Recovery Division, Head Office

7, Bhikhaiji Cama Place, New Delhi

In supersession of Recovery Division
Circulars No.
(i) 04/2016 dated 10.02.2016
(ii) 05/2016 dated 12.02.2016
(iii) 12/2016 dated 04.03.2016
(iv) 22/2016 dated 20.05.2016
(v) 34/2016 dated 08.11.2016
(vi) 37/2016 dated 07.12.2016
01.04.2017
TO ALL OFFICES

Recovery Division Circular no. 16/2017

Policy of the Bank on Recovery & Management of NPAs

Bank‟s extant Policy on Compromise / Negotiated Settlement / Write Off / Waiver of Legal
Action / Appeal etc. as a part of Banks Policy on Recovery of Loans & NPA Management was
last reviewed and modifications were approved by the Board in its meeting held on 01.02.2016
vide Resolution no. 44 and was circulated vide Recovery Division Circular No. 05/2016
dated 12.02.2016. Thereafter, Board in its meeting held on 04.11.16 vide resolution no. 31,
approved to switch over to Distress Sale Value, to be considered as Net Present Realizable
Value (NPRV). The guidelines in this respect were circulated vide Recovery Division
Circular no. 34/2016 dated 08.11.2016 and 37/2016 dated 07.12.2016.

2. Based on the suggestions received from the field made by the FGMs and Circle Heads
and by virtue of experience gained in implementing the Policy in the past, certain
changes/modifications (highlighted in yellow) in the existing Policy were proposed,
with details given in the Annexure- Amendment.

3. The revised Policy containing all the amendments was approved by the Board in its
meeting held on 28.03.2017 vide Resolution no. 70. Revised Policy, applicable for
the year 2017-2018 is annexed and all the field officials are advised to ensure
meticulous compliance of the guidelines stipulated in the revised policy. Further,
nomenclature of the OTS Policy stands changed to “Policy of the Bank on
Recovery & Management of NPAs and the Policy has been bifurcated into two parts:

Part-A: Policy on Compromise / Negotiated settlement/ Write off /Waiver of legal

Action/ Appeal etc.

Part-B: Ways & Strategies to improve NPA Management.

(V K Goyal)
Dy. General Manager
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 Annexure-Amendment

1. Amendments related to powers vested with different authorities for

sacrifice/waiver and extension of time period

1.1 Powers in respect of sacrifice/waiver

S.No. Committee Existing Powers To Revised Powers to

Approve Sacrifice/Waiver approve sacrifice/waiver
1. HOCAC-I Rs. 75 lacs Rs. 115 lacs
2. HOCAC-II Rs. 150 lacs Rs. 225 lacs
3. HOCAC-III Rs. 200 lacs Rs. 300 lacs
4. MC/Board Above 200 lacs Above Rs. 300 lacs
(Full powers) (Full Powers)
1.2 Extension of time period, where there is no further sacirice
Powers to permit extension of time period for payment of OTS amount, in already
approved OTS cases, where there is no further sacrifice, can be granted by the
respective sanctioning authorities are given below:
S.No. Committee Time Period Committee Time Period
(Existing Guidelines) (Revised Guidelines)
1. COCAC-I 12 months COCAC-I 12 months
2. ZOCAC 15 months ZOCAC 15 months
3. HOCAC-II 18 months HOCAC-I 24 months
4. HOCAC-III 24 months *HOCAC-II Full powers*
5. MC/Board Full powers HOCAC-III Full powers

* HOCAC-II will have full powers in the cases falling up to HOCAC-II level only.

1.3. OTS cases in Wilful Default/Fraud/ Criminal action etc. cases

1.3.1 Cases, where OTS offer is higher than the NPRV/Book O/s (whichever is higher)

S.No. Committee Book outstanding

(Existing Guidelines) (Revised Guidelines)
1. COCAC Up to Rs. 25 lacs Up to Rs. 40 lacs
2. ZOCAC More than Rs. 25 lacs upto Rs. More than Rs. 40 lacs upto Rs. 75
50 lacs lacs
3. HOCAC-I No mention in the Policy after More than Rs. 75 lacs upto Rs. 115
establishment of ZOs lacs
4. HOCAC-II More than Rs. 50 lacs upto Rs. More than Rs. 115 lacs upto Rs.
75 lacs 150 lacs
5. HOCAC-III More than Rs. 75 lacs upto Rs. More than Rs. 150 lacs upto Rs.
100 lacs 250 lacs
6. MC/Board More than Rs. 100 lacs More than Rs. 250 lacs
(Full Powers) (Full Powers)

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1.3.2 Cases, where OTS offer is lesser than the NPRV/Book O/s
S.No. Committee Book outstanding
Existing Guidelines Proposed Guidelines
1. ZOCAC Up to Rs. 25 lacs Up to Rs. 40 lacs
2. HOCAC-I No mention in the Policy after More than Rs. 40 lacs upto Rs. 75
establishment of ZOs lacs
3. HOCAC-II More than Rs. 25 lacs upto Rs. More than Rs. 75 lacs upto Rs. 115
50 lacs lacs
4. HOCAC-III More than Rs. 50 lacs upto Rs. More than Rs. 115 lacs upto Rs.
75 lacs 150 lacs
5. MC/Board More than Rs. 75 lacs More than Rs. 150 lacs
(Full Powers) (Full Powers)

2. Calculation of NPRV
The method of calculation of NPRV will be on the same lines, as were prevalent in
the previous OTS policy (prior to switching over to Distress Sale Value Concept)
i.e by applying various discounting factors on the Market Value, instead of taking
the Distress Sale Value, as per the existing policy.
(i) Plant & Machinery
Realizable Value should be taken into consideration after taking cognizance of
brand name/make of Plant & Machinery/Year of installation/Original
cost/Depreciation/Current physical conditions/technical changes and
obsolescence/present industry scenario and future viability etc. in line with the
guidelines given in Book of Instructions on Loans.
(ii) Immovable Properties
Present Market Value of the charged securities net of cost of realisation
discounted appropriately for the attendant factors affecting its realisability
shall be called Net Present Realisable Value of Securities. It may kindly be
noted that Realizable Value and/or Distress Value as calculated by the
Valuers in their Reports cannot be considered for arriving at Net Present
Realizable Value of the securities.
The Market Value of the Charged Securities (excluding Plant & Machinery) net
of cost of realization were to be discounted as under:
Nature of Discount/Attendant Factors Rate of
Discount
a) General Discount (Sale through Bank attracts tax burden/sharing of increase 10%
in value of IP with lessor etc. and results in diminutive realizable value)
b) Specific Discount
i) IPs having old/multiple tenancy/multiple suits and / or dispute about validity / 20%
enforceability of the mortgage/charge
ii) More than 1 year old stay against SARFAESI Action and/or SARFAESI action 10%
initiated and IPs put on auction but auction failed as no bidder came forward.
iii) Attachment of IP by Sale Tax / Income Tax / Other Revenue Authority 10%
(If there is no priority charge)
10%
iv)IP not demarcated/Undivided Share mortgaged/no independent Access
10%
v) Mortgagor is dead
The maximum discount having more than one attendant factors attached to IP
shall be restricted to 40% only.
++++
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POLICY OF THE BANK ON RECOVERY & MANAGEMENT OF NPA

PART-A- Policy on Compromise / Negotiated Settlement / Write

Off / Waiver of Legal Action / Appeal etc
1. PREFACE
1.1 The past experience reveals that the conventional means of recovery do not yield the
desired results in the desired time. Legal remedies are not only costly and time
consuming, but at times create hassles and multiplicity of litigations resulting into dead
locks, hardening of attitudes and delay in resolving the NPAs.
1.2 It is in this back ground that Resolution of Non Performing Assets through
Compromise/Negotiated settlement is accepted as an effective non-legal remedy by the
Bank due to twin advantages of availability of immediate liquidity and income generation
by recycling of funds otherwise blocked. Compromise settlement refers to a
negotiated settlement under which Bank endeavors to recover maximum amount
in a minimum time with minimum expenses. Normally under a Negotiated
Settlement, a borrower offers to pay and the Bank agrees to accept in full and final
settlement of its dues an amount less than the total amount due to Bank under the
relative contract. Thus the settlement invariably involves certain sacrifice by the
Bank (by way of write off and/or waiver) of a portion of its dues. Each offer of
compromise is unique in the context of circumstances necessitating its consideration as
a viable and commercial recovery option.
1.3 Bank‟s approach to compromise as a recovery option is based on analysis of strengths
and/or weakness in a particular given case. The basic parameters for such an analysis
are:
1.3.1 Quality of primary assets charged to the Bank, their realisability/marketability.
1.3.2 Collateral cover i.e. its value, marketability. realisability and enforceability.
1.3.3 Means/other attachable assets of the Borrower/guarantor(s).
1.3.4 Status of legal action/SARFAESI action and time involved.

2. OBJECTIVES
2.1 In respect of funds so blocked up in NPAs, Bank has to
2.1.1 Maintain capital at the prescribed level to comply with capital adequacy norms and
2.1.2 Continue incurring cost to service the funds blocked in NPAs and
2.1.3 Bear the cost for loss of opportunity to lend these funds at favourable rates and
2.1.4 Make provisions for such loan losses in terms of IRAC norms.
All these have adverse impact on Bank‟s Profit & Loss Account.
2.2 It is, therefore, imperative that the pace of reduction of NPAs is stepped up as per the
prevalent policies and established practices. One way to achieve it is entering into out
of courts compromise/negotiated settlement with the Borrowers/co-obligants. This is
one of the speedy ways of recovery of dues by which blocked funds can be easily and
promptly made available for:-

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2.2.1 Recycling at favourable rates and earning profits;
2.2.2 Reducing capital adequacy requirements; and

2.2.3 Saving the cost of funds so blocked up as NPAs;

2.2.4 Release of Provisions to favourably impact P & L Account of the Bank.

3. RBI GUIDELINES

3.1 From time to time, RBI has been issuing guidelines to be followed by the Banks while
entering into compromise/negotiated settlements with the borrowers or considering
waiver/write off of dues. As per instructions contained in RBI letter dated 28th July 1995,
Banks should observe the following guidelines:

3.1.1 Compromise should be a negotiated settlement by which the Bank should ensure to
recover its dues to the maximum extent possible at minimum expense;

3.1.2 Proper distinction has to be made between willful defaults and the borrowers defaulting
in repayments due to circumstances beyond their control.

3.1.3 Where security is available for assessing the realizable value, proper weightage has to
be given to the location, condition, marketable title and possession thereof;

3.1.4 What is important in such cases is that the bank could promptly recycle the funds with
advantage instead of resorting to expensive recovery and uncertain proceedings spread
over a long period;

3.1.5 Where staff accountability has not been examined, it should be ensured that it is
completed expeditiously within a time-frame;

3.1.6 Banks have to ensure that there should not be any significant deviation from the
principles of compromise/negotiated settlement/write off and the decisions should be
judicious and in the best interest of the Bank;

3.1.7 All compromise proposals approved by any functionary should be promptly reported to
the next higher authority for post facto scrutiny;

3.2 RBI further advised vide its aforesaid letter that Banks should have a “Loan Recovery
Policy‟ prepared and duly vetted by the Board of Directors which should clearly set
down/include;-

3.2.1 The manner of recovery of dues;

3.2.2 The norms for permitted sacrifice/waiver;

3.2.3 The factors to be taken into account before considering waiver;

3.2.4 The decision levels; and

3.2.5 Reporting to the higher authorities and monitoring write off/waiver cases.

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3.3. Pannir Selvam Committee constituted by Govt. of India to frame guidelines for
compromise policy had also recommended that ‘the opportunity cost of clinching the
compromise vis-à-vis waiting for a prolonged period of time should be carefully weighed
giving due importance to the recycling of funds‟. Thus the concept of compromise is an
extension of the concept of Net Present Value/Discounted Cash Flow.

3.4 Keeping in view various parameters prescribed by RBI and the suggestions made by
various Committees/Working Groups, these policy guidelines have been evolved by the
Bank which are being reviewed from time to time based on the Feed Back, Regulatory
& Administrative guidelines and the experience gained.

4. FACTORS TO BE TAKEN INTO ACCOUNT

While considering compromise/negotiated settlement/waiver/sacrifice/write off of dues,

the following factors are to be taken into account:

4.1 Genuineness of the case and difficulties of the borrower(s) and his/her/their readiness to
enter into compromise for repayment of the dues;

4.2 Age and status of the advance outstanding in the account;

4.3 Death of the borrower(s)/partner(s)/guarantor(s) during the course of the account(s) with
the Bank; materially affecting the affairs of the borrower(s);

4.4 Availability of primary and/or collateral securities and/or other attachable securities of
the borrower(s)/partner(s)/guarantor(s) realizability thereof in due time without any
lengthy/costly court proceedings at the expense of the Bank;

4.5 Realizable value of the primary and/or collateral securities and other attachable
securities as stated in above and whether it covers the dues to be recovered by the
Bank fully or partially;

4.6 Present business activities of the borrower(s), partner(s) and guarantor(s) and source of
funds for compromise/negotiated settlement;

4.7 Advisability for compromise/negotiated settlement without recourse to legal process as

it involves delay, cost and further increase in the dues to the Bank owing to addition of
interest and other charges over a period of time;

4.8 Assessment of the chances and extent of recovery for the Bank, if recovery of the dues
has to be achieved through Court proceedings.

4.9 Possibility for the Bank, even in suit filed accounts, to explore the chances of
compromise/negotiated settlement without pursuing suits any further;

4.10 Possibility for the Bank even in decreed accounts to explore, if compromise/negotiated
settlement would be advisable if (a) there are no assets available (b) available assets
may not fetch more than the compromise offer (c) there would be complications in
executing the decree and realize the dues in a short time at minimum expense.

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4.11 Sometime, after an account has turned NPA or after filing suit or obtaining decree,
another party or Asset Reconstruction Companies or NBFC etc. come forward to
purchase the Unit/business interest of the Debtors, Bank can consider
compromise/negotiated settlement either on outright basis or an assignment basis with
the third party and/or with the concerned Asset Reconstruction Company/NBFC with or
without the consent of the borrower(s)/partner(s)/guarantor(s).

5. NORMS FOR PERMITTING SACRIFICE/WAIVER

5.1 The endeavor at all levels has to be to recover maximum possible dues through
compromise route. It has, however, to be ensured that compromise decisions are taken
judiciously and in the best interest of the Bank in a professional and transparent
manner. Approach for considering waiver sacrifice/loss on compromise can be in the
following order based on merits and attendant circumstance of each individual case:

5.1.1 Waiver of penal interest only.

5.1.2 Waiver of the effect of compounding the interest if it facilitates recovery of dues fully by
application of interest in the account at documented rate on simple basis from the date
say

i). of filing suit in the account against the borrower(s)/guarantor(s) or

ii). of transfer of dues to the Protested Advances category or
iii). the account become NPA, or
iv). the Unit was affected by some natural calamity(ies) and/or other extent factor(s),
beyond the control of the borrower(s)/guarantor(s) or
v). of death of the borrower(s)/main partner(s)/guarantor(s), during the period of loan
materially affecting the affairs of the party;
vi). the closure of the unit/strike/lockout/Govt. policy/Court orders or
vii). the unit started incurring cash losses.
5.1.3 Waiver of a part or whole of simple interest can also be considered. In such an event,
the Bank may recover the dues as on the cut -off date in full plus a part of interest at
documented rate on simple basis, if part waiver is considered.
5.1.4 In exceptional cases, waiver of part of principle dues outstanding in the Bank‟s books
can also be considered wherever it is so justified on merits by the facts/circumstances in
each case.

5.1.5 The concept of compromise should be treated as an extension of the concept of Net
Present Value/Discounted Cash Flow. Therefore, the opportunity cost of funds in hand
vis-à-vis that of funds which could be in hand at a later period should be kept in view
while considering the compromise proposal.

5.1.6 In cases where compromise/negotiated settlements are to be entered into under the
aegis of BIFR/AAIFR/CDR, Bank will normally adhere to the directions/decisions.

5.2 However, endeavor should always be to make all possible efforts to keep effective level
of sacrifice to the minimum by following the principle of „Maximum Recovery, Minimum
Time and Least Expenses.

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6. ELIGIBILITY CRITERIA
6.1 All Borrowal/Loan accounts identified as NPA in terms of extant RBI guidelines
outstanding as at the end of last quarter shall be eligible for considering under
these Policy guidelines for compromise/negotiated settlement/one time
settlement and/or write off.

7. CALCULATION OF RECOVERABLE DUES

7.1 Although in terms of IRAC norms, no interest is to be debited to the account after its
classification as NPA, yet keeping in view the recommendations of “The group for
evolving uniform guidelines on write off/compromise” set up in February 1999 by
Reserve Bank of India that the principal and interest should be defined.

Accordingly, the Group had suggested that “Outstanding amount as on date of transfer
to Protested Account/Health Code 5/NPA should be treated as the Principal Amount
and unapplied/Recorded Interest on the aforesaid amount be calculated on PLR (at that
time Base Rate Mechanism was not in operations) operating as on the date of working
out the compromise settlement and applied on simple basis.” The group had further
suggested that even in respect of interest already charged the aforesaid definition
should be adopted.
7.2 Relevant/Material Date
In the above background, the date on which account was transferred to Protested
Advances Category or the date of NPA, whichever is earlier shall be the
Relevant/Material Date for calculation of Recoverable Dues.

7.3 Treatment of Unrealized Interest(SI/DI)

In terms of extant guidelines, the unrealized interest as outstanding on relevant/material
date is not to be taken to income and was/is identified as “Suspended/Derecognized
Interest” and is to be credited back to the Borrowal Account as on Relevant/Material
Date. The previous entries held separately as SI/DI have also been got reversed and
got credited back to the respective Borrowal Accounts. Thus notwithstanding the
reversal of entries of SI/DI, the said amount has to be kept identified and the amount
outstanding as on Relevant/Material Date has to be inclusive of SI/DI reversed. This is
to ensure that till the date of classification of account as NPA, interest has been
calculated at the prescribed rate as per the Interest Rate Circulars issued by Integrated
Risk Management Division, HO from time to time, on compounding basis and/or
otherwise in terms of their extant guidelines.

7.4 Recoverable dues

Recoverable Dues shall be calculated w.e.f. the date of NPA on the Book outstanding
as existing on the date of NPA (inclusive of SI/DI reversed subsequently) duly adjusted
for recoveries/further debits in the account, ignoring the interest, if any credited/debited
in the account after the date of NPA, on simple basis on daily reducing balance @ Base
Rate or Contractual Rate of interest, whichever is lower as prevailing on the date of
consideration of proposal. This will be done in all cases irrespective of the fact whether
recovery was appropriated towards income/reduction in outstanding/recovery of
expenditure out of pocket expenses. The interest/charges, if any debited to the account
after classification of account as NPA be netted off from the recoverable interest to give
effect to the correct calculation of simple interest.

