals such as immovable properties charged in
favour of the bank should be got valued once in three years by valuers appointed
as per the guidelines approved by the Board of Directors.
5.4 Substandard assets
(i) A general provision of 15 percent on total outstanding should be made without
making any allowance for ECGC guarantee cover and securities available.
(ii) The `unsecured exposures\' which are identified as `substandard\' would attract
additional provision of 10 per cent, i.e., a total of 25 per cent on the outstanding balance.
However, in view of certain safeguards such as escrow accounts available in respect of
infrastructure lending, infrastructure loan accounts which are classified as sub-standard will
attract a provisioning of 20 per cent instead of the aforesaid prescription of 25 per cent. To
avail of this benefit of lower provisioning, the banks should have in place an appropriate
mechanism to escrow the cash flows and also have a clear and legal first claim on these
cash flows. The provisioning requirement for unsecured `doubtful\' assets is 100 per cent.
Unsecured exposure is defined as an exposure where the realisable value of the security,
as assessed by the bank/approved valuers/Reserve Bank\'s inspecting officers, is not more
than 10 percent, ab-initio, of the outstanding exposure. `Exposure\' shall include all funded
and non-funded exposures (including underwriting and similar commitments). `Security\' will
mean tangible security properly discharged to the bank and will not include intangible
securities like guarantees (including State government guarantees), comfort letters etc.
(iii) In order to enhance transparency and ensure correct reflection of the unsecured
22
DBOD-MC On IRAC Norms - 2014
advances in Schedule 9 of the banks\' balance sheet, it is advised that the following would be
applicable from the financial year 2009-10 onwards:
a) For determining the amount of unsecured advances for reflecting in schedule 9
of the published balance sheet, the rights, licenses, authorisations, etc., charged to
the banks as collateral in respect of projects (including infrastructure projects)
financed by them, should not be reckoned as tangible security. Hence such
advances shall be reckoned as unsecured.
b) However, banks may treat annuities under build-operate-transfer (BOT) model in
respect of road / highway projects and toll collection rights, where there are
provisions to compensate the project sponsor if a certain level of traffic is not
achieved, as tangible securities subject to the condition that banks\' right to receive
annuities and toll collection rights is legally enforceable and irrevocable.
c) It is noticed that most of the infrastructure projects, especially road/highway
projects are user-charge based, for which the Planning Commission has published
Model Concession Agreements (MCAs). These have been adopted by various
Ministries and State Governments for their respective public-private partnership
(PPP) projects and they provide adequate comfort to the lenders regarding security
of their debt. In view of the above features, in case of PPP projects, the debts due to
the lenders may be considered as secured to the extent assured by the project
authority in terms of the Concession Agreement, subject to the following conditions :
i) User charges / toll / tariff payments are kept in an escrow account where
senior lenders have priority over withdrawals by the concessionaire;
ii) There is sufficient risk mitigation, such as pre-determined increase in user
charges or increase in concession period, in case project revenues are lower
than anticipated;
iii) The lenders have a right of substitution in case of concessionaire default;
iv) The lenders have a right to trigger termination in case of default in debt
service; and
v) Upon termination, the Project Authority has an obligation of (i) compulsory
buy-out and (ii) repayment of debt due in a pre-determined manner.
In all such cases, banks must satisfy themselves about the legal enforceability of the
provisions of the tripartite agreement and factor in their past experience with such
contracts.
d) Banks should also disclose the total amount of advances for which intangible
securities such as charge over the rights, licenses, authority, etc. has been taken as
also the estimated value of such intangible collateral. The disclosure may be made
under a separate head in \"Notes to Accounts\". This would differentiate such loans
from other entirely unsecured loans.
5.5 Standard assets
(i) The provisioning requirements for all types of standard assets stands as
below. Banks should make general provision for standard assets at the following
rates for the funded outstanding on global loan portfolio basis:
23
DBOD-MC On IRAC Norms - 2014
(a) direct advances to agricultural and Small and Micro Enterprises
(SMEs) sectors at 0.25 per cent;
(b) advances to Commercial Real Estate (CRE) Sector at 1.00 per cent;
(c) advances to Commercial Real Estate Residential Housing Sector
(CRE - RH) at 0.75 per cent1
(d) housing loans extended at teaser rates and restructured advances as
as indicated in Para 5.9.13 and 12.4 respectively;
(e) all other loans and advances not included in (a) (b) and (c) above at
0.40 per cent.
(ii) The provisions on standard assets should not be reckoned for arriving at net
NPAs.
(iii) The provisions towards Standard Assets need not be netted from
gross advances but shown separately as \'Contingent Provisions against Standard
Assets\' under \'Other Liabilities and Provisions Others\' in Schedule 5 of the balance
sheet.
(iv) It is clarified that the Medium Enterprises will attract 0.40% standard asset
provisioning. The definition of the terms Micro Enterprises, Small Enterprises, and
Medium Enterprises shall be in terms of Master Circular RPCD.SME&NFS.BC.No.
5/06.02.31/2013-14 dated July 1, 2013 on Lending to Micro, Small & Medium
Enterprises (MSME) Sector.
(v) While the provisions on individual portfolios are required to be calculated at
the rates applicable to them, the excess or shortfall in the provisioning, vis-a-vis the
position as on any previous date, should be determined on an aggregate basis. If the
provisions required to be held on an aggregate basis are less than the provisions
held as on November 15, 2008, the provisions rendered surplus should not be
reversed to Profit and Loss account; but should continue to be maintained at the level
existed as on November 15, 2008. In case of shortfall determined on aggregate
basis, the balance should be provided for by debit to Profit and Loss account.
1
For this purpose, CRE-RH would consist of loans to builders/developers for residential housing projects (except
for captive consumption) under CRE segment. Such projects should ordinarily not include non-residential
commercial real estate. However, integrated housing projects comprising of some commercial space (e.g.
shopping complex, school, etc.) can also be classified under CRE-RH, provided that the commercial area in the
residential housing project does not exceed 10% of the total Floor Space Index (FSI) of the project. In case the
FSI of the commercial area in the predominantly residential housing complex exceeds the ceiling of 10%, the
project loans should be classified as CRE and not CRE-RH.
24
DBOD-MC On IRAC Norms - 2014
(vi) A high level of unhedged foreign currency exposures of the entities can increase
the probability of default in times of high currency volatility. Hence, banks are
required to estimate the riskiness of unhedged position of their borrowers as per the
instructions contained in our circular DBOD.No.BP.BC.85/21.06.200/2013-14 dated
January 15, 2014 as well as our circular DBOD.No.BP.BC.116/21.06.200/2013-14
dated June 3, 2014 and make incremental provisions on their exposures to such
entities:
Incremental Provisioning Requirement on the
Likely Loss / EBID (%) total credit exposures over and above extant
standard asset provisioning
Upto15 per cent 0
More than 15 per cent and 20bps
upto 30 per cent
More than 30 per cent and 40bps
upto 50 per cent
More than 50 per cent and 60bps
upto 75 per cent
More than 75 per cent 80 bps
5.6 Prudential norms on creation and utilisation of floating provisions
5.6.1 Principle for creation of floating provisions by banks
The bank\'s board of directors should lay down approved policy regarding the level to
which the floating provisions can be created. The bank should hold floating
provisions for `advances\' and `investments\' separately and the guidelines prescribed
will be applicable to floating provisions held for both `advances\' & `investment\'
portfolios.
5.6.2 Principle for utilisation of floating provisions by banks
i The floating provisions should not be used for making specific provisions as per
the extant prudential guidelines in respect of nonperforming assets or for making
regulatory provisions for standard assets. The floating provisions can be used
only for contingencies under extraordinary circumstances for making
specific provisions in impaired accounts after obtaining board\'s approval and with
prior permission of RBI. The Boards of the banks should lay down an approved
policy as to what circumstances would be considered extraordinary.
ii To facilitate banks\' Boards to evolve suitable policies in this regard, it is clarified
that the extra-ordinary circumstances refer to losses which do not arise in the
normal course of business and are exceptional and non-recurring in nature.
25
DBOD-MC On IRAC Norms - 2014
These extra-ordinary circumstances could broadly fall under three categories viz.
General, Market and Credit. Under general category, there can be situations
where bank is put unexpectedly to loss due to events such as civil unrest or
collapse of currency in a country. Natural calamities and pandemics may also be
included in the general category. Market category would include events such as a
general melt down in the markets, which affects the entire financial system.
Among the credit category, only exceptional credit losses would be considered as
an extra-ordinary circumstance.
5.6.3 Accounting
Floating provisions cannot be reversed by credit to the profit and loss account. They
can only be utilised for making specific provisions in extraordinary circumstances as
mentioned above. Until such utilisation, these provisions can be netted off from gross
NPAs to arrive at disclosure of net NPAs. Alternatively, they can be treated as part of
Tier II capital within the overall ceiling of 1.25 % of total risk weighted assets.
5.6.4 Disclosures
Banks should make comprehensive disclosures on floating provisions in the \"notes
on accounts\" to the balance sheet on (a) opening balance in the floating provisions
account, (b) the quantum of floating provisions made in the accounting year, (c)
purpose and amount of draw down made during the accounting year, and (d) closing
balance in the floating provisions account.
5.7 Additional Provisions for NPAs at higher than prescribed rates
The regulatory norms for provisioning represent the minimum requirement. A
bank may voluntarily make specific provisions for advances at rates which are higher
than the rates prescribed under existing regulations, to provide for estimated actual
loss in collectible amount, provided such higher rates are approved by the Board of
Directors and consistently adopted from year to year. Such additional provisions are
not to be considered as floating provisions. The additional provisions for NPAs, like
the minimum regulatory provision on NPAs, may be netted off from gross NPAs to
arrive at the net NPAs
5.8 Provisions on Leased Assets
i) Substandard assets
a) 15 percent of the sum of the net investment in the lease and the
unrealised portion of finance income net of finance charge component. The
terms `net investment in the lease\', `finance income\' and `finance charge\' are
as defined in `AS 19 Leases\' issued by the ICAI.
26
DBOD-MC On IRAC Norms - 2014
b) Unsecured (as defined in paragraph 5.4 above) lease exposures,,
which are identified as `substandard\' would attract additional provision of 10
per cent, i.e., a total of 25 per cent.
ii) Doubtful assets
100 percent of the extent to which the finance is not secured by the realisable value
of the leased asset, should be provided for. Realisable value is to be estimated on a
realistic basis. In addition to the above provision, provision at the following
rates should be made on the sum of the net investment in the lease and the
unrealised portion of finance income net of finance charge component of the secured
portion, depending upon the period for which asset has been doubtful:
Period for which the advance has Provision
remained in `doubtful\' category requirement (%)
Up to one year 25
One to three years 40
More than three years 100
iii) Loss assets
The entire asset should be written off. If for any reason, an asset is allowed to remain
in books, 100 percent of the sum of the net investment in the lease and the
unrealised portion of finance income net of finance charge component should be
provided for.
5.9 Guidelines for Provisions under Special Circumstances
5.9.1 Advances granted under rehabilitation packages approved by BIFR/term
lending institutions
(i) In respect of advances under rehabilitation package approved by
BIFR/term lending institutions, the provision should continue to be made in
respect of dues to the bank on the existing credit facilities as per their
classification as substandard or doubtful asset.
(ii) As regards the additional facilities sanctioned as per package finalised
by BIFR and/or term lending institutions, provision on additional
facilities sanctioned need not be made for a period of one year from the date
of disbursement.
(iii) In respect of additional credit facilities granted to SSI units which are
identified as sick [as defined in Section IV (Para 4.7) of circular
RPCD.SME&NFS.BC.No.5/06.02.31/2013-14 dated July 1, 2013] and where
rehabilitation packages/nursing programmes have been drawn by the banks
themselves or under consortium arrangements, no provision need be made
for a period of one year.
5.9.2 Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs,
27
DBOD-MC On IRAC Norms - 2014
gold ornaments, government & other securities and life insurance policies would
attract provisioning requirements as applicable to their asset classification status.
5.9.3 Treatment of interest suspense account
Amounts held in Interest Suspense Account should not be reckoned as part of
provisions. Amounts lying in the Interest Suspense Account should be deducted from
the relative advances and thereafter, provisioning as per the norms, should be made
on the balances after such deduction.
5.9.4 Advances covered by ECGC guarantee
In the case of advances classified as doubtful and guaranteed by ECGC, provision
should be made only for the balance in excess of the amount guaranteed by the
Corporation. Further, while arriving at the provision required to be made for doubtful
assets, realisable value of the securities should first be deducted from the
outstanding balance in respect of the amount guaranteed by the Corporation and
then provision made as illustrated hereunder:
Example
Outstanding Balance Rs. 4 lakhs
ECGC Cover 50 percent
Period for which the advance has More than 2 years remained doubtful
remained doubtful (say as on March 31, 2014)
Value of security held
Rs. 1.50 lakhs
Provision required to be made
Outstanding balance Rs. 4.00 lakhs
Less: Value of security held Rs. 1.50 lakhs
Unrealised balance Rs. 2.50 lakhs
Less: ECGC Cover
Rs. 1.25 lakhs
(50% of unrealisable balance)
Net unsecured balance Rs. 1.25 lakhs
Provision for unsecured portion of Rs. 1.25 lakhs (@ 100 percent of
advance unsecured portion)
Provision for secured portion of advance Rs.0.60 lakhs (@ 40 per cent of the
(as on March 31, 2012) secured portion)
Rs.1.85 lakhs (as on March 31, 2014)
Total provision to be made
28
DBOD-MC On IRAC Norms - 2014
5.9.5 Advance covered by guarantees of Credit Guarantee Fund Trust For Micro
And Small Enterprises (CGTMSE) or Credit Risk Guarantee Fund Trust for Low
Income Housing (CRGFTLIH)
In case the advance covered by CGTMSE or CRGFTLIH guarantee becomes non-
performing, no provision need be made towards the guaranteed portion. The amount
outstanding in excess of the guaranteed portion should be provided for as per the
extant guidelines on provisioning for nonperforming advances. An illustrative
example is given below:
Example
Outstanding Balance Rs. 10 lakhs
75% of the amount outstanding or 75% of the
CGTMSE/CRGFTLIH Cover unsecured amount or Rs.37.50 lakh, whichever
is the least
Period for which the advance has More than 2 years remained doubtful (say
remained doubtful as on March 31, 2014)
Value of security held
Rs. 1.50 lakhs
Provision required to be made
Balance outstanding Rs.10.00 lakh
Less: Value of security Rs. 1.50 lakh
Unsecured amount Rs. 8.50 lakh
Less: CGTMSE/CRGFTLIH
cover (75%) Rs. 6.38 lakh
Net unsecured and uncovered Rs. 2.12 lakh
portion:
Provision for Secured portion @ Rs.0.60 lakh
40% of Rs.1.50 lakh
Provision for Unsecured & Rs.2.12 lakh
uncovered portion @ 100% of
Rs.2.12 lakh
Total provision required Rs.2.72 lakh
5.9.6 Takeout finance
The lending institution should make provisions against a \'takeout finance\' turning into
NPA pending its takeover by the taking-over institution. As and when the asset
is taken-over by the taking-over institution, the corresponding provisions could be
reversed.
5.9.7 Reserve for Exchange Rate Fluctuations Account (RERFA)
29
DBOD-MC On IRAC Norms - 2014
When exchange rate movements of Indian rupee turn adverse, the outstanding
amount of foreign currency denominated loans (where actual disbursement was
made in Indian Rupee) which becomes overdue, goes up correspondingly, with its
attendant implications of provisioning requirements. Such assets should not normally
be revalued. In case such assets need to be revalued as per requirement of
accounting practices or for any other requirement, the following procedure may be
adopted:
Ø The loss on revaluation of assets has to be booked in the bank\'s
Profit & Loss Account.
Ø In addition to the provisioning requirement as per Asset
Classification, the full amount of the Revaluation Gain, if any, on
account of foreign exchange fluctuation should be used to make
provisions against the corresponding assets.
5.9.8 Provisioning for country risk
Banks shall make provisions, with effect from the year ending March 31, 2003, on the
net funded country exposures on a graded scale ranging from 0.25 to 100 percent
according to the risk categories mentioned below. To begin with, banks shall make
provisions as per the following schedule:
Provisioning
ECGC Requirement
Risk category
Classification (per cent)
Insignificant A1 0.25
Low A2 0.25
Moderate B1 5
High B2 20
Very high C1 25
Restricted C2 100
Off-credit D 100
Banks are required to make provision for country risk in respect of a country where
its net funded exposure is one per cent or more of its total assets.
The provision for country risk shall be in addition to the provisions required to be held
according to the asset classification status of the asset. However, in the case of
`loss assets\' and `doubtful assets\', provision held, including provision held for
country risk, may not exceed 100% of the outstanding.
Banks may not make any provision for `home country\' exposures i.e. exposure to
India. The exposures of foreign branches of Indian banks to the host country should
be included. Foreign banks shall compute the country exposures of their Indian
branches and shall hold appropriate provisions in their Indian books. However, their
30
DBOD-MC On IRAC Norms - 2014
exposures to India will be excluded.
Banks may make a lower level of provisioning (say 25% of the requirement) in
respect of short-term exposures (i.e. exposures with contractual maturity of less than
180 days).
5.9.9 Excess Provisions on sale of Standard Asset / NPAs
(a) If the sale is in respect of Standard Asset and the sale consideration is
higher than the book value, the excess provisions may be credited to Profit
and Loss Account.
(b) Excess provisions which arise on sale of NPAs can be admitted as Tier
II capital subject to the overall ceiling of 1.25% of total Risk Weighted Assets.
Accordingly, these excess provisions that arise on sale of NPAs would be
eligible for Tier II status in terms of paragraph 4.3.2 of Master Circular
DBOD.No.BP.BC.9/21.06.001/2013-14 dated July 01, 2013 on Prudential
guidelines on Capital Adequacy and Market Discipline - New Capital
Adequacy Framework (NCAF).
5.9.10 Provisions for Diminution of Fair Value
Provisions for diminution of fair value of restructured advances, both in respect of
Standard Assets as well as NPAs, made on account of reduction in rate of interest
and / or reschedulement of principal amount are permitted to be netted from the
relative asset.
5.9.11 Provisioning norms for Liquidity facility provided for Securitisation transactions
The amount of liquidity facility drawn and outstanding for more than 90 days, in
respect of securitisation transactions undertaken in terms of our guidelines on
securitisation dated February 1, 2006, should be fully provided for.
5.9.12 Provisioning requirements for derivative exposures
Credit exposures computed as per the current marked to market value of the
contract, arising on account of the interest rate & foreign exchange derivative
transactions, credit default swaps and gold, shall also attract provisioning
requirement as applicable to the loan assets in the \'standard\' category, of the
concerned counterparties. All conditions applicable for treatment of the provisions for
standard assets would also apply to the aforesaid provisions for derivative and gold
exposures.
31
DBOD-MC On IRAC Norms - 2014
5.9.13 Provisioning for housing loans at teaser rates
It has been observed that some banks are following the practice of sanctioning
housing loans at teaser rates i.e. at comparatively lower rates of interest in the first
few years, after which rates are reset at higher rates. This practice raises concern as
some borrowers may find it difficult to service the loans once the normal interest rate,
which is higher than the rate applicable in the initial years, becomes effective. It has
been also observed that many banks at the time of initial loan appraisal, do not take
into account the repaying capacity of the borrower at normal lending rates. Therefore,
the standard asset provisioning on the outstanding amount of such loans has been
increased from 0.40 per cent to 2.00 per cent in view of the higher risk associated
with them. The provisioning on these assets would revert to 0.40 per cent after 1 year
from the date on which the rates are reset at higher rates if the accounts remain
`standard\'.
5.10 Provisioning Coverage Ratio
i. Provisioning Coverage Ratio (PCR) is essentially the ratio of provisioning to gross
non-performing assets and indicates the extent of funds a bank has kept aside to
cover loan losses.
ii. From a macro-prudential perspective, banks should build up provisioning and capital
buffers in good times i.e. when the profits are good, which can be used for absorbing
losses in a downturn. This will enhance the soundness of individual banks, as also
the stability of the financial sector. It was, therefore, decided that banks should
augment their provisioning cushions consisting of specific provisions against NPAs
as well as floating provisions, and ensure that their total provisioning coverage ratio,
including floating provisions, is not less than 70 per cent. Accordingly, banks were
advised to achieve this norm not later than end-September 2010.
iii. Majority of the banks had achieved PCR of 70 percent and had represented to RBI
whether the prescribed PCR is required to be maintained on an ongoing basis. The
matter was examined and till such time RBI introduces a more comprehensive
methodology of countercyclical provisioning taking into account the international
standards as are being currently developed by Basel Committee on Banking
Supervision (BCBS) and other provisioning norms, banks were advised that :
a) the PCR of 70 percent may be with reference to the gross NPA position in
banks as on September 30, 2010;
b) the surplus of the provision under PCR vis-a-vis as required as per
prudential norms should be segregated into an account styled as
32
DBOD-MC On IRAC Norms - 2014
\"countercyclical provisioning buffer\", computation of which may be undertaken
as per the format given in Annex - 3; and
c) this buffer will be allowed to be used by banks for making specific
provisions for NPAs during periods of system wide downturn, with the prior
approval of RBI2.
iv. The PCR of the bank should be disclosed in the Notes to Accounts to the Balance
Sheet.
v. In terms of the Discussion Paper on Introduction of Dynamic Loan Loss Provisioning
Framework for Banks in India dated March 30, 2012, banks are required to build up
`Dynamic Provisioning Account\' during good times and utilise the same during
downturn. Under the proposed framework, banks are expected to either compute
parameters such as probability of default, loss given default, etc. for different asset
classes to arrive at long term average annual expected loss or use the standardised
parameters prescribed by Reserve Bank of India towards computation of Dynamic
Provisioning requirement. Dynamic loan loss provisioning framework is expected to
be in place with improvement in the system. Meanwhile, banks should develop
necessary capabilities to compute their long term average annual expected loss for
different asset classes, for switching over to the dynamic provisioning framework.
