The Reserve Bank of India (RBI) will allow banks incentives and better treatment of the stressed asset if they are quick to resolve issues relating to bad loans, a discussion paper released by the regulator on Tuesday notes. For instance, in the event of a loss on sale of assets, banks will be allowed to amortise their losses over two years. However, if banks are slow, they will have to face accelerated provisioning once these accounts are classified as non-performing assets (NPAs).
The paper also discusses how banks would be required to take a tough stance against wilful defaulters, by making it more difficult for them to access loans from the banking system. Similarly, if a borrower is non-cooperative and tries to create too many hurdles for banks in their recovery process, banks would be required to take on a much tougher stand.
The RBI favours an independent evaluation of recasts of Rs 500 crore and above, which it believes, will improve the current restructuring process; the regulator is hoping that they will come up with workable plans and will ensure that any losses are borne equally between the promoters and creditors.
In order to facilitate speedy resolution of distressed assets, RBI plans to introduce a central repository of information on large credits (CRILC) that will store and disseminate credit data to lenders.
The discussion paper states that banks will have to furnish details of any account where they have an exposure of R5 crore and above for building the repository.
Additionally, they will have to submit current account details of customers with oustanding balance of Rs 1 crore and above.
RBI officials explained that the idea is to ensure all banks can access information about borrowers who resort to multiple banking.
In case an account is classified as a stressed asset, with repayment due for more than 60 days, by one or more lending banks or non-banking finance companies (NBFCs), they will be required to form a joint lender’s forum (JLF), which will look at formation of an action plan for resolution of the case. Alternatively, borrowers too can trigger the formation of a JLF, with substantiated grounds, if they feel that there is some imminent stress. In case of consortium lending, the consortium will become the JLF and the lead bank will act as a convener for further decisions. When dealing with a case of multiple banking, the lender with the