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 The modus operandi for calculation of Recoverable Dues is given in the
Annexure-Recoverable Dues.

7.4.1 However, for NPAs under Direct Agriculture Advances with balance outstanding up to
Rs. 10 lacs (including KCC but excluding Tractor Loans) recoverable dues shall be
calculated with interest @6% simple from the date of classification of the account as
NPA.

7.4.2 Calculation part

To have adequate and necessary clarity on the methodology of calculation of
Recoverable Dues, the same shall be calculated and presented in the format as per
Annexure-Recoverable Dues.

7.5 Recoverable dues shall be the guiding factor for arriving at the sacrifice involved in the
OTS/Write off/Waiver of legal action and to decide the authority competent to sanction
the waiver.

7.6 Recoverable dues shall be calculated as at the close of the quarter preceding the date
of preparation of the proposal at branch and shall include legal/other expenses also.

7.7 Recoverable dues being only a Notional concept and purely an internal exercise,
the calculations shall be kept strictly confidential and under no circumstances
shall be made known to the borrower.

8. VALUATION OF SECURITIES

8.1 Proper distinction has to be made between Market Value and Distress Sale Value
(Realizable Value) of the securities while considering/recommending OTS proposals.
Valuation Report should indicate Distress Sale Value (Realizable Value) in
addition to the Market Value, in terms of the guidelines circulated by IRMD in
respect of Valuation of Properties.

8.2 Any major variation in value of property (ies) at the time of considering the OTS/ Write
off compared to its valuation at the time of original/ last sanction or at the time of making
provisions should be critically examined. Preferably, the earlier valuation may also be
correlated/ commented in the latest valuation report. Unwarranted variations in the
valuation of securities at the time of considering the OTS proposal negate our
bargaining power/pressure on the borrower to reach at an amount acceptable to the
bank. Therefore, there is an urgent need to understand that the valuation reports are
analyzed and self assessment is adequately made about the genuineness of the Market
Value of the securities given by the valuer, keeping in mind the real estate market and
other attendant factors prevailing in the area so that it proves to be an effective tool for
discussion/negotiation for OTS amount.

Wherever there are large negative variations in the valuations, comments on as to

what action has been taken against the Valuers/Staff at fault must be provided
clearly.

There should be uniformity in reporting the “Value of securities”, while

preparing/submitting Status Notes/Review Notes and/or while fixing the Reserve Price
under SARFAESI and/or at the time of considering the OTS/Compromise etc. proposal.
9
8.3 Various aspects affecting the Market Value of securities/assets vis-à-vis the Distress
Sale Value (Realizable Value), as enumerated below should be kept in view while
evaluating the valuation of properties.
i). whether the property i.e land and building, is self occupied or tenant occupied.
If tenant occupied, since how many years the same is occupied by the present
tenant;
ii). whether land, is on lease from the Government, its agencies/ authorities,
since such leased property carry clause of sharing unearned increase/ profit
resulting in diminutive realisable value of property;
iii). whether the property is commercial or residential;
iv). whether dispute about validity and enforceability of the IPs/Block Assets
charged/available in the account surfaced at any stage of the
negotiation/legal proceedings;
v). Demand for the underlying security in the event of its sale/ disposal and
availability of ready buyers;
vi). Statutory encumbrances like Property Tax, lease rent, development charges etc.
vii). Actual value to be received under circumstances of forced/ distress sale.
viii). Attachment of IP by Sale Tax/ Income Tax/ other revenue authorities
ix). Other Statutory/ related liabilities on the IP.
x). Undivided share in property particularly agricultural land.
xi). Assets having no independent access.
xii). Large or big units/ estates.
xiii). Assets created for special purpose.

8.4 Validity/Periodicity of Valuation Reports

8.4.1 Arriving at realistic value of securities is an important aspect in considering an OTS. It

is thus necessary that, for the purpose of OTS, especially in respect of the accounts
involving book outstanding of upto Rs. 2 crore, the valuation report should be as
recent as possible but not more than 1 year old.

8.4.2 However, in respect of accounts where book outstanding and/or Value of Securities is
more than Rs. 2 crore, valuation of property(ies) and other details should not be
more than 6 months old to assess the proposals with more justice.

8.4.3 Further, wherever properties are valued at Rs. 5 crore or above, minimum two
independent latest Valuation Reports from Bank‟s Board approved valuers shall
be obtained.

Important Note:
The above mentioned periodicity for valuation reports is meant only in case of
OTS/Compromise/Write off cases and in other NPA accounts, the valuation will
continue to be done as per the Valuation Policy framed by HO: IRMD from time to
time through L & A Circulars.

8.4.4 Variation in Valuation Reports (Refer latest Recovery Division Circular)

While considering an OTS/Compromise etc. proposal:

(i) In case the difference in valuation is less than 15%, the average value may be
taken.

10
 (ii) In case the difference in valuations is more than 15%, fresh valuation may be
got done from independent third valuer approved by the Bank‟s Board) and
average of those two valuation reports be taken, in which the variation is less
than 15%.

However before exercising such option, it must be ensured that the Valuers have
used similar methods/techniques/underlying assumptions before preparing the
Valuation Report.

8.5 Vetting of valuation by Bank officials

The valuation assessed by the approved valuer shall be verified and vetted by the Bank
officials after due cognizance of the above guidelines as under, depending upon the
outstanding balance in the account:

Up to Rs.50 lacs Valuation to be verified/vetted by an official of the bank

independently not below the rank of Scale II.
More than Rs. 50 lacs Valuation to be verified/vetted by 2 officials of the Bank
and up to Rs. 5.00 independently, one of the officials should not be below the rank of
crores Chief Manager.
More than Rs. 5.00 Valuation to be verified/vetted by 2 officials of the Bank
crores independently, one of the officials must not be below the
rank of Chief Manager.
Further additional vetting shall be done by two Circle
Office officials independently, one of whom should not
be less than the rank of Chief Manager.
Officials verifying/vetting the valuation given by the Board approved valuers only shall
submit their report on the proforma as stipulated by Integrated Risk Management
Division from time to time (currently L & A Circular no. 38/2013 dated 28.03.2013).

9. NET PRESENT REALISABLE VALUE (NPRV)

9.1 Reserve Bank of India vide its communication No.DBOD.No.BP.BC.34/21.04.048/2007-

08 dated 4.10.2007 has advised as under

“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 realizable value of securities.”

In view of the above Net Present Value of the OTS amount and Net Present Realizable
value of securities are defined as under:

9.2 Net Present Value of the OTS amount

S.No. Particulars Net Present Value

1. Payment within 3 months without interest is considered immediate payment and as
such would not require calculation of net present value of OTS amount.
2. Where OTS amount is to OTS amount
be paid along-with the
interest @Base Rate, from

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 the date of conveying OTS
3. Where the OTS amount is
to be recovered without
interest or at a rate lower
than the Base Rate
Net Present Value (NPV) shall be calculated by
deducting the difference in the interest component,
calculated as per Base Rate and as per the rate of
interest as per the OTS sanction, from the approved
OTS amount i.e
NPV= Approved OTS amount Less {Intt. @Base Rate (-
) Intt. @OTS sanctioned Rate}

9.3 Net Present Realizable Value of Securities

Present Market Value of the charged securities net of cost of realisation
discounted appropriately for the attendant factors affecting its realisability shall
be called Net Present Realisable Value of Securities. It may kindly be noted that
Realizable Value and/or Distress Value as calculated by the Valuers in their
Reports cannot be considered for arriving at Net Present Realizable Value of the
securities.

9.3.1 The Market Value of the Charged Securities (excluding Plant & Machinery) net of cost
of realization shall be discounted as under:

Nature of Discount/Attendant Factors Rate of

Discount
a) General Discount (Sale through Bank attracts tax burden/sharing of
increase in value of IP with lessor etc. and results in diminutive realizable 10%
value)
b) Specific Discount
i) IPs having old/multiple tenancy/multiple suits and / or dispute about 20%
validity / enforceability of the mortgage/charge

ii) More than 1 year old stay against SARFAESI Action and/or SARFAESI 10%
action initiated and IPs put on auction but auction failed as no bidder came
forward.

iii) Attachment of IP by Sale Tax / Income Tax / Other Revenue Authority 10%
(If there is no priority charge)

iv)IP not demarcated/Undivided Share mortgaged/no independent Access 10%

v) Mortgagor is dead 10%

The maximum discount having more than one attendant factors attached
to IP shall be restricted to 40% only.

For Plant & Machinery

In case of Plant & Machinery, only Realizable Value (as mentioned in the Book on
instructions on loans) should be taken into consideration after taking cognizance of
brand name/make of Plant & Machinery/Year of installation/Original
cost/Depreciation/Current physical conditions/technical changes and
obsolescence/present industry scenario and future viability etc.

9.3.1 Where 2 or more Bids under SARFAESI have failed, the last Reserve Price or
NPRV as above, whichever is lower, shall be accepted as NPRV.

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9.3.2 In Consortium/Multiple Banking Accounts, Bank‟s share in Valuation adopted by
Consortium/Joint Lenders shall be accepted as NPRV.

9.3.3 Under Direct Agriculture Advances with balance outstanding upto Rs. 10 lac, the
realizable value of primary/collateral security will exclude the agricultural land
offered as security. However, security available other than agricultural land shall be
taken into consideration for arriving at the NPRV as hitherto fore.

10. MINIMUM INDICATIVE OTS AMOUNT

10.1 Minimum indicative OTS amount will be arrived at as under:

Situation Minimum Indicative OTS Amount
1. Where NPRV > Recoverable Dues Recoverable Dues.
2. Where NPRV < Recoverable Dues NPRV of the securities
but more than Book Outstanding
3. Where NPRV < less than Book NPRV of the securities
Outstanding
4. Where NPRV is Zero Whatever maximum can be recovered
The basis for negotiation shall always be Memoranda Dues and should aim
at recovering maximum share of the same.

10.2 However, Minimum Indicative OTS Amount in case of Direct Agricultural Advances
having balance outstanding up to Rs. 10 lacs, will be as under where NPRV (so
calculated as per para 9.3 above) is less than Book Outstanding
Sub-Std NPAs: Minimum 50% of Book O/s
Doubtful NPAs: Minimum 40% of Book O/s

In such direct agricultural advances also, with balance outstanding up to Rs. 10 lacs, if
NPRV is zero, the guidelines mentioned at Para 10.1 will be applicable (whatever
maximum can be recovered). However, the negotiation should always be for
Memoranda Dues and aim should be to recover the maximum amount.

10.3 In Consortium/Multiple lending Accounts, Minimum Indicative Amount shall be

equivalent to the share in OTS earmarked for us by joint lenders as per the mandate
given by us in the Consortium.

10.4 However, it is to be understood clearly that the above formulae is just to arrive at an
indicative OTS amount only. Due cognizance of other attachable assets of the
borrowers/guarantors, apart from the primary/collateral securities, should also be taken
during negotiation/approval of OTS and endeavor should be to maximize the recoveries
keeping in view the memoranda dues.

Minimum Indicative Amount is only for Bank‟s internal use and under no
circumstances should be made known to the borrower or their representatives.

10.5 Deviation Cases (When the borrower is not able to pay indicative OTS amount)
If the borrower, under compelling circumstances, is unable to pay the indicative
OTS amount, the best possible offer involving higher sacrifice, depending upon
13
 merits and attendant circumstances of individual case, can be considered by the
next higher authority. Reasons and proper justification for such higher sacrifice
shall be placed on record by the recommending/sanctioning authority under the
Head – Specific Justification for accepting OTS below the Indicative Amount.

11. OTS/WRITE OFF IN WILFUL DEFAULT/BORROWAL FRAUDS/CRIMINAL ACTION

CASES
11.1 In cases of Willful Default/Fraud (as reported to RBI) and/or cases where Bank or other
outside agencies like Police/ CBI has/have initiated investigations/criminal action, as far
as possible, efforts should be made to recover the entire amount of the loan. This is
necessary to ensure that a person committing fraud is not allowed to benefit from
commission of such fraudulent acts.
11.2 However, where it is not possible to recover the full amount and the borrower is coming
forward to offer settlement, all such proposals shall be considered on case to case basis
only as a commercial decision. While negotiating the offer, it must be made clear that
recovery of the loan taken by the borrower and the criminal action for the fraud
committed by him are two separate and distinct matters.
Bank‟s commercial decision to accept OTS offer/recovery of entire outstanding
amount shall have no bearing whatsoever on the ongoing criminal
cases/investigation being carried out by the CBI/Police and the same shall
proceed as per law.
11.3 In case compromise agreement is reached with such borrowers or consent decree is
obtained from the Court/DRT, the same would contain a specific clause that the
settlement is subject to continuation of criminal proceedings against the borrowers/
obligants, which cannot be withdrawn by the Bank as such cases are on behalf of the
„State‟ and not on behalf of „Bank‟.
11.4 Bank officials called upon as witnesses by the court shall not unwittingly depose that the
matter has been compromised. They must depose in terms of the agreement
executed/consent decree obtained and clear the position that although the bank has
accepted the settlement proposal given by the borrower, there is no settlement with
regard to the criminal proceedings initiated against the borrower.

11.5 Powers to consider OTS in Willful Default/Frauds (RBI Reported)/Criminal action

cases shall be as under:-

11.5.1 The criminal cases filed under Section 138 of Negotiable Instrument Act shall not
be governed by these guidelines and OTS proposals in such cases shall be dealt in
normal course as per vested powers.
11.5.2 After lodging of FIR/criminal complaint, if the case stands closed by Police/Investigating
Agency/Court and no investigation is pending, OTS proposals in such cases shall be
considered in normal course as per the vested powers.
11.5.3 All such cases approved at the level of COCAC OR HOCAC Level II shall be placed to
Management Committee on quarterly basis for post facto information.
11.5.4 Powers to consider OTS in Willful Default/Frauds (RBI Reported)/Criminal action cases
shall be as under:-
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 A. Cases, where OTS offer is higher than NPRV/Book O/s (whichever is higher)
S.No. Committee Limits

1. COCAC Up to Rs. 40 lacs

2. ZOCAC More than Rs. 40 lacs upto Rs. 75 lacs
3. HOCAC-I More than Rs. 75 lacs upto Rs. 115 lacs
4. HOCAC-II More than Rs. 115 lacs upto Rs. 150 lacs
5. HOCAC-III More than Rs. 150 lacs upto Rs. 250 lacs
6. MC/Board More than Rs. 250 lacs (Full Powers)

B. Cases, where OTS offer is lesser than the NPRV/Book O/s

S.No. Committee Limits

1. ZOCAC Up to Rs. 40 lacs

2. HOCAC-I More than Rs. 40 lacs upto Rs. 75 lacs
3. HOCAC-II More than Rs. 75 lacs upto Rs. 115 lacs
4. HOCAC-III More than Rs. 115 lacs upto Rs. 150 lacs
5. MC/Board More than Rs. 150 lacs (Full Powers)

11.6 Powers to consider write off in such cases will be as under

Write off is purely an internal exercise and obligants are in no way released from their
liability towards bank. Therefore, write off of wilful defaulters/fraud cases/cases where
bank or other outside agencies like police/CBI have initiated investigations/criminal
action and such investigations/criminal actions are yet to be concluded may be
considered at the level, as per the Table given above at Para 11.5.4 as per the powers
delegated subject to the following:
(a) Write off of an account should be without prejudice to the recovery proceedings
and criminal proceedings pending with Court/DRT/CBI which in any case be
followed up till their logical conclusion.
(b) In all Fraud related proposals being put up for write off, it must be ensured that all
other efforts for recovery stand exhausted.
(c) After write off of an account closure of the related files should be considered by HO
(FRMD) only after all other laid down criteria have been complied with.
11.7 It shall be ensured that the staff accountability has been initiated before considering
OTS and finalized before considering Write off in such accounts involving Willful
Default/Borrowal Frauds/Criminal action, otherwise the same shall be treated as a
Deviation case.

12. OTS/WRITE OFF IN STAFF ACCOUNTS

12.1 The OTS/ Write off proposals in accounts where an existing or ex-staff is a
borrower/guarantor shall be considered by an authority not below the level of COCAC
subject to delegated powers.

12.2 However, this clause will not be applicable in case credit facilities were sanctioned,
where staff has become a borrower/guarantor/co-obligant, after retirement/resignation
from the services of the Bank.
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13. OTS/WRITE OFF IN ACCOUNTS OF PUBLIC SECTOR UNDERTAKINGS (PSUs)
OTS in respect of PSUs shall be considered by the Management Committee of the
Board irrespective of the amount of waiver involved.

14. ACCOUNTS BACKED BY GOVT. GUARANTEE

Generally, the accounts backed by Govt. Guarantees shall not be eligible to be
considered for Negotiated Settlement / Write off. It will be more proper to initiate legal
action in such cases against the parties. However, in exceptional circumstances, OTS/
Write off, if any, in accounts backed by Govt. Guarantee may be considered for
approval on merits, by the Board.

15. OTS IN CONSORTIUM ACCOUNTS

15.1 In cases where OTS has been negotiated by all members of consortium and other
banks are in the process of approval, the OTS approved by our Bank would be effective
from the date of last sanction given by other consortium members. However, if the gap
in sanctions of our bank and last bank is more than 6 months, our sanction shall be
placed before the sanctioning authority for revalidation. Terms of payment of interest
shall also be effective taking into consideration the date of revalidation/date of sanction
by the last Bank.
15.2 In cases where OTS has been negotiated/sanctioned on standalone basis, terms and
conditions approved by the sanctioning authority for payment of OTS amount and
interest shall prevail without any reference to consideration of OTS by other member
banks. Sanctioning Authorities may generally stipulate a condition of „Right of
Recompense‟ if the terms of OTS offered to other lenders are better than the offer made
to us.

16. OTS IN BIFR/AAIFR/CDR ACCOUNTS

In cases where OTS/negotiated settlements are to be entered into under the aegis of
BIFR/AAIFR/CDR, Bank will normally adhere to the direction/decision of such
authorities.

17. OTS/WRITE OFF IN DECREED ACCOUNTS

17.1 An opportunity to explore a reasonable OTS offer, looking to expected realization out of
the decree execution vis-a-vis the Net Present Value of the OTS in hand, may also be
weighed. The competent authorities, as per their delegation of powers to approve the
sacrifice involved in the account, may consider OTS in such decreed cases, on merits.

OTS should be considered in decreed accounts only after all efforts to recover the
decretal amount as per the decree have been exhausted.