6. Guidelines on sale of financial assets to Securitisation Company (SC)/
Reconstruction Company (RC) (created under the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002) and related issues
6.1 Scope
These guidelines would be applicable to sale of financial assets enumerated in
paragraph 6.3 below, by banks/ FIs, for asset reconstruction/ securitisation under the
Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002.
6.2 Structure
The guidelines to be followed by banks/ FIs while selling their financial assets to
SC/RC under the Act ibid and investing in bonds/ debentures/ security receipts
offered by the SC/RC are given below. The prudential guidelines have been grouped
under the following headings:
2
As a countercyclical measure, on February 7, 2014, banks were permitted to utilise upto
33 per cent of countercyclical provisioning buffer / floating provisions held by them as on
March 31, 2013, for making specific provisions for non-performing assets, as per the
policy approved by their Board of Directors.
33
DBOD-MC On IRAC Norms - 2014
i) Financial assets which can be sold.
ii) Procedure for sale of banks\'/ FIs\' financial assets to SC/ RC,
including valuation and pricing aspects.
iii) Prudential norms, in the following areas, for banks/ FIs for sale of
their financial assets to SC/ RC and for investing in bonds/
debentures/ security receipts and any other securities offered by the
SC/RC as compensation consequent upon sale of financial assets:
a) Provisioning / Valuation norms
b) Capital adequacy norms
c) Exposure norms
iv) Disclosure requirements
6.3 Financial assets which can be sold
A financial asset may be sold to the SC/RC by any bank/ FI where the asset is:
i) A NPA, including a non-performing bond/ debenture.
ii) A Standard Asset where:
(a) the asset is under consortium/ multiple banking arrangements,
(b) at least 75% by value of the asset is classified as non-
performing asset in the books of other banks/FIs, and
(c) at least 75% (by value) of the banks / FIs who are under the
consortium / multiple banking arrangements agree to the sale of the
asset to SC/RC.
and
iii) An asset reported as SMA-2 by the bank / FI to Central Repository for
Information on Large Credit (CRILC) in terms of
DBOD.BP.BC.No.98/21.04.132/2013-14 February 26, 2014
6.4. Procedure for sale of banks\'/ FIs\' financial assets to
SC/ RC, including valuation and pricing aspects
(a) The Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 (SARFAESI Act) allows acquisition of financial assets
by SC/RC from any bank/ FI on such terms and conditions as may be agreed upon
between them. This provides for sale of the financial assets on `without recourse\'
basis, i.e., with the entire credit risk associated with the financial assets being
transferred to SC/ RC, as well as on `with recourse\' basis, i.e., subject to unrealized
part of the asset reverting to the seller bank/ FI. Banks/ FIs are, however, directed to
ensure that the effect of the sale of the financial assets should be such that the asset
34
DBOD-MC On IRAC Norms - 2014
is taken off the books of the bank/ FI and after the sale there should not be any
known liability devolving on the banks/ FIs.
(b) Banks/ FIs, which propose to sell to SC/RC their financial assets should
ensure that the sale is conducted in a prudent manner in accordance with a policy
approved by the Board. The Board shall lay down policies and guidelines covering,
inter alia,
i. Financial assets to be sold;
ii. Norms and procedure for sale of such financial assets;
iii. Valuation procedure to be followed to ensure that the realisable value of
financial assets is reasonably estimated;
iv. Delegation of powers of various functionaries for taking decision on the
sale of the financial assets; etc.
(c) Banks/ FIs should ensure that subsequent to sale of the financial assets to
SC/RC, they do not assume any operational, legal or any other type of risks relating
to the financial assets sold.
(d) (i) Each bank / FI will make its own assessment of the value offered by
the SC / RC for the financial asset and decide whether to accept or
reject the offer.
(ii) In the case of consortium / multiple banking arrangements, if 75%
(by value) of the banks / FIs decide to accept the offer, the remaining
banks / FIs will be obligated to accept the offer.
(iii) Under no circumstances can a transfer to the SC/ RC be made at a
contingent price whereby in the event of shortfall in the realization by
the SC/RC, the banks/ FIs would have to bear a part of the shortfall.
(iv) Banks using auction process for sale of NPAs to SCs / RCs should be
more transparent, including disclosure of the Reserve Price, specifying
clauses for non-acceptance of bids, etc. If a bid received is above the
Reserve Price and a minimum of 50 per cent of sale proceeds is in
cash, and also fulfills the other conditions specified in the Offer
Document, acceptance of that bid would be mandatory.
(e) Banks/ FIs may receive cash or bonds or debentures as sale consideration
for the financial assets sold to SC/RC.
(f) Bonds/ debentures received by banks/ FIs as sale consideration towards sale
of financial assets to SC/RC will be classified as investments in the books of banks/
FIs.
35
DBOD-MC On IRAC Norms - 2014
(g) Banks may also invest in security receipts, Pass-through certificates (PTC), or
other bonds/ debentures issued by SC/RC. These securities will also be classified as
investments in the books of banks/ FIs.
(h) In cases of specific financial assets, where it is considered necessary, banks/
FIs may enter into agreement with SC/RC to share, in an agreed proportion, any
surplus realised by SC/RC on the eventual realisation of the concerned asset. In
such cases the terms of sale should provide for a report from the SC/RC to the bank/
FI on the value realised from the asset. No credit for the expected profit will be taken
by banks/ FIs until the profit materializes on actual sale.
6.5. Prudential norms for banks/ FIs for the sale transactions
(A) Provisioning/ valuation norms
(a) (i) When a bank / FI sells its financial assets to SC/ RC, on transfer the
same will be removed from its books.
(ii) If the sale to SC/ RC is at a price below the net book value (NBV) (i.e.,
book value less provisions held), the shortfall should be debited to the
profit and loss account of that year. Banks can also use countercyclical
/ floating provisions for meeting any shortfall on sale of NPAs i.e.,
when the sale is at a price below the net book value (NBV).
However, for assets sold on or after February 26, 2014 and upto
March 31, 2015, as an incentive for early sale of NPAs, banks can
spread over any shortfall, if the sale value is lower than the NBV, over
a period of two years. This facility of spreading over the shortfall will be
subject to necessary disclosures in the Notes to Account in Annual
Financial Statements of the banks.
(iii) For assets sold on or after February 26, 2014, banks can reverse the
excess provision on sale of NPAs, if the sale value is for a value higher
than the NBV, to its profit and loss account in the year the amounts are
received. However, banks can reverse excess provision arising out of
sale of NPAs only when the cash received (by way of initial
consideration and / or redemption of SRs / PTCs) is higher than the
net book value (NBV) of the asset. Further, reversal of excess
provision will be limited to the extent to which cash received exceeds
the NBV of the asset.
With regard to assets sold before February 26, 2014, excess provision,
on account of sale value being higher than NBV, should not be
reversed but should be utilized to meet the shortfall/ loss on account of
sale of other financial assets to SC/RC.
(iv) When banks/ FIs invest in the security receipts/ pass-through
certificates issued by SC/RC in respect of the financial assets sold
by them to the SC/RC, the sale shall be recognised in books of the
banks / FIs at the lower of:
36
DBOD-MC On IRAC Norms - 2014
Ø the redemption value of the security receipts/ pass-through
certificates, and
Ø the NBV of the financial asset.
The above investment should be carried in the books of the bank / FI
at the price as determined above until its sale or realization, and on
such sale or realization, the loss or gain must be dealt with in the
same manner as at (ii) and (iii) above.
(b) The securities (bonds and debentures) offered by SC / RC should satisfy the
following conditions:
(i) The securities must not have a term in excess of six years.
(ii) The securities must carry a rate of interest which is not lower than
1.5% above the Bank Rate in force at the time of issue.
(iii) The securities must be secured by an appropriate charge on the
assets transferred.
(iv) The securities must provide for part or full prepayment in the event
the SC / RC sells the asset securing the security before the maturity
date of the security.
(v). The commitment of the SC / RC to redeem the securities must be
unconditional and not linked to the realization of the assets.
(vi) Whenever the security is transferred to any other party, notice of
transfer should be issued to the SC/ RC.
(c) Investment in debentures/ bonds/ security receipts/ Pass-through certificates
issued by SC/ RC
All instruments received by banks/FIs from SC/RC as sale consideration for financial
assets sold to them and also other instruments issued by SC/ RC in which banks/ FIs
invest will be in the nature of non SLR securities. Accordingly, the valuation,
classification and other norms applicable to investment in non-SLR instruments
prescribed by RBI from time to time would be applicable to bank\'s/ FI\'s investment in
debentures/ bonds/ security receipts/PTCs issued by SC/ RC. However, if any of the
above instruments issued by SC/RC is limited to the actual realisation of the financial
assets assigned to the instruments in the concerned scheme the bank/ FI shall
reckon the Net Asset Value (NAV), obtained from SC/RC from time to time, for
valuation of such investments.
(B) Exposure Norms
Banks\'/ FIs\' investments in debentures/ bonds/ security receipts/PTCs issued by a
SC/RC will constitute exposure on the SC/RC. As only a few SC/RC are being set up
now, banks\'/ FIs\' exposure on SC/RC through their investments in debentures/
bonds/security receipts/PTCs issued by the SC/ RC may go beyond their prudential
37
DBOD-MC On IRAC Norms - 2014
exposure ceiling. In view of the extra ordinary nature of event, banks/ FIs will be
allowed, in the initial years, to exceed prudential exposure ceiling on a case-to-case
basis.
6.6. Disclosure Requirements
Banks/ FIs, which sell their financial assets to an SC/ RC, shall be required to make the
following disclosures in the Notes on Accounts to their Balance sheets:
Details of financial assets sold during the year to SC/RC for Asset Reconstruction
a. No. of accounts
b. Aggregate value (net of provisions) of accounts sold to SC / RC
c. Aggregate consideration
d. Additional consideration realized in respect of accounts transferred in
earlier years
e. Aggregate gain / loss over net book value.
6.7. Related Issues
(a) SC/ RC will also take over financial assets which cannot be revived and
which, therefore, will have to be disposed of on a realisation basis. Normally
the SC/ RC will not take over these assets but act as an agent for recovery for
which it will charge a fee.
(b) Where the assets fall in the above category, the assets will not be removed
from the books of the bank/ FI but realisations as and when received will be
credited to the asset account. Provisioning for the asset will continue to be
made by the bank / FI in the normal course.
7. Guidelines on purchase/ sale of Non - Performing Financial Assets (other than
to SC/RC)
In order to increase the options available to banks for resolving their non performing
assets and to develop a healthy secondary market for nonperforming assets, where
securitisation companies and reconstruction companies are not involved, guidelines have
been issued to banks on purchase / sale of Non Performing Assets. Since the sale/purchase
of nonperforming financial assets under this option would be conducted within the financial
system the whole process of resolving the non performing assets and matters related thereto
has to be initiated with due diligence and care warranting the existence of a set of clear
guidelines which shall be complied with by all entities so that the process of resolving non-
performing assets by sale and purchase of NPAs proceeds on smooth and sound lines.
Accordingly guidelines on sale/purchase of nonperforming assets have been formulated and
furnished below. The guidelines may be placed before the bank\'s /FI\'s /NBFC\'s Board and
appropriate steps may be taken for their implementation.
38
DBOD-MC On IRAC Norms - 2014
Scope
7.1 These guidelines would be applicable to banks, FIs and NBFCs purchasing/ selling non
performing financial assets, from/ to other banks/FIs/NBFCs (excluding securitisation
companies/ reconstruction companies).
A financial asset, including assets under multiple/consortium banking arrangements, would
be eligible for purchase/sale in terms of these guidelines if it is a nonperforming asset/non
performing investment in the books of the selling bank.
The reference to `bank\' in the guidelines on purchase/sale of nonperforming financial
assets would include financial institutions and NBFCs.
Structure
7.2 The guidelines to be followed by banks purchasing/ selling nonperforming financial
assets from / to other banks are given below. The guidelines have been grouped under the
following headings:
i) Procedure for purchase/ sale of non performing financial assets by banks,
including valuation and pricing aspects.
ii) Prudential norms, in the following areas, for banks for purchase/ sale of
non performing financial assets:
a) Asset classification norms
b) Provisioning norms
c) Accounting of recoveries
d) Capital adequacy norms
e) Exposure norms
iii) Disclosure requirements
7.3 Procedure for purchase/ sale of non performing financial assets, including
valuation and pricing aspects
i) A bank which is purchasing/ selling nonperforming financial assets should
ensure that the purchase/ sale is conducted in accordance with a policy approved
by the Board. The Board shall lay down policies and guidelines covering, inter alia,
a) Non performing financial assets that may be purchased/ sold;
b) Norms and procedure for purchase/ sale of such financial assets;
c) Valuation procedure to be followed to ensure that the economic value
of financial assets is reasonably estimated based on the estimated
cash flows arising out of repayments and recovery prospects;
39
DBOD-MC On IRAC Norms - 2014
d) Delegation of powers of various functionaries for taking decision on
the purchase/ sale of the financial assets; etc.
e) Accounting policy
ii) While laying down the policy, the Board shall satisfy itself that the bank has
adequate skills to purchase non performing financial assets and deal with them in an
efficient manner which will result in value addition to the bank. The Board should also
ensure that appropriate systems and procedures are in place to effectively
address the risks that a purchasing bank would assume while engaging in this
activity.
iii) Banks should, while selling NPAs, work out the net present value of the
estimated cash flows associated with the realisable value of the available securities
net of the cost of realisation. The sale price should generally not be lower than the
net present value arrived at in the manner described above. (same principle should
be used in compromise settlements. As the payment of the compromise amount may
be in instalments, the net present value of the settlement amount should be
calculated and this amount should generally not be less than the net present value of
the realisable value of securities.)
iv) The estimated cash flows are normally expected to be realised within a period
of three years and at least 10% of the estimated cash flows should be realized in the
first year and at least 5% in each half year thereafter, subject to full recovery within
three years.
v) A bank may purchase/sell nonperforming financial assets from/to other
banks only on `without recourse\' basis, i.e., the entire credit risk associated with the
nonperforming financial assets should be transferred to the purchasing bank. Selling
bank shall ensure that the effect of the sale of the financial assets should be such
that the asset is taken off the books of the bank and after the sale there should not
be any known liability devolving on the selling bank.
vi) Banks should ensure that subsequent to sale of the non performing financial
assets to other banks, they do not have any involvement with reference to assets
sold and do not assume operational, legal or any other type of risks relating to the
financial assets sold. Consequently, the specific financial asset should not enjoy the
support of credit enhancements / liquidity facilities in any form or manner.
vii) Each bank will make its own assessment of the value offered by the
purchasing bank for the financial asset and decide whether to accept or reject the
40
DBOD-MC On IRAC Norms - 2014
offer.
viii) Under no circumstances can a sale to other banks be made at a contingent
price whereby in the event of shortfall in the realization by the purchasing banks, the
selling banks would have to bear a part of the shortfall.
ix) Banks shall sell nonperforming financial assets to other banks only on cash
basis. The entire sale consideration should be received upfront and the asset can be
taken out of the books of the selling bank only on receipt of the entire sale
consideration.
x) A nonperforming financial asset should be held by the purchasing bank in its
books at least for a period of 12 months before it is sold to other banks. Banks should
not sell such assets back to the bank, which had sold the NPFA.
(xi) Banks are also permitted to sell/buy homogeneous pool within retail non-
performing financial assets, on a portfolio basis provided each of the nonperforming
financial assets of the pool has remained as nonperforming financial asset for at least
2 years in the books of the selling bank. The pool of assets would be treated as a
single asset in the books of the purchasing bank.
xii) The selling bank shall pursue the staff accountability aspects as per the
existing instructions in respect of the nonperforming assets sold to other banks.
7.4. Prudential norms for banks for the purchase/ sale transactions
(A) Asset classification norms
(i) The nonperforming financial asset purchased, may be classified as `standard\'
in the books of the purchasing bank for a period of 90 days from the date of
purchase. Thereafter, the asset classification status of the financial asset purchased,
shall be determined by the record of recovery in the books of the purchasing
bank with reference to cash flows estimated while purchasing the asset which should
be in compliance with requirements in Para 7.3 (iv).
(ii) The asset classification status of an existing exposure (other than purchased
financial asset) to the same obligor in the books of the purchasing bank will continue
to be governed by the record of recovery of that exposure and hence may be
different.
(iii) Where the purchase/sale does not satisfy any of the prudential
41
DBOD-MC On IRAC Norms - 2014
requirements prescribed in these guidelines the asset classification status of the
financial asset in the books of the purchasing bank at the time of purchase shall be
the same as in the books of the selling bank. Thereafter, the asset classification
status will continue to be determined with reference to the date of NPA in the selling
bank.
(iv) Any restructure/reschedule/rephrase of the repayment schedule or the
estimated cash flow of the nonperforming financial asset by the purchasing bank
shall render the account as a nonperforming asset.
(B) Provisioning norms
Books of selling bank
i) When a bank sells its nonperforming financial assets to other banks, the
same will be removed from its books on transfer.
ii) If the sale is at a price below the net book value (NBV) (i.e., book value less
provisions held), the shortfall should be debited to the profit and loss account of that
year.
iii) If the sale is for a value higher than the NBV, the excess provision shall not
be reversed but will be utilised to meet the shortfall/ loss on account of sale of other
nonperforming financial assets.
Books of purchasing bank
The asset shall attract provisioning requirement appropriate to its asset classification
status in the books of the purchasing bank.
(C) Accounting of recoveries
Any recovery in respect of a nonperforming asset purchased from other banks
should first be adjusted against its acquisition cost. Recoveries in excess of the
acquisition cost can be recognised as profit.
(D) Capital Adequacy
For the purpose of capital adequacy, banks should assign 100% risk weights to the
nonperforming financial assets purchased from other banks. In case the non-
performing asset purchased is an investment, then it would attract capital charge for
market risks also. For NBFCs the relevant instructions on capital adequacy would be
applicable.
(E) Exposure Norms
42
DBOD-MC On IRAC Norms - 2014
The purchasing bank will reckon exposure on the obligor of the specific financial
asset. Hence these banks should ensure compliance with the prudential credit
exposure ceilings (both single and group) after reckoning the exposures to the
obligors arising on account of the purchase. For NBFCs the relevant instructions on
exposure norms would be applicable.
7.5. Disclosure Requirements
Banks which purchase nonperforming financial assets from other banks shall be required to
make the following disclosures in the Notes on Accounts to their Balance sheets:
A. Details of nonperforming financial assets purchased:
(Amounts in Rupees crore)
1. (a) No. of accounts purchased during the year
(b) Aggregate outstanding
2. (a) Of these, number of accounts restructured during the year
(b) Aggregate outstanding
B. Details of nonperforming financial assets sold:
(Amounts in Rupees crore)
1. No. of accounts sold
2. Aggregate outstanding
3. Aggregate consideration received
C. The purchasing bank shall furnish all relevant reports to RBI, credit
information company which has obtained Certificate of Registration from RBI and of
which the bank is a member etc. in respect of the nonperforming financial
assets purchased by it.
8. Writing off of NPAs
8.1 In terms of Section 43(D) of the Income Tax Act 1961, income by way of interest in
relation to such categories of bad and doubtful debts as may be prescribed having regard to
the guidelines issued by the RBI in relation to such debts, shall be chargeable to tax in the
previous year in which it is credited to the bank\'s profit and loss account or received,
whichever is earlier.
8.2 This stipulation is not applicable to provisioning required to be made as indicated
above. In other words, amounts set aside for making provision for NPAs as above are not
eligible for tax deductions.
43
DBOD-MC On IRAC Norms - 2014
8.3 Therefore, the banks should either make full provision as per the guidelines or write-
off such advances and claim such tax benefits as are applicable, by evolving appropriate
methodology in consultation with their auditors/tax consultants. Recoveries made in such
accounts should be offered for tax purposes as per the rules.
8.4 Write-off at Head Office Level
Banks may write-off advances at Head Office level, even though the relative advances are
still outstanding in the branch books. However, it is necessary that provision is made as per
the classification accorded to the respective accounts. In other words, if an advance is a
loss asset, 100 percent provision will have to be made therefor.
9. NPA Management Requirement of Effective Mechanism and Granular Data
(i) Asset quality of banks is one of the most important indicators of their financial health.
Banks should, therefore put in place a robust MIS mechanism for early detection of signs of
distress at individual account level as well as at segment level (asset class, industry,
geographic, size, etc.). Such early warning signals should be used for putting in place an
effective preventive asset quality management framework, including a transparent
restructuring mechanism for viable accounts under distress within the prevailing regulatory
framework, for preserving the economic value of those entities in all segments.
(ii) The banks\' IT and MIS system should be robust and able to generate reliable and quality
information with regard to their asset quality for effective decision making. There should be
no inconsistencies between information furnished under regulatory / statutory reporting and
the banks\' own MIS reporting. Banks should also have system generated segment wise
information on non-performing assets and restructured assets which may include data on the
opening balances, additions, reductions (upgradations, actual recoveries, write-offs etc.),
closing balances, provisions held, technical write-offs, etc.
44
DBOD-MC On IRAC Norms - 2014
PART B
Prudential Guidelines on Restructuring of Advances by Banks
10. Background
10.1 The guidelines issued by the Reserve Bank of India on restructuring of advances
(other than those restructured under a separate set of guidelines issued by the Rural
Planning and Credit Department (RPCD) of the RBI on restructuring of advances on account
of natural calamities) are divided into the following four categories :
(i) Guidelines on restructuring of advances extended to industrial units.
(ii) Guidelines on restructuring of advances extended to industrial units under the
Corporate Debt Restructuring (CDR) Mechanism
(iii) Guidelines on restructuring of advances extended to Small and Medium
Enterprises (SME)
(iv) Guidelines on restructuring of all other advances.
