The smaller loans for which JLFs are mandatory are so small that it becomes taxing for banks. The amount of time spent on the CAP doesn't always justify the exposure. To add to that, it takes times to agree unanimously on the date of the JLF meet, a senior banker at a top state-owned lender said.
He pointed out that while, normally, the lead banker convenes the meeting, it is unclear what happens when the account is not an SMA-2 for the lead banker, but is an SMA-2 at another bank, also part of the consortium.
According to CVR Rajendran, chairman and managing director, Andhra Bank, No doubt, the guidelines have been drawn up to help us provide swift action to resolve stressed accounts. However, it takes time for lenders to agree on a date and place of meeting since the same procedures have to be followed for smaller as well as larger accounts.
An executive director of a Mumbai-based public sector lender said bankers are finding it difficult to complete the process of coming up with a CAP in 30 days (from the 61st day of non-payment of dues and before 90 days). Bankers, he said, want the process to start on the 31st day as it would give them enough time till the 90-day NPA declaration deadline.
The banker added that normally there are three options under the CAP: Rectification, restructuring and recovery. However, rectification is not possible as the borrower rarely provides a commitment to regularise payments.
Bankers, however, say the system has been in place for a little over two months and that the issues are going to be resolved in a year. With core banking solutions in place at all banks, gathering data even for smaller accounts will not be a problem, SL Bansal, chairman and managing director, Oriental Bank of Commerce, said.
A loan is classified as an NPA if the interest or principal repayment is due for more than 90 days. According to guidelines issued by the RBI in December last year, banks have to strictly monitor loan accounts that run the risk of turning into npas. These guidelines also call for early detection of stressed assets.
This led to the creation of SMA (where repayment is overdue for up to 30 days), SMA-1 (where repayments are overdue between 31 to 60 days), and SMA-2 (where repayments are overdue between 61 and 90 days).