17.2 Justification for compromise/OTS in such accounts should be given in a

comprehensive/logical manner particularly with regard to justification for not executing
the Decree.
17.3 On entering into OTS in decreed accounts, following guidelines are to be adhered to:

16
 i). Decree Issued by Civil Court not under execution: Where decree passed by
civil court is not under execution, no information is required to be submitted to the
court.

ii). Where decree passed by Civil Court is under execution: In such cases Bank is
required to certify payments or adjustments received to the Executing Court, which
shall record the same accordingly.

iii). Where Recovery Certificate (RC) has been issued by Debt Recovery Tribunal
(DRT): While entering into OTS in the RC issued account the Bank is to move an
application before the Presiding Officer for stay of the proceedings under RC for
the period, which has been given for payment of the OTS amount. Further,
payment as and when received be got recorded to the Presiding Officer as well as
Recovery Officer.

18. DISCHARGE OF LIABILITY OF ONE OR MORE OBLIGANT/S / RELEASE OF

CHARGE ON MORTGAGED PROPERTY/PLANT & MACHINERY

18.1 Discharge of liability of one or more obligants/Release of Charge on Mortgaged

Property/Plant & Machinery may be considered by the competent authority not
below the Level of COCAC as per delegated powers to approve the sacrifice
involved i.e. the difference between the offer amount and minimum recoverable
dues. Indicative OTS amount shall not be calculated as in the case of other accounts.
In case of discharge of one or more obligants, his/their position as obligant (technical
director etc.) and present means (income/attachable assets) should be kept in view.
The above concept of sacrifice shall be applicable only for determining the authority in
whose power such a decision shall fall based on the Residual Dues.
18.2 In suit filed cases, on receipt of the approved amount the bank may make a prayer for
release of the said co-obligant/security to the Court/DRT. However, suit against the
firm/company and other obligants i.e. guarantor(s)/ borrower(s)/ legal heir(s) etc. shall
continue subject to adjustment of part amount so recovered.
18.3 On receipt of the amount from the parties, suitable letter/ No Dues Certificate would be
issued to them releasing their liability as one of the co-obligants.
18.4 For release of IP/Plant & Machinery for sale, NOC may be given after execution of
tripartite agreement between Bank, mortgagor and proposed purchaser with the
condition that purchase consideration shall be deposited directly with the Bank.
However, title deeds shall be released only after receipt of approved amount in full.
18.5 Sanctioning Authority needs to exercise due diligence while taking a call to
release a particular security and/or personal liability, particularly the Residential
Houses of the co-obligants/Personal Guarantee of Female Guarantors etc. as
these are quite critical and sensitive to the overall recovery in the account.
Similarly, it must be ensured that collateral cover for the remaining/residual dues does
not get diluted adversely and the Assets proposed to be continued to be charged to the
Bank are legally enforceable, marketable and readily saleable.

17
19. PROPOSALS UNDER SARFAESI ACT
19.1 Accounts, where after serving notice under Section 13(2) of SARFAESI Act and
subsequent actions under SARFEASI Act but before the actual sale/auction of assets,
the obligants approach the Bank with an OTS offer and/or with partial
settlement/recoveries by release of charge over mortgaged properties/hypothecated
goods/assets under Negative Lien and such proposals are considered favourably by the
competent authority, supplementary agreement with the borrower to keep further
actions in abeyance and letter of consent from the guarantor shall be obtained as per
the prescribed formats available in this circular (Enclosures 2 and 3).
19.2 The Sanctioning Authority before considering an OTS offer in such cases shall ensure
the probability of the successful implementation of the OTS offer, insist on substantial
upfront and shorter repayment schedules, to avoid a ploy by such recalcitrant borrowers
to use the route of OTS to gain further time.

20. ASSIGNMENT OF DEBT AS PART OF OTS

20.1 There may be certain cases where borrowers/guarantors want to settle the dues with
Bank through OTS but have no liquidity for making payment. In such a situation, they
arrange funds from their friends/relatives/third party and/or Asset Reconstruction
Companies who are ready to lend the money for making payment to the Bank. In lieu of
this the said lender wants to secure himself and request the Bank to transfer all its rights
to recover the dues from the borrowers (right of subrogation) to him to which the
borrowers have also agreed. This arrangement is known as OTS through Assignment
of Debt.
In such cases, Memorandum of Assignment of Debt be got approved from Law Division,
HO. However, a Standard Format is already prescribed in our Policy of Sale of NPAs to
ARCs/NBFCs/other Banks.
20.2 Administrative clearance for allowing due diligence by the proposed assignee of the
debt shall be given as per the extant Sale Policy of the bank subject to following:

i). Offer from the assignee/borrower should be account-wise, in case of

allied/associate accounts.
ii). Technical Terms & Conditions (as laid down in case of sale of NPAs) shall be
accepted by the proposed assignee unconditionally.
iii). Non-disclosure Agreement (as laid down in case of sale of NPAs) shall be
executed by the proposed assignee before due diligence, if already not executed.
20.3. Assignment of Debt proposals shall be approved at a level not lower than HOCAC Level
II subject to the delegated powers irrespective of Book O/s and OTS amount”.

However, already approved OTS proposals either at HO level or at field level where the
source of funds is required to be modified/amended to ARC/NBFC etc. need not to be
again routed through HOCC/HOSAC before being placed to HOCAC Level II as in such
cases OTS proposal has already been approved by the competent authority on the
recommendations of respective Compromise committee/HOSAC.

20.4 While stipulating terms and conditions in approval of such proposals, care should be
taken that:
18
 i). The stamp duty, registration and other charges shall be borne by the assignee.
ii). The assignee can continue recovery proceedings started by the Bank in Court of
Law/ DRT. However, this right of subrogation is to be passed on to assignee only
after entire payment of OTS amount and issuance of discharge certificate by the
Bank.

21. OTS THROUGH DEBT-ASSET SWAP & ACQUISITION THROUGH SELF-BIDDING

21.1 In some of the OTS proposals, the obligants offer some immoveable property in part or
full satisfaction of the OTS amount. There are cases where bank‟s dues are collaterally
secured by mortgage of properties and the properties are located in prime areas and
are saleable, especially residential/ commercial flats. The party, though having sufficient
properties, yet due to liquidity crunch or depressed real estate market, is unable to
immediately repay the bank‟s dues in full. Even they are unable to arrange funds for
OTS and they offer IPs in part or in full consideration of OTS amount. If the bank
deems it fit to go in for the offer looking to utility of the concerned property for
bank‟s use or otherwise, then a combined proposal can be considered for
settlement of account through OTS or otherwise on one hand and for purchase of
such property at market competitive rates on the other hand.

21.2 Acquisition through Self-Bidding

In the process of execution of decrees/enforcement of security interest under
SARFAESI Act through auction of land and properties, at times bidders do not come
forward with offers or bid amount is very low in comparison to market value due to
various reasons including vested interests and in such situations, at times it is felt that
bank should offer bid in the auction through self Bidding.

For detailed guidelines in respect of self bidding, Recovery Divisions‟ Circular

issued from time to time may be referred to. (Currently, Recovery Division‟s
Circulars 47/2013 and 48/2013 both dated 01.11.13).

22. OTS THROUGH LOK ADALAT

22.1 The institution of Lok Adalat constituted under Legal Services Authorities Act 1987
helps in resolving the disputes between the parties by conciliation, mediation,
compromise or by amicable settlement. Every award of the Lok Adalat shall be deemed
to be a decree of a Civil Court and no appeal shall lie to any Court against the award
made by the Lok Adalat. Therefore, Field functionaries are advised to make best
possible use of forum of Lok Adalat for amicable and quick resolution of NPAs. Lok
Adalat being an avenue open for settlement may continue to be utilized for amicable
settlement of cases.

22.2 As per Bank‟s guidelines, cases involving suit claims upto Rs. 20 lac can be brought
before the Lok Adalat. The detailed guidelines regarding participation of Bank in Lok
Adalats for amicable settlement of NPAs have been separately circulated vide
Recovery Division Circular No. 12/2013 dated 25.03.2013 which may be effectively
used to tackle resolution/recovery in NPA accounts.

22.3 Lok Adalats are also being conducted by various DRTs. Such Lok Adalats in DRT
matters are not being conducted in terms of the Legal Services Authorities Act. These
19
 provide an avenue to arrive at mutually acceptable amicable settlements. If settlement
is arrived at, it shall be ensured that a memo of compromise is filed before DRT and
consent adjudication order is obtained.
22.4 In such matters, as the dates that may be fixed for such Lok Adalat normally provide
enough time and the matter that may be taken up in such Lok Adalat are known. Lok
Adalat cases, therefore, shall be examined in advance by the concerned
Committee/s within their vested powers to mandate the „range‟ within which
compromise can be considered. Negotiated settlement at the Lok Adalat can be
reached by the official so mandated within the „range‟ authorized in tune with these
policy guidelines.

22.5 The vested powers of various functionaries Credit Appraisal Committee at CO/HO for
approving sacrifice amount for compromise under the aegis of Lok Adalat shall be the
same as the powers vested for approval of sacrifice involved under these Guidelines.
However, “The Range of Amount” mandated by the concerned competent Committee
along with the actual amount of settlement shall be placed to next higher authority for
information only.

23. DOWN PAYMENT/UPFRONT PAYMENT

23.1 Sanctioning authority should ensure that:

a) Frivolous OTS cases without upfront are generally not entertained.
b) Sources from which the OTS amount will be paid should be specifically mentioned
instead of stereo-type statement like borrowing from friends & relatives.
Therefore, efforts should be made to get upfront payment to show borrowers‟
seriousness in settlement of OTS proposal as under:

S.No. Details of OTS Offer Upfront Amount

1. OTS Offer up to Rs. 10 lacs Upfront 20%
2. OTS offer more than Rs. 10 lacs up to Rs. 50 lacs Upfront 15%
3. OTS offer more than Rs. 50 lacs Upfront 10%
23.2 The upfront amount may be kept in an „Escrow/ „No Lien Account‟ with a mandate to
appropriate the proceeds towards adjustment of the dues in the event of acceptance of
OTS proposal.

23.3 Where due to genuine reasons, borrower is not in a position to make upfront payment;
the competent authority may consider the sanction of OTS with lower/ no upfront on the
merits of the case with proper justification. Cases where the borrower is unable to
deposit the upfront amount beforehand due to various reasons, (for example, the OTS
amount is to come from sale of assets, induction of outside investor etc) then on
individual merits a reasonable time of 7-10 days may be given to him to deposit the
amount simultaneously with the communication of sanction.
23.4 Even in such cases, where it is considered that upfront amount is difficult to be insisted
in advance (reasons to be recorded specifically), minimum amount to be deposited shall
be insisted upon before considering the OTS proposal as follows:

20
 OTS Offer Upfront Upfront Amount where it is difficult
Amount to provide prescribed upfront
Amount
Upto Rs. 10 lacs 20% NIL
Rs. 10 lacs to Rs. 50 lacs 15% Rs. 0.50 lacs
Rs. 50 lacs to Rs. 100 lacs 10% Rs. 1.00 lacs
Rs. 100 lacs to 500 lacs 10% Rs. 5.00 lacs
Rs. 500 lacs & Above 10% Rs.10.00 lacs

23.5 Upfront amount shall be appropriated to NPA A/c simultaneously while conveying the
sanction. While communicating the sanction of OTS to the borrower, it must be
clearly stated that the upfront amount held has been appropriated and the
Demand and Payment Schedule should be only for the Residual Amount.
23.6 Amounts held in FDR/SF A/Cs of third party and/or in the name of co-obligants
cannot be treated as upfront unless an unconditional letter of authority to
appropriate such deposits and an undertaking not to withdraw the amount is
held.
23.7 In cases where it is stipulated that upfront amount be recovered simultaneously, instead
of holding back the sanction of OTS for want of upfront amount, formal sanction be
conveyed on approval with a condition in payment terms to deposit the balance upfront
amount within 15 days failing which OTS is treated as cancelled/withdrawn and
conveyed to the borrower in writing. Such cases be diarized properly and in the event
of non compliance by the borrower, the failure notice of OTS be given promptly.

24. PAYMENT TERMS OF OTS AMOUNT

24.1 As the name indicates „One Time Settlement,‟ obviously acceptance of negotiated
amount as one time down payment is preferable way of settlement compared to
payment in installments.
24.2 Cases where the OTS amount is to be paid beyond a period of 3 months from the
date of conveying approval, and/ or payment in installments, future interest on
the settlement amount to be charged at least @ 6-10% on simple basis on
reducing balance from the date of conveying approval in writing to the borrower
by the branch. Within the aforesaid range appropriate rate of interest shall be stipulated
by the competent authority looking to NPRV, attachable assets and other attendant
circumstances of the case.
24.3 ZMCAC (previously COCAC level II) and above in exceptional circumstances may
consider sanction of OTS at lower rate/without interest as per merits of the
individual case provided the overall sacrifice calculated on the basis of NPRV of
OTS amount i.e after adjusting the opportunity loss of interest being not
charged/being charged at lower rates remains within the delegated powers.
However, reasons for the same shall be recorded specifically.
24.4 However, the cases where OTS amount is payable/or is paid within three months
from the date of settlement borrowers be allowed to pay OTS amount without any
interest.
24.5 OTS amount should normally be paid within a maximum period of 12 months. In those
cases where repayment period is decided by some outside agency like BIFR etc longer
21
 period may also be allowed by the sanctioning authority. HOCAC Level II and above
may consider proposals under their powers with payment period up to 24 months.
Cases where payment period is proposed to be more than 24 months shall be placed
before the Management Committee for consideration irrespective of the amount of
waiver involved.

24.6 If source of payment of the offered amount is through sale of security, NOC for release
of security may be given after execution of tripartite agreement between Bank,
mortgagor and proposed purchaser with the condition that purchase consideration shall
be deposited directly with the Bank. However title deeds shall be released only after
receipt of approved amount in full. Such stipulations may be clearly spelt out in the
proposal itself. However, it should be made clear in such NOCs/Agreements that
assets are being sold on “as is where is” and “as is what is” basis without any recourse
to the Bank. It should also be made clear that in the event of non compliance of the
prescribed time schedule in the NOC/Agreements, advance money received, if any shall
stand forfeited without any recourse to the Bank.

25. EXTENSION OF TIME PERIOD FOR PAYMENT OF OTS AMOUNT

25.1 Without further Sacrifice:

25.1.1 Extension of time period beyond the originally stipulated due date of payment for OTS
amount in already approved OTS cases without any further sacrifice can be
granted by respective sanctioning authorities maximum up to:

COCAC Level - I ZOCAC HOCAC Level-I HOCAC Level-II HOCAC Level-III

12 Months 15 Months 24 Months Full powers* Full Powers

*HOCAC-II will have full powers in the cases falling up to HOCAC-II level only.

25.1.2 Same/Similar powers shall be exercised by a higher authority for the OTS proposal
approved by their lower authority.
25.1.3 HOCAC Level III may approve extension in cases sanctioned by HOCAC level-III
and MC.

25.2 With Further Sacrifice

25.2.1 Extension of Time Period with further sacrifices i.e. without/partial payment of interest
shall be placed to the next higher authority other than who had originally approved the
OTS, who shall exercise the above powers subject to his delegated authority provided
total sacrifice (sacrifice at the time of approval plus further proposed sacrifice of interest
loss) remains in his powers. Proposals approved originally by MC shall be placed to
MC only.

25.2.2 Proposals sanctioned by HOCAC Level II or earlier by Executive Director/HOCAC Level

III or earlier by CMD/MD & CEO/Management Committee shall be considered by
respective Sanctioning Authority within delegated powers.

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26. AMENDMENT IN TERMS AND CONDITIONS
Amendments, if any, in terms and conditions (i.e. other than the OTS amount/ interest)
of the already approved cases shall be granted by the sanctioning authority. Cases
approved under HO powers (including MC) shall be considered by HOCAC Level-II.

27. REJECTION OF PROPOSALS

27.1 The applications/offers received at the branches proposing a specific OTS offer, after
due negotiations in terms of these guidelines be examined by the Branch Head
expeditiously and depending upon the merits of the case, the proposal for acceptance/
rejection, as the case may be, shall be placed to the approving authority and/or Circle
Office maximum within 15 days.

27.2 If the approving/recommending authority feels that the offer is on lower side, then
further negotiations may be held within a time bound programme (say not exceeding
one month) and a final view to sanction/ recommend/ reject the proposal should be
taken with directions for further action and such suggested actions be closely
monitored.

27.3 Any proposal submitted by the branch can be rejected by an authority one step higher
than the authority competent to approve the proposal. Accordingly, competent authority
should refer the case for rejection to his next higher authority, giving reasons thereof.
However, proposals falling under the powers of HOCAC Level III and above may be
rejected at the level of HOCAC Level III itself, as hither-to fore.

Such rejections shall also be put up for Post Facto scrutiny to the next higher
authority.

28. DISPOSAL OF OTS PROPOSALS

28.1 To monitor the Receipt and Disposal of OTS proposals / applications, a register shall be
maintained at the branches/ CO/ZO/HO giving therein the date of receipt of proposal,
name of the party, Book Outstanding, OTS Amount etc. and date of its disposal.
Decision on OTS proposal should be taken expeditiously but maximum within 15 days
for proposals up to ZMCAC /HOCAC Level I and within 30 days for proposals under the
powers of HOCAC Level II and above from the date of receipt of the proposal. The
same shall be monitored by respective authorities at CO/ZO/HO.

28.2 Information about OTS proposals pending for more than a month should be placed to
General Manager (Recovery Division) at HO level and to ZM/Circle Head at ZO/Circle
level on monthly basis.
29. FAILURE OF OTS
In case of obligants‟ failure to pay the OTS amount as per schedule of payment, the
OTS should be declared as failed with the prior approval of Circle Head. The failure
should be notified to the party maximum within one month after giving due notice. After
declaring the OTS failed legal recourse be taken immediately for recovery of bank‟s
dues and such proposals be deleted from the list of approved proposals under
execution.

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30. RE-OPENING OF FAILED OTS CASE
In certain cases the approved OTS may not have fructified/implemented due to failure of
the borrower/guarantor to pay the approved OTS amount or cases which were abnitio
not honoured and/or had not taken off beyond the payment of upfront amount and OTS
has been treated as failed by the Bank and/or written communication regarding failure
of OTS has been communicated to the obligant/s. In such cases, if a proposal is
offered by the borrower for revival of the failed OTS and/or OTS is offered with revised
terms and if such revised proposals are considered beyond the scope of delegated
powers for Extension of Time Period (with/without further sacrifice), such
proposals shall be considered as Fresh/Denovo proposals.