In these four sets of guidelines on restructuring of advances, the differentiations were
broadly made based on whether a borrower is engaged in an industrial activity or a non-
industrial activity. In addition, an elaborate institutional mechanism was laid down for
accounts restructured under CDR Mechanism. The major difference in the prudential
regulations was in the stipulation that subject to certain conditions, the accounts of
borrowers engaged in industrial activities (under CDR Mechanism, SME Debt Restructuring
Mechanism and outside these mechanisms) continued to be classified in the existing asset
classification category upon restructuring. This benefit of retention of asset classification on
restructuring was not made available to the accounts of borrowers engaged in non-industrial
activities except to SME borrowers. Another difference was that the prudential regulations
covering the CDR Mechanism and restructuring of advances extended to SMEs were more
detailed and comprehensive than that covering the restructuring of the rest of the advances
including the advances extended to the industrial units, outside CDR Mechanism. Further,
the CDR Mechanism was made available only to the borrowers engaged in industrial
activities.
10.2 Since the principles underlying the restructuring of all advances were identical, it
was felt that the prudential regulations needed to be aligned in all cases. Accordingly, the
prudential norms across all categories of debt restructuring mechanisms, other than those
restructured on account of natural calamities which will continue to be covered by the extant
guidelines issued by the RPCD, were harmonised in August 2008.
10.3 In the backdrop of extraordinary rise in restructured standard advances, these
prudential norms were further revised by taking into account the recommendations of the
45
DBOD-MC On IRAC Norms - 2014
Working Group (Chairman: Shri B. Mahapatra) to review the existing prudential guidelines
on restructuring of advances by banks/financial institutions. These prudential norms
applicable to all restructurings including those under CDR Mechanism are included in this
circular. The details of the institutional / organizational framework for CDR Mechanism and
SME Debt Restructuring Mechanism are given in Annex - 4.
10.4 The CDR Mechanism (Annex - 4) will also be available to the corporates
engaged in non-industrial activities, if they are otherwise eligible for restructuring as per the
criteria laid down for this purpose. Further, banks are also encouraged to strengthen the co-
ordination among themselves in the matter of restructuring of consortium / multiple banking
accounts, which are not covered under the CDR Mechanism.
11. Key Concepts
Key concepts used in these guidelines are defined in Annex - 5.
12. General Principles and Prudential Norms for Restructured Advances
The principles and prudential norms laid down in this paragraph are applicable to all
advances including the borrowers, who are eligible for special regulatory treatment for asset
classification as specified in para 15.
12.1 Eligibility criteria for restructuring of advances
12.1.1 Banks may restructure the accounts classified under \'standard\', \'sub-
standard\' and \'doubtful\' categories.
12.1.2 Banks cannot reschedule / restructure / renegotiate borrowal accounts
with retrospective effect. While a restructuring proposal is under consideration, the
usual asset classification norms would continue to apply. The process of re-
classification of an asset should not stop merely because restructuring proposal is
under consideration. The asset classification status as on the date of approval of the
restructured package by the competent authority would be relevant to decide the
asset classification status of the account after restructuring / rescheduling /
renegotiation. In case there is undue delay in sanctioning a restructuring package and
in the meantime the asset classification status of the account undergoes deterioration, it
would be a matter of supervisory concern.
12.1.3 Normally, restructuring cannot take place unless alteration / changes
in the original loan agreement are made with the formal consent / application of the
debtor. However, the process of restructuring can be initiated by the bank in
deserving cases subject to customer agreeing to the terms and conditions.
46
DBOD-MC On IRAC Norms - 2014
12.1.4 No account will be taken up for restructuring by the banks unless the
financial viability is established and there is a reasonable certainty of repayment from
the borrower, as per the terms of restructuring package. Any restructuring done
without looking into cash flows of the borrower and assessing the viability of the
projects / activity financed by banks would be treated as an attempt at ever greening a
weak credit facility and would invite supervisory concerns / action. Banks should
accelerate the recovery measures in respect of such accounts. The viability should be
determined by the banks based on the acceptable viability benchmarks determined by
them, which may be applied on a case-by-case basis, depending on merits of each
case. Illustratively, the parameters may include the Return on Capital Employed, Debt
Service Coverage Ratio, Gap between the Internal Rate of Return and Cost of Funds
and the amount of provision required in lieu of the diminution in the fair value of the
restructured advance. As different sectors of economy have different performance
indicators, it will be desirable that banks adopt these broad benchmarks with suitable
modifications. Therefore, it has been decided that the viability should be determined
by the banks based on the acceptable viability parameters and benchmarks for each
parameter determined by them. The benchmarks for the viability parameters adopted
by the CDR Mechanism are given in the Appendix to Part B of this Master Circular
and individual banks may suitably adopt them with appropriate adjustments, if any, for
specific sectors while restructuring of accounts in non-CDR cases.
12.1.5 While the borrowers indulging in frauds and malfeasance will continue
to remain ineligible for restructuring, banks may review the reasons for classification
of the borrowers as wilful defaulters, specially in old cases where the manner of
classification of a borrower as a wilful defaulter was not transparent, and satisfy itself
that the borrower is in a position to rectify the wilful default. The restructuring of such
cases may be done with Board\'s approval, while for such accounts the restructuring
under the CDR Mechanism may be carried out with the approval of the Core Group
only.
12.1.6 BIFR cases are not eligible for restructuring without their express
approval. CDR Core Group in the case of advances restructured under CDR
Mechanism, the lead bank in the case of SME Debt Restructuring Mechanism and the
individual banks in other cases, may consider the proposals for restructuring in such
cases, after ensuring that all the formalities in seeking the approval from BIFR are
completed before implementing the package.
47
DBOD-MC On IRAC Norms - 2014
12.2 Asset classification norms
Restructuring of advances could take place in the following stages:
(a) before commencement of commercial production / operation;
(b) after commencement of commercial production / operation but before
the asset has been classified as \'sub-standard\';
(c) after commencement of commercial production / operation and the
asset has been classified as \'sub-standard\' or \'doubtful\'.
12.2.1 The accounts classified as \'standard assets\' should be immediately re-
classified as \'sub-standard assets\' upon restructuring.
12.2.2 The non-performing assets, upon restructuring, would continue to have
the same asset classification as prior to restructuring and slip into further lower asset
classification categories as per extant asset classification norms with reference to the
pre-restructuring repayment schedule.
12.2.3 Standard accounts classified as NPA and NPA accounts retained in the
same category on restructuring by the bank should be upgraded only when all the
outstanding loan/facilities in the account perform satisfactorily during the `specified
period\' (Annex - 5), i.e. principal and interest on all facilities in the account are
serviced as per terms of payment during that period.
12.2.4 In case, however, satisfactory performance after the specified period is
not evidenced, the asset classification of the restructured account would be governed
as per the applicable prudential norms with reference to the pre-restructuring payment
schedule.
12.2.5 Any additional finance may be treated as \'standard asset\' during the
specified period (Annex 5) under the approved restructuring package. However, in
the case of accounts where the pre-restructuring facilities were classified as \'sub-
standard\' and \'doubtful\', interest income on the additional finance should be
recognised only on cash basis. If the restructured asset does not qualify for
upgradation at the end of the above specified period, the additional finance shall be
placed in the same asset classification category as the restructured debt.
12.2.6 If a restructured asset, which is a standard asset on restructuring in
terms of para 14.5.2, is subjected to restructuring on a subsequent occasion, it should
be classified as substandard. If the restructured asset is a sub-standard or a doubtful
asset and is subjected to restructuring, on a subsequent occasion, its asset
classification will be reckoned from the date when it became NPA on the first
occasion. However, such advances restructured on second or more occasion may be
48
DBOD-MC On IRAC Norms - 2014
allowed to be upgraded to standard category after the specified period (Annex-5) in
terms of the current restructuring package, subject to satisfactory performance.
12.3 Income recognition norms
Subject to provisions of paragraphs 12.2.5, 13.2 and 14.2, interest income in respect of
restructured accounts classified as \'standard assets\' will be recognized on accrual basis and
that in respect of the accounts classified as \'non-performing assets\' will be recognized on
cash basis.
12.4 Provisioning norms
12.4.1 Provision on restructured advances
(i) Banks will hold provision against the restructured advances as per the extant
provisioning norms.
(ii) Restructured accounts classified as standard advances will attract a higher
provision (as prescribed from time to time) in the first two years from the date of
restructuring. In cases of moratorium on payment of interest/principal after
restructuring, such advances will attract the prescribed higher provision for the period
covering moratorium and two years thereafter.
(iii) Restructured accounts classified as non-performing advances, when upgraded to
standard category will attract a higher provision (as prescribed from time to time) in
the first year from the date of upgradation.
(iv) The above-mentioned higher provision on restructured standard advances (2.75
per cent as prescribed vide circular dated November 26, 2012) would increase to 5
per cent in respect of new restructured standard accounts (flow) with effect from June
1, 2013 and increase in a phased manner for the stock of restructured standard
accounts as on May 31, 2013 as under :
· 3.50 per cent - with effect from March 31, 2014 (spread over the four quarters of
2013-14)
· 4.25 per cent - with effect from March 31, 2015 (spread over the four quarters of
2014-15)
· 5.00 per cent - - with effect from March 31, 2016 (spread over the four quarters of
2015-16)
12.4.2 Provision for diminution in the fair value of restructured advances
(i) Reduction in the rate of interest and / or reschedulement of the
repayment of principal amount, as part of the restructuring, will result in
diminution in the fair value of the advance. Such diminution in value is an
economic loss for the bank and will have impact on the bank\'s market value of
49
DBOD-MC On IRAC Norms - 2014
equity. It is, therefore, necessary for banks to measure such diminution in the
fair value of the advance and make provisions for it by debit to Profit & Loss
Account. Such provision should be held in addition to the provisions as per
existing provisioning norms as indicated in para 12.4.1 above, and in an
account distinct from that for normal provisions.
For this purpose, the erosion in the fair value of the advance should be
computed as the difference between the fair value of the loan before and after
restructuring. Fair value of the loan before restructuring will be computed as
the present value of cash flows representing the interest at the existing rate
charged on the advance before restructuring and the principal, discounted at
a rate equal to the bank\'s BPLR or base rate3 (whichever is applicable to the
borrower) as on the date of restructuring plus the appropriate term premium
and credit risk premium for the borrower category on the date of restructuring.
Fair value of the loan after restructuring will be computed as the present value
of cash flows representing the interest at the rate charged on the advance on
restructuring and the principal, discounted at a rate equal to the bank\'s BPLR
or base rate (whichever is applicable to the borrower) as on the date of
restructuring plus the appropriate term premium and credit risk premium for
the borrower category on the date of restructuring.
The above formula moderates the swing in the diminution of present value of
loans with the interest rate cycle and will have to be followed consistently by
banks in future. Further, it is reiterated that the provisions required as above
arise due to the action of the banks resulting in change in contractual terms of
the loan upon restructuring which are in the nature of financial concessions.
These provisions are distinct from the provisions which are linked to the asset
classification of the account classified as NPA and reflect the impairment due
to deterioration in the credit quality of the loan. Thus, the two types of the
provisions are not substitute for each other.
ii) It was observed that on a few occasions, there were divergences in the
calculation of diminution of fair value of accounts by banks. Illustratively,
divergences could occur if banks are not appropriately factoring in the term
premium on account of elongation of repayment period on restructuring. In
such a case the term premium used while calculating the present value of
3
This change has been introduced as a result of the introduction of Base Rate System w.e.f. July 1, 2010 vide
circular DBOD.No.Dir.BC.88/13.03.00/2009-10 dated April 9, 2010 on `Guidelines on the Base Rate\'.
50
DBOD-MC On IRAC Norms - 2014
cash flows after restructuring would be higher than the term premium used
while calculating the present value of cash flows before restructuring. Further,
the amount of principal converted into debt/equity instruments on restructuring
would need to be held under AFS and valued as per usual valuation norms.
Since these instruments are getting marked to market, the erosion in fair
value gets captured on such valuation. Therefore, for the purpose of arriving
at the erosion in the fair value, the NPV calculation of the portion of principal
not converted into debt/equity has to be carried out separately. However, the
total sacrifice involved for the bank would be NPV of the above portion plus
valuation loss on account of conversion into debt/equity instruments.
Banks are therefore advised that they should correctly capture the diminution
in fair value of restructured accounts as it will have a bearing not only on the
provisioning required to be made by them but also on the amount of sacrifice
required from the promoters (Ref. para 15.2.2.iv). Further, there should not be
any effort on the part of banks to artificially reduce the net present value of
cash flows by resorting to any sort of financial engineering. Banks are also
advised to put in place a proper mechanism of checks and balances to ensure
accurate calculation of erosion in the fair value of restructured accounts.
(iii) In the case of working capital facilities, the diminution in the fair
value of the cash credit / overdraft component may be computed as indicated
in para (i) above, reckoning the higher of the outstanding amount or the limit
sanctioned as the principal amount and taking the tenor of the advance as
one year. The term premium in the discount factor would be as applicable for
one year. The fair value of the term loan components (Working Capital Term
Loan and Funded Interest Term Loan) would be computed as per actual cash
flows and taking the term premium in the discount factor as applicable for the
maturity of the respective term loan components.
(iv) In the event any security is taken in lieu of the diminution in the
fair value of the advance, it should be valued at Re.1/- till maturity of the
security. This will ensure that the effect of charging off the economic sacrifice
to the Profit & Loss account is not negated.
(v) The diminution in the fair value may be re-computed on each
balance sheet date till satisfactory completion of all repayment obligations and
full repayment of the outstanding in the account, so as to capture the changes
in the fair value on account of changes in BPLR or base rate (whichever is
51
DBOD-MC On IRAC Norms - 2014
applicable to the borrower), term premium and the credit category of the
borrower. Consequently, banks may provide for the shortfall in provision or
reverse the amount of excess provision held in the distinct account.
(vi) If due to lack of expertise / appropriate infrastructure, a bank finds
it difficult to ensure computation of diminution in the fair value of advances, as
an alternative to the methodology prescribed above for computing the amount
of diminution in the fair value, banks will have the option of notionally
computing the amount of diminution in the fair value and providing therefor, at
five per cent of the total exposure, in respect of all restructured accounts
where the total dues to bank(s) are less than rupees one crore.
12.4.3 The total provisions required against an account (normal provisions
plus provisions in lieu of diminution in the fair value of the advance) are capped at
100% of the outstanding debt amount.
12.5 Risk-Weights
a. Restructured housing loans should be risk weighted with an additional risk weight of 25
percentage points.
b. With a view to reflecting a higher element of inherent risk which may be latent in entities
whose obligations have been subjected to restructuring / rescheduling either by banks on
their own or along with other bankers / creditors, the unrated standard / performing claims on
corporates should be assigned a higher risk weight of 125% until satisfactory performance
under the revised payment schedule has been established for one year from the date when
the first payment of interest / principal falls due under the revised schedule.
c. For details on risk weights, Master Circular DBOD.No.BP.MC.2/21.06.201/2013-14 dated
July 1, 2013 on `Basel III Capital Regulations\' may be referred.
13. Prudential Norms for Conversion of Principal into Debt / Equity
13.1 Asset classification norms
A part of the outstanding principal amount can be converted into debt or equity
instruments as part of restructuring. The debt / equity instruments so created will be
classified in the same asset classification category in which the restructured advance has
been classified. Further movement in the asset classification of these instruments would also
be determined based on the subsequent asset classification of the restructured advance.
13.2 Income recognition norms
13.2.1 Standard Accounts
52
DBOD-MC On IRAC Norms - 2014
In the case of restructured accounts classified as \'standard\', the income, if any,
generated by these instruments may be recognised on accrual basis.
13.2.2 Non- Performing Accounts
In the case of restructured accounts classified as non-performing assets, the income,
if any, generated by these instruments may be recognised only on cash basis.
13.3 Valuation and provisioning norms
These instruments should be held under AFS and valued as per usual valuation norms.
Equity classified as standard asset should be valued either at market value, if quoted, or at
break-up value, if not quoted (without considering the revaluation reserve, if any) which is to
be ascertained from the company\'s latest balance sheet. In case the latest balance sheet is
not available, the shares are to be valued at Re. 1. Equity instrument classified as NPA
should be valued at market value, if quoted, and in case where equity is not quoted ,it should
be valued at Re. 1. Depreciation on these instruments should not be offset against the
appreciation in any other securities held under the AFS category.
14. Prudential Norms for Conversion of Unpaid Interest into \'Funded Interest Term
Loan\' (FITL), Debt or Equity Instruments
14.1 Asset classification norms
The FITL / debt or equity instrument created by conversion of unpaid interest will be
classified in the same asset classification category in which the restructured advance has
been classified. Further movement in the asset classification of FITL / debt or equity
instruments would also be determined based on the subsequent asset classification of the
restructured advance.
14.2 Income recognition norms
14.2.1 The income, if any, generated by these instruments may be recognised
on accrual basis, if these instruments are classified as \'standard\', and on cash basis
in the cases where these have been classified as a non-performing asset.
14.2.2 The unrealised income represented by FITL / Debt or equity instrument
should have a corresponding credit in an account styled as \"Sundry Liabilities
Account (Interest Capitalization)\".
14.2.3 In the case of conversion of unrealised interest income into equity,
which is quoted, interest income can be recognized after the account is upgraded to
standard category at market value of equity, on the date of such upgradation, not
exceeding the amount of interest converted into equity.
53
DBOD-MC On IRAC Norms - 2014
14.2.4 Only on repayment in case of FITL or sale / redemption proceeds of the
debt / equity instruments, the amount received will be recognized in the P&L
Account, while simultaneously reducing the balance in the \"Sundry Liabilities Account
(Interest Capitalisation)\".
14.2.5 It is learnt that banks have not uniformly adhered to these instructions. It is
reiterated that whenever the unrealised interest income of a loan is converted into
FITL / Debt or equity instrument, banks must have a corresponding credit in an
account styled as \"Sundry Liabilities Account (Interest Capitalization). Banks are
advised to strictly adhere to these instructions and rectify the position, if required,
before finalising their balance sheets for the financial year 2013-14.
14.3 Valuation & Provisioning norms
Valuation and provisioning norms would be as per para 13.3 above. The depreciation, if any,
on valuation may be charged to the Sundry Liabilities (Interest Capitalisation) Account.
15. Special Regulatory Treatment for Asset Classification
15.1 The special regulatory treatment for asset classification, in modification to the
provisions in this regard stipulated in para 12, will be available to the borrowers engaged in
important business activities, subject to compliance with certain conditions as e numerated
in para 15.2 below. Such treatment is not extended to the following categories of advances:
i. Consumer and personal advances;
ii. Advances classified as Capital market exposures;
iii. Advances classified as commercial real estate exposures
The asset classification of these three categories accounts as well as that of other accounts
which do not comply with the conditions enumerated in para 15.2, will be governed by the
prudential norms in this regard described in para 12 above.
15.2 Elements of special regulatory framework
The special regulatory treatment has the following two components:
(i) Incentive for quick implementation of the restructuring package.
(ii) Retention of the asset classification of the restructured account in the
pre-restructuring asset classification category
15.2.1 Incentive for quick implementation of the restructuring package
54
DBOD-MC On IRAC Norms - 2014
As stated in para 12.1.2, during the pendency of the application for
restructuring of the advance with the bank, the usual asset classification norms would
continue to apply. The process of reclassification of an asset should not stop merely
because the application is under consideration. However, as an incentive for quick
implementation of the package, if the approved package is implemented by the bank
as per the following time schedule, the asset classification status may be restored to
the position which existed when the reference was made to the CDR Cell in respect of
cases covered under the CDR Mechanism or when the restructuring application was
received by the bank in non-CDR cases:
(i) Within 120 days from the date of approval under the CDR Mechanism.
(ii) Within 120 days from the date of receipt of application by the bank in
cases other than those restructured under the CDR Mechanism.
15.2.2 Asset classification benefits
Subject to the compliance with the undernoted conditions in addition to the
adherence to the prudential framework laid down in para 12:
(i) In modification to para 12.2.1, an existing \'standard asset\' will not be
downgraded to the sub-standard category upon restructuring.
(ii) In modification to para 12.2.2, during the specified period, the asset
classification of the sub-standard / doubtful accounts will not deteriorate
upon restructuring, if satisfactory performance is demonstrated during
the specified period.
However, these benefits will be available subject to compliance with the following
conditions:
i) The dues to the bank are \'fully secured\' as defined in Annex - 5. The
condition of being fully secured by tangible security will not be applicable in the
following cases:
(a) MSE borrowers, where the outstanding is up to Rs.25 lakh.
(b) Infrastructure projects, provided the cash flows generated from
these projects are adequate for repayment of the advance, the
financing bank(s) have in place an appropriate mechanism to
escrow the cash flows, and also have a clear and legal first claim
on these cash flows.
ii) The unit becomes viable in 8 years, if it is engaged in infrastructure
activities, and in 5 years in the case of other units.
55
DBOD-MC On IRAC Norms - 2014
iii) The repayment period of the restructured advance including the
moratorium, if any, does not exceed 15 years in the case of infrastructure
advances and 10 years in the case of other advances. The aforesaid ceiling of
10 years would not be applicable for restructured home loans; in these cases the
Board of Directors of the banks should prescribe the maximum period for
restructured advance keeping in view the safety and soundness of the
advances.
iv) Promoters\' sacrifice and additional funds brought by them should be a
minimum of 20 per cent of banks\' sacrifice or 2 per cent of the restructured debt,
whichever is higher. This stipulation is the minimum and banks may decide on a
higher sacrifice by promoters depending on the riskiness of the project and
promoters\' ability to bring in higher sacrifice amount. Further, such higher
sacrifice may invariably be insisted upon in larger accounts, especially CDR
accounts. The promoters\' sacrifice should invariably be brought upfront while
extending the restructuring benefits to the borrowers. The term \'bank\'s sacrifice\'
means the amount of \"erosion in the fair value of the advance\" or \"total
sacrifice\", to be computed as per the methodology enumerated in para 12.4.2 (i)
and (ii) above.
