Banks that take swift action to control stressed assets will be rewarded with incentives and receive better treatment in general. RBI has also mandated banks to take a tougher stance towards wilful and non-coooperative borrowers. In case of existing exposures to companies with directors, whose names appear in the wilful defaulter list more than once, banks will be subjected to 5% standard asset provisioning on these accounts. If these accounts are classified as NPAs, accelerated provisioning will be applicable, it said.
RBI has also allowed leveraged buyouts for specialised entities, including private equity companies, who want to acquire stressed companies from banks. The central bank has also incentivised early sale of NPAs to asset reconstruction companies (ARCs). If banks were to make a profit on such a sale, they would be allowed to reverse the excess provisions to their profit and loss account, as against the current norm.
Similarly, if banks make a loss on such a sale, they will be allowed to amortise it over the next two years, provided they declare such losses in full. Such facilities, however, will be available for NPAs sold up to March 31, 2015.
Lenders are required to classify stressed assets under three categories, namely: special mention account (SMA0), where the account is showing early signs of stress, SMA1, where the interest and principal payment is overdue between 31-60 days and SMA2, where the repayment is overdue between 61-90 days.
In case an account is classified as SMA2 by one or more lending banks or NBFCs, the lenders will be required to form a joint lenders forum (JLF), which will look at formation of an action plan to resolve the case. Borrowers too can trigger the formation of a JLF. Where there is a consortium, it 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 largest exposure will act as a convener for the JLF to ensure swift resolution of the issues.
Forming a JLF will be mandatory for distressed borrowers, engaged in any type of activity, with aggregate fund based and non-fund based exposure of R100 crore and above. For other cases, lenders may choose to form an JLF if they feel the need.