31. REPORTING OF APPROVALS AND MONITORING OF APPROVED OTS

31.1 Information about OTSs/ negotiated settlements/write off proposals for bad debts/
losses / sacrifice etc. approved by any functionary shall be promptly reported to the next
higher authority for post-facto scrutiny as per L & A Circular No. 83/2014 dated
09.07.2014, the minutes of Credit Appraisal Committees shall be placed to the next
higher authority for over sighting as under:
S. No. Minutes of Credit Appraisal To be placed for Post Facto
Committee Scrutiny To
1 COCAC Level I ZOCAC
2 ZOCAC (previously COCAC Level II) HOCAC Level II
3 HOCAC Level I HOCAC Level II
4 HOCAC Level II Board/MC
5 HOCAC Level III Board/MC

Oversighting shall include ensuring that delegated financial powers are exercised in line
with the Bank‟s OTS/Recovery related regulatory guidelines and other instructions etc.

31.2 Payments received in approved OTS cases should be closely monitored at all levels.
Account-wise information of payments received in OTS proposals approved at HO level,
shall be placed to the Management Committee on Quarterly basis. Similarly, account-
wise information (irrespective of the level at which the case has been approved) about
the payment received in OTS approved cases shall be placed before the Circle Head on
monthly basis.
31.3 Data in respect of the OTS proposals approved at BO/CO/ZO/HO levels and the
payments received in all OTS/Negotiated Settlement proposals approved at various
levels, shall be placed to Board on yearly basis as per Calendar of Reviews approved
by Board in its meeting held on 14.01.2009 and to Management Committee on
Quarterly basis.

32. COMMITTEE SYSTEM RECOMMENDATIONS

32.1 All proposals for write off of dues/ waiver of legal proceedings/ OTS shall be considered
by the respective authorities duly recommended by the Committees constituted at
various levels. Constitution of various committees at BO/CO/HO level shall be as per
Annexure – Decision Levels/Powers.

24
32.2 It has been stipulated in the role and responsibilities of the ZMs that they will not carry
out reprocessing of credit proposals submitted by the Circle Head. The same will apply
to Compromise/WO proposals as well. Therefore, there need not to a separate
committee for considering OTS/WO proposals falling under the powers of ZMCAC.

33. DECISION LEVELS/POWERS

The Authorities and the powers to be exercised by them have been mentioned in
Annexure-Decision Levels/Powers.

34.1 Powers in respect of Associate/Allied concerns:

34.1.1 For the purpose of exercising above powers for approval of sacrifice as per guidelines
contained in the latest L & A Circulars (latest being 85/2014 dated 10.07.14)
Associate/Allied concerns and connected accounts shall be considered as one
borrower/debtor for the purposes of exercising above powers for approval of sacrifice by
the officers upto the AGM level (other than Circle Heads). However, Credit Approval
Committees (previously Credit Appraisal Committees) headed by Circle Head and
above are empowered to approve sacrifice to allied/associate concerns/connected
accounts taken together upto 2 times the powers vested to them as above.

34.1.2 Level of authority shall be determined based on proposed exercise of powers in NPA
A/cs only. Other allied/associate accounts in Standard Category will not be included for
the purpose of calculation of notional dues for determining the level of authority.
34.1.3 In accounts having common securities, while the charges in the A/c under reference can
be released, the charges in the other A/c shall not be allowed to be released even if the
said account is in Standard Category.
34.1.4 While exercising powers in case of Associate/Allied Concerns, it has to be ensured that
the sacrifice in individual account shall not exceed beyond vested powers for the
account.
34.2 Special Categories of NPA Accounts
34.2.1 Powers to be exercised in respect of following special categories shall be governed by
the respective policies mentioned in the Annexures attached.
i) OTS in Written Off Accounts Annexure II
ii) OTS/Write Off in ePNB Capital Services Accounts Annexure III
iii) OTS/Write Off in Non Performing Investments(NPIs) Annexure IV
iv) OTS/Write Off in Non Borrowal Impaired Assets Annexure V
34.2.2.Similarly in certain special category of accounts, certain restrictions have been imposed
in the above Policy guidelines. These powers shall be exercised subject to restrictions.
34.3 No powers shall be exercised by any authority in his individual capacity, if he/she
had been a Sanctioning Authority in individual capacity (and not as a member of
any Committee) of credit proposal during the last 5 years. All such cases shall be
placed to the next higher authority.

35. HEAD OFFICE SETTLEMENT ADVISORY COMMITTEE (HOSAC)

35.1 In accordance with RBI guidelines, Bank is having a system of routing the OTS
proposals through OTS committee/s consisting of officers at various levels. In order to
25
 further strengthen the scrutiny of high value OTS proposals, Board in its meeting held
on 08.08.2000 while approving General Guidelines, inter-alia, prescribed for formation
of High Level Settlement Advisory Committee (HLSAC) now called Head Office
Settlement Advisory Committee (HOSAC) for consideration of OTS/ Write off Proposals
falling in the powers of MC/ Board. Subsequently, Board in its meeting held on
4/9.03.2002 further prescribed that all OTS cases falling under the powers of Chairman
& Managing Director/MD & CEO (now HOCAC Level III) and Executive Director (now
HOCAC Level II) shall also be routed through the HOSAC of the Bank.
35.2 The Committee may consist of (i) one retired High Court Judge, (ii) one eminent/
reputed person (iii) three General Managers, out of which General Manager (RD) will be
the Member Convener. The two General Managers (other than GM/RD), shall be
nominated by the Chairman & Managing Director/MD & CEO for a period of six
months by rotation. Names of the retired High Court Judge and eminent/ reputed
person shall be approved by the Executive Committee of the Bank and the same
be informed to the Board thereafter.

35.3 Cases to be considered by Head Office Settlement Advisory Committee (HOSAC) shall
be as under:
i). OTS proposals envisaging sacrifice of more than Rs.75.00 lac under General
guidelines.

ii). All OTS cases falling under the power of Board/ Management Committee/ HOCAC
Level II/HOCAC Level III.

iii). Write off proposals for taking final decision to write off Rs.100/- in already written
off accounts under the powers of MC/Board/ HOCAC Level II / HOCAC Level III.

iv). Proposals involving Debt-Asset swap as part of OTS, irrespective of the amount of
sacrifice involved.

v). Proposals involving write off Non-Performing Investments.

vi). Proposals for release of guarantors/obligants/release of IP, where loan limits have
been sanctioned at Head office level.

vii). OTS Proposals in respect of Public Sector Undertakings/ Govt. Guaranteed

accounts/ irrespective of the amount of sacrifice involved.

viii). OTS proposals falling in the powers of HOCAC Level II/HOCAC Level III/MC/Board
relating to wilful default / Fraud / cases where Bank or other agencies like Police/
CBI have initiated criminal action.

ix). Proposals for assignment of Debt to third party/ARCs falling in powers of HOCAC
Level II/HOCAC Level III/MC/Board.

x). Proposals relating to sale of NPAs to ARCs/FIs/Other Banks/NBFCs etc.

xi). All proposals which fall in the powers of HOCAC Level II/HOCAC Level
III/MC/Board even if not listed above.

26
35.4 in case of HOSAC, besides GM (Recovery) as convener, there are two other GMs and
two outside members. For considering the proposals, out of the two other GMs, at-least
one GM and at-least one outside member must be present in the meeting.

36. COMPILATION AND PRESENTATION OF PROPOSALS

36.1 The name & designation of the authority who first sanctioned the limits along-with his
present place of posting and Name, Designation of the last Sanctioning/ Renewing/
Reviewing authority and his present place of posting shall be incorporated in the
proposal.
36.2 DRS based OTS proposals under the aegis of BIFR/AAIFR and/or OTS Proposals in
CDR accounts shall be processed and placed before HOCC/HOSAC/competent
authority by Industrial Rehablitation Division (IRD) suo-moto. DGM/GM (IRD), if he
otherwise not a member of HOCC shall be co-opted as a member of HOCC in addition
to existing members, for consideration of such proposals. Similarly, Executive Incharge
of Industrial Rehabilitation shall be co-opted as a member in Circle Level Committee.
36.3 OTS proposals in other BIFR/AAIFR accounts shall be processed and placed before
HOCC/HOSAC/competent authority independently by Recovery Division. GM
(IRD)/DGM (IRD), if he is otherwise not a member of HOCC shall be co-opted as a
member of HOCC in addition to existing members for consideration of such proposals.
Similarly, Executive Incharge of Industrial Rehabilitation shall be co-opted as a member
in Circle Level Committee.
36.4 For considering proposals in Borrowal Fraud cases, Departmental Head of the Fraud
Risk Manager Division (i.e. /AGMDGM – FRMD)or AGM/DGM – IRMD (Operational
Risk) shall be co-opted as a member in addition to existing members of HOCC, so that
fraud/vigilance angle and present status gets properly examined. Similarly, Executive
Incharge of Fraud Prevention Section shall be co-opted as a member in Circle Level
Committee.

36.5 All proposals must invariably bear the following certificates:

“Certified that recoverable Dues have been calculated as per the latest guidelines
issued by the Recovery Division. Further certified that the above proposal is drawn and
considered strictly in conformity with the extant guidelines issued by the Bank / RBI.”

37. COMMUNICATING THE OTS APPROVAL TO THE BORROWERS

37.1 On receipt of sanction of OTS or other relaxations or concessions or part release of

securities/obligants, from the competent authority, the branch should immediately send
a communication in writing to the borrower/obligants conveying detailed terms and
conditions of OTS/approval of such relaxations/concessions/part release of
securities/obligants including the terms relating to payment of interest. Stipulations, if
any for giving extension in time schedule for payment of OTS amount by
borrowers shall be kept privy to Bank and shall not be communicated to them.

37.2 No OTS approval shall be kept open for acceptance by the borrowers generally beyond
15 days. In case, any amendment is sought by the borrowers, the same may be
considered/referred to the competent authority immediately or a decision to cancel the
OTS be taken without further delay.

27
37.3 In case the bank has suo motto sanctioned OTS for an amount higher than the
offer of the borrower such sanction shall also be communicated to the borrower
in writing and if the borrower further offer/proposes an amount below the amount
sanctioned by the bank, it will not be treated as reduction in OTS amount and
shall be re-considered by the competent sanctioning authority again, on merits
and all other attendant circumstances

37.4 In case sanction of OTS stipulates an upfront amount to be deposited simultaneously,

the branch should send an interim communication in writing to the borrowers/obligants
asking to deposit the upfront amount immediately so that detailed approval may be
communicated to them on receipt of such stipulated upfront amount within the specified
period.

37.5 Under no circumstances the Recoverable Dues/Sacrifice so calculated in terms of

the Policy guidelines shall be made known to the borrowers. The sanction of
OTS should be communicated vis-à-vis the Memorandum Dues/Decretal Dues.
37.6 The acceptance to the Terms & Conditions be obtained and kept on record.

38. CONSENT DECREE/ OTS AGREEMENT

38.1 The model drafts of „No Objection Certificate‟; OTS Agreement; Memorandum of
Settlement; Memo of Satisfaction; Consent Decree etc. have been prescribed by the
Bank along with the procedures for their execution, (vide Recovery Division Circular No.
32/2014 dated 26.07.2014). These guidelines be followed meticulously.
38.2 In case of decreed accounts, on receipt of entire OTS amount, a Memo of Satisfaction
of decree shall be filed in the respective Court.
38.3 In case of suit filed accounts, whenever OTS proposals are approved, the parties
shall consent for a decree as prayed for in the plaint/ DRT application with provision to
pay as per OTS terms subject to a default clause that in the event of borrower‟s failure
to pay OTS amount as per terms approved, all relief / concessions shall be treated as
withdrawn. The Consent Decree shall be obtained for the full amount of the claim
subject to the condition that in case of payment of the amount as per OTS terms, the
decree will stand satisfied. Under no circumstances the consent decree for OTS
amount only shall be obtained. Draft Letter of NOC where lumpsum payment of
OTS is proposed in Suit Filed cases/Decree cases is given as per Enclosure-8.

In case of OTS in suit filed cases where payment is spread over a period of time,
the Memo of Compromise is given as per Enclosure-9.

38.4.1 In case of non-suit filed accounts suitable OTS Agreements/ Memoranda of Settlement
shall be got executed from borrowers, where payments are proposed in installments
(Enclosure- 10).

38.4.2 In case the payment of OTS amount is proposed in lump sum, a receipt in full and final
settlement of the Bank‟s claim can be issued / suit be withdrawn/ satisfaction of decree
may be recorded without entering into any OTS agreement and/or consent decree etc.
(Enclosure-11).

28
38.4.3 Where payment of OTS amount is proposed to be received in installments over a period
of time, OTS agreement should be executed/joint application for consent decree be filed
immediately. On receipt of the payments in terms of the settlement, the satisfaction of
the consent decree be recorded.

38.5 In any case recovery of OTS amount should not be delayed for obtaining consent
decree/OTS agreement and the securities charged to the Bank are to be released only
after receipt of OTS amount in terms of sanction.

39. COUNTER CLAIMS/SUIT AGAINST THE BANK AND ITS OFFICIALS

39.1 Cases where counter claim/suit against bank is pending, details thereof shall be brought
out in the OTS proposal. On approval of OTS by the Bank, borrower shall withdraw
all pending suits/ counter claims against the Bank and its officials including
Bank‟s Advocate. Final No Dues Certificate / Memo of Satisfaction etc. shall be
issued/ filed only after ensuring compliance of these stipulations, failing which the OTS
even after payment of OTS amount be notified as failed.

40. STAFF ACCOUNTABILITY

40.1 Bank‟s Board has approved the ground rules relating to staff accountability and the
same were circulated to the field functionaries. Accordingly, the staff accountability
aspects are examined/ decided on an account becoming NPA. The decision of
competent authority/ Disciplinary Authority shall be mentioned specifically with nature of
punishment inflicted, if any, and implementation thereof, in the OTS/ write off proposals.

40.2 Recovery of Bank Dues being of greater importance, cases may also be considered,
where at the time of initiation of the OTS proposal, the Staff accountability aspect is yet
to be examined/initiated/is under process. In such cases, the reasons for delay and the
time by which staff accountability will be examined/initiated shall be indicated in the
proposal. Complete status of the same may be incorporated in the proposal. Finalization
of staff accountability in such cases should be completed within a time bound period as
per CVC guidelines. The sanctioning authorities may stipulate a condition to this effect
while approving the OTS.

40.3 No case of Write off in respect of Wilful Defaulters/ Fraud/ Criminal action shall be
generally considered by the competent authority, unless the Staff accountability aspects
have been finalized. Recovery of Bank‟s funds being of greater importance, cases may
also be considered where staff accountability is still in progress. Complete status of the
same may incorporated in the proposal.

41. WRITE OFF OF NPAS

41.1 Writing off exercise is purely an internal and confidential exercise towards cleansing the
Balance Sheet and obligants are in no way released from their liability towards bank.
Therefore, field functionaries are required to continue to pursue recoveries even after
writing off the accounts. Particularly in High Value written off accounts proper monitoring
shall be ensured at all levels.

41.2 While considering write off, it shall be ensured that:

29
 i). avenues available for the recovery of Bank‟s dues have been explored, and
ii). accounts involving ledger outstanding of Rs. 20 lac and above, where write off is
considered should be backed by the report of Detective Agency/ Investigating
agency w.r.t. the traceability of the obligants/ ascertaining the attachable assets
of the borrowers/ guarantors.
iii). the staff accountability has been finalized.

41.3 Each case has to be considered after proper evaluation of its attendant circumstances,
such as:
i). Borrower/ Guarantor is either dead/ missing/ not traceable.
ii). Unit is shut down without any prospects of revival and promoters have no
capacity to repay.
iii). No enforceable security is available or value of security is negligible.
iv). Account is listed under loss asset and full provision is made.
v). ECGC/DICGC/CGFT cover is either not eligible or rejected.
vi). Legal action is not feasible/ has been exhausted/has been waived.
vii). Cost of recovery is considered to be more than the likely amount to be
recovered.
viii). Company has been wound up and there is no surplus available with the Official
Liquidator.
ix). The co-obligants have been declared insolvent under the respective Insolvency
Laws.

41.4 Write off may be considered in respect of the

i). Borrowal accounts which were classified as Loss Assets on or before the
preceding financial year/ half-year and 100% provision there against has been
made.

ii). Borrowal accounts, in Doubtful Category, where no security is available but the
same have been classified as Doubtful Assets merely because DICGC/ ECGC
claim is available.

41.5 The accounts where write off is approved by the competent authority, notional balance
of Rs.100/- shall be left in the account to pursue likely recovery over a period of time.
The prospects of recovery through litigation need to be evaluated carefully depending
upon the merits and attendant circumstances of each case, the sanctioning authority
may simultaneously take a view for waivement of legal action, if so required.

41.6 Final view to write off the residual amount of Rs.100/- may be taken at the level of the
authority competent to sanction the write off as per present policy for original written off
amount, after three years of such write off, if it is considered that no useful purpose is
likely to be achieved by continuing to hold the asset in the Books. In cases approved by
the Board/ MC, HOCAC Level III may take such view. However, in accounts written off
with balance outstanding up to Rs.25000/- final view to write off the residual amount of
Rs.100/- may be taken at the level of authority who has sanctioned the write off after
one year of such write off where no recovery is forthcoming and there are no chances of
recovery in future. In all such cases, while taking view to write off the residual amount of
Rs.100/-, efforts made for recovery during the last 3 years/1 year (as the case may be)
shall be clearly mentioned in the proposal.
30
41.7 Approving Authority shall ensure that Staff Accountability aspect has been examined
and taken to logical conclusion for the lapses, if any.

41.8 In order to ensure that write off is not resorted to as a soft strategy for reduction
of NPAs by the field functionaries, the powers to write off at different levels would
generally remain in abeyance with the exception of write off of residual amount of
Rs.100/- in already written off accounts.

41.9 However, Powers to decide quantum of write off, depending upon the corporate needs,
will be vested with the Chairman & Managing Director/Managing Director & CEO
interalia meaning that while at Field Level, the Write Off powers can be exercised only
subject to availability of quota, as and when and if, allotted by Head Office. Write off
proposals at Head Office may be considered by the HOCAC Level III, on an ongoing
basis and decided on merits within the overall policy framework.

42. APPROPRIATION OF PROVISION/DEBIT TO BANK REVENUE

42.1 After receipt of principal OTS amount but before recovery of entire amount of interest if
any, as per terms of sanction, the sacrifice by way of debit to bank‟s revenue may be
sought for from the finance division to liquidate the residual balance in the account. An
amount of Rs. 100/- shall be left outstanding in the account for further follow up w.r.t.
recovery of interest. Similarly, provision of Rs.100/- shall continue to outstand till final
recovery of interest in the account.

42.2 Recovery of Delayed Period Interest on OTS approved cases should be credited
to “Income: Recovery in Written Off A/cs” instead of “Income: Interest on
Advances”.

42.3 Since in the present system, no accounting for provisions made in NPA accounts is
done at Field Level (Provisions are held by HO, Finance Division), therefore, while
seeking the reimbursement by Branches/Circle Offices and/or while communicating the
sanction to the branches, no distinction needs to be made in „Appropriation of
Provisions‟ and/or „Fresh Debt to Revenue‟ and both the factors of Sacrifice shall be
clubbed as “Debit to Bank‟s Revenue” by the Branches.