(Prior to May 30, 2013, if banks were convinced that the promoters face
genuine difficulty in bringing their share of the sacrifice immediately and need
some extension of time to fulfill their commitments, the promoters could be
allowed to bring in 50% of their sacrifice, i.e. 50% of 15%, upfront and the
balance within a period of one year. However, in such cases, if the promoters fail
to bring in their balance share of sacrifice within the extended time limit of one
year, the asset classification benefits derived by banks will cease to accrue and
the banks will have to revert to classifying such accounts as per the asset
classification norms specified under para 12.2 of this circular.)
v) Promoter\'s contribution need not necessarily be brought in cash and can be
brought in the form of de-rating of equity, conversion of unsecured loan brought
by the promoter into equity and interest free loans.
vi) The restructuring under consideration is not a \'repeated restructuring\' as
defined in para (v) of Annex - 5.
15.2.3. In line with the recommendation of the Working Group (Chairman: Shri B.
Mahapatra) to review the existing prudential guidelines on restructuring of advances
by banks/financial institutions, the extant incentive for quick implementation of
restructuring package and asset classification benefits (paragraph 15.2.1 & 15.2.2
above) available on restructuring on fulfilling the conditions will however be
56
DBOD-MC On IRAC Norms - 2014
withdrawn for all restructurings effective from April 1, 2015 with the exception of
provisions related to changes in DCCO in respect of infrastructure as well as non-
infrastructure project loans (please see para 4.2.15). It implies that with effect from
April 1, 2015, a standard account on restructuring (for reasons other than change in
DCCO) would be immediately classified as sub-standard on restructuring as also the
non-performing assets, upon restructuring, would continue to have the same asset
classification as prior to restructuring and slip into further lower asset classification
categories as per the extant asset classification norms with reference to the pre-
restructuring repayment schedule.
16. Miscellaneous
16.1 The banks should decide on the issue regarding convertibility (into equity) option
as a part of restructuring exercise whereby the banks / financial institutions shall have the
right to convert a portion of the restructured amount into equity, keeping in view the statutory
requirement under Section 19 of the Banking Regulation Act, 1949, (in the case of banks)
and relevant SEBI regulations.
16.2 Conversion of debt into preference shares should be done only as a last resort and
such conversion of debt into equity/preference shares should, in any case, be restricted to a
cap (say 10 per cent of the restructured debt). Further, any conversion of debt into equity
should be done only in the case of listed companies.
16.3 Acquisition of equity shares / convertible bonds / convertible debentures in companies
by way of conversion of debt / overdue interest can be done without seeking prior approval
from RBI, even if by such acquisition the prudential capital market exposure limit prescribed
by the RBI is breached. However, this will be subject to reporting of such holdings to RBI,
Department of Banking Supervision (DBS), every month along with the regular DSB Return
on Asset Quality. Nonetheless, banks will have to comply with the provisions of Section
19(2) of the Banking Regulation Act, 1949.
16.4 Acquisition of non-SLR securities by way of conversion of debt is exempted from
the mandatory rating requirement and the prudential limit on investment in unlisted non-SLR
securities, prescribed by the RBI, subject to periodical reporting to the RBI in the aforesaid
DSB return.
16.5 Banks may consider incorporating in the approved restructuring packages creditor\'s
rights to accelerate repayment and the borrower\'s right to pre pay. Further, all restructuring
packages must incorporate `Right to recompense\' clause and it should be based on certain
performance criteria of the borrower. In any case, minimum 75 per cent of the recompense
57
DBOD-MC On IRAC Norms - 2014
amount should be recovered by the lenders and in cases where some facility under
restructuring has been extended below base rate, 100 per cent of the recompense amount
should be recovered.
16.6 As stipulating personal guarantee will ensure promoters\' \"skin in the game\" or
commitment to the restructuring package, promoters\' personal guarantee should be obtained
in all cases of restructuring and corporate guarantee cannot be accepted as a substitute for
personal guarantee. However, corporate guarantee can be accepted in those cases where
the promoters of a company are not individuals but other corporate bodies or where the
individual promoters cannot be clearly identified.
17. Disclosures
With effect from the financial year 2012-13, banks should disclose in their published annual
Balance Sheets, under \"Notes on Accounts\", information relating to number and amount of
advances restructured, and the amount of diminution in the fair value of the restructured
advances as per the format given in Annex - 6. The information would be required for
advances restructured under CDR Mechanism, SME Debt Restructuring Mechanism and
other categories separately. Banks must disclose the total amount outstanding in all the
accounts / facilities of borrowers whose accounts have been restructured along with the
restructured part or facility. This means even if only one of the facilities / accounts of a
borrower has been restructured, the bank should also disclose the entire outstanding
amount pertaining to all the facilities / accounts of that particular borrower. The disclosure
format prescribed in Annex-6, inter-alia, includes the following:
i. details of accounts restructured on a cumulative basis excluding the standard
restructured accounts which cease to attract higher provision and risk weight (if
applicable);
ii. provisions made on restructured accounts under various categories; and
iii. details of movement of restructured accounts.
This implies that once the higher provisions and risk weights (if applicable) on restructured
advances (classified as standard either abinitio or on upgradation from NPA category) revert
to the normal level on account of satisfactory performance during the prescribed period,
such advances should no longer be required to be disclosed by banks as restructured
accounts in the \"Notes on Accounts\" in their Annual Balance Sheets. However, the provision
for diminution in the fair value of restructured accounts on such restructured accounts should
continue to be maintained by banks as per the existing instructions.
18. It has been reiterated that the basic objective of restructuring is to preserve economic
value of units, not ever-greening of problem accounts. This can be achieved by banks and
58
DBOD-MC On IRAC Norms - 2014
the borrowers only by careful assessment of the viability, quick detection of weaknesses in
accounts and a time-bound implementation of restructuring packages.
59
DBOD-MC On IRAC Norms - 2014
Appendix to Part B
Broad benchmarks for the viability parameters
i. Return on capital employed should be at least equivalent to 5 year
Government security yield plus 2 per cent.
ii. The debt service coverage ratio should be greater than 1.25 within the 5
years period in which the unit should become viable and on year to year basis
the ratio should be above 1. The normal debt service coverage ratio for 10
years repayment period should be around 1.33.
iii. The benchmark gap between internal rate of return and cost of capital should
be at least 1per cent.
iv. Operating and cash break even points should be worked out and they should
be comparable with the industry norms.
v. Trends of the company based on historical data and future projections should
be comparable with the industry. Thus behaviour of past and future EBIDTA
should be studied and compared with industry average.
vi. Loan life ratio (LLR), as defined below should be 1.4, which would give a
cushion of 40% to the amount of loan to be serviced.
Present value of total available cash flow (ACF) during the loan life period (including
interest and principal)
LLR= ----------------------------------------------------------------------------------------------
Maximum amount of loan
60
DBOD-MC On IRAC Norms - 2014
Part C
C-1 Early Recognition of Financial Distress, Prompt Steps for Resolution and Fair
Recovery for Lenders: Framework for Revitalising Distressed Assets in the Economy
19. Introduction
In the backdrop of the slowdown of the Indian economy, and resulting increase in Non-
Performing Assets (NPAs) and restructured accounts in the Indian banking system during
the recent years, a need was felt to ensure that the banking system recognise financial
distress early, takes prompt steps to resolve it, and ensures fair recovery for lenders and
investors. Accordingly, a Framework for revitalising distressed assets in the economy was
placed on RBI website on December 17, 2013 as a Discussion Paper for comments by
January 1, 2014. Taking into account the comments received, the Reserve Bank issued the
`Framework for Revitalising Distressed Assets in the Economy\' on its website on January 30,
2014, outlining a corrective action plan that will incentivize early identification of problem
account, timely restructuring of accounts which are considered to be viable, and taking
prompt steps by lenders for recovery or sale of unviable accounts.
Guidelines on Joint Lenders\' Forum (JLF) and Corrective Action Plan (CAP)
20. These guidelines will be applicable for lending under Consortium and Multiple Banking
Arrangements (MBA) [except instructions in paragraphs 21.1, 26.1, 27 & 28 below, which will
be applicable in all cases of lending], and should be read with our prudential norms on
`Restructuring of Advances by banks\' as contained in Part B of this Master Circular and any
other instruction issued in this regard from time to time.
21. Formation of Joint Lenders\' Forum
21.1 As proposed in paragraph 2.1.1 of the Framework, before a loan account turns into a
NPA, banks are required to identify incipient stress in the account by creating three sub-
categories under the Special Mention Account (SMA4) category as given in the table below:
SMA Sub- Basis for classification
categories
SMA-0 Principal or interest payment not overdue for more than 30 days but
account showing signs of incipient stress (Please see Appendix to Part C)
SMA-1 Principal or interest payment overdue between 31-60 days
SMA-2 Principal or interest payment overdue between 61-90 days
4
`Special Mention Account\' (SMA) was introduced in terms of RBI Circular No.
DBS.CO.OSMOS/B.C./4/33.04.006/2002-2003 dated September 12, 2002, whereby banks are
required to identify incipient stress in the account by creating a sub-asset category viz., SMA.
61
DBOD-MC On IRAC Norms - 2014
21.2 It was also proposed in the Framework that the Reserve Bank of India (RBI) will set up
a Central Repository of Information on Large Credits (CRILC) to collect, store, and
disseminate credit data to lenders. Accordingly, our Department of Banking Supervision
(DBS) has advised vide circular DBS.No.OSMOS.9862/33.01.018/2013-14 dated February
13, 2014 on `Central Repository of Information on Large Credits (CRILC) Revision in
Reporting\' that banks will be required to report credit information, including classification of
an account as SMA to CRILC on all their borrowers having aggregate fund-based and non-
fund based exposure of Rs.50 million and above with them. DBS has further updated these
reporting requirements vide their circular DBS.OSMOS.No.14703/33.01.001/2013-14 dated
May 22, 2014 on `Reporting to Central Repository of Information on Large Credits (CRILC)\'.
21.3 Banks are advised that as soon as an account is reported by any of the lenders to
CRILC as SMA-2, they should mandatorily form a committee to be called Joint Lenders\'
Forum (JLF) if the aggregate exposure (AE) [fund based and non-fund based taken together]
of lenders in that account is Rs 1000 million and above. Lenders also have the option of
forming a JLF even when the AE in an account is less than Rs.1000 million and/or when the
account is reported as SMA-0 or SMA-1.
21.4 While the existing Consortium Arrangement for consortium accounts will serve as JLF
with the Consortium Leader as convener, for accounts under Multiple Banking Arrangements
(MBA), the lender with the highest AE will convene JLF at the earliest and facilitate
exchange of credit information on the account. In case there are multiple consortium of
lenders for a borrower (e.g. separate consortium for working capital and term loans), the
lender with the highest AE will convene the JLF.
21.5 It is possible that a borrower may request the lender/s, with substantiated grounds, for
formation of a JLF on account of imminent stress. When such a request is received by a
lender, the account should be reported to CRILC as SMA-0, and the lenders should also
form the JLF immediately if the AE is Rs. 1000 million and above. It is, however, clarified that
for the present, JLF formation is optional in other cases of SMA-0 reporting.
21.6 All the lenders should formulate and sign an Agreement (which may be called JLF
agreement) incorporating the broad rules for the functioning of the JLF. The Indian Banks\'
Association (IBA) has prepared a Master JLF agreement and operational guidelines for JLF
which can be adopted by all lenders. The JLF should explore the possibility of the borrower
setting right the irregularities/weaknesses in the account. The JLF may invite representatives
of the Central/State Government/Project authorities/Local authorities, if they have a role in
the implementation of the project financed.
62
DBOD-MC On IRAC Norms - 2014
21.7 While JLF formation and subsequent corrective actions will be mandatory in accounts
having AE of Rs.1000 million and above, in other cases also the lenders will have to monitor
the asset quality closely and take corrective action for effective resolution as deemed
appropriate.
22 Corrective Action Plan (CAP) by JLF
22.1 The JLF may explore various options to resolve the stress in the account. The intention
is not to encourage a particular resolution option, e.g. restructuring or recovery, but to arrive
at an early and feasible solution to preserve the economic value of the underlying assets as
well as the lenders\' loans. The options under Corrective Action Plan (CAP) by the JLF would
generally include:
(a) Rectification - Obtaining a specific commitment from the borrower to regularise the
account so that the account comes out of SMA status or does not slip into the NPA category.
The commitment should be supported with identifiable cash flows within the required time
period and without involving any loss or sacrifice on the part of the existing lenders. If the
existing promoters are not in a position to bring in additional money or take any measures to
regularise the account, the possibility of getting some other equity/strategic investors to the
company may be explored by the JLF in consultation with the borrower. These measures are
intended to turn-around the entity/company without any change in terms and conditions of
the loan. The JLF may also consider providing need based additional finance to the
borrower, if considered necessary, as part of the rectification process. However, it should be
strictly ensured that additional financing is not provided with a view to ever-greening the
account.
(b) Restructuring - Consider the possibility of restructuring the account if it is prima facie
viable and the borrower is not a wilful defaulter, i.e., there is no diversion of funds, fraud or
malfeasance, etc. At this stage, commitment from promoters for extending their personal
guarantees along with their net worth statement supported by copies of legal titles to assets
may be obtained along with a declaration that they would not undertake any transaction that
would alienate assets without the permission of the JLF. Any deviation from the commitment
by the borrowers affecting the security/recoverability of the loans may be treated as a valid
factor for initiating recovery process. For this action to be sustainable, the lenders in the JLF
may sign an Inter Creditor Agreement (ICA) and also require the borrower to sign the Debtor
Creditor Agreement (DCA) which would provide the legal basis for any restructuring process.
The formats used by the Corporate Debt Restructuring (CDR) mechanism for ICA and DCA
63
DBOD-MC On IRAC Norms - 2014
could be considered, if necessary with appropriate changes. Further, a `stand still\'5 clause
could be stipulated in the DCA to enable a smooth process of restructuring. The `stand-still\'
clause does not mean that the borrower is precluded from making payments to the lenders.
The ICA may also stipulate that both secured and unsecured creditors need to agree to the
final resolution.
(c) Recovery - Once the first two options at (a) and (b) above are seen as not feasible, due
recovery process may be resorted to. The JLF may decide the best recovery process to be
followed, among the various legal and other recovery options available, with a view to
optimising the efforts and results.
22.2 The decisions agreed upon by a minimum of 75% of creditors by value and 60% of
creditors by number in the JLF would be considered as the basis for proceeding with the
restructuring of the account, and will be binding on all lenders under the terms of the ICA.
However, if the JLF decides to proceed with recovery, the minimum criteria for binding
decision, if any, under any relevant laws/Acts would be applicable.
22.3 The JLF is required to arrive at an agreement on the option to be adopted for CAP
within 30 days from (i) the date of an account being reported as SMA-2 by one or more
lender, or (ii) receipt of request from the borrower to form a JLF, with substantiated grounds,
if it senses imminent stress. The JLF should sign off the detailed final CAP within the next 30
days from the date of arriving at such an agreement.
22.4 If the JLF decides on options 22.1 (a) or (b), but the account fails to perform as per the
agreed terms under option (a) or (b), the JLF should initiate recovery under option 22.1 (c).
23. Restructuring Process
23.1 Prudential guidelines on restructuring of advances as contained in Part B of this Master
Circular lay down detailed methodology and norms for restructuring of advances under sole
banking as well as multiple/ consortium arrangements. Corporate Debt Restructuring (CDR)
5
One of the important elements of DCA would be a \'stand still\' agreement binding for the period from
the date of signing of DCA to the date of approval of restructuring package as per the time frame
indicated in paragraphs 22.3 and 22.4 of these Guidelines. Under this clause, both the debtor and
creditor(s) shall agree to a legally binding \'stand-still\' whereby both the parties commit themselves not
to take recourse to any other legal action during the \'stand-still\' period. This would be necessary to
undertake the necessary debt restructuring exercise without any outside intervention, judicial or
otherwise. However, the stand-still clause will be applicable only to any civil action either by the
borrower or any lender against the other party and will not cover any criminal action. Further, during
the stand-still period, outstanding foreign exchange forward contracts, derivative products, etc., can
be crystallised, provided the borrower is agreeable to such crystallisation. The borrower will
additionally undertake that during the stand-still period the documents will stand extended for the
purpose of limitation and also that it will not approach any other authority for any relief and the
directors of the borrowing company will not resign from the Board of Directors during the stand-still
period.
64
DBOD-MC On IRAC Norms - 2014
mechanism, as described in Annex 4 of this Master Circular, is an institutional framework for
restructuring of multiple/ consortium advances of banks where even creditors who are not
part of CDR system can join by signing transaction to transaction based agreements.
23.2 If the JLF decides restructuring of the account as CAP, it will have the option of either
referring the account to CDR Cell after a decision to restructure is taken under para 22.1 as
indicated above or restructure the same independent of the CDR mechanism.
23.3 Restructuring by JLF
23.3.1 If the JLF decides to restructure an account independent of the CDR mechanism, the
JLF should carry out the detailed Techno-Economic Viability (TEV) study, and if found
viable, finalise the restructuring package within 30 days from the date of signing off the final
CAP as mentioned in paragraph 22.3 above.
23.3.2 For accounts with AE of less than Rs.5000 million, the above-mentioned restructuring
package should be approved by the JLF and conveyed by the lenders to the borrower within
the next 15 days for implementation.
23.3.3 For accounts with AE of Rs.5000 million and above, the above-mentioned TEV study
and restructuring package will have to be subjected to an evaluation by an Independent
Evaluation Committee (IEC)6 of experts fulfilling certain eligibility conditions. The IEC will
look into the viability aspects after ensuring that the terms of restructuring are fair to the
lenders. The IEC will be required to give their recommendation in these cases to the JLF
within a period of 30 days. Thereafter, considering the views of IEC if the JLF decides to go
ahead with the restructuring, the restructuring package including all terms and conditions as
mutually agreed upon between the lenders and borrower, would have to be approved by all
the lenders and communicated to the borrower within next 15 days for implementation.
23.3.4 Asset Classification benefit as applicable under the extant guidelines will accrue to
such restructured accounts as if they were restructured under CDR mechanism. For this
purpose, the asset classification of the account as on the date of formation of JLF will be
taken into account.
23.3.5 The above-mentioned time limits are maximum permitted time periods and the JLF
should try to arrive at a restructuring package as soon as possible in cases of simple
restructuring.
6
The constitution of the IEC and the funding needs for payment of fees for independent experts has
been decided by Indian Banks\' Association (IBA) in consultation with RBI. Banks have been advised
by IBA in this regard vide its circular No. C&I/CIR/2013-14/9307 dated April 29, 2014
65
DBOD-MC On IRAC Norms - 2014
23.3.6 Restructuring cases will be taken up by the JLF only in respect of assets reported as
Standard, SMA or Sub-Standard by one or more lenders of the JLF. While generally no
account classified as doubtful should be considered by the JLF for restructuring, in cases
where a small portion of debt is doubtful i.e. the account is standard/sub-standard in the
books of at least 90% of creditors (by value), the account may then be considered under JLF
for restructuring.
23.3.7 Wilful defaulters will normally not be eligible for restructuring. However, the JLF may
review the reasons for classification of the borrower as a wilful defaulter and satisfy itself that
the borrower is in a position to rectify the wilful default. The decision to restructure such
cases should however also have the approvals of the board/s of individual bank/s within the
JLF who have classified the borrower as wilful defaulter.
23.3.8 The viability of the account should be determined by the JLF based on acceptable
viability benchmarks determined by them. Illustratively, the parameters may include the Debt
Equity Ratio, Debt Service Coverage Ratio, Liquidity/Current Ratio and the amount of
provision required in lieu of the diminution in the fair value of the restructured advance, etc.
Further, the JLF may consider the benchmarks for the viability parameters adopted by the
CDR mechanism (as mentioned in Appendix to Part B of this Master Circular) and adopt the
same with suitable adjustments taking into account the fact that different sectors of the
economy have different performance indicators.
23.4 Restructuring Referred by the JLF to the CDR Cell
23.4.1 If the JLF decides to refer the account to CDR Cell after a decision to restructure is
taken under para 22.1, the following procedure may be followed.
23.4.2 As the preliminary viability of account has already been decided by the JLF, CDR Cell
should directly prepare the Techno-Economic Viability (TEV) study and restructuring plan in
consultation with JLF within 30 days from the date of reference to it by the JLF.
23.4.3 For accounts with AE of less than Rs.5000 million, the above-mentioned restructuring
package should be submitted to CDR Empowered Group (EG) for approval. Under extant
instructions, CDR EG can approve or suggest modifications but ensure that a final decision
is taken within a total period of 90 days, which can be extended up to a maximum of 180
days from the date of reference to CDR Cell. However, the cases referred to CDR Cell by
JLF will have to be finally decided by the CDR EG within the next 30 days. If approved by
66
DBOD-MC On IRAC Norms - 2014
CDR EG, the restructuring package should be approved by all lenders and conveyed to the
borrower within the next 30 days for implementation.
23.4.4 For accounts with AE of Rs.5000 million and above, the TEV study and restructuring
package prepared by CDR Cell will have to be subjected to an evaluation by an Independent
Evaluation Committee (IEC) of experts. As stated in paragraph 23.3.3, composition and
other details of the IEC has been communicated separately by IBA to banks. The IEC will
look into the viability aspects after ensuring that the terms of restructuring are fair to the
lenders. The IEC will be required to give their recommendation in these aspects to the CDR
Cell under advice to JLF within a period of 30 days. Thereafter, considering the views of IEC
if the JLF decides to go ahead with the restructuring, the same should be communicated to
CDR Cell and CDR Cell should submit the restructuring package to CDR EG within a total
period of 7 days from receiving the views of IEC. Thereafter, CDR EG should decide on the
approval/modification/rejection within the next 30 days. If approved by CDR EG, the
restructuring package should be approved by all lenders and conveyed to the borrower
within the next 30 days for implementation.
24. Other Issues/Conditions Relating to Restructuring by JLF/CDR Cell
24.1 Both under JLF and CDR mechanism, the restructuring package should also stipulate
the timeline during which certain viability milestones (e.g. improvement in certain financial
ratios after a period of time, say, 6 months or 1 year and so on) would be achieved. The JLF
must periodically review the account for achievement/non-achievement of milestones and
should consider initiating suitable measures including recovery measures as deemed
appropriate.
24.2 Restructuring whether under JLF or CDR is to be completed within the specified time
periods. The JLF and CDR Cell should optimally utilise the specified time periods so that the
aggregate time limit is not breached under any mode of restructuring. If the JLF/CDR takes a
shorter time for an activity as against the prescribed limit, then it can have the discretion to
utilise the saved time for other activities provided the aggregate time limit is not breached.
24.3 The general principle of restructuring should be that the shareholders bear the first loss
rather than the debt holders. With this principle in view and also to ensure more `skin in the
game\' of promoters, JLF/CDR may consider the following options when a loan is
restructured:
· Possibility of transferring equity of the company by promoters to the lenders to
compensate for their sacrifices;
· Promoters infusing more equity into their companies;
67
DBOD-MC On IRAC Norms - 2014
· Transfer of the promoters\' holdings to a security trustee or an escrow arrangement till
turnaround of company. This will enable a change in management control, should
lenders favour it.
24.4 In case a borrower has undertaken diversification or expansion of the activities which
has resulted in the stress on the core-business of the group, a clause for sale of non-core
assets or other assets may be stipulated as a condition for restructuring the account, if under
the TEV study the account is likely to become viable on hiving-off of non-core activities and
other assets.
24.5 For restructuring of dues in respect of listed companies, lenders may be ab-initio
compensated for their loss/sacrifice (diminution in fair value of account in net present value
terms) by way of issuance of equities of the company upfront, subject to the extant
regulations and statutory requirements. In such cases, the restructuring agreement shall not
incorporate any right of recompense clause. However, if the lenders\' sacrifice is not fully
compensated by way of issuance of equities, the right of recompense clause may be
incorporated to the extent of shortfall. For unlisted companies, the JLF will have option of
either getting equities issued or incorporate suitable `right to recompense\' clause.
24.6 Paragraph 2.2 of our circular DBOD.No.Dir.BC.47/13.07.05/2006-07 dated December
15, 2006 on `Limits on Banks\' Exposure to Capital Markets\' stipulates certain limits on banks\'
exposure to Capital Markets. In partial modification of the circular ibid, it has been decided
that if acquisition of equity shares, as indicated in paragraph 24.5 above, results in
exceeding the extant regulatory Capital Market Exposure (CME) limit, the same will not be
considered as a breach of regulatory limit. However, this will require reporting to RBI and
disclosure by banks in the Notes to Accounts in Annual Financial Statements.
24.7 In order to distinguish the differential security interest available to secured lenders,
partially secured lenders and unsecured lenders, the JLF/CDR could consider various
options like:
· Prior agreement in the ICA among the above classes of lenders regarding
repayments, say, as per an agreed waterfall mechanism;
· A structured agreement stipulating priority of secured creditors;
· Appropriation of repayment proceeds among secured, partially secured and
unsecured lenders in certain pre-agreed proportion.
The above is only an illustrative list and the JLF may decide on a mutually agreed option. It
also needs to be emphasised that while one bank may have a better security interest when it
comes to one borrower, the case may be vice versa in the case of another borrower. So, it
68
DBOD-MC On IRAC Norms - 2014
would be beneficial if lenders appreciate the concerns of fellow lenders and arrive at a
mutually agreed option with a view to preserving the economic value of assets. Once an
option is agreed upon, the bank having the largest exposure may take the lead in ensuring
distribution according to agreed terms once the restructuring package is implemented.
24.8 As regards prudential norms and operational details, RBI\'s guidelines on CDR
Mechanism, including OTS, will be applicable to the extent that they are not inconsistent with
these guidelines.
25. Prudential Norms on Asset Classification and Provisioning
25.1 While a restructuring proposal is under consideration by the JLF/CDR, the usual asset
classification norm would continue to apply. The process of re-classification of an asset
should not stop merely because restructuring proposal is under consideration by the
JLF/CDR.
25.2 However, as an incentive for quick implementation of a restructuring package, the
special asset classification benefit on restructuring of accounts as per extant instructions
would be available for accounts undertaken for restructuring under these guidelines, subject
to adherence to the overall timeframe for approval of restructuring package detailed in
paragraphs 23.3 and 23.4 above and implementation of the approved package within 90
days from the date of approval. The asset classification status as on the date of formation of
JLF would be the relevant date to decide the asset classification status of the account after
implementation of the final restructuring package. As mentioned in paragraph 15.2.3 in Part
B of this Master Circular, the special asset classification benefit as above will however be
withdrawn for all restructurings with effect from April 1, 2015 with the exception of provisions
related to changes in Date of Commencement of Commercial Operations (DCCO) in respect
of infrastructure and non-infrastructure project loans.
25.3 As a measure to ensure adherence to the proposals made in these guidelines as also
to impose disincentives on borrowers for not maintaining credit discipline, accelerated
provisioning norms (as detailed in paragraph 26 below) are being introduced.
26. Accelerated Provisioning
26.1 In cases where banks fail to report SMA status of the accounts to CRILC or resort to
methods with the intent to conceal the actual status of the accounts or evergreen the
account, banks will be subjected to accelerated provisioning for these accounts and/or other
supervisory actions as deemed appropriate by RBI. The current provisioning requirement
69
DBOD-MC On IRAC Norms - 2014
and the revised accelerated provisioning in respect of such non performing accounts are as
under:
Asset Period as NPA Current provisioning Revised
Classification (%) accelerated
provisioning (%)
Sub- standard Up to 6 months 15 No change
(secured) 6 months to 1 year 15 25
Sub-standard Up to 6 months 25 (other than
(unsecured ab- infrastructure loans) 25
initio) 20 (infrastructure loans)
6 months to 1 year 25 (other than
infrastructure loans) 40
20 (infrastructure loans)
Doubtful I 2nd year 25 (secured portion) 40 (secured portion)
100 (unsecured portion) 100 (unsecured
portion)
Doubtful II 3rd & 4th year 40 (secured portion) 100 for both secured
100 (unsecured portion) and unsecured
portions
Doubtful III 5th year onwards 100 100
26.2 Further, any of the lenders who have agreed to the restructuring decision under the
CAP by JLF and is a signatory to the ICA and DCA, but changes their stance later on, or
delays/refuses to implement the package, will also be subjected to accelerated provisioning
requirement as indicated at para 26.1 above, on their exposure to this borrower i.e., if it is
classified as an NPA. If the account is standard in those lenders\' books, the provisioning
requirement would be 5%. Further, any such backtracking by a lender might attract negative
supervisory view during Supervisory Review and Evaluation Process.
26.3 Presently, asset classification is based on record of recovery at individual banks and
provisioning is based on asset classification status at the level of each bank. However, if
lenders fail to convene the JLF or fail to agree upon a common CAP within the stipulated
time frame, the account will be subjected to accelerated provisioning as indicated at para
26.1 above, if it is classified as an NPA. If the account is standard in those lenders\' books,
the provisioning requirement would be 5%.
26.4 If an escrow maintaining bank under JLF/CDR mechanism does not appropriate
proceeds of repayment by the borrower among the lenders as per agreed terms resulting
into down gradation of asset classification of the account in books of other lenders, the
account with the escrow maintaining bank will attract the asset classification which is lowest
among the lending member banks, and corresponding provisioning requirement.
70
DBOD-MC On IRAC Norms - 2014
27. Wilful Defaulters and Non-Cooperative Borrowers
27.1 Instructions regarding treatment of Wilful Defaulters are contained in our Master
Circular DBOD No. CID.BC. 3 /20.16.003/2013-14 dated July 1, 2013 on `Wilful Defaulters\'
updated from time to time. Banks are required to strictly adhere to these guidelines. In
addition to these instructions and with a view to ensuring better corporate governance
structure in companies and ensuring accountability of independent/professional directors,
promoters, auditors, etc. henceforth, the following prudential measures will be applicable:
(a) The provisioning in respect of existing loans/exposures of banks to companies having
director/s (other than nominee directors of government/financial institutions brought on board
at the time of distress), whose name/s appear more than once in the list of wilful defaulters,
will be 5% in cases of standard accounts; if such account is classified as NPA, it will attract
accelerated provisioning as indicated at para 26.1 above. This is a prudential measure since
the expected losses on exposures to such borrowers are likely to be higher. It is reiterated
that no additional facilities should be granted by any bank/FI to the listed wilful defaulters, in
terms of paragraph 2.5 (a) of Master Circular on Wilful Defaulters dated July 1, 2013.
(b) With a view to discouraging borrowers/defaulters from being unreasonable and non-
cooperative with lenders in their bonafide resolution/recovery efforts, banks may classify
such borrowers as non-cooperative borrowers7, after giving them due notice if satisfactory
clarifications are not furnished. Banks will be required to report classification of such
borrowers to CRILC. Further, banks will be required to make higher/accelerated provisioning
in respect of new loans/exposures to such borrowers as also new loans/exposures to any
other company promoted by such promoters/ directors or to a company on whose board any
of the promoter / directors of this non-cooperative borrower is a director. The provisioning
applicable in such cases will be at the rate of 5% if it is a standard account and accelerated
provisioning as per para 26.1 above, if it is an NPA. This is a prudential measure since the
expected losses on exposures to such non-cooperative borrowers are likely to be higher.
28. Dissemination of Information
7
A non-cooperative borrower is broadly one who does not provide necessary information required by a lender
to assess its financial health even after 2 reminders; or denies access to securities etc. as per terms of sanction
or does not comply with other terms of loan agreements within stipulated period; or is hostile / indifferent / in
denial mode to negotiate with the bank on repayment issues; or plays for time by giving false impression that
some solution is on horizon; or resorts to vexatious tactics such as litigation to thwart timely resolution of the
interest of the lender/s. The borrowers will be given 30 days\' notice to clarify their stand before their names are
reported as non-cooperative borrowers.
71
DBOD-MC On IRAC Norms - 2014
28.1 At present, the list of Suit filed accounts of Wilful Defaulters (Rs.2.5 million and above)
is submitted by banks to the Credit Information Companies (CICs) of which they are
member(s), who display the same on their respective websites as and when received. The
list of non-suit filed accounts of Wilful Defaulters (Rs.2.5 million and above) is confidential
and is disseminated by RBI among banks and FIs only for their own use. In order to make
the current system of banks/FIs reporting names of suit filed accounts and non-suit filed
accounts of Wilful Defaulters and its availability to the banks by CICs/RBI as current as
possible, banks are advised to forward data on wilful defaulters to the CICs/Reserve Bank at
the earliest but not later than a month from the reporting date and they must use/ furnish the
detailed information as per the format prescribed in our Master Circular
DBOD.No.CID.BC.3/20.16.003/2013-14 dated July 1, 2013 on `Wilful Defaulters\'.
28.2 In terms of our Master Circular on Wilful Defaulters mentioned above, in case any
falsification of accounts on the part of the borrowers is observed by the banks / FIs, and if it
is observed that the auditors were negligent or deficient in conducting the audit, banks
should lodge a formal complaint against the auditors of the borrowers with the Institute of
Chartered Accountants of India (ICAI) to enable the ICAI to examine and fix accountability of
the auditors. RBI reiterates these instructions for strict compliance. Pending disciplinary
action by ICAI, the complaints may also be forwarded to the RBI (Department of Banking
Supervision, Central Office) and IBA for records. IBA would circulate the names of the CA
firms against whom many complaints have been received amongst all banks who should
consider this aspect before assigning any work to them. RBI would also share such
information with other financial sector regulators/Ministry of Corporate Affairs
(MCA)/Comptroller and Auditor General (CAG).
28.3 Further, banks may seek explanation from advocates who wrongly certify as to clear
legal titles in respect of assets or valuers who overstate the security value, by negligence or
connivance, and if no reply/satisfactory clarification is received from them within one month,
they may report their names to IBA. The IBA may circulate the names of such
advocates/valuers among its members for consideration before availing of their services in
future. The IBA would create a central registry for this purpose.
29. These guidelines have become effective from April 1, 2014.
72
DBOD-MC On IRAC Norms - 2014
Appendix to Part C-1
SMA-0 Signs of Stress
Illustrative list of signs of stress for categorising an account as SMA-0:
1. Delay of 90 days or more in (a) submission of stock statement / other stipulated operating
control statements or (b) credit monitoring or financial statements or (c) non-renewal of
facilities based on audited financials.
2. Actual sales / operating profits falling short of projections accepted for loan sanction by
40% or more; or a single event of non-cooperation / prevention from conduct of stock audits
by banks; or reduction of Drawing Power (DP) by 20% or more after a stock audit; or
evidence of diversion of funds for unapproved purpose; or drop in internal risk rating by 2 or
more notches in a single review.
3. Return of 3 or more cheques (or electronic debit instructions) issued by borrowers in 30
days on grounds of non-availability of balance/DP in the account or return of 3 or more bills /
cheques discounted or sent under collection by the borrower.
4. Devolvement of Deferred Payment Guarantee (DPG) instalments or Letters of Credit
(LCs) or invocation of Bank Guarantees (BGs) and its non-payment within 30 days.
5. Third request for extension of time either for creation or perfection of securities as against
time specified in original sanction terms or for compliance with any other terms and
conditions of sanction.
6. Increase in frequency of overdrafts in current accounts.
7. The borrower reporting stress in the business and financials.
8. Promoter(s) pledging/selling their shares in the borrower company due to financial stress.
73
DBOD-MC On IRAC Norms - 2014
C-2: Framework for Revitalising Distressed Assets in the Economy -
Refinancing of Project Loans, Sale of NPA and Other Regulatory Measures
30. Paragraphs 3, 4 and 5 of the our circular DBOD.BP.BC.No.98/21.04.132/2013-14 dated
February 26, 2014 on `Framework for Revitalising Distressed Assets in the Economy -
Refinancing of Project Loans, Sale of NPA and Other Regulatory Measures\' contain
instructions on sale of financial assets by banks and use of countercyclical/floating
provisions. These instructions have been consolidated in paragraphs 6 and 7 under Part A of
this Master Circular. Detailed guidelines on the subject of `Refinancing of Project Loans\', and
other regulatory measures are as under:
31. Refinancing of Project Loans
31.1 As per the definition of a restructured account as given under `Key Concepts\' in Annex
5 of this Master Circular, a restructured account is one where the bank, for economic or legal
reasons relating to the borrower\'s financial difficulty, grants to the borrower concessions that
the bank would not otherwise consider. Restructuring would normally involve modification of
terms of the advances/securities, which would generally include, among others, alteration of
repayment period/repayable amount/ the amount of instalments/rate of interest (due to
reasons other than competitive reasons). Thus, any change in repayment schedule of a loan
will render it as restructured account.
31.2 Further, in terms of DBOD.No.BP.BC.144/21.04.048-2000 dated February 29, 2000 on
`Income Recognition, Asset Classification, Provisioning and other related matters and
Capital Adequacy Standards - Takeout Finance\', banks can refinance their existing
infrastructure project loans by entering into take-out financing agreements with any financial
institution on a pre-determined basis. If there is no pre-determined agreement, a standard
account in the books of a bank can still be taken over by other banks/FIs, subject to our
guidelines on `Transfer of Borrowal Accounts from one Bank to Another\' issued vide circular
DBOD.No.BP.BC-104/21.04.048/2011-12 dated May 10, 2012.
31.3 In partial modification to the above-mentioned circulars, banks are advised that if they
refinance any existing infrastructure and other project loans by way of take-out financing,
even without a pre-determined agreement with other banks / FIs, and fix a longer repayment
period, the same would not be considered as restructuring if the following conditions are
satisfied:
· Such loans should be `standard\' in the books of the existing banks, and should have
not been restructured in the past.
· Such loans should be substantially taken over (more than 50% of the outstanding
loan by value) from the existing financing banks/Financial institutions.
74
DBOD-MC On IRAC Norms - 2014
· The repayment period should be fixed by taking into account the life cycle of the
project and cash flows from the project.
32. Bank Loans for Financing Promoters\' Contribution
32.1 In terms of extant instructions on Bank Loans for Financing Promoters Contribution as
consolidated in our Master Circular DBOD.No.Dir.BC.14/13.03.00/2013-14 dated July 1,
2013 on `Loans and Advances Statutory and Other Restrictions\', the promoters\'
contribution towards the equity capital of a company should come from their own resources
and banks should not normally grant advances to take up shares of other companies.
32.2 It has been decided that banks can extend finance to `specialized\' entities established
for acquisition of troubled companies subject to the general guidelines applicable to
advances against shares/debentures/bonds as contained in the above-mentioned Master
Circular and other regulatory and statutory exposure limits. The lenders should, however,
assess the risks associated with such financing and ensure that these entities are
adequately capitalized, and debt equity ratio for such entity is not more than 3:1.
32.3 In this connection, a `specialized\' entity will be a body corporate exclusively set up for
the purpose of taking over and turning around troubled companies and promoted by
individuals or/and institutional promoters (including Government) having professional
expertise in turning around `troubled companies\' and eligible to make investments in the
industry/segment to which the target asset belonged.
33. Credit Risk Management
33.1 Banks are advised that they should strictly follow the credit risk management guidelines
contained in our circular DBOD.No.BP.(SC).BC.98/21.04.103/99 dated October 7, 1999 on
`Risk Management Systems in Banks\' and DBOD.No.BP.520/21.04.103/2002-03 dated
October 12, 2002 on `Guidance Notes on Management of Credit Risk and Market Risk\'.
33.2 It is reiterated that lenders should carry out their independent and objective credit
appraisal in all cases and must not depend on credit appraisal reports prepared by outside
consultants, especially the in-house consultants of the borrowing entity.
33.3 Banks/lenders should carry out sensitivity tests/scenario analysis, especially for
infrastructure projects, which should inter alia include project delays and cost overruns. This
will aid in taking a view on viability of the project at the time of deciding Corrective Action
Plan (CAP) as mentioned in paragraph 22 of this Master Circular .
75
DBOD-MC On IRAC Norms - 2014
33.4 Lenders should ascertain the source and quality of equity capital brought in by the
promoters /shareholders. Multiple leveraging, especially, in infrastructure projects, is a
matter of concern as it effectively camouflages the financial ratios such as Debt/Equity ratio,
leading to adverse selection of the borrowers. Therefore, lenders should ensure at the time
of credit appraisal that debt of the parent company is not infused as equity capital of the
subsidiary/SPV.
33.5 Ministry of Corporate Affairs had introduced the concept of a Director Identification
Number (DIN) with the insertion of Sections 266A to 266G of Companies (Amendment) Act,
2006. Further, in terms of paragraph 5.4 of our Master Circular on Wilful Defaulters dated
July 1, 2013, in order to ensure that directors are correctly identified and in no case, persons
whose names appear to be similar to the names of directors appearing in the list of wilful
defaulters, are wrongfully denied credit facilities on such grounds, banks/FIs have been
advised to include the Director Identification Number (DIN) as one of the fields in the data
submitted by them to Reserve Bank of India/Credit Information Companies.
33.6 It is reiterated that while carrying out the credit appraisal, banks should verify as to
whether the names of any of the directors of the companies appear in the list of defaulters/
wilful defaulters by way of reference to DIN/PAN etc. Further, in case of any doubt arising on
account of identical names, banks should use independent sources for confirmation of the
identity of directors rather than seeking declaration from the borrowing company.
33.7 Paragraph 2.7 of our Master Circular on Wilful Defaulters states that, \"with a view to
monitoring the end-use of funds, if the lenders desire a specific certification from the
borrowers\' auditors regarding diversion / siphoning of funds by the borrower, the lender
should award a separate mandate to the auditors for the purpose. To facilitate such
certification by the auditors the banks and FIs will also need to ensure that appropriate
covenants in the loan agreements are incorporated to enable award of such a mandate by
the lenders to the borrowers / auditors\".
33.8 In addition to the above, banks are advised that with a view to ensuring proper end-use
of funds and preventing diversion/siphoning of funds by the borrowers, lenders could
consider engaging their own auditors for such specific certification purpose without relying
on certification given by borrower\'s auditors. However, this cannot substitute bank\'s basic
minimum own diligence in the matter.
76
DBOD-MC On IRAC Norms - 2014
34. Reinforcement of Regulatory Instructions
34.1 In terms of circular DBOD.No.CAS(COD)BC.142/WGCC-80 December 8, 1980 on
`Report of the Working Group to Review the System of Cash Credit Implementation\', banks
were advised that before opening current accounts/sanctioning post sale limits, they should
obtain the concurrence of the main bankers and/or the banks which have sanctioned
inventory limits. Such accounts already opened may also be reviewed in the light of these
instructions and appropriate action should be taken. Further, in terms of Master Circular
DBOD.No.Dir.BC.12/13.03.00/2013-14 dated July 1, 2013 on `Guarantees and Co-
Acceptances\', banks should refrain from issuing guarantees on behalf of customers who do
not enjoy credit facilities with them.
34.2 RBI reiterates the above instructions regarding restrictions placed on banks on
extending credit facilities including non-fund based limits, opening of current accounts, etc.
to constituents who are not their regular borrowers. Banks must take necessary corrective
action in case the above instructions have not been strictly followed. Further, RBI will ensure
strict adherence by banks to these instructions. As non-compliance of RBI regulations in this
regard is likely to vitiate credit discipline, RBI will consider penalising non-compliant banks.