43. OTS/WRITE OFF IN NON PERFORMING CREDIT CARD ACCOUNTS

Credit Card Division will continue to consider OTS/Write Off in Non Performing Credit
Card Accounts in accordance with the separate policy approved by the Board.

45. DEVIATION FROM POLICY GUIDELINES

Cases not conforming to these Policy guidelines shall be placed to the Board for
consideration.

++++++

31
 Annexure-Decision Levels/Powers

Powers delegated to various functionaries to approve sacrifice are as follows:

At ARMBs/Circle Offices/Head Office
(Rs. in Lacs)
Particulars CM AGM DGM COCAC- COCAC ZMCAC HOCAC HOCAC HOCAC MC/
ARMB* ARMB* ARMB* Level-I -Level-I Level I Level II Level III Board
headed headed
by AGM by DGM
as CH as CH
i) Sacrifice being
debit to bank
revenue/ Waiver of
RI/ PI/ legal & other 8.00 25.00 40.00 25.00 40.00 75.00 115.00 225.00 300.00 Full
expenses on entering
into OTS/negotiated
settlement.
ii. Sacrifice being
debit to bank
revenue/ Waiver of
RI/ PI/ legal & other 8.00 25.00 40.00 25.00 40.00 75.00 115.00 225.00 300.00 Full
expenses on **Write
off of bad debts/ loss
assets
iii) Waiver of legal
action in terms of 8.00 25.00 40.00 25.00 40.00 75.00 115.00 225.00 300.00 Full
recoverable dues.
iv)***Waiver of appeal
8.00 25.00 40.00 25.00 40.00 Full Full Full Full Full

*At ARMBs, powers shall be exercised only by the Branch Head in accordance with the Scale in which
he/she is placed.

**Powers for write off are kept in abeyance and can be exercised only in terms of Para- Write Off Of
NPAs

***This is the amount of sacrifice which bank shall forego if appeal is not filed and is to be arrived at by
calculating amount recoverable in terms of prayer made to the Court vis-à-vis amount recoverable in
terms of judgement/ decree awarded by the Court.
All proposals being submitted to the Head Office for approval must be routed through
ZO and must invariably carry recommendations of the respective ZMs (including for
ARMBs and LCBs).

At Branch Level Including LCBs (other than ARMBs)

(Rs. in lacs)
BM BM BM BM BM BM
Scale-I Scale-II Scale-III Scale-IV Scale-V Scale-VI
Powers to approve sacrifice
on entering OTS/negotiated 0.25* 0.50* 1.00* 2.00** 5.00** 10.00**
settlement

* Sacrifice being only on account of waiver of RI/PI/legal and other expenses. Cases
involving Debit to Revenue, if any shall be considered by respective competent
authorities at CO/HO level.

32
** Sacrifice involving Debit to Revenue maximum upto the provision held in the account
as on last quarter can also be considered besides the sacrifice on account of Waiver of
RI/PI/legal & other expenses within the above delegated powers. Cases beyond these
powers shall be considered by the respective competent authorities at CO/HO level.
++++++

33
 Annexure-I

Guidelines for Formation of Committees for Approval of OTS/ Write

Off/Waiver of Legal Action/Appeal etc.- General Guidelines

All the proposals for OTS / Negotiated Settlement/ write off of dues/ Waiver of legal action/
Appeal would be considered by the respective authorities if duly recommended by the
committee (comprising of 3 members) constituted for various decision levels as under:

DECISION LEVEL CONSTITUTION OF COMMITTEE

Head Board/ Management (i) General Manager – HO Recovery Division
Office Committee/ (Convenor)
HOCAC Level II/
HOCAC Level III (ii)
Other two General Managers to be
(iii)
nominated on rotational basis for a period
of 6 months by CMD/MD & CEO.
After consideration of the proposal by HOCC, the proposal will be
further scrutinized by HOSAC and would be placed thereafter to
MC/HOCAC Level II/HOCAC Level III.

NOTE: The authority, who had earlier sanctioned a particular loan, shall not
participate and sign for considering the proposal relating to the said account
as a member of the Head Office Compromise Committee (HOCC)/HOSAC.
Another official authorized to work in his absence as per office arrangement
shall be substituted as a member of the committee.
HOCAC Level I (i) DGM - Recovery Division, HO (Convenor)
(ii) DGM/AGM/CM – Credit/IRD – dealing with
the Account/Circle concerned
(iii) AGM/CM – Recovery Division, HO –
dealing with the Account/ Circle concerned
ZO ZMCAC (i) ZM, DGM, AGM/CM(Recovery), AGM/CM
(In terms of L& A (Credit) & AGM/CM (Risk Management/
Circular no. 83/2014 Business Development) wherever
dated 09.07.14) posted/available and any other officer in
scale-IV & above at ZO
Circle COCAC Level I (i) 2nd in command at Circle Office
(Convenor)
(ii) Executive Incharge OR Functional
Manager of Credit or Risk Management
Deptt.
(iii) Executive Incharge OR Functional
Manager of Recovery Deptt.

Branches (i) Branch Head (Convenor)

(ii) 2nd in command at the Branch
(iii) Functional Manager Incharge of Credit OR
Recovery Deptt.
Branch Manager* (i) 2nd in command at the Branch (Convenor)

34
 (Including ARMBs) (ii) Sr. Manager OR Manager OR Officer of
Credit OR Recovery Deptt.
(iii) Any other Officer
*Wherever, it is not possible to constitute such a
Committee in the absence of adequate number of
officers, committee consisting of at least 2
officials may be framed to recommend the
proposal to Branch Manager.

Note:
i). For considering proposals in Borrowal Fraud cases, Departmental Head of the
Fraud Risk Management Division (i.e. AGM/DGM – FRMD) OR AGM/DGM IRMD
(Operational Risk), , shall be co-opted as a member in addition to existing
members of HOCC, if he is otherwise not a member of HOCC, so that
fraud/vigilance angle and present status gets properly examined. Similarly, Executive
Incharge of Fraud Risk management Section shall be co-opted as a member in Circle
Level Committee.

ii). DRS based OTS proposals under the aegis of BIFR/AAIFR and/or OTS Proposals in
CDR accounts shall be processed and placed before HOCC/HOSAC/competent
authority by Industrial Rehablitation Division (IRD) suo-moto. DGM(IRD)/GM (IRD) shall
be co-opted as a member of HOCC, if he is not otherwise a member of HOCC in
addition to existing members, for consideration of such proposals. Similarly,
Executive Incharge of Industrial Rehabilitation shall be co-opted as a member in Circle
Level Committee.

iii). OTS proposals in other BIFR/AAIFR accounts shall be processed and placed before
HOCC/HOSAC/competent authority independently by Recovery Division. GM
(IRD)/DGM (IRD) shall be co-opted as a member of HOCC, if he is not otherwise
member of HOCC, in addition to existing members for consideration of such proposals.
Similarly, Executive Incharge of Industrial Rehabilitation shall be co-opted as a member
in Circle Level Committee.
iv). For considering OTS proposals involving Debt Asset Swap/ and Acquisition through
Self Bidding General Manager (GSAD) shall also be co-opted as a member in
addition to existing members of Head Office Compromise Committee (HOCC), if
he is otherwise not a member of HOCC, so that GSAD angles viz. procedure of
acquisition and its post-utilisation etc. get properly examined. At Circle office also, the
Executive Incharge of GSAD shall be co-opted as a member of Circle Level
Compromise Committee while recommending the proposal to Head Office.
v) CMD/MD & CEO shall have full powers to reconstitute the above said committees.

vi) In case of HOSAC, besides GM (Recovery) as convener, there are two other GMs and
two outside members. For considering the proposals, out of the two other GMs, at-least
one GM and at-least one outside member must be present in the meeting.

vii) In HOCC, besides GM (Recovery) as convener, there are two other GMs as members
of the committee. For considering the proposals, out of the two other GMs, at-least one
GM must be present in the meeting.

35
 Annexure-II

Special Guidelines for One Time Settlement in Written Off accounts

1. ELIGIBILITY CRITERIA
Borrowal NPA accounts, which were written off earlier duly approved by the competent
authority, whether by leaving a balance of Rs.100/ - or not, shall be eligible to be
considered for OTS under these special guidelines.

2. RELEVANT/ MATERIAL DATE

The date, on which the account was written off in the books of the branch, i.e. the date
on which the amount of revenue loss reimbursed by HO/CO was credited to the account
shall be the relevant/ material date.

3. CALCULATION OF RECOVERABLE DUES

Net Outstanding prior to Write off i.e. the book outstanding (exclusive of Suspended
Interest/ De-recognized Interest) as on the relevant/ material date shall be the relevant
amount. The relevant amount is to be duly adjusted for recoveries, if any, subsequent
to the relevant/ material date. Duly adjusted relevant amount shall be treated as the
„Recoverable Dues‟ without applying any future interest.

4. MINIMUM INDICATIVE AMOUNT

A comprehensive view on the capacity of the borrower(s)/ Guarantor(s) shall have to be
taken. Since these cases were already written off by competent authority in the past in
terms of bank‟s laid down policy on „write off‟, whatever maximum can be recovered
through negotiations, under given circumstances shall be the amount to be recovered.

5. SACRIFICE/ WAIVER
Sacrifice/ waiver in such cases shall be calculated as the „Difference between
Recoverable Dues and the Compromise amount‟.
6. PAYMENT OF SETTLEMENT AMOUNT
The amount of settlement arrived at in above cases, should preferably be paid in lump
sum. Cases where the borrower is unable to pay the entire amount in lump sum, 15-
25% of the amount of settlement should be recovered upfront and the balance amount
should be recovered within a period of 3 months. In exceptional circumstances where
the amount involved is high, cases for longer repayment period (not exceeding 12
months), with or without interest at the existing Base Rate (*as prevalent on the date of
approval of compromise and shall remain unchanged during the tenure of the proposal)
on simple basis from the date of settlement up to the date of final payment can be
considered by the next higher authority. Proper justification shall be placed on record by
the recommending authority for considering a payment period longer than 3 months.
7. DELEGATION OF POWERS
Specifically for considering compromise proposals in written off accounts, the delegation
of powers shall be as under:

36
7.1 Accounts written off with balance outstanding up to Rs.1 lac
Cases where the compromise offer is 50% or more of the Recoverable Dues, the
Branch Heads of all categories of branches are vested with the powers to approve the
sacrifice.

7.2 Accounts written off with balance outstanding more than Rs.1 lac

7.2.1 Cases where the Compromise Offer is 50% or more of the Recoverable Dues, the
Branch Heads of all category of branches may exercise the powers as under, subject to
the condition that the Branch Head who had earlier sanctioned the loan and/ or during
whose tenure the write off was recommended to the competent authority shall not
exercise such powers:

(Amount Rs. lac)

BM BM BM BM BM
Scale I Scale II Scale III Scale IV Scale V/VI
Approval of
sacrifice/waiver, not 1.00 2.00 3.00 5.00 10.00
exceeding:

7.2.2 Cases where the compromise offer is less than 50% of the Recoverable Dues and/
or the sacrifice exceeds the ceilings mentioned above and /or the cases where though
the sacrifice falls within the delegated powers of the Branch Head but the Branch Head
had earlier sanctioned the loan and/ or during his/her tenure the write off was
recommended to the competent authority shall be placed to the Circle Office for
consideration/ recommending further where functionaries shall exercise their normal
powers as per Para 36 of the Policy. Subject to above guidelines, Branch Heads
of ARMBs shall also exercise their normal powers.

8. Staff Accountability related aspects shall be properly looked into before

approving the Compromise in such accounts shall be properly recorded in the
proposal.

9. Other General Guidelines regarding compilation/presentation of proposal, reporting of

approvals/rejections/post-facto scrutiny and monitoring as stipulated in General
Guidelines shall mutatis-mutandis form part of these guidelines also.

************

37
 Annexure-III
OTS/Write off guidelines in respect of accounts of Erstwhile PNB Capital
Services Ltd. (ePNBCSL)

1. General Guidelines (Annexure-A) for compilation/presentation of proposals shall

apply mutatis-mutandis for accounts of PNB Capital Services Ltd. also, except for
the following

2. CALCULATION OF RECOVERABLE DUES:

The method for calculation of recoverable dues shall be as under:

2.1 For Lease Finance Accounts:

Primary Rentals ______________
(Total Primary rentals receivable
as per sanction less amount received)
Add Secondary Rentals receivable ______________
(as per sanction)
Add Salvage Value ______________
Sub Total ______________

Add Interest @Base Rate* simple as per usual

product system on primary rentals not received ______________
Add Interest @Base Rate* simple as per usual
product system on secondary rentals not received ______________

Add legal/other charges not recovered ______________

Total Recoverable Dues ______________

2.2 For Inter-Corporate Deposit(ICD)/Short Term Deposit (STD)

i) Amount of ICD/STD to be recovered ______________
ii) Add Interest to be recovered in terms of sanction
for the maturity period of ICD/STD @ applicable
in terms of sanction
iii) Total of i) & ii) ______________
Add Interest @Base Rate* on iii) above
from the date of maturity of ICD/STD to upto date ______________
Add legal/other charges not recovered ______________
Total Recoverable Dues ______________

* Base Rate applicable on the date of submission of OTS proposal by the branch.

3. INDICATIVE COMPROMISE AMOUNT:

The accounts of Lease Finance and Short Term Deposits/Inter Corporate Deposits are
different from those of Bank‟s advances. Therefore, Minimum Indicative Amount based
on NPRV as applicable as per General Guidelines shall not be applicable for these
accounts.

38
 However, while negotiating OTS settlement, various factors such as total dues
recoverable from the borrower, realisabale value of securities, present level of activity
and profitability status of the unit, working capital facilities availed and present position,
net worth/means of the obligants (borrowers/guarantors/legal heirs), stage of criminal
complaint filed for dishonour of post dated cheques submitted by the party at the time of
availing lease finance/ICD/STD, legal action initiated for taking possession of leased
assets etc. be kept in mind for clinching maximum offer.

4. SANCTIONING AUTHORITY:

4.1 Powers to approve OTS/Write off in the accounts of PNB Capital Services Ltd. shall
vest with Management Committee only.

*************

39
 Annexure-IV

Policy for Write off/Settlement of Non Performing Investments (NPIs)

1. BACKGROUND:

1.1 Treasury invests in SLR securities as well as Non-SLR securities of different entities as
a part of investments within the framework of Investment Policy and in conformity with
the guidelines issued by RBI/FIMMDA. SLR securities are Government securities and
other approved securities issued by Central Government/State Government/Municipal
corporations, PSUs and FIs which are eligible for maintenance of the SLR.

1.2 Non SLR investment portfolio includes all other investments of the bank except those
qualify for SLR purposes. It primarily includes Bonds/Debentures, Equity (ordinary &
preference), Mutual Funds, CDs and CPs.

1.3 However within the investment portfolio some investments turn into non-performing
category on default by the issuer and non availability of financial statements/quotes in
the market in terms of RBI guidelines.

1.4 The valuation, classification and provisioning norms prescribed by RBI, as applicable to
non performing investment assets (NPI) will only be applicable.

2. COVERAGE:

The category of the investments along with their eligibility for write off will be as under:

2.1 Non-SLR - Debentures, Bonds & Commercial Paper –

i). Investment categorized as NPI and classified as loss assets in the books of the
bank and
ii). Issuer Company is under liquidation or already liquidated and
iii). All recourses for recovery have been exhausted.

(All the above condition are to be satisfied for considering writing off the NPI)

2.2 Non – SLR – Equity /Preference Shares

i). Investment categorized as NPI and classified as loss assets in the books of the
bank and
ii). The company is under liquidation or already liquidated.
(All the above conditions are to be satisfied for considering writing off the NPI)

2.3 Investment in Securities backed by Govt. Guarantee

Generally investment in securities guaranteed by Central / State Govt. which qualifies

for SLR purpose or otherwise shall not be eligible for write off. It would be proper to
initiate legal action in such cases. However, in exceptional circumstances write off
proposal / OTS, if any, in securities guaranteed by Central / State Govt. may be
considered for approval on merits, by Board.
40
2.4 Investment in Security Receipts issued by the trusts floated by Securitisation
Companies/Reconstruction Companies

The Security receipts issued by the trusts floated by Securitisation Companies/

Reconstruction Companies would be eligible for write off on closure of its trusts and
there is no chance of any recovery. These cases would be considered by competent
authority. The amount outstanding in the books at the time of closure of the Trust be
adjusted by obtaining the outstanding amount from HO: Finance Division from the
provision held for the purpose.

3. RECOVERABLE DUES:

3.1 Debentures & Bonds - Principal outstanding + unrealized interest at Base Rate or
coupon/contracted rate whichever is lower up to the date of maturity.

3.2 Equity Shares: Acquisition cost

3.3 Preference shares (Cumulative) - Principal outstanding + unrealized cumulative

dividend upto the date of maturity.

3.4 Preference shares (Non-Cumulative) - Principal outstanding + dividend declared but

not realized.

3.5 Commercial Paper – Face value of the commercial paper

4. SANCTIONING AUTHORITY:
(Rs. in lacs)
HOCAC HOCAC HOCAC
Level of Authority MC
Level- I Level -II Level -III
Power to approve 35.00 150.00 200.00 FULL
Sacrifice
OR
Powers to Book Losses in respect of Share, Debenture and Bonds etc. as per
applicable investment policy of the Bank, whichever is higher.
4.1 All the proposals for write off would be placed by the Treasury Division for
consideration of the respective authorities through HOSAC.

4.2 The authority who had earlier sanctioned the particular investment shall not recommend
and/or participate as a member of any committee constituted for the write off/settlement
proposals. Another officer authorized to work in his/her absence as per office
arrangement shall be substituted in his/her place.

5. Other General Guidelines regarding compilation/presentation of proposal, reporting of

approvals/rejections/post-facto scrutiny and monitoring as stipulated in General
Guidelines (Annexure-A) shall mutatis-mutandis form part of these guidelines also.
**************

41
 Annexure-V

Policy for Write off/Settlement of Non Borrowal Impaired Assets i.e. Non-
Borrowal Fraud cases, Cases of theft/dacoity/robbery etc. and other Non-
Borrowal accounts

1. Non-borrowal fraud and Non-fraudulent cases may be considered for write

off/Settlement, on fulfillment of following conditions:-

i). Staff side action has been decided against all erring officials.
ii). Account is listed under loss assets and 100% provision is made.
iii). Insurance claim, wherever applicable, has been finalized / settled.
iv). Police / CBI investigations have been completed or final report / charge sheet
has been filed by the investigating agencies.
v). All avenues of recovery have been exhausted and there is no prospect of
recovery / no enforceable security is available.
vi). In cases where criminal cases are in progress, technical write off leaving a
notional balance of Rs.100/= till finalisation of action may be considered.

2. As per Resolution No. 6 of the Executive Committee in its meeting held on 29.09.12
(resolution No. 6)

a) Frauds in non-borrowal accounts will be written off by Fraud Risk

Management Division.

b) In other cases matter will be continue to be dealt by the Inspection & Audit
Division.

3. However, for cases of theft/ dacoity/ robbery etc., DGM, Security shall be the co-
signatory.

4. All the proposals for write off would be placed by the respective Divisions
(Fraud/Inspection & Audit) for consideration of the respective authorities through
HOSAC.

5. COMPUTATION OF RECOVERABLE DUES:

In all such cases, Recoverable Dues to be considered for write off/settlement will be
balance outstanding only exclusive of recorded interest, if any.

6. DELEGATION OF POWERS
(Rs. in lacs)
Authority HOCAC HOCAC HOCAC MC
Level I Level II Level III
Powers to approve sacrifice in
Non Borrowal Impaired Assets 50.00 75.00 100.00 Full
6.1 The above powers to approve sacrifice in Non Borrowal Impaired Assets shall be
exercised by the respective authorities, if duly recommended by the concerned

42
 Head Office Divisions. Further, concerned HO Divisions shall consider proposals
for recommendations to the competent authority, if duly recommended by the
Field General Manager.

7. FORMATION OF COMMITTEES AT VARIOUS LEVELS:

7.1 The above powers to approve sacrifice in Non Borrowal Impaired Assets shall be
exercised by the respective authorities, if duly recommended by the Committee
constituted as follows:

Head Office DECISION LEVEL CONSTITUTION OF COMMITTEE

HOCAC Level II/ (i) GM - HO – FRMD (Convenor)
HOCAC Level III (ii) GM - HO- IAD (or)
GM - HO-Security Deptt.
(iii) GM – HO Recovery Division
HOCAC Level I (i) AGM/DGM - HO – FRMD
(Convenor)
(ii) AGM/DGM - HO- IAD (or)
AGM/DGM - HO-Security Deptt.
(iii) DGM – HO Recovery Division
*After finalization of the proposal by the above Committee, the same shall be sent to HO
Recovery Division for marking to HOSAC and would be placed thereafter to
MC/HOCAC level II/HOCAC Level III by the respective Division.

7.2 The above Committees shall consider proposals for recommendations to the competent
authority, if duly approved by the Circle Level Committee constituted as follows:

DECISION LEVEL CONSTITUTION OF COMMITTEE

Head Office (i) Circle Head
(ii) 2nd in command at the Circle Office
(iii) Executive OR Functional Manager
Incharge of Inspection Deptt. (or)
Security Deptt. at Circle Office.
Note:

1. While for proposals relating to Non Borrowal Fraud cases, a representative from
Fraud Prevention & Investigation Section (FPIS) at HO/CO shall be the member
of the above committees, whereas for considering the proposals relating to other
Non Borrowal Impaired Assets (viz. Loss of Cash/Theft/Dacoity/Robbery) a
representative of “Security Department” shall be the member of the above
committees as the case may be.

2. CMD/MD & CEO shall have full powers to reconstitute the above said
committees.

8. MANAGEMENT INFORMATION SYSTEM

43
 The information in respect of amount written off during the financial year shall be
placed before Board of Directors on yearly basis.

9. DEVIATIONS FROM POLICY GUIDELINES:

Cases not conforming to these policy guidelines shall be placed to the Board for
consideration.
**************

44
 Annexure-Recoverable Dues

S.No. Particulars Amount (In Rs.)

(A) Balance outstanding as on the date of NPA including amount of DI/SI
reversed (which was credited back into account, in terms of
Recovery Division Circular No.6/2010 dated 02.02.2010)
PLUS
Any interest amount pertaining to the period before the NPA date, but
debited subsequently in the Account.
(B) (+) Plus Simple interest (@ Base Rate or Contractual Rate, whichever
is lower) on the balance outstanding reported in (A) from
the date of NPA to______(end of last quarter) on daily
reducing balance, taking into consideration the amount of
recoveries in the account also.
(C) (+) Plus Legal and Other Charges recoverable but not debited to the
account including commission payable/paid to the
Recovery Agencies/Resolution Agents/Supporting
Agencies etc.
(D) (+) Plus Charges debited to the account, if any, after the NPA date
(E) (-) Less Recoveries received after the NPA date (irrespective of
whether credited to income/out of pocket expenses)
(F) Recoverable Dues as on the last date of last quarter.
(Columns No. A+B+C+D-E)
Supplementary Information
Amount of SI/DI (For information only & not part of calculation)

Example
Let us say an account became NPA with NPA Date as 20.12.2007 with details given below:
S.No. Particulars Balance O/s
(A) Balance O/s including DI (credited back to the account) 10000
(B) Amount of DI (for information only & not part of calculation) 1000
(C) Simple Interest calculated at Base Rate or Contractual Rate (whichever 7400
is lower) .
(D) Legal and other recoverable charges but not debited in A/c (say) 1250
(E) Charges (e.g Inspection Charges) debited to the account after the NPA 450
date (say)
(F) Recoveries made in the account after 20.12.2007 till say 31.03.2016 3200
(G) Recoverable Dues (Columns No. A+C+D+E-F) 15900

++++++

45
 Enclosure-1

FORMAT FOR CALCULATION OF NET PRESENT REALIZABLE VALUE

Zonal Office:________Circle Office:_________
Name of account:__________________Branch Office:________________________

Description of Security * Market Attendant Factors & Discount Total % of NPRV

Value** Rate*** Discount
1. Stock ---NA--- ---NA---
2. Plant & Machinery ---NA--- ---NA---
3. IP i)
ii)
4. IP i)
ii)
Total Xxxxxxxxxx xxxxxxxxx

* Give full details regarding Date of Purchase/Make/Branch/Measurements/ location/ ownership etc.

**Deductions to be applied to the Market Value of Charged Securities:
a) Attachment by Sale Tax/ Income Tax/Other Full Dues/ Amount of attachment (If Priority
Revenue Authority charge)
b) IPs having statutory encumbrances 50% of such charges etc.
like Property dues Tax, Lease Rent,
Development (with proof)

***Attendant Factors & Discount Rate

Nature of Discount/Attendant Factors Rate of

Discount
a) General Discount (Sale through Bank attracts tax burden/sharing of
increase in value of IP with lessor etc. and results in diminutive realizable 10%
value)
b) Specific Discount
i) IPs having old/multiple tenancy/multiple suits 10%
and/or dispute about validity/ enforceability of the mortgage/charge

ii) More than 1 year old stay against SARFAESI Action

and/or SARFAESI action initiated and IPs put on auction but auction failed 10%
as no bidder came forward

iii) Attachment of IP by 10% (If no

Sale Tax/Income Tax/Other Revenue Authority Priority
Charge)
iv) IP not demarcated/Undivided Share mortgaged 10%
/no independent Access
v) Mortgagor is dead 10%
The maximum discount having more than one attendant factors attached to IP
shall be restricted to 40% only.

Signature :
Name :
Designation :
BO/CO :

46
 Enclosure- 2
SUPPLEMENTARY AGREEMENT
(To Keep Sarfaesi action on hold)
This Supplementary Agreement is executed at _______ on this ____ day of
__________ between
M/s_________________________________________________________________
(hereinafter referred to as “the Borrower” which term shall include its successors and
assigns) and PUNJAB NATIONAL BANK, a body corporate constituted under Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1970 having its Head Office at
7, Bhikhaiji Cama Place, New Delhi 110 066 and, inter alia, a Branch Office at
___________ (hereinafter referred to as “the Bank” which term shall include its successors
and assigns).

WHEREAS the Borrower has availed, inter alia, the following facility/ies from the Bank :
_________________________________________________________________________
_________________________________________________________________________
WHEREAS the abovesaid facility/ies has/have been secured by the following securities:
_________________________________________________________________________
_____________________________________________________________

WHEREAS the Bank, in terms of the provisions of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI ACT), has
issued 60 days notice/have taken further steps,
Namely,________________________________________________________________ in
exercise of the powers given under the Act, in respect of following securities:
_________________________________________________________________________
________________________________(hereafter referred to as „ the said security.)

WHEREAS the borrower has shown his / her inability to pay the total outstanding amount
under the said credit facilities within the prescribed period.
WHEREAS the borrower proposed to enter into a compromise / one time settlement in the
account.
WHEREAS the Borrower has requested the Bank to hold on the enforcement of security
interest in respect of the said security.
WHEREAS the Bank has agreed to the proposal of the borrower for compromise on the
following terms and conditions and also to hold on the enforcement of security interest
during implementation of compromise proposal.

NOW, THIS AGREEMENT WITNESSETH :

1. The Borrower agrees and acknowledges that the amount outstanding in respect of the
above said facility/ies as on _________is Rs.__________ (Rupees
_______________________ only) as under:

Facility Amount

2. The Bank and the Borrower have agreed that if and only if the borrower pays without
default Rs. ________ (Rupees _________________) along with interest @ _____ from
time to time as per the following time schedule, Bank will hold on the enforcement of
security interest.
(Time Schedule as per sanction of OTS)
47
 3. Further if and only if the Borrower pays the amount without default as above said, all
the amount due to the bank, as stated in clause 1 above will stand discharged.
4. The Bank and the Borrower agree that possession notice earlier issued by the Bank be
treated as not having acted upon. The Borrower confirms that the possession of the
secured asset taken by the Bank, has been restored back to him / them in good
condition as was taken by the Bank.
OR
The Borrower agrees that the security is taken possession of by the Bank as per
procedure as prescribed under the Security Interest (Enforcement) Rules, 2002 and the
Bank will not proceed further for sale, to facilitate the fulfillment of compromise terms
by the Borrower.
5. The Borrower confirms the continuance of the said security and other securities as
before.

6. The borrower agrees that in the event of any default in payment of the compromise
amount by the borrower:

(a) All concessions granted as above, shall lapse and the Bank shall be entitled to recover
entire amount with further interest and costs as stated in the clause 1 above.

(b) Bank will be entitled to resume process of taking possession / sale of the security from
the point where it was „held on‟ and Bank‟s decision in this regard will be final and
binding upon borrower.

7. The Borrower agrees that all other terms and conditions as contained in the loan and
security documents continue to be in force and be binding, save and except those
modified as above.

8. This Supplementary Agreement is in addition to the loan and security documents

executed by the Borrower.

IN WITNESS WHEREOF, the parties hereto have signed these presents on the day, month
and year above mentioned.
For ………………
____________
(BORROWER)

For PUNJAB NATIONAL BANK

(AUTHORISED SIGNATORY)

48
 Enclosure-3

NOTE: To be stamped as an agreement. Not to be Attested/Witnessed

LETTER OF CONSENT FROM GUARANTOR
(To Keep Sarfaesi action on hold)
PLACE : _________
DATE : __________
The Branch Manager
Punjab National Bank
BO: _____________
Dear Sir,
Reg : M/s ………………………………... (Borrower),
Facility…………………Account No…………..
The Borrower has been availing the credit facility/ies as above said. The above credit facility/ies, inter
alia, has/have been guaranteed by me/us vide guarantee deed / letter of guarantee dated_________.

The Bank has issued demand notice for recovery of Rs._______ along-with further interest @____p.a
with______rest from______ and also has taken further steps namely__________________________in
terms of provisions of SARFAESI Act, 2002.

The Borrower while acknowledging amount of demand notice as correct, has entered into a
compromise / one time settlement with the Bank. The same is acknowldegde by me (us) In terms of the
compromise the Bank and the borrower has agreed that if and only if the borrower pays without default
a sum of Rs.____________ (Rupees _________________ only) along with interest @______% PA
from time to time as per the time schedule agreed upon between the bank and the borrower, bank will
hold on the enforcement of the security interest, as stated in supplementary agreement dated_______

I/We also acknowledge our liability under the Demand Notice as guarantor and give consent to the
arrangement as above said as per the Supplementary Agreement/s dated_____.

I/We agree that the Guarantee/s dated ___________ already executed by me/us will continue to be in
force and binding on us.

I/We confirm and acknowledge that the mortgage/hypothecation security, as created/executed by

me/us continues to be in force and secures the above facility/ies availed/being availed by the Borrower.

In case of non-compliance of the OTS, I/We will continue as guarantor for amount as per demand
notice adjusting the amount paid under OTS and the mortgage/hypothecation security, as
created/executed by me/us continues to be in force and secures the above facility/ies availed/being
availed by the borrower.
Thanking you,
Yours faithfully,

[GUARANTOR (S)]

49
 Enclosure-4-No Lien Letter
DRAFT OF NO LIEN LETTER
(FOR UPFRONT AMOUNT IN COMRPOMISE PROPOSAL)

PUNJAB NATIONAL BANK

BO:___________________

Date:__________

M/s_____________
________________________

________________

Dear Sir,

Reg: Suit No./DRT Application No.*_______ Punjab National Bank V/s M/s__________ &
others. Loan Accounts No._______________.

This is to acknowledge your depositing of Rs.____________________

(Rs.__________________) in account__________________being______% of the
compromise amount proposed by you in your letter of offer dated__________ to show your
bonafide for compliance of the compromise.

Without prejudice to Bank‟s right in pending DRT application No.______/ Suit

NOo.__________ under the loan and security documents executed by you*, we state that no
lien will be exercised on the said deposit, except in the event of your compromise offer being
approved by the competent authority of the Bank, when the aforesaid amount shall be
appropriated towards dues to the Bank at the time of conveying approval to you. In the event
of your compromise offer not being accepted by the Bank, the deposit will be released/ repaid
as per your instructions.

Thanking you,

Yours faithfully,

Manager

* Delete which is not applicable.

50
 Enclosure- 5-Check Points

Check points to be taken care of while submitting OTS proposals.

i. Correct calculation of Recoverable dues of last quarter applying present base rate.
Recoverable dues should be the guiding factor for arriving at sacrifice and authority
competent to sanction, when proposal is recommended to HO.
ii. The recoverable dues /memoranda dues as on last quarter must be reported.

iii. Market Value of stocks at the time of sanction/OTS with date of verification be given.
iv. Market Value of Plant & Machinery at the time of sanction/ Realisable value of Plant &
Mach. at the time of OTS alongwith copy of report of the valuer be given.

v. Status of primary security i.e stocks/BD must be clearly mentioned and if found
depleted, reason for the same be given along with action taken for safeguarding bank‟s
interest. Last date of verification of stocks be invariably mentioned.

vi. Any major variation in the value of property at the time of sanction & at the time of OTS
be examined & proper reasons for such variation be given.
vii. Details of other attachable assets be provided, if other attachable assets are available,
the details of the same with present status be mentioned. If Detective Agency has been
appointed, the findings thereof be informed. If no attachable asset is available it should
categorically be mentioned in the proposal.

viii. As per Bank‟s extant Policy, in case of OTS/Compromise etc. in the accounts
involving book outstanding of upto Rs.2 crore, the valuation report should be as
recent as possible but not more than 1 year old.
Further, in respect of accounts where book outstanding and/or value of securities is
more than Rs.2 crore, valuation of properties and other details should not be
more than 6 months old to assess the proposals. In case of IPs valuing Rs.5
crore & above, minimum 2 independent latest valuation reports from Bank‟s
approved valuers shall be obtained.

ix. In the accounts with outstanding balance of more than Rs.5.00 crore, “Valuation to be
verified/vetted by 2 officials of the Bank independently, one of the officials must
not be below the rank of Chief Manager, Further additional vetting shall be done
by two Circle office officials independently, one of whom should not be less than
the rank of Chief Manager”. (For Validity/Periodicity of Valuation Reports refer
Para 8.5 of the policy)

x. For calculation of Net Present Realizable value general discount is 10% from the Market
Value. For other discounts, refer Para no. 9.3.1 of the Policy.

xi. Minimum indicative OTS Amount where NPRV is more than recoverable dues minimum
indicative Amount will be recoverable dues otherwise NPRV.

xii. As per Para (10.5) of Policy If there are compelling Circumstances where the amount of
OTS is below the indicative amount, give convincing/ specific reasons / justifications in
the proposal.
51
 xiii. Regarding down payment efforts should be made for 10% upfront.

xiv. Efforts should be made for settlement of the account through OTS within 90 days.
However maximum period allowed for payment of OTS amount is 12 months with
payment of delayed period interest generally at base rate.

xv. Under justification, proper justifications for the OTS and reasons for consideration of the
same be spelt out clearly.

xvi. The OTS proposal should be duly recommended by the COCAC/ZO Committee.
xvii. Latest position of ECGC/CGFT claims with status of its settlements must be reported
correctly.

xviii. Staff accountability position be clearly mentioned with the name of the erring officials,
present status/decision taken by the bank. Otherwise categorically confirm that there is
no staff accountability observed in the account wherever it is under process it should be
clearly mentioned as under process.

xix. In case of consortium accounts the details of member banks along with their share
/present dues with status of their accounts be informed.

xx. The brief history must be complete and purposeful, giving sequence of sanction of the
limits, up to what time account was regular, restructuring / reschedulement, if any.
When Account became irregular/NPA. Steps taken for recovery of Banks dues i.e.
SARFAESI action/Suit filed/Meeting with Borrower/ Guarantors at different levels
(CO/ZO/HO level) & latest offer of the party.

******

52
 Enclosure-6-Executive Summary

BO/CO/ZO/HO________________
Date:
_________
EXECUTIVE SUMMARY
OTS Proposal BEING PLACED BEFORE MANAGEMENT COMMITTEE
NPA A/C: M/s ________________________ BO: _______ CO: ________ ZO: ________

Gist of Proposal : Recommended for acceptance OTS Proposal

with: (Rs. in crore)

1 Ledger Outstanding :
2 Recoverable Dues :
3 Memoranda Dues :
4 Indicative OTS Amt :
5 OTS Offer :
6 Sacrifice :
I. As per O/s Bal.
II. As per Recoverable dues :
III As per Memoranda Dues
7 Impact:

i.Provision Held
ii.Provision to be :
appropriated
iii.Provision to be released

8 Repayment Period

As on _________ figures rounded off in crores.

53
 ( Rs. in crores)
Sr. Particulars
No.
1 Name of the Account / Asset
Classification
2 Branch / Circle Office/ZO
3 Date of original sanction/last
renewal/review

4 Date and O/s at the time of NPA

5 Outstanding as on _______
6. Provision as on _______
7 Recoverable dues as on _______
8 Memorandum Dues as on _______
9 NPRV/ Indicative Amount
10 OTS Offer
11 Provision Held
Provision to be appropriated
Provision to be released

12 Sacrifice on OTS
1. Waiver of DI/RI/PI
2. Waiver of legal & other charges
3. Set off provision
4. Debit to bank‟s revenue

13 Position of Sale of assets under

SARFAESI

14 Identified other Attachable Assets

15 Last meeting held at

Circle office/FGMO/HO Level

16 Justifications

17 Payment Schedule (A)

A. Down Payment (upfront)

B. Payment Scheduled for

remaining amount

54
 Enclosure- 7-OTS Proposal Format

BO/CO/ZO/HO_______

Ref : Date : __________

Gist of Proposal:
Recommended for acceptance of OTS offer of
Rs.......... lacs against Ledger O/s of Rs...............,
Recoverable Dues of Rs.................., Memoranda
Dues of Rs................. as on (last quarter) with
sacrifice of Rs..............., and minimum indicative
OTS amount of Rs................... Lacs.