34.3 Banks are custodians of public deposits and are therefore expected to make all efforts
to protect the value of their assets. Banks are required to extinguish all available means of
recovery before writing off any account fully or partly. It is observed that some banks are
resorting to technical write off of accounts, which reduces incentives to recover. Banks
resorting to partial and technical write-offs should not show the remaining part of the loan as
standard asset. With a view to bring in more transparency, henceforth banks should disclose
full details of write offs, including separate details about technical write offs, in their annual
financial statements as per the format prescribed in the Appendix to this part of the Master
Circular.
35. Registration of Transactions with CERSAI
Currently security registration, especially registration of mortgages, is done at district level
and Central Registry of Securitisation Asset Reconstruction and Security Interest of India
(CERSAI) is generally used to register equitable mortgages. The Government mandate to
register all types of mortgages with CERSAI will have to be strictly followed by banks. In this
connection, instructions contained in our circular DBOD.Leg.No.BC.86/09.08.011/2010-11
dated April 21, 2011 on `Setting up of Central Electronic Registry under the Securitisation
and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002\' is
reiterated, i.e. transactions relating to securitization and reconstruction of financial assets
77
DBOD-MC On IRAC Norms - 2014
and those relating to mortgage by deposit of title deeds to secure any loan or advances
granted by banks and financial institutions, as defined under the SARFAESI Act, are to be
registered in the Central Registry.
36. Board Oversight
36.1 The Board of Directors of banks should take all necessary steps to arrest the
deteriorating asset quality in their books and should focus on improving the credit risk
management system. Early recognition of problems in asset quality and resolution
envisaged in these guidelines requires the lenders to be proactive and make use of CRILC
as soon as it becomes functional.
36.2 Boards of banks should put in place a policy for timely submission of credit information
to CRILC and accessing information therefrom, prompt formation of Joint Lenders\' Forums
(JLFs), monitoring the progress of JLFs and adoption of Corrective Action Plans (CAPs), etc.
There should be a periodical review, say on a half yearly basis, of the above policy.
36.3 The boards of banks should put in place a system for proper and timely classification of
borrowers as wilful defaulters or/and non-cooperative borrowers. Further, Boards of banks
should periodically review the accounts classified as such, say on a half yearly basis.
78
DBOD-MC On IRAC Norms - 2014
Appendix Part C-2
Disclosure of Write-Offs & Technical Write-Offs
Instructions contained in our circular DBOD.BP.BC.No. 79/21.04.018/2009-10 dated March
15, 2010 on `Additional Disclosures by banks in Notes to Accounts\' specifically require banks
to disclose the amounts written off during the year while giving details of movement in non-
performing assets (NPAs). The format specified in the said circular stands modified as
under.
(Amount in Rs. crore)
Particulars Current year Previous year
8
Gross NPAs as on 1st April of particular year (Opening
Balance)
Additions (Fresh NPAs) during the year
Sub-total (A)
Less:-
(i) Upgradations
(ii) Recoveries (excluding recoveries made from upgraded
accounts)
(iii) Technical/ Prudential9 Write-offs
(iv) Write-offs other than those under (iii) above
Sub-total (B)
Gross NPAs as on 31st March of following year (closing
balance) (A-B)
Further banks should disclose the stock of technical write-offs and the recoveries made
thereon as per the format below:
(Amount in Rs. crore)
Particulars Current year Previous year
Opening balance of Technical/ Prudential written-off accounts
as at April 1
Add: Technical/ Prudential write-offs during the year
Sub-total (A)
Less: Recoveries made from previously technical/ prudential
written-off accounts during the year (B)
Closing balance as at March 31 (A-B)
8
*Gross NPAs as per item 2 of Annex to DBOD Circular DBOD.BP.BC.No. 46/21.04.048/2009-10
dated September 24, 2009 which specified a uniform method to compute Gross Advances, Net
Advances, Gross NPAs and Net NPAs.
9
Technical or prudential write-off is the amount of non-performing loans which are outstanding in the
books of the branches, but have been written-off (fully or partially) at Head Office level. Amount of
Technical write-off should be certified by statutory auditors. (Defined in our circular reference
DBOD.No.BP.BC. 64 /21.04.048/2009-10 dated December 1, 2009 on Provisioning Coverage for
Advances)
79
DBOD-MC On IRAC Norms - 2014
Annex 1
(Cf. para 3.5)
Part A
Details of Gross Advances, Gross NPAs, Net Advances and Net NPAs
(Rs. in Crore up to two decimals)
Particulars Amount
1. Standard Advances
2. Gross NPAs *
3. Gross Advances ** ( 1+2 )
4. Gross NPAs as a percentage of Gross Advances
(2/3) (in %)
5. Deductions
(i) Provisions held in the case of NPA Accounts as
per asset classification (including additional
Provisions for NPAs at higher than prescribed
rates).
(ii) DICGC / ECGC claims received and held
pending adjustment
(iii) Part payment received and kept in Suspense
Account or any other similar account
(iv) Balance in Sundries Account (Interest
Capitalization - Restructured Accounts), in
respect of NPA Accounts
(v) Floating Provisions***
(vi) Provisions in lieu of diminution in the fair value of
restructured accounts classified as NPAs
(vii) Provisions in lieu of diminution in the fair value of
restructured accounts classified as standard
assets
6. Net Advances(3-5)
7. Net NPAs {2-5(i + ii + iii + iv + v + vi)}
8. Net NPAs as percentage of Net Advances (7/6) (in %)
* Principal dues of NPAs plus Funded Interest Term Loan (FITL) where the
corresponding contra credit is parked in Sundries Account (Interest
Capitalization - Restructured Accounts), in respect of NPA Accounts.
** For the purpose of this Statement, `Gross Advances\' mean all outstanding
loans and advances including advances for which refinance has been received
but excluding rediscounted bills, and advances written off at Head Office level
(Technical write off).
*** Floating Provisions would be deducted while calculating Net NPAs, to the
extent, banks have exercised this option, over utilising it towards Tier II capital.
80
DBOD-MC On IRAC Norms - 2014
Part B
Supplementary Details
(Rs. in Crore up to two decimals)
Particulars Amount
1. Provisions on Standard Assets excluding 5(vi) in Part A above
2. Interest recorded as Memorandum Item
3. Amount of cumulative Technical Write - Off in respect of NPA
accounts reported in Part A above
81
DBOD-MC On IRAC Norms - 2014
Annex - 2
(Cf. para 4.2.13)
Relevant extract of the list of direct agricultural advances, from the Circular Priority
Sector Lending Targets and Classification - paragraph III (1.1) of RPCD.CO.Plan.
BC.9/04.09.01/2013-14 dated July 1, 2013
Direct Agriculture
A. Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups
(JLGs), i.e. groups of individual farmers, provided banks maintain disaggregated data on
such loans] engaged in Agriculture only.
(i) Short-term loans to farmers for raising crops, i.e. for crop loans. This will include
traditional / non-traditional plantations and horticulture.
(ii) Medium & long-term loans to farmers for agriculture (e.g. purchase of agricultural
implements and machinery, loans for irrigation and other developmental activities
undertaken in the farm).
(iii) Loans to farmers for pre-harvest and post-harvest activities, viz., spraying, weeding,
harvesting, sorting, grading and transporting of their own farm produce.
(iv) Loans to farmers up to `50 lakh against pledge / hypothecation of agricultural produce
(including warehouse receipts) for a period not exceeding 12 months, irrespective of whether
the farmers were given crop loans for raising the produce or not. (as amended by
RPCD.CO.Plan.BC.72/04.09.01/2012-13 dt 03-05-13)
(v) Loans to small and marginal farmers for purchase of land for agricultural purposes.
(vi) Loans to distressed farmers indebted to non-institutional lenders.
(vii) Bank loans to Primary Agricultural Credit Societies (PACS), Farmers\' Service Societies
(FSS) and Large-sized Adivasi Multi Purpose Societies (LAMPS) ceded to or managed /
controlled by such banks for on lending to farmers for agricultural activities.
(viii) Loans to farmers under Kisan Credit Card Scheme.
(ix) Export credit to farmers for exporting their own farm produce.
B. Loans to corporates including farmers\' producer companies of individual farmers,
partnership firms and co-operatives of farmers directly engaged in Agriculture Activities, up
to an aggregate limit of `2 crore per borrower for the following purposes.
(i)Short-term loans for raising crops, i.e. for crop loans. This will include traditional / non-
traditional plantations and horticulture.
(ii) Medium & long-term loans for agriculture (e.g. purchase of agricultural implements and
machinery, loans for irrigation and other developmental activities undertaken in the farm).
(iii) Loans for pre-harvest and post-harvest activities, viz., spraying, weeding, harvesting,
grading and sorting.
(iv) Export credit for exporting their own farm produce.
82
DBOD-MC On IRAC Norms - 2014
Annex 3
Format for Computing Countercyclical Provisioning Buffer
Amount in Rs. in Crore
Computing Countercyclical Provisioning Buffer as on September 30, 2010
1 2 3 4 5 6 7 8
Gross
Provisions for
NPA @
diminution in
Plus Specific
fair value of
Tech Provisions Ratio
the Technical Total
nical / for NPAs of (7)
restructured write-off (4+5+6)
Prud held / to (3)
accounts
ential required
calssified as
Write-off
NPAs
*
1. Sub-Standard Advances
2. Doubtful Advances
(a+b+c)
a < 1 year
b 1-3 Years
c >3 years
3. Advances classified as
Loss Assets
4. Total
5. Floating Provisions for
Advances (only to the
extent they are not used
as Tier II Capital)
6. DICGC / ECGC claims
received and held
pending
adjustment
7. Part payment received
and kept in Suspense
Account or any other
similar account
8. Total
(Sum of column 7 of
Row 4+ Row 5 + Row
6+ Row 7)
9. Provision Coverage
Ratio
{(Row 8/Total of Column
3 of Row 4)*100}
10. If PCR < 70%, shortfall
in provisioning to
achieve PCR of 70%
(70% of Column 3 of
Row 4 - Row 8)
11. a Countercyclical
83
DBOD-MC On IRAC Norms - 2014
Provisioning
Buffer, if bank has
achieved PCR of
70% - Floating
Provisions for
advances to the
extent not used as
Tier II capital (Row
5)
b Countercyclical
Provisioning
Buffer, if bank has
not achieved PCR
of 70% - Floating
Provisions for
advances to the
extent not used as
Tier II capital (Row
5) + Shortfall in
provisioning to
achieve PCR of
70%, if any (Row 10)
which needs to be
built up at the
earliest.
84
DBOD-MC On IRAC Norms - 2014
Annex - 4
Organisational Framework for Restructuring of Advances Under
Consortium / Multiple Banking / Syndication Arrangements
A. Corporate Debt Restructuring (CDR) Mechanism
1.1 Objective
The objective of the Corporate Debt Restructuring (CDR) framework is to
ensure timely and transparent mechanism for restructuring the corporate debts
of viable entities facing problems, outside the purview of BIFR, DRT and other
legal proceedings, for the benefit of all concerned. In particular, the framework
will aim at preserving viable corporates that are affected by certain internal and
external factors and minimize the losses to the creditors and other
stakeholders through an orderly and coordinated restructuring programme.
1.2 Scope
The CDR Mechanism has been designed to facilitate restructuring of advances
of borrowers enjoying credit facilities from more than one bank / Financial
Institution (FI) in a coordinated manner. The CDR Mechanism is an
organizational framework institutionalized for speedy disposal of restructuring
proposals of large borrowers availing finance from more than one banks / FIs.
This mechanism will be available to all borrowers engaged in any type of
activity subject to the following conditions :
a) The borrowers enjoy credit facilities from more than one bank / FI under
multiple banking / syndication / consortium system of lending.
b) The total outstanding (fund-based and non-fund based) exposure is
Rs.10 crore or above.
CDR system in the country will have a three tier structure :
· CDR Standing Forum and its Core Group
· CDR Empowered Group
· CDR Cell
2. CDR Standing Forum
2.1 The CDR Standing Forum would be the representative general body of all
85
DBOD-MC On IRAC Norms - 2014
financial institutions and banks participating in CDR system. All financial
institutions and banks should participate in the system in their own interest.
CDR Standing Forum will be a selfempowered body, which will lay down
policies and guidelines, and monitor the progress of corporate debt
restructuring.
2.2 The Forum will also provide an official platform for both the creditors and
borrowers (by consultation) to amicably and collectively evolve policies and
guidelines for working out debt restructuring plans in the interests of all
concerned.
2.3 The CDR Standing Forum shall comprise of Chairman & Managing Director,
Industrial Development Bank of India Ltd; Chairman, State Bank of India;
Managing Director & CEO, ICICI Bank Limited; Chairman, Indian Banks\'
Association as well as Chairmen and Managing Directors of all banks and
financial institutions participating as permanent members in the system. Since
institutions like Unit Trust of India, General Insurance Corporation, Life
Insurance Corporation may have assumed exposures on certain borrowers,
these institutions may participate in the CDR system. The Forum will elect its
Chairman for a period of one year and the principle of rotation will be followed
in the subsequent years. However, the Forum may decide to have a Working
Chairman as a whole-time officer to guide and carry out the decisions of the
CDR Standing Forum. The RBI would not be a member of the CDR Standing
Forum and Core Group. Its role will be confined to providing broad guidelines.
2.4 The CDR Standing Forum shall meet at least once every six months and would
review and monitor the progress of corporate debt restructuring system. The
Forum would also lay down the policies and guidelines including those relating
to the critical parameters for restructuring (for example, maximum period for a
unit to become viable under a restructuring package, minimum level of
promoters\' sacrifice etc.) to be followed by the CDR Empowered Group and
CDR Cell for debt restructuring and would ensure their smooth functioning and
adherence to the prescribed time schedules for debt restructuring. It can also
review any individual decisions of the CDR Empowered Group and CDR Cell.
The CDR Standing Forum may also formulate guidelines for dispensing special
treatment to those cases, which are complicated and are likely to be delayed
beyond the time frame prescribed for processing.
2.5 A CDR Core Group will be carved out of the CDR Standing Forum to assist the
86
DBOD-MC On IRAC Norms - 2014
Standing Forum in convening the meetings and taking decisions relating to
policy, on behalf of the Standing Forum. The Core Group will consist of Chief
Executives of Industrial Development Bank of India Ltd., State Bank of India,
ICICI Bank Ltd, Bank of Baroda, Bank of India, Punjab National Bank, Indian
Banks\' Association and Deputy Chairman of Indian Banks\' Association
representing foreign banks in India.
2.6 The CDR Core Group would lay down the policies and guidelines to be
followed by the CDR Empowered Group and CDR Cell for debt restructuring.
These guidelines shall also suitably address the operational difficulties
experienced in the functioning of the CDR Empowered Group. The CDR Core
Group shall also prescribe the PERT chart for processing of cases referred to
the CDR system and decide on the modalities for enforcement of the time
frame. The CDR Core Group shall also lay down guidelines to ensure that
over-optimistic projections are not assumed while preparing / approving
restructuring proposals especially with regard to capacity utilization, price of
products, profit margin, demand, availability of raw materials, input-output ratio
and likely impact of imports / international cost competitiveness.
3. CDR Empowered Group
3.1 The individual cases of corporate debt restructuring shall be decided by the
CDR Empowered Group, consisting of ED level representatives of Industrial
Development Bank of India Ltd., ICICI Bank Ltd. and State Bank of India as
standing members, in addition to ED level representatives of financial
institutions and banks who have an exposure to the concerned company.
While the standing members will facilitate the conduct of the Group\'s meetings,
voting will be in proportion to the exposure of the creditors only. In order to
make the CDR Empowered Group effective and broad based and operate
efficiently and smoothly, it would have to be ensured that participating
institutions / banks approve a panel of senior officers to represent them in the
CDR Empowered Group and ensure that they depute officials only from among
the panel to attend the meetings of CDR Empowered Group. Further,
nominees who attend the meeting pertaining to one account should invariably
attend all the meetings pertaining to that account instead of deputing their
representatives.
3.2 The level of representation of banks / financial institutions on the CDR
Empowered Group should be at a sufficiently senior level to ensure that
87
DBOD-MC On IRAC Norms - 2014
concerned bank / FI abides by the necessary commitments including
sacrifices, made towards debt restructuring. There should be a general
authorisation by the respective Boards of the participating institutions / banks
in favour of their representatives on the CDR Empowered Group, authorising
them to take decisions on behalf of their organization, regarding restructuring
of debts of individual corporates.
3.3 The CDR Empowered Group will consider the preliminary report of all cases of
requests of restructuring, submitted to it by the CDR Cell. After the Empowered
Group decides that restructuring of the company is prima-facie feasible and the
enterprise is potentially viable in terms of the policies and guidelines evolved
by Standing Forum, the detailed restructuring package will be worked out by
the CDR Cell in conjunction with the Lead Institution. However, if the lead
institution faces difficulties in working out the detailed restructuring package,
the participating banks / financial institutions should decide upon the alternate
institution / bank which would work out the detailed restructuring package at
the first meeting of the Empowered Group when the preliminary report of the
CDR Cell comes up for consideration.
3.4 The CDR Empowered Group would be mandated to look into each case of
debt restructuring, examine the viability and rehabilitation potential of the
Company and approve the restructuring package within a specified time frame
of 90 days, or at best within 180 days of reference to the Empowered Group.
The CDR Empowered Group shall decide on the acceptable viability
benchmark levels on the following illustrative parameters, which may be
applied on a case-by-case basis, based on the merits of each case :
* Return on Capital Employed (ROCE),
* Debt Service Coverage Ratio (DSCR),
Gap between the Internal Rate of Return (IRR) and the Cost of Fund
*
(CoF),
* Extent of sacrifice.
3.5 The Board of each bank / FI should authorise its Chief Executive Officer (CEO)
and / or Executive Director (ED) to decide on the restructuring package in
respect of cases referred to the CDR system, with the requisite requirements
to meet the control needs. CDR Empowered Group will meet on two or three
occasions in respect of each borrowal account. This will provide an opportunity
88
DBOD-MC On IRAC Norms - 2014
to the participating members to seek proper authorisations from their CEO /
ED, in case of need, in respect of those cases where the critical parameters of
restructuring are beyond the authority delegated to him / her.
3.6 The decisions of the CDR Empowered Group shall be final. If restructuring of
debt is found to be viable and feasible and approved by the Empowered
Group, the company would be put on the restructuring mode. If restructuring is
not found viable, the creditors would then be free to take necessary steps for
immediate recovery of dues and / or liquidation or winding up of the company,
collectively or individually.
4. CDR Cell
4.1 The CDR Standing Forum and the CDR Empowered Group will be assisted by
a CDR Cell in all their functions. The CDR Cell will make the initial scrutiny of
the proposals received from borrowers / creditors, by calling for proposed
rehabilitation plan and other information and put up the matter before the CDR
Empowered Group, within one month to decide whether rehabilitation is prima
facie feasible. If found feasible, the CDR Cell will proceed to prepare detailed
Rehabilitation Plan with the help of creditors and, if necessary, experts to be
engaged from outside. If not found prima facie feasible, the creditors may start
action for recovery of their dues.
4.2 All references for corporate debt restructuring by creditors or borrowers will be
made to the CDR Cell. It shall be the responsibility of the lead institution /
major stakeholder to the corporate, to work out a preliminary restructuring plan
in consultation with other stakeholders and submit to the CDR Cell within one
month. The CDR Cell will prepare the restructuring plan in terms of the general
policies and guidelines approved by the CDR Standing Forum and place for
consideration of the Empowered Group within 30 days for decision. The
Empowered Group can approve or suggest modifications but ensure that a
final decision is taken within a total period of 90 days. However, for sufficient
reasons the period can be extended up to a maximum of 180 days from the
date of reference to the CDR Cell.
4.3 The CDR Standing Forum, the CDR Empowered Group and CDR Cell is at
present housed in Industrial Development Bank of India Ltd. However, it may
be shifted to another place if considered necessary, as may be decided by the
Standing Forum. The administrative and other costs shall be shared by all
89
DBOD-MC On IRAC Norms - 2014
financial institutions and banks. The sharing pattern shall be as determined by
the Standing Forum.
4.4 CDR Cell will have adequate members of staff deputed from banks and
financial institutions. The CDR Cell may also take outside professional help.
The cost in operating the CDR mechanism including CDR Cell will be met from
contribution of the financial institutions and banks in the Core Group at the rate
of Rs.50 lakh each and contribution from other institutions and banks at the
rate of Rs.5 lakh each.
5. Other features
5.1 Eligibility criteria
5.1.1 The scheme will not apply to accounts involving only one financial
institution or one bank. The CDR mechanism will cover only multiple
banking accounts / syndication / consortium accounts of corporate
borrowers engaged in any type of activity with outstanding fund-based
and non-fund based exposure of Rs.10 crore and above by banks and
institutions.
5.1.2 The Category 1 CDR system will be applicable only to accounts
classified as \'standard\' and \'sub-standard\'. There may be a situation
where a small portion of debt by a bank might be classified as doubtful.
In that situation, if the account has been classified as \'standard\'/
\'substandard\' in the books of at least 90% of creditors (by value), the
same would be treated as standard / substandard, only for the purpose
of judging the account as eligible for CDR, in the books of the remaining
10% of creditors. There would be no requirement of the account /
company being sick, NPA or being in default for a specified period
before reference to the CDR system. However, potentially viable cases
of NPAs will get priority. This approach would provide the necessary
flexibility and facilitate timely intervention for debt restructuring.
Prescribing any milestone(s) may not be necessary, since the debt
restructuring exercise is being triggered by banks and financial
institutions or with their consent.
5.1.3 While corporates indulging in frauds and malfeasance even in a single
bank will continue to remain ineligible for restructuring under CDR
mechanism as hitherto, the Core group may review the reasons for
90
DBOD-MC On IRAC Norms - 2014
classification of the borrower as wilful defaulter specially in old cases
where the manner of classification of a borrower as a wilful defaulter
was not transparent and satisfy itself that the borrower is in a position to
rectify the wilful default provided he is granted an opportunity under the
CDR mechanism. Such exceptional cases may be admitted for
restructuring with the approval of the Core Group only. The Core Group
may ensure that cases involving frauds or diversion of funds with
malafide intent are not covered.