Reg: OTS Proposal IN NPA Account: M/s _________________ BO: ______ CO:
________ ZO:_______.

1. GIST of Proposal

1. Name of the Account

2. Constitution
3. Name of Directors Name Net Means IPs* CR
(In Lacs) (In Lacs) dated

4. Name of Guarantors (Amt. Rs. In lac)

Name Net Means IPs CR dated

5. Type of Activity

6. Present activity of Borrower

7. i. Dealing with PNB since

ii Nature of facility
8. Date of last
sanction/renewal of limits
with amounts

55
9. Date and amount at the time
of NPA
10. Asset classification as on
_______
11. Ledger O/s as on _________

(Amount in rupees)
12. NPA provision as on
_____(Amount in rupees)
13. Recoverable dues as on last
quarter:
O/s: Rs. _____
DI : Rs._____
RI : Rs. _____
Legal & other charges (not
debited): Rs. _____

14. Memoranda Dues as on

_________
15. Security
At the time of last At the time of OTS
sanction (MV) (In lacs) (Rs. in lacs)
Primary : MV NPRV
Stocks & Receivables
Plant & Machinery

Sub-Total
Collateral:

Sub-Total
Total

16. Attachable/ attached assets. Mention source of information even for reporting Nil.

17. Minimum Indicative OTS Amt

18. OTS Offer
19. ECGC/DICGC/CGFT claim
available for appropriation
20. Sacrifice on OTS to be
accounted for as under :-
- Waiver of RI/PI up-to last
quarter + &future Interest
- Set off of SI/DI
-Waiver off legal & other
charges
56
 - Set off of provision in books
- Debit to bank‟s revenue
20
21 Provision Held
Provision to be appropriated
Provision to be released

22 % of OTS offer to Book O/s

a. Down Payment:

23.
b. Balance amount to be paid

24. Source of Payment for OTS

amount
25. Status of SARFAESI Action
with latest position

26 Date of Suit with latest

position
27 Status of declaring the Please mention the date of declaration of willful
borrower as wilful defaulter. default and reasons thereof?
28. Whether RBI reported fraud/
/criminal complaint case
29. Staff accountability Please mention the date of examination of staff
accountability and the competent authority along-
with the present status of the staff side case
(whether decide, under process etc.)
“Certified that Recoverable Dues have been calculated as per latest guidelines circulated by
Recovery Division. Further certified that the above proposal is drawn and considered strictly in
conformity with the extant guidelines issued by the Bank/RBI.”
1. Brief History

1.1 Sanction and Renewal/ Review position with sanctioning authority.

1.2 In case of consortium (Details of All lenders with their %age share & O/s be given)

1.3 Circumstances under which account turned NPA and upto year when the conduct of
account was regular.

1.4 Corrective action taken to revive the account including rescheduling/ restructuring done
with present position.

1.5 Details of steps taken for ABJ of IPs of borrower/guarantor including position of
detective agencies engaged and its outcome.
57
1.6 Status of BIFR with latest position.

1.7 Details of SA filed by borrower/guarantor against SARFAESI Action and its latest
position including stay granted.

1.8 Efforts for OTS/resolution of the account including meeting held at CO/ZO/HO.

2. Justifications:-

3. Terms & Conditions (Following list is suggestive in nature and not exhaustive.
Mention only those, which are applicable) :
Authorities on the. specified terms and conditions to be complied with by the
borrowers. To quote:
(Proposed only such conditions which are relevant and agreed by the borrower)
 Entire OTS amount of Rs.______ shall be paid within ___ days /months from the date
of conveying approval in writing by the branch.

 Rs.______ (…..% of OTS amount will be deposited on or before/ simultaneously at the

time of conveying the approval.
 Balance amount of Rs.________ will be paid in ____ equal monthly/ quarterly
instalments alongwith interest @ ___ p.a. (simple) on reducing balance basis from the
date of conveying approval till the date of final payment.

 Post dated cheques for the aforesaid monthly/quarterly instalments shall be obtained
simultaneously at the time of conveying approval. However, last instalment shall be
paid for the balance amount plus remaining interest, if any, on OTS amount.

 Consent decree/ OTS agreement/ Memorandum of settlement in respect of debt due, to

be drafted in consultation with legal cell at ROZO. However, delay in obtention of
consent decree/OTS agreement shall not be an impediment in the payment of OTS
amount. On receipt of the payment in terms of the settlement the satisfaction of the
consent decree be recorded.

 The NOC for sale of IPs mortgaged to the bank shall be issued by the bank and entire
sale consideration shall be deposited by the purchaser directly with the bank. In case of
more than one property, the request for release of charge on specific property may be
considered after receipt of amount stipulated/specified for that property to facilitate sale
of assets and to provide clear title to the buyer for expeditious recovery of OTS amount.

 A tripartite agreement will be executed between the borrower, prospective purchaser of

mortgaged IP and the bank and sale proceeds will be directly deposited with the bank.

58
  OTS is being considered by the bank as a commercial decision and shall have no
bearing whatsoever on the ongoing criminal case/investigation, if any, being carried out
by the CBI/Police and the same shall proceed as per law.

 Party shall withdraw the counter claim/criminal case filed against the bank/ its officials
immediately.

 Default in payment of one/ two/… instalments shall render the OTS as failed and all
reliefs and concessions shall lapse automatically and bank will be entitled to recover the
entire dues as per documents/ prayer in the plaint, after adjusting the payment, if any,
received.

 Charge on security/title deeds shall be released only after receipt of entire OTS amount
along-with interest, if any.

 Bank reserves “Right of Recompense” if terms offered to other lenders are better than
the OTS approved by PNB.

 A supplementary agreement to keep the SARFAESI action in abeyance shall be

obtained.

4. Recommendations of Compromise Committee at CO/ZO/HO.

59
 Annexure-I-OTS Proposal

Account Name:_________________________________

CBS Account Number:___________________________

ADDITIONAL INFORMATION:

1. Position of limitation in case suit has not been filed.

2. Present activity of the borrower/guarantor including status of the unit whether working or
since closed.
3. Details of dues of VAT/Excise/Custom/IT or any State Govt. (if known or as per Balance
Sheet)
4. In case Balance Sheet is available, enclosed maximum two balance sheet.
5. Movement of outstanding balance in NPA account:
Amount in Rupees
i) Amount of NPA as on _______
ii) Credits in the a/c on a/c of Recovery after the date of
NPA including by sale under SARFAESI.

iii) Other Credits in the a/c (specify) after the date of NPA
iv) Interest, if any, debited in the a/c after the date of NPA
v) Debits (other than interest ) after the date of NPA
vi) Present Ledger O/S (i-ii-iii+iv+v)

6. DETAILS OF ALLIED/ASSOCIATE CONCERN (S) : (If dealing with us, the limit sanctioned,
o/s and status be informed). In case no dealing, the same be informed.

7. In case ECGC/CGFT claim yet to be settled, the amount of claim lodged with latest position be
informed.

8. Any Other important information :

Recommendations : The recoverable dues are calculated as per OTS policy. The information
submitted is as per available record of the account.

Members of Compromise Committee

CIRCLE HEAD

60
 Annexure-2-OTS Proposal

FORMAT FOR CALCULATION OF NET PRESENT REALIZABLE VALUE

Zonal Office:________Circle Office:_________

Name of account:__________________Branch Office:________________________

(Amount Rs. in lacs)

Description of Security MV (at the Attendant Total % of NPRV
time of OTS) Factors & Discount)
Discount Rate
Primary Security
Stocks & Book Debts ( Give NA NA
present realizable value)
Plant & Machinery (Give present NA NA
realizable value)
Sub Total
Collateral Security
Details of mortgaged IPs / MV as
per VR dated ______
Surplus value of stock / block asset
/ land & building under Second
Charge
Sub Total
Total

The %age of discounts is as per Bank‟s extant guidelines.

a) Attachment by Sale Tax/ Income Tax : Full Dues/ Amount of
/Other Revenue Authority attachment (If Priority charge)

b) IPs having statutory encumbrances like : 50% of such dues

Property Tax, Lease Rent, Development
charges etc. (with proof)

c) Cost of Resolution : Full

** Attendant Factors & Discount Rate

Nature of Discount/Attendant Factors Rate of
Discount
a) General Discount (Sale through Bank attracts tax burden/sharing of 10%
increase in value of IP with lessor etc. and results in diminutive realizable value)

b) Specific Discount
i) IPs having old/multiple tenancy/multiple suits and / or dispute about validity / 20%
enforceability of the mortgage/charge

ii) More than 1 year old stay against SARFAESI Action and/or SARFAESI action 10%
initiated and IPs put on auction but auction failed as no bidder came forward.

61
iii) Attachment of IP by Sale Tax / Income Tax / Other Revenue Authority 10%
(If there is no priority charge)

iv)IP not demarcated/Undivided Share mortgaged/no independent Access 10%

v) Mortgagor is dead 10%

The maximum discount having more than one attendant factors attached to IP
shall be restricted to 40% only.
*****

62
 Enclosure- 8- NOC Letter-Suit Filed & Decreed Cases

Draft letter of NOC where lumpsum payment of OTS is proposed in Suit Filed
cases/Decreed Cases.

PUNJAB NATIONAL BANK

BO:_________________________
Date :____________
_____________
_____________

(i) Suit No.*____ of __________ Court ________________________________

OR
(ii) In OA No.*______________ of DRT at_______________________________
OR
(iii) Suit No.*____ of __________ Court ____________ EP No.______________
OR
(iv) RC* Dated____________ In OA No.______________ of DRT at__________

*(Please delete whichever is not applicable)

Please refer to your offer of compromise vide letter dated _______________. Without
prejudice to the Bank‟s rights in Suit No.____________/DRT application No._________/
__________, it is informed that the Bank has no objection to receive Rs.____________
(Rupees_____________________________________) along-with interest or as per terms of
compromise separately conveyed to you on or before __________ in full and final settlement
of dues to Bank under the above suit No.__________/DRT Application
No.______________/Decree/Recovery Certificate dated_________. If full payment is not
received as per above, all the concession granted shall be deemed to have been withdrawn
and the bank shall be entitled to recover the entire amount due with further interest and cost
after adjusting the amount received in the meanwhile and court/DRT will be informed
accordingly and the Suit/Application/Execution Petition/Recovery Certificate will proceed
further.

MANAGER

63
 Enclosure-9-Memo of compromise

MEMO OF COMPROMISE
(OTS in Suit Filed Cases where payment is spread over a period of time)
(Terms & conditions be modified as per the OTS sanction)

THE COURT OF ______________ AT _______________________ / BEFORE DEBT

RECOVERY TRIBUNAL ___________ AT ______________

Suit No.________________ of ____________

Original/Transferred Application No._____________of _____________

Punjab National Bank Applicant

Vs.

Defendants

D.O.H.______________

JOINT APPLICATION ON BEHALF OF THE PARTIES FOR RECORDING “THE

COMPROMISE “AMONGST THE PARTIES.

RESPECTFULLY SHOWETH:

1. That the applicant/plaintiff bank has filed the above mentioned original application/suit
against the defendants which is pending adjudication before this Hon‟ble Tribunal/Court
and the next date of hearing is _____________.
2. That the parties have agreed to settle the matter and pray that this application, may be
disposed off in accordance with the said settlement.
3. That the terms and conditions of the said compromise are as under :-

i) All the defendants admit, accept, acknowledge and absolutely confirm their
indebtedness to the applicant bank as claimed in the original application/suit and
accordingly Final Order/ Judgement and Decree and certificate to that effect for
recovery of Rs.__________ with interest @ _________ % per annum from
________to _________ till realisation and costs and for sale of
hypothecated/mortgaged securities be passed/issued in favour of the
applicant/plaintiff bank.

ii) It is prayed that the applicant/plaintiff bank is ready to accept a sum of

Rs._________ (Rs.______________________________) in full and final settlement
towards the total dues as claimed in the original application/suit, if and only if the
said sum of Rs._____________ shall be paid by the defendants in the following
manner:-
a) A sum of Rs._______ is to be deposited on/or before __________

64
 b) The balance amount of Rs.________ is to be deposited in instalments of
Rs.______each.
c) Interest @ ____% p.a. is to be charged on the compromise amount on reducing
balance w.e.f. ______ payable as and when due as per settlement
d) Until payment of compromise amount, the charge/hypothecation/mortgage in
favour of the applicant/ plaintiff bank continue(s) to be in force.

iii) Notwithstanding anything contained as above in para 3 (ii), if full payment as per
above compromise terms is not received on or before_________, all the
concessions granted shall be deemed to have been withdrawn and the bank shall
be entitled to recover the entire amount as per Recovery Certificate/Decree as per
clause-1, after adjusting the amount received in the meanwhile and sell the
securities for realisation of amount due as per Recovery Certificate/Decree.

4. Realisation as per Decree/Recovery Certificate be kept in abeyance till_______ to

enable defendants to pay as per the compromise terms.

5. That the above terms and conditions may be ordered to form part of the final order and
certificate/judgement and Decree.

6. Defendants declare that they have entered into this compromise with the applicant out
of their own free will and consent.
Dated at New Delhi ___________ this ______ day of _____________ 200 .
For Punjab National Bank
APPLICANT/PLAINTIFF
through
Principal Officer/Duly
constituted Attorney
through
Advocate

Defendant No.1
______________________
Defendant No.2
_____________________

65
 Enclosure- 10- OTS Agreement-Non-Suit filed cases
AGREEMENT
(OTS Agreement for Non Suit Filed Accounts)

This agreement is made at________on this __________ day of _________ between

M/s # , (hereinafter referred to as first party).

$ Shri _____________S/o ____________ R/o____________ & $ Shri _____________

S/o______________R/o_______________(hereinafter referred to as second party).

AND
Punjab National Bank a body corporate consituted under the Banking Companies (Acquisition
& Transfer of Undertakings) Act 1970 having its Head Office at 7, Bhikhaiji Cama Place, New
Delhi 110 066 and interalia, among others, a Branch Office at (name of the branch) herein
after referred to as the third party)

Whereas * erstwhile New Bank of India/ Nedungadi Bank Ltd./third party had on the request
of the first and second parties extended various credit facilities to the first party.

*Whereas the erstwhile New Bank of India has been amalgamated with Punjab National Bank,
the third party herein vide Government notification dated 04.09.1993.

*Whereas the erstwhile Nedungadi Bank Ltd. has been amalgamated with Punjab National
Bank, the third party herein vide Government notification dated 31.01.2003.

WHEREAS the amount outstanding under the said facilities availed by the first party as on
____________ are as under:-

Facility Amount Outstanding

____________________ __________________
____________________ __________________
____________________ __________________

WHEREAS the said credit facilities were secured by Hypothecation of stock/ machinery and
Mortgage of property at ___________ and further the said second party
namely_______________ guaranteed the said credit facilities.
# (Describe name, constitution and address of borrower)
$ (Describe name, constitution and address of guarantor)
*The words “erstwhile New Bank of India”, erstwhile Nedungadi Bank Ltd. and sentence
“whereas the erstwhile New Bank of India/ Nedungadi Bank Ltd. has been amalgamated with
Punjab National Bank, the third party herein vide Government notification dated
04.09.93/31.01.2003” be deleted in respect of those cases where advances have not been
granted by erstwhile New Bank of India/Nedungadi Bank Ltd.

WHEREAS the first party has shown its inability to pay its total liability under the said credit
facilities and further both the parties requested for reasonable compromise and grant of
certain relief and concessions. Whereas on the request of parties, the Bank has approved the
compromise offer.
66
WHEREAS it is now proposed to enter into a formal agreement to record the terms and
conditions of compromise.

NOW IT IS AGREED AMONG THE PARTIES AS FOLLOWS:-

1. The first party and second party admit and acknowledge that as on __________, a sum
of Rs.__________ (Rupees __________________________); is due and payable to
third party and agree to pay the same with further interest @_____% per annum plus
interest tax if any with monthly rests, costs and expenses.
2. However, the parties hereto agree that if and only if the first party/second party pays
without default a sum of Rs._______(Rupees_____________________); alongwith
interest @______% as in force from time to time as per the following time schedule to
the third party, all the amount due to the third party, as stated in Clause 1 above will
stand discharged.

a) A sum of Rs._______ has been paid at the time of execution of this agreement, the
receipt of which third party hereby acknowledges.
b) The balance including interst at the rate of ______% plus interest tax if any shall be paid
by the first party to the third party in monthly/quarterly instalments of Rs._______each
commencing from _________.
c) The last instalment shall be for the balance, whatever remains payable
d) The interest shall be calculated on the reducing balance (Please see sanction/
guidelines).

e) In the event of any instalment being unpaid as above stated, all the concessions
granted as above to the first and second party shall lapse/deemded to have been
withdrawn without notice and third party shall be entitled to recover the entire amount
with further interest and costs as stated in clause 1, after adjusting payment, if any,
received in the meanwhile from the first and second party.

3. The parties agree, admit and acknowledge that till all the liabilities under the said credit
facilities due from first and second party to the third party are paid, all the securities
hypothecated/mortgaged to the third party shall remain hypothecated/mortgaged to the
third party and this agreement shall not affect or dilute charges already created (as
detailed in the scheduled) in favour of the third party.
4. The second party, being guarantor, has given his assent to the above said arrangement
and has signed this agreement in token thereof.
5. This agreement is executed by the parties with free consent.
6. This agreement is supplemental to all loaning and other documents executed by first
and second parties.

Schedule

Nature of Securities Details of Property Created by

67
IN WITNESS THEREOF, the parties have put their hands on the day, month and year above
mentioned.

For Punjab National Bank

Authorised Signatory

FIRST PARTY SECOND PARTY THIRD PARTY

NOTE FOR BRANCH OFFICE (Not to be typed in agreement)

1. Application in non suit filed matters.

2. This agreement be stamped as an agreement

3. Need not be witnessed.

4. All blanks have to be filled up, properly in line with sanction

5. Additional clause, if any needed, have to be included.

68
 Enclosure-11- OTS lumpsum Payment Receipt

RECEIPT
(Receipt where OTS amount is paid in lumpsum)

Date :______________

Received a sum of Rs._______________ (Rs.___________________________ only) from

Shri / M/s ________________________________________ in full and final settlement of

outstanding under the credit facilities availed in the account of

______________________________________________.

For PUNJAB NATIONAL BANK

REVENUE STAMP

Authorised signatory

69
 PART- B- WAYS & STRATEGIES TO IMPROVE MANAGEMENT OF NPAs

Concerned over the mounting NPAs and slow pace of Recoveries/Reduction of NPAs, it has
been considered expedient to consolidate various instructions/guidelines relating to “Effective
Management of NPAs”, with an objective to provide a Handy Document to the Field Staff to
speed up the pace of Recoveries of NPAs.