5.1.4 The accounts where recovery suits have been filed by the creditors
against the company, may be eligible for consideration under the CDR
system provided, the initiative to resolve the case under the CDR
system is taken by at least 75% of the creditors (by value) and 60% of
creditors (by number).
5.1.5 BIFR cases are not eligible for restructuring under the CDR system.
However, large value BIFR cases may be eligible for restructuring under
the CDR system if specifically recommended by the CDR Core Group.
The Core Group shall recommend exceptional BIFR cases on a case-to-
case basis for consideration under the CDR system. It should be
ensured that the lending institutions complete all the formalities in
seeking the approval from BIFR before implementing the package.
5.2 Reference to CDR system
5.2.1 Reference to Corporate Debt Restructuring System could be triggered
by (i) any or more of the creditor who have minimum 20% share in either
working capital or term finance, or (ii) by the concerned corporate, if
supported by a bank or financial institution having stake as in (i) above.
5.2.2 Though flexibility is available whereby the creditors could either consider
restructuring outside the purview of the CDR system or even initiate
legal proceedings where warranted, banks / FIs should review all
eligible cases where the exposure of the financial system is more than
Rs.100 crore and decide about referring the case to CDR system or to
proceed under the new Securitisation and Reconstruction of Financial
Assets and Enforcement of Securities Interest Act, 2002 or to file a suit
in DRT etc.
5.3 Legal Basis
91
DBOD-MC On IRAC Norms - 2014
5.3.1 CDR is a non-statutory mechanism which is a voluntary system based
on Debtor- Creditor Agreement (DCA) and Inter-Creditor Agreement
(ICA). The Debtor-Creditor Agreement (DCA) and the Inter-Creditor
Agreement (ICA) shall provide the legal basis to the CDR mechanism.
The debtors shall have to accede to the DCA, either at the time of
original loan documentation (for future cases) or at the time of reference
to Corporate Debt Restructuring Cell. Similarly, all participants in the
CDR mechanism through their membership of the Standing Forum shall
have to enter into a legally binding agreement, with necessary
enforcement and penal clauses, to operate the System through laid-
down policies and guidelines. The ICA signed by the creditors will be
initially valid for a period of 3 years and subject to renewal for further
periods of 3 years thereafter. The lenders in foreign currency outside the
country are not a part of CDR system. Such creditors and also creditors
like GIC, LIC, UTI, etc., who have not joined the CDR system, could join
CDR mechanism of a particular corporate by signing transaction to
transaction ICA, wherever they have exposure to such corporate.
5.3.2 The Inter-Creditor Agreement would be a legally binding agreement
amongst the creditors, with necessary enforcement and penal clauses,
wherein the creditors would commit themselves to abide by the various
elements of CDR system. Further, the creditors shall agree that if 75 per
cent of creditors by value and 60 per cent of the creditors by number,
agree to a restructuring package of an existing debt (i.e., debt
outstanding), the same would be binding on the remaining creditors.
Since Category 1 CDR Scheme covers only standard and sub-standard
accounts, which in the opinion of 75 per cent of the creditors by value
and 60 per cent of creditors by number, are likely to become performing
after introduction of the CDR package, it is expected that all other
creditors (i.e., those outside the minimum 75 per cent by value and 60
per cent by number) would be willing to participate in the entire CDR
package, including the agreed additional financing.
5.3.3 In order to improve effectiveness of the CDR mechanism a clause may
be incorporated in the loan agreements involving consortium / syndicate
accounts whereby all creditors, including those which are not members
of the CDR mechanism, agree to be bound by the terms of the
restructuring package that may be approved under the CDR
92
DBOD-MC On IRAC Norms - 2014
mechanism, as and when restructuring may become necessary.
5.3.4 One of the most important elements of Debtor-Creditor Agreement
would be \'stand still\' agreement binding for 90 days, or 180 days by both
sides. Under this clause, both the debtor and creditor(s) shall agree to a
legally binding \'stand-still\' whereby both the parties commit themselves
not to take recourse to any other legal action during the \'stand-still\'
period, this would be necessary for enabling the CDR System to
undertake the necessary debt restructuring exercise without any outside
intervention, judicial or otherwise. However, the stand-still clause will be
applicable only to any civil action either by the borrower or any lender
against the other party and will not cover any criminal action. Further,
during the stand-still period, outstanding foreign exchange forward
contracts, derivative products, etc., can be crystallised, provided the
borrower is agreeable to such crystallisation. The borrower will
additionally undertake that during the stand-still period the documents
will stand extended for the purpose of limitation and also that it will not
approach any other authority for any relief and the directors of the
borrowing company will not resign from the Board of Directors during
the stand-still period.
5.4 Sharing of Additional finance
5.4.1 Additional finance, if any, is to be provided by all creditors of a \'standard\'
or \'substandard account\' irrespective of whether they are working capital
or term creditors, on a pro-rata basis. In case for any internal reason,
any creditor (outside the minimum 75 per cent and 60 per cent) does not
wish to commit additional financing, that creditor will have an option in
accordance with the provisions of para 5.5.
5.4.2 The providers of additional finance, whether existing creditors or new
creditors, shall have a preferential claim, to be worked out under the
restructuring package, over the providers of existing finance with
respect to the cash flows out of recoveries, in respect of the additional
exposure
5.5 Exit Option
5.5.1 As stated in para 5.4.1 a creditor (outside the minimum 75 per cent and
93
DBOD-MC On IRAC Norms - 2014
60 per cent) who for any internal reason does not wish to commit
additional finance will have an option. At the same time, in order to
avoid the \"free rider\" problem, it is necessary to provide some
disincentive to the creditor who wishes to exercise this option. Such
creditors can either (a) arrange for its share of additional finance to be
provided by a new or existing creditor, or (b) agree to the deferment of
the first year\'s interest due to it after the CDR package becomes
effective. The first year\'s deferred interest as mentioned above, without
compounding, will be payable along with the last instalment of the
principal due to the creditor.
5.5.2 In addition, the exit option will also be available to all lenders within the
minimum 75 percent and 60 percent provided the purchaser agrees to
abide by restructuring package approved by the Empowered Group.
The exiting lenders may be allowed to continue with their existing level
of exposure to the borrower provided they tie up with either the existing
lenders or fresh lenders taking up their share of additional finance.
5.5.3 The lenders who wish to exit from the package would have the option to
sell their existing share to either the existing lenders or fresh lenders, at
an appropriate price, which would be decided mutually between the
exiting lender and the taking over lender. The new lenders shall rank on
par with the existing lenders for repayment and servicing of the dues
since they have taken over the existing dues to the exiting lender.
5.5.4 In order to bring more flexibility in the exit option, One Time Settlement
can also be considered, wherever necessary, as a part of the
restructuring package. If an account with any creditor is subjected to
One Time Settlement (OTS) by a borrower before its reference to the
CDR mechanism, any fulfilled commitments under such OTS may not
be reversed under the restructured package. Further payment
commitments of the borrower arising out of such OTS may be factored
into the restructuring package.
5.6 Category 2 CDR System
5.6.1 There have been instances where the projects have been found to be
viable by the creditors but the accounts could not be taken up for
restructuring under the CDR system as they fell under \'doubtful\'
category. Hence, a second category of CDR is introduced for cases
94
DBOD-MC On IRAC Norms - 2014
where the accounts have been classified as \'doubtful\' in the books of
creditors, and if a minimum of 75% of creditors (by value) and 60%
creditors (by number) satisfy themselves of the viability of the account
and consent for such restructuring, subject to the following conditions :
(i) It will not be binding on the creditors to take up additional financing
worked out under the debt restructuring package and the decision
to lend or not to lend will depend on each creditor bank / FI
separately. In other words, under the proposed second category of
the CDR mechanism, the existing loans will only be restructured
and it would be up to the promoter to firm up additional financing
arrangement with new or existing creditors individually.
(ii) All other norms under the CDR mechanism such as the standstill
clause, asset classification status during the pendency of
restructuring under CDR, etc., will continue to be applicable to this
category also.
5.6.2 No individual case should be referred to RBI. CDR Core Group may
take a final decision whether a particular case falls under the CDR
guidelines or it does not.
5.6.3 All the other features of the CDR system as applicable to the First
Category will also be applicable to cases restructured under the Second
Category.
5.7 Incorporation of \'right to recompense\' clause
All CDR approved packages must incorporate creditors\' right to accelerate
repayment and borrowers\' right to pre-pay. All restructuring packages must
incorporate `Right to recompense\' clause and it should be based on certain
performance criteria of the borrower. In any case, minimum 75 per cent of the
recompense amount should be recovered by the lenders and in cases where
some facility under restructuring has been extended below base rate, 100 per
cent of the recompense amount should be recovered.
B SME Debt Restructuring Mechanism
Apart from CDR Mechanism, there exists a much simpler mechanism for
restructuring of loans availed by Small and Medium Enterprises (SMEs). Unlike in
the case of CDR Mechanism, the operational rules of the mechanism have been left
95
DBOD-MC On IRAC Norms - 2014
to be formulated by the banks concerned. This mechanism will be applicable to all
the borrowers which have funded and non-funded outstanding up to Rs.10 crore
under multiple /consortium banking arrangement. Major elements of this
arrangements are as under :
(i) Under this mechanism, banks may formulate, with the approval of their Board
of Directors, a debt restructuring scheme for SMEs within the prudential norms
laid down by RBI. Banks may frame different sets of policies for borrowers
belonging to different sectors within the SME if they so desire.
(ii) While framing the scheme, banks may ensure that the scheme is simple to
comprehend and will, at the minimum, include parameters indicated in these
guidelines.
(iii) The main plank of the scheme is that the bank with the maximum outstanding
may work out the restructuring package, along with the bank having the
second largest share.
(iv) Banks should work out the restructuring package and implement the same
within a maximum period of 90 days from date of receipt of requests.
(v) The SME Debt Restructuring Mechanism will be available to all borrowers
engaged in any type of activity.
(vi) Banks may review the progress in rehabilitation and restructuring of SMEs
accounts on a quarterly basis and keep the Board informed.
96
DBOD-MC On IRAC Norms - 2014
Annex - 5
Key Concepts
(i) Advances
The term \'Advances\' will mean all kinds of credit facilities including cash credit,
overdrafts, term loans, bills discounted / purchased, factored receivables, etc. and
investments other than that in the nature of equity.
(ii) Agricultural Activities
As defined in RPCD circular RPCD.No.Plan.BC.84/04.09.01/2006-07 dated April 30,
2007 as modified from time to time.
(iii) Fully Secured
When the amounts due to a bank (present value of principal and interest receivable as
per restructured loan terms) are fully covered by the value of security, duly charged in
its favour in respect of those dues, the bank\'s dues are considered to be fully secured.
While assessing the realisable value of security, primary as well as collateral securities
would be reckoned, provided such securities are tangible securities and are not in
intangible form like guarantee etc., of the promoter / others. However, for this purpose
the bank guarantees, State Government Guarantees and Central Government
Guarantees will be treated on par with tangible security.
(iv) Restructured Accounts
A restructured account is one where the bank, for economic or legal reasons relating to
the borrower\'s financial difficulty, grants to the borrower concessions that the bank
would not otherwise consider. Restructuring would normally involve modification of
terms of the advances / securities, which would generally include, among others,
alteration of repayment period / repayable amount/ the amount of instalments / rate of
interest (due to reasons other than competitive reasons). However, extension in
repayment tenor of a floating rate loan on reset of interest rate, so as to keep the EMI
unchanged provided it is applied to a class of accounts uniformly will not render the
account to be classified as `Restructured account\'. In other words, extension or
deferment of EMIs to individual borrowers as against to an entire class, would render
the accounts to be classified as \'restructured accounts\'.
In the cases of roll-over of short term loans, where proper pre-sanction assessment has
97
DBOD-MC On IRAC Norms - 2014
been made, and the roll-over is allowed based on the actual requirement of the
borrower and no concession has been provided due to credit weakness of the
borrower, then these might not be considered as restructured accounts. However, if
such accounts are rolled-over more than two times, then third roll-over onwards the
account would have to be treated as a restructured account. Besides, banks should be
circumspect while granting such facilities as the borrower may be availing similar
facilities from other banks in the consortium or under multiple banking. Further, Short
Term Loans for the purpose of this provision do not include properly assessed regular
Working Capital Loans like revolving Cash Credit or Working Capital Demand Loans.
(v) Repeatedly Restructured Accounts
When a bank restructures an account a second (or more) time(s), the account will be
considered as a \'repeatedly restructured account\'. However, if the second restructuring
takes place after the period upto which the concessions were extended under the terms
of the first restructuring, that account shall not be reckoned as a \'repeatedly
restructured account\'.
(vi) SMEs
Small and Medium Enterprise (SME) is an undertaking defined in RPCD circulars
RPCD.PLNFS.BC.No.63.06.02/2006-07 dated April 4, 2007 amended from time to time.
(vii) Specified Period
Specified Period means a period of one year from the commencement of the first
payment of interest or principal, whichever is later, on the credit facility with longest
period of moratorium under the terms of restructuring package.
(viii) Satisfactory Performance
Satisfactory performance during the specified period means adherence to the following
conditions during that period.
Non-Agricultural Cash Credit Accounts
In the case of non-agricultural cash credit accounts, the account should not be out of
order any time during the specified period, for a duration of more than 90 days. In
addition, there should not be any overdues at the end of the specified period.
Non-Agricultural Term Loan Accounts
In the case of non-agricultural term loan accounts, no payment should remain overdue
for a period of more than 90 days. In addition there should not be any overdues at the
98
DBOD-MC On IRAC Norms - 2014
end of the specified period.
All Agricultural Accounts
In the case of agricultural accounts, at the end of the specified period the account
should be regular.
* Note: It is observed that in a rising interest rate scenario, banks normally extend the
repayment period by keeping the EMI constant. However, in a few cases this resulted in
extending the repayment period much beyond the retirement age or the revenue generating
capacity of the borrower. Therefore, it is advised that :
(i) While extending repayment period in respect of housing loans to keep the EMI
unchanged, banks should satisfy themselves about the revenue generation / repaying
capacity of the borrower during the entire repayment period including the extended
repayment period.
(ii) Banks should not extend the repayment period of such borrowers where they have
concerns regarding the repaying capacity over the extended period, even if the
borrowers want to extend the tenor to keep the EMI unchanged.
(iii) Banks should provide the option of higher EMI to such borrowers who want to
repay the housing loan as per the original repayment period.
99
DBOD-MC On IRAC Norms - 2014
Annex - 6
Disclosure of Restructured Accounts (Rs. in Crore)
Sl Type of Restructuring Under CDR Mechanism Under SME Debt Others Total
N Restructuring Mechanism
o Asset Classification Stan Sub- Dou Lo Tot Stan Sub- Dou Lo T Sta Sub Dou L To Sta Sub Dou L Total
Details dard Stan btful ss al dard Stan btful ss ot ndar - btful os tal ndar - btful os
dard dard al d Sta s d Sta s
ndar ndar
d d
1 Restructured No. of
Accounts as borrow
on April 1 of ers
the FY Amount
(opening outstan
figures)* ding
Provisi
on
thereon
2 Fresh No. of
restructuring borrow
during the year ers
Amount
outstan
ding
Provisi
on
thereon
3 Upgradations No. of
to restructured borrow
standard ers
100 DBOD-MC On IRAC Norms-2014
category Amount
during the FY outstan
ding
Provisi
on
thereon
4 Restructured No. of
standard borrow
advances ers
which cease to
attract higher
provisioning Amount
and / or outstan
additional risk ding
weight at the Provisi
end of the FY on
and hence thereon
need not be
shown as
restructured
standard
advances at
the beginning
of the next FY
5 Downgradation No. of
s ofborrow
restructured ers
accounts Amount
during the FY outstan
ding
Provisi
on
thereon
6 Write-offs of No. of
restructured borrow
101 DBOD-MC On IRAC Norms-2014
accounts ers
during the FY Amount
outstan
ding
7 Restructured No. of
Accounts as borrow
on March 31 of ers
the FY Amount
outstan
(closing ding
figures*) Provisi
on
thereon
*Excluding the figures of Standard Restructured Advances which do not attract higher provisioning or risk weight (if applicable).
Instructions For the purpose of disclosure in the above Format, the following instructions are required to be followed:
(i) Advances restructured under CDR Mechanism, SME Debt Restructuring Mechanism and other categories of restructuring should be
shown separately.
(ii) Under each of the above categories, restructured advances under their present asset classification, i.e. standard, sub-standard, doubtful
and loss should be shown separately.
(iii) Under the `standard\' restructured accounts; accounts, which have objective evidence of no longer having inherent credit weakness,
need not be disclosed. For this purpose, an objective criteria for accounts not having inherent credit weakness is discussed below:
(a) As regards restructured accounts classified as standard advances, in view of the inherent credit weakness in such accounts,
banks are required to make a general provision higher than what is required for otherwise standard accounts in the first two
years from the date of restructuring. In case of moratorium on payment of interest / principal after restructuring, such advances
attract the higher general provision for the period covering moratorium and two years thereafter.
102 DBOD-MC On IRAC Norms-2014
(b) Further, restructured standard unrated corporate exposures and housing loans are also subjected to an additional risk weight of
25 percentage point with a view to reflect the higher element of inherent risk which may be latent in such entities (cf. paragraph
5.8.3 of circular DBOD.No.BP.BC.90/20.06.001/2006-07 dated April 27, 2007 on `Prudential Guidelines on Capital Adequacy
and Market Discipline - Implementation of the New Capital Adequacy Framework\' and paragraph 4 of circular
DBOD.No.BP.BC.76/21.04.0132/2008-09 dated November 3, 2008 on `Prudential Guidelines on Restructuring of Advances by
Banks\' respectively).
(c) The aforementioned [(a) and (b)] additional/ higher provision and risk weight cease to be applicable after the prescribed period if
the performance is as per the rescheduled programme. However, the diminution in the fair value will have to be assessed on
each balance sheet date and provision should be made as required.
(d) Restructured accounts classified as sub-standard and doubtful (non-performing) advances, when upgraded to standard category
also attract a general provision higher than what is required for otherwise standard accounts for the first year from the date of
up-gradation, in terms of extant guidelines on provisioning requirement of restructured accounts. This higher provision ceases
to be applicable after one year from the date of upgradation if the performance of the account is as per the rescheduled
programme. However, the diminution in the fair value will have to be assessed on each balance sheet date and provision
made as required.
(e) Once the higher provisions and/or risk weights (if applicable and as prescribed from time to time by RBI) on restructured
standard advances revert to the normal level on account of satisfactory performance during the prescribed periods as
indicated above, such advances, henceforth, would no longer be required to be disclosed by banks as restructured standard
accounts in the \"Notes on Accounts\" in their Annual Balance Sheets. However, banks should keep an internal record of such
restructured accounts till the provisions for diminution in fair value of such accounts are maintained.
103 DBOD-MC On IRAC Norms-2014
(iv) Disclosures should also indicate the intra category movements both on upgradation of restructured NPA accounts as well as on
slippage. These disclosures would show the movement in restructured accounts during the financial year on account of addition,
upgradation, downgradation, write off, etc.
(v) While disclosing the position of restructured accounts, banks must disclose the total amount outstanding in all the accounts / facilities of
borrowers whose accounts have been restructured along with the restructured part or facility. This means that even if only one of the
facilities / accounts of a borrower has been restructured, the bank should also disclose the entire outstanding amount pertaining to all
the facilities/ accounts of that particular borrower.
(vi) Upgradation during the year (Sl No. 3 in the Disclosure Format) means movement of `restructured NPA\' accounts to `standard asset
classification from substandard or doubtful category\' as the case may be. These will attract higher provisioning and / or risk weight\'
during the `prescribed period\' as prescribed from time to time. Movement from one category into another will be indicated by a (-) and a
(+) sign respectively in the relevant category.
(vii) Movement of Restructured standard advances (Sr. No. 4 in the Disclosure Format) out of the category into normal standard advances
will be indicated by a (-) sign in the column \"Standard\".
(viii) Downgradation from one category to another would be indicated by (-) ve and (+) ve sign in the relevant categories.
(ix) Upgradation, downgradation and write-offs are from their existing asset classifications.
(x) All disclosures are on the basis of current asset classification and not `pre-restructuring\' asset classification.
104 DBOD-MC On IRAC Norms-2014
(xi) 10Additional/fresh sanctions made to an existing restructured account can be shown under Sr. No. 2 `Fresh Restructuring during the
year\' with a footnote stating that the figures under Sr. No.2 include Rs. xxx crore of fresh/additional sanction (no. of accounts and
provision thereto also) to existing restructured accounts. Similarly, reductions in the quantity of restructured accounts can be shown
under Sr.No.6 `write-offs of restructured accounts during the year\' with a footnote stating that that it includes Rs. xxx crore (no. of
accounts and provision thereto also) of reduction from existing restructured accounts by way of sale / recovery.
(xii) Closing balance as on March 31st of a FY should tally arithmetically with opening balance as on April 1st of the FY + Fresh
Restructuring during the year including additional /fresh sanctions to existing restructured accounts + Adjustments for movement across
asset categories Restructured standard advances which cease to attract higher risk weight and/or provision reductions due to write-
offs/sale/recovery, etc. However, if due to some unforeseen/ any other reason, arithmetical accuracy is not achieved, then the difference
should be reconciled and explained by way of a foot-note.
10
Sl Nos. (xi) & (xii) are revisions.
105 DBOD-MC On IRAC Norms-2014
Annex - 7
(Cf. para 2 of the covering letter to the circular)
List of Circulars consolidated by the Master Circular on IRAC Norms
Sl. Para No. of
Circular No. Date Subject
No. the MC
Prudential Norms on
Income Recognition, Asset
DBOD.No.BP.BC.125/21.04. Classification and 4.2.15.5 (iv)
1. 26.06.2014
048/2013-14 Provisioning Pertaining to and (v)
Advances - Projects under
Implementation
Prudential Norms for
Conversion of Unpaid
Mailbox Clarification Interest into
2. 11.04.2014 14.2.5
\'Funded Interest Term
Loan\' (FITL), Debt or
Equity Instruments
Framework for Revitalising
Distressed Assets in the
6.5 (A) (a)
Mailbox Clarification Economy Refinancing of
3. 09.04.2014 (iii)
Project Loans, Sale of
NPAs and Other
Regulatory Measures
6.3 (iii)
Framework for Revitalising
6.4 (d) (iv)
Distressed Assets in the
DBOD.No.BP.BC.98/21.04.1 6.5 (A) (a)
26.02.2014 Economy Refinancing of
4. 32/2013-14 (ii) and (iii)
Project Loans, Sale of
7.3 (ix)
NPAs and Other
7.3 (x)
Regulatory Measures
Part C-2
Framework for Revitalising
DBOD.No.BP.BC.97/21.04.1 Distressed Assets in the
5. 26.02.2014 Economy Guidelines on Part C - 1
32/2013-14
Joint Lenders Forum (JLF)
and Corrective Action Plan
Utilisation of Floating
DBOD.No.BP.BC.95/21.04.0 Provisions / Counter 5.10 (iii) (c)
6. 7.02.2014
48/2013-14 Cyclical Provisioning 5.10 (v)
Buffer
Capital and Provisioning
Requirements for
DBOD.No.BP.BC.85/21.06.2
7. 15.01.2014 Exposures to entities with 5.5 (vi)
00/2013-14
Unhedged Foreign
Currency Exposures
Prudential Norms on
DBOD.No.BP.BC.78/21.04.0 Income Recognition, Asset
8. 20.12.2013 4.2.21
48/2013-14 Classification and
Provisioning pertaining to
106 DBOD-MC On IRAC Norms-2014
Advances Credit Card
Accounts
Housing Sector: New sub-
sector CRE (Residential
DBOD.BP.BC.No. Housing) within CRE &
9. 21.06.2013 5.5 (c)
104/08.12.015/2012-13 Rationalisation of
provisioning, risk-weight
and LTV ratios
Review of Prudential
Guidelines on 4.2.15.3 (iv)
Mail Box Clarification
10. 06.06.2013 Restructuring of Advances 4.2.15.4 (iii)
by Banks and Financial Part B
Institutions
Review of Prudential
DBOD.No.BP.BC- Guidelines on 4.2.15, Part
11. 99/21.04.048/2012-13 30.05.2013 Restructuring of Advances B, Annex 4
by Banks and Financial &5
Institutions
Advances Guaranteed by
Credit Risk Guarantee
DBOD.No.BP.BC-
Fund Trust for Low Income
12. 90/21.04.048/2012-13 16.04.2013 5.9.5
Housing (CRGFTLIH)
Risk Weights and
Provisioning
DBOD.No.BP.BC- Prudential Norms on
13. 83/21.04.048/2012-13 18.03.2013 Advances to Infrastructure 5.4 (iii) (c)
Sector
Disclosure Requirements
DBOD.BP.BC.No.80/21.04.1 on Advances Part B &
14. 31.01.2013
32/2012-13 Restructured by Banks and Annex - 6
Financial Institutions
Review of Prudential
DBOD.No.BP.BC- Guidelines on
4.2.15.3 (iv)
15. 63/21.04.048/2012-13 26.11.2012 Restructuring of Advances
4.2.15.4 (iii)
by Banks and Financial
Institutions
NPA Management
DBOD.No.BP.BC-
Requirement of an
16. 42/21.04.048/2012-13 14.09.2012 4.2.21
Effective Mechanism and
Granular Data
DBOD.No.BP.BC- Revisions to the
17. 103/21.04.177/2011-12 07.05.2012 Guidelines on 4.2.20
Securitisation Transactions
DBOD.No.BP.BC- Prudential Norms for Off-
4.2.7 (d) to
18. 28/21.04.157/2011-12 11.08.2011 balance Sheet Exposures
(h)
of Banks
Prudential Guidelines on
DBOD.BP.BC.No.99/21.04.1
19. 10.06.2011 Restructuring of Advances
32/2010-11
by Banks 12.4.2
Enhancement of Rates of 5.3 (ii),
DBOD.No.BP.BC.94/21.04.0 Provisioning for Non- 5.4(i), 5.4(ii)
20. 18.05.2011
48/2011-12 Performing Assets and 5.8(i),
Restructured Advances 5.8(ii),
107 DBOD-MC On IRAC Norms-2014
5.9.14
DBOD.No.BP.BC.87/21.04.0 Provisioning Coverage
21. 21.04.2011
48/2010-11 Ratio (PCR) for Advances 5.10
DBOD.BP.BC.No.74/21.04.1 Credit Support to Micro
22. 19.01.2011
32/2010-11 Finance Institutions 15.2.2
Housing Loans by
DBOD.No.BP.BC.69/08.12.0 Commercial Banks LTV
23. 23.12.2010
01/2010-11 Ratio, Risk Weight and
Provisioning 5.9.13
Prudential Guidelines on
DBOD.BP.No.49/21.04.132/
24. 07.10.2010 Restructuring of Advances
2010-11
by Banks 15.2.2
Provisioning for Standard
25. Mail Box Clarification 06.07.2010 Assets Medium
Enterprises 5.5 (vi)
Prudential Norms on 5.4 (ii), and
DBOD.No.BP.BC.96/08.12.0
26. 23.04.2010 Advances to Infrastructure 5.4 (iii) (b)
14/2009-10
Sector
Prudential Norms on
Income Recognition, Asset 4.2.15
DBOD.No.BP.BC.85/21.04.0 Classification and
27. 31.03.2010
48/2009-10 Provisioning Pertaining to
Advances - Projects under
Implementation
Second Quarter Review of
Monetary Policy for the 5.10,
DBOD.No.BP.BC.64/21.04.0
28. 01.12.2009 Year 2009-10 - Annex - 3
48/2009-10
Provisioning Coverage for
Advances
Second Quarter Review of
Monetary Policy for the 5.5 (i)
DBOD.No.BP.BC.58/21.04.0
29. 05.11.2009 Year 2009-10 -
48/2009-10
Provisioning Requirement
for Standard Assets
Prudential Norms on
Income Recognition, Asset 3.2, 3.4 3.5,
DBOD.No.BP.BC.46/21.04.0 Classification and Annex -1
30. 24.09.2009
48/2009-10 Provisioning pertaining to
Advances - Computation of
NPA Levels
Prudential Treatment in 5.6.3
DBOD.No.BP.BC.33/21.04.0
31. 27.08.2009 respect of Floating
48/2009-10
Provisions
32. DBOD.No.BP.BC.125/21.04. Prudential Norms on
17.04.2009 5.4(iii)
048/2008-09 Unsecured Advances
33. DBOD.No.BP.BC.No.124/21. Prudential Guidelines on
17.04.2009 Annex - 4
04.132/2008-09 Restructuring of Advances
34. DBOD.No.BP.BC.122/21.04. 09/04/2009 Prudential Treatment in 5.6.3
048/2008-09 respect of Floating
Provisions
108 DBOD-MC On IRAC Norms-2014
35. DBOD.BP.BC.121/21.04.132 Prudential guidelines on
/2008-09 09.04.2009 Restructuring of Advances 12.4.2, 17
36.
37. DBOD.No.BP.BC.118/21.04. 25/03/2009 Prudential Treatment of
048/2008-09 different Types of 5.6.3, 5.7,
Provisions in respect of 5.9.9, 5.9.10
Loan Portfolios
38. DBOD.BP.BC.83/21.01.002/ 15/11/2008 Review of Prudential 5.5
2008-09 Norms - Provisioning for
Standard Assets and Risk
Weights for Exposures to
Corporates, Commercial
Real Estate and NBFC-
ND-SI
39. DBOD.No.BP.BC.84/21.04.0 14/11/2008 Asset Classification Norms 4.2.15
48/2008-09 for Infrastructure Projects
under Implementation
40. DBOD.BP.BC.76/21.04.132/ 03.11.2008 Prudential guidelines on
2008-09 Restructuring of Advances 15.2.2
41. DBOD.BP.BC.No.69/21.03.0 29/10/2008 Prudential Norms for Off- 4.2.7 (iv)
09/2008-09 Balance Sheet Exposures
of Banks
42. DBOD.BP.BC.58/21.04.048/ 13.10.2008 (i) Disbursal of Loans Annex - 4
2008-09 against Sanctioned Limits
(ii) Restructuring of Dues
of the Small and Medium
Enterprises (SMEs)
43. DBOD.No.BP.BC.57/21.04.1 13/10/2008 Prudential Norms for Off- 2.1.2 (vii),
57/2008-09 balance Sheet Exposures 4.2.7 (iv) to
of Banks 4.2.7 (vii)
44. DBOD.BP.BC.37/21.04.132/ 27.08.2008 Prudential guidelines on Part B
2008-09 Restructuring of Advances-
comprehensive guidelines
45. DBOD.No.BP.BC.31/21.04.1 08/08/2008 Prudential Norms for Off- 2.1.2 (vii),
57/2008-09 balance Sheet Exposures 5.9.12
of Banks
46. DBOD.BP.BC.82/21.04.048/ 08.05.2008 Prudential Norms on Asset 4.2.15 (iv)
2007-08 Classification Pertaining to
Advances -
Infrastructure Projects
under Implementation and
Involving Time Overrun
47. DBOD.No.BP.BC.34/21.04.0 04.10.2007 Guidelines on Purchase / 7.3 (iii)
48/2007-08 Sale of Non Performing
Assets
48. DBOD.No.BP.BC.97/21.04.0 16.05.2007 Guidelines on Purchase / 7.3 (iii)
48/2006-07 Sale of Non Performing
Assets
109 DBOD-MC On IRAC Norms-2014
49. DBOD.No.BP.BC.76/21.04.0 12.04.2007 Prudential Norms on 4.2.15 (iv)
48/2006-07 Income Recognition, Asset
Classification and
Provisioning Pertaining to
Advances - Projects
Involving Time Overrun
50. DBOD.No.BP.BC.68/21.04.0 13.03.2007 Prudential Norms on 5.6.2
48/2006-07 Creation and Utilisation of
Floating Provisions
51. DBOD.No.BP.BC.53/21.04.0 31.01.2007 Third Quarter Review of 5.5 (i)
48/2006-2007 the Annual Statement on
Monetary Policy for the
year 2006-07 -
Provisioning Requirement
for Standard Assets and
Risk Weights for Capital
Adequacy
52. DBOD.No.BP.BC.21/21.04.0 12.07.2006 Annual Policy Statement 5.5 (i)
48/2006-2007 for the year 2006-07 -
Additional Provisioning
Requirement for Standard
Assets
53. DBOD.NO.BP.BC.89/21.04. 22.06.2006 Prudential norms on 5.6
048/2005-06 creation and utilization of
floating provisions
54. DBOD.NO.BP.BC.85/21.04. 29.05.2006 Annual Policy Statement 5.5(i)
048/2005-06 for the year 2006-07:
Additional Provisioning
Requirement for Standard
Assets
55. DBOD.NO.BP.BC.45/21.042 10.11.2005 Revised Guidelines on Part B
1.04.048/2005-06 Corporate Debt
Restructuring(CDR)
Mechanism
56. DBOD.NO.BP.BC.46/21.042 10.11.2005 Debt restructuring Part B
1.04.048/2005-06 mechanism for Small and
Medium Enterprises
(SMEs)
57. DBOD.NO.BP.BC.40/21.04. 04.11.2005 Mid Term Review of 5.5(i)
048/2005-06 Annual Policy Statement
for the year 200506:
Additional Provisioning
Requirement for Standard
Assets
58. DBOD.NO.BP.BC.34/21.04. 08.09.2005 Debt restructuring Part B
132/2005-06 mechanism for Small and
Medium
Enterprises (SMEs) -
Announcement made
by the Union Finance
Minister
110 DBOD-MC On IRAC Norms-2014
59. DBOD.NO.BP.BC.16/21.04. 13.07.2005 Guidelines on 7
048/2005-06 purchase/sale of Non
performing Assets
60. DBOD.BP.BC.34/21.04.048/ 26.08.2004 Repayment schedule of 4.2.13(vi)
2004-05 rural housing loans
61. DBOD.BP.BC.29/21.04.048/ Prudential norms State
2004-05 13.08.2004 Government guaranteed 4.2.14
exposures
62. RPCD.No.Plan.BC.92/04.09. 24.06.2004 Flow of credit to 4.2.13 (iv)
01/2003-04 Agriculture
63. DBOD No.BP.BC 24.06.2004 Prudential Norms for 2.1.2(iv),(v)
102/21.04.048/2003-04 Agricultural Advances 4.2.10,
4.2.13(i)
64.
DBOD
Additional Provisioning
No.BP.BC.99/21.04.048/200 21.06.2004 5
Requirement for NPAs
3-04
65. DBOD No. BP.BC 17.06.2004 Prudential Guidelines on 5.4
97/21.04.141/2003-04 Unsecured Exposures
66. DBOD No.BP.BC 17.06.2004 Country Risk Management 5.9.8
96/21.04.103/2003-04 Guidelines
67. Guidelines on sale of
financial assets to
DBODNo.BP.BC Securitisation /
23.04.2003 6
96/21.04.048/2002-03 reconstruction company
and related issues
68. Projects under
DBOD BP.BC. NO.
27.02.2003 implementation involving 4.2.15
74/21.04.048/2002-2003
time overrun
69. DBOD No. BP.BC. 19.02.2003 Risk Management 5.9.8
71/21.04.103/2002-2003 Systems in Banks
Guidelines on Country
Risk Management
70. Upgradation of loan
DBOD BP.BC. No.
10.02.2003 accounts classified as 4.2.5
69/21.04.048/2002-03
NPAs
71. DBOD. BP.BC No. Agricultural loans affected
30.11.2002 4.2.13
44/21.04.048/2002-03 by natural calamities
72. DBOD No.BP.BC. 108/ 28.05.2002 Income recognition, asset 4.2.15
21.04.048/2001-2002 classification and
provisioning on advances -
treatment of
projects under
implementation involving
time overrun
111 DBOD-MC On IRAC Norms-2014
73. DBOD No.BP.BC.101/ 09.05.2002 Corporate Debt Part B
21.01.002/2001-02 Restructuring
74. DBOD No.BP.BC.100/ 09.05.2002 Prudential norms on asset 4.1.2
21.01.002/2001-02 classification
75. DBOD No.BP.BC.59/ 22.01.2002 Prudential norms on 4.2.13
21.04.048/2001-2002 income recognition, asset
classification and
Provisioning agricultural
advances
76. DBOD No.BP.BC.25/ 11.09.2001 Prudential norms on 3
21.04.048/2000-2001 income recognition, asset
classification and
provisioning
77. DBOD No.BP.BC.15/ 23.08.2001 Corporate Debt Part B
21.04.114/2000-2001 Restructuring
78. DBOD No.BP.BC.132/ 14.06.2001 Income Recognition, Asset 4.2
21.04.048/2000-2001 Classification and
Provisioning for Advances
79. DBOD No. BP.BC.128/ 07.06.2001 SSI Advances Guaranteed 5.9.5
21.04.048/2000-2001 by CGTSI Riskweight
and provisioning norms
80. Monetary & Credit
DBOD No.BP.BC.
02.05.2001 Policy Measures 2.1.2
116/21.04.048/2000-2001
2001-02
81. DBOD No.BP.BC.98/ 30.03.2001 Treatment of Restructured Part B
21.04.048/2000-2001 Accounts
82. DBOD No.BP.BC.40/ 30.10.2000 Income Recognition, Asset 3.5
21.04.048/2000-2001 Classification and
Provisioning Reporting of
NPAs to RBI
83. DBOD.No.BP.BC.164/21.04. 24.04.2000 Prudential Norms on 5.5
048/2000 Capital Adequacy, Income
Recognition, Asset
Classification and
Provisioning, etc.
84. DBOD.No.BP.BC.144/21.04. 29.02.2000 Income Recognition, Asset 4.2.16
048/2000 Classification and
Provisioning and Other
Related Matters and
Adequacy Standards -
Takeout Finance
85. DBOD.No.BP.BC.138/21.04. 07.02.2000 Income Recognition, Asset 4.2.18
048/2000 Classification and
Provisioning Export Project
Finance
112 DBOD-MC On IRAC Norms-2014
86. DBOD.No.BP.BC.103/21.04. 21.10.99 Income Recognition, Asset 4.2.10
0 48/ 99 Classification and
Provisioning Agricultural
Finance by Commercial
Banks through Primary
Agricultural Credit
Societies
87. DBOD.No.FSC.BC.70/24.01. 17.07.99 Equipment Leasing 3.2.3, 5.8
001/ 99 Activity Accounting/
Provisioning Norms
88. DBOD.No.BP.BC.45/21.04.0 10.05.99 Income Recognition Asset 4.2.15
4 8/99 Classification and
Provisioning Concept of
Commencement of
Commercial Production
89. DBOD.No.BP.BC.120/21.04. 29.12.98 Prudential norms on 4.2.13
0 48/ 98 Income Recognition, Asset
Classification and
Provisioning Agricultural
Loans Affected by Natural
Calamities
90. DBOD.No.BP.BC.103/21.01. 31.10.98 Monetary & Credit 4.1.1, 4.1.2,
0 02/ 98 Policy Measures 5.5
91. DBOD.No.BP.BC.17/21.04.0 04.03.98 Prudential Norms on 4.2.13
4 8/98 Income Recognition, Asset
Classification and
92. DOS. No. CO.PP. BC.6/
Assessments relating to
11.01.005/ 9697
15.05.97 asset valuation and loan 5.1.1
loss provisioning
93. DBOD.No.BP.BC.29/21.04.0 09.04.97 Income Recognition Asset 4.2.13
4 8/97 Classification and
Provisioning Agricultural
Advances
94. DBOD.No.BP.BC.14/21.04.0 19.02.97 Income Recognition Asset 4.2.13
48/97 Classification and
Provisioning Agricultural
Advances
95. DBOD.No.BP.BC.9/21.04.04 29.01.97 Prudential Norms Capital 4.2.4, 4.2.5,
8 /97 Adequacy, Income 4.2.8, 4.2.9
Recognition Asset
Classification and
Provisioning
96. Classification of
DBOD.No.BP.BC.163/21.04.
24.12.96 Advances with Balance 4.1
0 48/ 96
less than Rs. 25,000/
97. Income Recognition
DBOD.No.BP.BC.65/21.04.0 04.06.96 Asset Classification and
4.2.8
48/96 Provisioning
113 DBOD-MC On IRAC Norms-2014
98. DBOD.No.BP.BC.26/21.04.0 19.03.96 Nonperforming 3.5
48/96 Advances Reporting to RBI
99. DBOD.No.BP.BC.25/21.04.0 19.03.96 Income Recognition 4.2.8, 4.2.14
48/96 Asset Classification and
Provisioning
100. DBOD.No.BP.BC.134/21.04. 20.11.95 EXIM Bank\'s New Lending 4.2.17
0 48/ 95 Programme Extension of
Guarantee cum Refinance
to Commercial Bank in
respect of Post shipment
Supplier\'s Credit
101. Income Recognition
DBOD.No.BP.BC.36/21.04.0 3.2.2, 3.3,
03.04.95 Asset Classification and
48/95 4.2.17, 5.8.1
Provisioning
102. DBOD.No.BP.BC.134/21.04. 14.11.94 Income Recognition 5
0 48/ 94 Asset Classification
Provisioning and Other
Related Matters
103. 16.05.94 Income Recognition Asset 5
Classification and
DBOD.No.BP.BC.58/21.04.0
Provisioning and Capital
4 894
Adequacy Norms -
Clarifications
104. DBOD.No.BP.BC.50/21.04.0 Income Recognition Asset
48/94 30.04.94 Classification and 5.9.4
Provisioning
105. DOS.BC.4/16.14.001/9394 19.03.94 Credit Monitoring System - 1.3
Health Code System for
Borrowal Accounts
106. DBOD.No.BP.BC.8/21.04.04 04.02.94 Income Recognition, 3.1.2, 3.4,
3 /94 Provisioning and Other 4.2
Related Matters
107. DBOD.No.BP.BC.195/21.04. 24.11.93 Income Recognition, Asset 4.2
0 48/ 93 Classification and
Provisioning Clarifications
108. DBOD.No.BP.BC.95/21.04.0 Income Recognition, Asset
48/93 23.03.93 Classification, Provisioning 3.2, 5
and Other Related Matters
109. DBOD.No.BP.BC.59/21.04.0 17.12.92 Income Recognition, Asset 3.2.1, 3.2.2,
4 392 Classification and 4.2
Provisioning Clarifications
110. 27.04.92 1.1, 1.2,
2.1.1, 2.2,
Income Recognition, Asset
DBOD.No.BP.BC.129/21.04. 3.1.1,3.1.3,
Classification, Provisioning
0 4392 4.1, 4.1.1,
and Other Related Matters
4.1.2, 4.1.3,
4.2, 5.1, 5.2,
114 DBOD-MC On IRAC Norms-2014
5.3, 5.4
111. DBOD.No.BP.BC.42/C.469 31.10.90 3.1.1
Classification of Non
(W)90
Performing Loans
112. DBOD.No.Fol.BC.136/C.249 07.11.85 Credit Monitoring System - 1.3
85 Introduction of Health
Code for Borrowal
Accounts in Banks
113. DBOD.No.BP.BC.35/21.01.0 Monetary & Credit
24.04.99 4.2
02/99 Policy Measures
114.
DBOD.No.FSC.BC.18/24.01. 19.02.94 Equipment Leasing, 2.1, 3.2.3
001/ 9394 Hire Purchase,
Factoring, etc. Activities
115 DBOD-MC On IRAC Norms-2014
|