SEGMENT-A- MONITORING & IDENTIFICATION OF NPAs

A.1. IRACP (Income Recognition, Asset Classification & Provisioning) Norms
Based on the latest regulatory guidelines issued by Reserve Bank of India, the
guidelines on Income Recognition, Asset Classification and Provisioning are
circulated by HO: Recovery Division from time to time (latest being Recovery
Division Circular No. 6/2017 dated 17.01.17). These guidelines are to be
meticulously followed by all concerned.

A.2. Responsibility and Validation for proper Asset Classification

A.2.1 Functionaries responsible for proper Asset Classification/ Provisioning in Loan

Accounts are:
Loan Accounts With Responsibility & validation level for proper
Balance Outstanding of asset classification
Rs.1 crore and above Circle Head / Branch Head of LCB (Under intimation to
Zonal Manager)
Rs.10 lac and above but AGM/Chief Manager of ELBs/VLBs/MCB/ Circle
below Rs.1 crore Office (Under intimation to Circle Head & Zonal
Manager in case of LCB)
Branch Heads jointly with the Concurrent Auditor
wherever posted.
In other branches, B r a n c h H e a d jointly with the
Incharge of Loans Department.
Loan accounts of below Rs.
10 lac Incharge of Loan Department in respect of
ELBs/VLBs/LCBs jointly with Concurrent Auditor
wherever posted (Loan Officer Incharge wherever
Concurrent Auditor is not posted)

A.2.2 Channel to settle doubts in asset Classification due to any reason:

Level seeking Authority to settle Maximum Time period
clarification the doubts
Branch Heads of AGM/ CM of respective Within 48 hours of
Branches other than Circles reference received.
ELBs/ VLBs
Branch Heads of Circle Head of respective Within 3 days of reference
ELBs/VLBs/MCB Circles received.
Circle Heads/ DGM Zonal Manager or any Within 3 days of reference
of LCB functionary authorized by ZM received.

70
A.3. Ascertainment of Interest not Realized (DI)
A.3.1 When a credit facility is classified for the first time as NPA interest accrued & credited
to the income account in the past periods, which has not been realized is ascertained
and same has to be reversed and credited back in the respective account itself at the
close of the year/half-year/Quarter at the branch level by debiting Profit & Loss
Account with following particulars:

“Unrecovered Interest reversed and recorded in Memoranda A/c”

In respect of NPAs, fees, commission and similar income that have accrued,
ceases to accrue in the current period, has to be reversed with respect of past
periods, if uncollected, as above.

A.3.2 Interest on advance guaranteed by Central Government irrespective of its assets

classification status, is not taken to income account unless the interest has been
actually realized.

A.3.3 Fees and commission earned by Bank as a result of renegotiations or re- scheduling
of outstanding debts shall be recognized on an accrual basis over the period of
time covered by the re-negotiated or rescheduled extensions of credit.

A.4. Order of Appropriation of Recoveries in NPAs

Following Revised Guidelines on Appropriation of Recoveries in NPA Accounts have
come into force w.e.f. Ist January 2013:

Category of NPA Mode of appropriation in order to priority

Revised Guidelines
Suit filed & Decreed Recoveries in NPA Accounts (irrespective of the mode / status /
A/cs stage of recovery actions), henceforth shall be appropriated in the
OTS/Compromise following order of priority:
cases i) Expenditure/Out of Pocket Expenses incurred for
NPA where Recovery, including under SARFAESI action (earlier
recovery is under recorded in Memorandum Dues;
SARFAESI Act
Other NPAs ii) Principal irregularities i.e. NPA outstanding in the account
gets up-graded / adjusted, whichever is earlier;

iii) Thereafter towards interest irregularities/accrued interest.

A.5. Miscellaneous Issues in Asset Classification

A.5.1 For treating an irregular account as NPA some branches wrongly mention the date as
at the end of financial year/quarter i.e. For example, in case an account becomes out
of order or irregular from 26.10.2015, it shall be treated as NPA as on 24.01.2016,
in case default persists. The date of NPA in this account will be 24.01.2016
and not 31.03.2016.

A.5.2 Pari-passu/second charge on all block assets should be treated as security.

While calculating our share, availability of security to cover our exposure & share in

71
 security of the 1st charge holder should be assessed. Reporting of available security
cover should always be correctly explained restricted to our share only.

A.5.3 Surplus security available in one facility of an account should be

considered in another facility of the same borrower where there is shortfall.

A.5.4 In case of primary security, value of security should be taken on the basis of the
latest stock report. In case the stock report is not available/ old, bank official should
inspect the stock physically, after drawing a stock report where signature of borrower/
borrower‟s authorized signatory is obtained and fair value be arrived at.

Important Note
Operative guidelines in respect of transferring the accounts to NPA category in
the GL/SGL Heads, up-dation/maintenance of Heads, Due Date Defaults,
Memoranda Registers, generation of Reports through CBS are stipulated in the
Recovery Division Circulars issued from time time on IRACP norms.

A.6 Monitoring & Review of NPA Accounts

The most important step in resolving/reducing NPAs is close, intensive and prompt
monitoring of accounts so as to evolve Accounts Specific Resolution Strategies.
Various authorities at BO/CO/ZO/HO level review developments/progress vis-à-vis the
strategies evolved/adopted and Action Taken Report on such suggested action points
aimed towards quicker resolution of NPAs are as under:
S. Category of NPAs Monitoring Periodicity
No. Authority of Review
1. Fresh Slippages during the Quarter
NPAs with outstanding balance of more than Rs. CMD/ As & when*
5.00 crore MD &
CEO
NPAs with outstanding balance of more than Rs. ED As & when*
1.00 c rore, up to Rs.5.00 crore
NPAs with outstanding balance of more than Rs. GM, As & when*
50.00 lacs up to Rs.1.00 crore Recovery
Division, HO
NPAs with outstanding balance of more than Rs. Zonal As & when*
10.00 lacs, up to Rs. 50.00 lacs Manager
NPAs with outstanding balance of more than Circle As & when*
Rs.1.00 lac, up to Rs.10.00 lacs Head/LCB
Head
NPAs with outstanding balance of Rs. 1 lac and Branch As & when*
below Manager
*review is required to be undertaken and Action Points/Resolution
Strategies are to be evolved within one month of the close of the quarter.
2. Review & Monitoring:

72
 Of Top 100 Borrowal Accounts with outstanding of Management Once in a
Below Rs. 5.00 crore in each Asset Category Committee Year
i.e. Sub- Standard, Doubtful & Loss as
st
outstanding as on 31 March of previous
Financial Year
NPAs with outstanding Balance of more than ED Once in a
Rs. 5.00 crore as outstanding as on 31st Year
March of previous Financial Year
NPAs with outstanding Balance of more than Rs. GM Recovery Quarterly
50.00 lacs as outstanding as on last day of Division, HO
previous quarter
NPAs with outstanding Balance of more than Zonal Quarterly
Rs.10.00 lacs, u p t o R s . 50.00 lacs as Manager
outstanding as on last day of previous quarter

N PAs with outstanding Balance of more than Rs. Circle Head/ Quarterly
1.00 lacs, up to Rs. 10.00 lacs as outstanding as LCB Head
last day of previous quarter
NPAs with outstanding Balance of Rs. 1.00 lac Branch Quarterly
and below, as outstanding as on last day of Manager
previous quarter

Note
Although ZOs/Circles are responsible for resolution of all NPA accounts
irrespective of balance outstanding in their jurisdiction, the above limits have been
stipulated for intensive and prompt monitoring of NPA accounts falling in the said
category.

A.6.2 Updating & Maintenance of Status Notes

A detailed Status Note as per (Encl. 1) prescribed format shall be required to be
placed with details given below:

(i) Fresh Slippage Notes of NPA accounts with balance outstanding of Rs. 10 lacs
& above up to Rs. 50 lacs will be submitted by the Circle Offices to their
Zonal Offices.

(ii) Fresh Slippage Notes of NPA accounts with balance outstanding of above Rs.
50 lacs will be submitted by the Circle Offices to HO: Recovery Division,
under copy to the Zonal Office.

Such Status Notes shall always be kept updated by the Circles in soft copies
and can be requisitioned at very short notices.

Similarly Circle Offices will submit information in respect of the existing NPA
accounts with balance outstanding of Rs. 10 lacs to Rs. 50 lacs to Zonal Office and
above Rs. 50 lacs to Head Office , under intimation to ZOs also, on quarterly
basis (presently through 16 column statement).

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A.7 Physical verification of securities/Immovable properties etc.:
On classifying an account as NPA, it is all the more Branch Head upon Branch
Managers to immediately visit and verify the primary and collateral securities and
thereafter regularly at irregular intervals so that the same are not diluted/disposed
off/alienated by the obligants. The following guidelines have been laid down:

i. Branch Head should are ensure that title deeds of the charged IPs are intact
and mortgage continues to be legally enforceable.

ii. All NPA accounts be distributed among branch officials for verification of
primary/collateral securities and proper record be maintained. The verification
in respect of IPs charged to the Bank is to be done through independent
discreet enquiries/market report as well and strict
compliance of Bank guidelines is to be ensured. At the time of verification of
securities, the obligants are also to be followed up for
regularization/upgradation/adjustment through negotiated settlement.

iii. In case any dilution/short fall in the securities is noticed, immediate action is
taken and efforts are made to strengthen the security aspect to safe guard
Bank‟s interest.

iv. The public at large is also informed about charge on the assets of the obligants
through brief press advertisement.

v. Details of other attachable assets of the obligants are also required to be

ascertained/verified and placed on bank‟s record with the help of Detective
Agencies etc..

A.8 Inter Circle Transfer of NPA A/cs

There may be some cases where securities mortgaged to bank are situated at
places other than where the unit was situated/where the advance was made. On
account becoming NPA/closure of unit, the obligants might also shift where the assets
are situated. Further, the DRT suit may be being pursued at centre other than where
the account is being maintained. There may also be other situations, which warrant
inter-circle transfer of accounts for their effective monitoring and follow up with
obligants for recovery.

Such cases shall be referred to HO for seeking approval for transfer of the NPA
accounts to other Circles with proper justification and reasons of transfer. At Head
Office, General Manager, Recovery Division shall be the competent authority to allow
such Inter Circle transfer of NPA accounts in similar situations, Circle Heads may
allow transfer of such NPA accounts within the Circle and in case of accounts of
LCB, Zonal Manager will take decision. However, Inter-Circle transfers within the
same Zone may be done by the Zonal Manager.

A.9 Transfer of NPA Accounts to ARMBs

A.9.1 NPA accounts of Rs. 10 lacs & above of all the branches at the Centre of ARMB and
NPA accounts of Rs. 50 lacs & above in the entire Circle should be promptly
74
 transferred to ARMB immediately after the „cooling period (3 months)‟ is over and/or a
final call for initiating recovery action has been taken on finding it non viable for up-
gradation/rehabilitation or rehabilitation package is declared failed. However,
accounts covered under CGTMSE Guarantee Cover shall not be transferred to
ARMBs. The branch where such NPA accounts exist, the same shall lodge claim for
Guarantee Cover with CGFT and shall make all efforts for resolution of accounts,
till its logical conclusion.

A.9.2. As circulated vide Recovery Division Circular no. 7/2017 dated 27.01.17 it has been
decided that for transfer of accounts to ARMBs, depending upon the balance
outstanding in the NPA account, competent authorities will be vested with the powers as
per details given below:
S.No. Balance outstanding in the Competent Authority Recommending
NPA A/c to be transferred to Authority
ARMB
1. Up to Rs. 5 crore Circle Head Branch Head*
2. Above Rs. 5 crore up to Rs. Zonal Manager Circle Head
50 crore
3. Above Rs. 50 crore Head Office (GM Zonal Manager
Recovery)
*For LCBs, the Branch Head will submit recommendations to the Zonal Office,
irrespective of the balance outstanding in the account.

The proposal for transfer to ARMB, originated by the concerned branch as per
Annexure-II given in Recovery Division Circular no. 2/2017 dated 05.01.2017, be
sent to the respective competent authority along-with the recommendations of the
authority, as mentioned in the Table above.

While submitting recommendations to the competent authority, it must be ensured that

the recovery actions initiated along-with the dates and their outcome, are mentioned in
the Proposal, for example:
 Action initiated under SARFAESI Act (issue of notices under Section 13(2),
position of possession taken, efforts for sale of secured assets etc.)
 Filing of suit
 Impounding of passport
 Examining the Wilful Defaulter‟s aspect
 Any details or any proposal for restructuring, tagging, SDR etc. under
consideration.

A.9.3It must be ensured that while transferring the accounts, the files are delivered in
person by the dealing officials. The transfer should be through SOL which should
be done after file and other records have been properly scrutinized and handed over
to concerned ARMB and that they have given a green signal for transfer after scrutiny.

A.9.4 It has been observed that in many cases, as soon as the account is slipped to
NPA, the record file is transferred to ARMBs and/or Recovery Deptt. by Credit
Department/Division at controlling offices even before concluding that the account is
not feasible for upgradation through recovery of overdue
amount/restructuring/rehabilitation/rescheduling/ tagging etc. In order to avoid such
75
 situations, following guidelines should be adhered to by officials at controlling offices
before transferring the files relating to NPAs:

i). The fresh slippage accounts be dealt with on priority basis as there is a
good scope for their resolution through upgradation by recovering
overdue amount.
ii). Reasons of account becoming NPA be analyzed and chances of
Rescheduling/restructuring/rehabilitation be also explored without delay.
Wherever required, Techno-economic Viability Study be also got conducted
within three months of account turning NPA.

iii). If account has been classified NPA due to non-financial parameters,

needful be done to ensure its upgradation.

A.9.5 In accounts where it is established that upgradation through

rescheduling/restructuring/rehabilitation is not possible, only then the file
relating to account be transferred to ARMB and/or Recovery
Deptt./Division by Credit Deptt./Division along with the following:

i). Confirmation that all efforts for upgradation have been exhausted.
ii). Confirmation that there are no chances of rescheduling/
restructuring/ rehabilitation.
iii). Latest verification/valuation report of primary/collateral securities
received from the branch.
iv). Confirmation that no issue/correspondence is pending in the file.

A.9.6 Circle Head will also ensure that staff accountability issues have been
examined/crystallized before transfer of the file to ARMB and/or Recovery Deptt.

+++++++

76
 SEGMENT-B- SPEEDING UP THE PACE OF RECOVERIES

Despite taking all possible measures in terms of Bank‟s above guidelines to keep the
accounts in standard category, some accounts slip to NPA category on accounts of following
two parameters:
• Financial Parameters
• Non-Financial Parameters

Once the account becomes NPA, SARFAESI action be immediately taken in the eligible
cases.

B.2 Up-gradation Through Tagging Arrangements

B.2.1 One of the strategies to resolve NPAs is up-gradation of accounts to standard

category by regularizing the accounts either through recovery of overdue amount or
bringing the exposure within the Drawing Power (DP) besides other option of
restructuring/re-scheduling. In certain cases, bank permits operation in the
account by tagging arrangement. Detailed guidelines are contained in Recovery
Division Circular No. 21/2009 dated 26.12.2009, which should be pro-actively
implemented to get freshly slipped accounts upgraded to Standard Category.

B.2.2 Powers to allow need based Tagging have been delegated as follows:
i. Tagging of 15% and above is to be sanctioned by Branch Head.
ii. Tagging from 10% to less than 15% is to be sanctioned by Circle
Head.
iii. In exceptional cases if tagging is to be fixed below 10%, the proposal are to
be sent to Zonal Manager {previously GM(HO) as per Recovery Div.
Circular no. 21/2009 but as per Recovery Division Circular no. 17/2012
changed to ZM} for sanction.

B.2.3 Accounting System (Appropriation of credits) in NPAs with Tagging

Arrangement
Even in case of recoveries through tagging arrangement, the chain of appropriation
will remain same, as in case of other NPA accounts (refer Para A-4).
B.2.4 Viability of Tagging Arrangement
Analysis of future cash flows and expected credits available through tagging vis-a-
vis overdues would be done to ascertain the viability of up-gradation and accordingly a
specified time period be spelt out in the sanction for upgradation of accounts.
B.2.5 Securities
There should be no dilution in securities and all other aspects relating to security i.e.
receipt of inventory and inspection thereof shall be as per extant guidelines of the
Bank.

B.2.6 Operations in the account

77
 i). Tagged amount out of each credit would be retained in the CC a/c and
balance would be allowed to be withdrawn by the party.
ii). Debits in the account will be allowed with the written permission of Branch
Head through Overdraft Sanction Register to ensure that tagging
arrangement is being implemented in strict compliance of the sanction.

B.2.7 Termination of Tagging Arrangement

i). Tagging arrangement should be reviewed on half-yearly basis to take
decision to continue or terminate the said arrangement.
ii). Up-gradation of account with exercise of tagging be ensured within the
specified time period.
iii). On failure of recovery as above the tagging arrangement should be
terminated immediately after giving a notice of 15 days and recovery action
should be initiated.

B.3 Up-gradation through Restructuring

B.3.1 Simultaneously the circumstances leading to the account becoming NPA are
examined in detail with a dispassionate mind and in genuine cases of default, the
matter is examined for Re-phasing/ Restructuring/ Rescheduling /Extension
of Moratorium/ Partial Recoveries through Tagging etc.

B.3.2 At the initial stage, an account may be operative NPA and it can be resolved
either through recovery of overdue amount while in some accounts
there may be a need for financial restructuring / rehabilitation / reschedulement of the
credit facilities on merits after studying the specific problems and feasibility/viability of
individual accounts in terms of Bank‟s guidelines. Different mechanisms presently
available for restructuring of debt are as under:

i. Rehabilitation scheme sanctioned under the aegis of BIFR

ii. Corporate Debt Restructuring
iii. Restructuring under Debt Restructuring Mechanism for Small and
Medium Enterprises (SMEs)
iv. Reschedulement of Terms Loans – Interest/instalment

B.3.3 Restructuring Cells have already been set up at controlling offices for implementing
and monitoring restructuring of debt under CDR and Debt Restructuring Mechanism
for SMEs. The policies in respect of restructuring are issued by HO: IRD.
Restructuring of debt or Financial restructuring involves three basic steps as under:

i. Timely identification of the problem

ii. Realistic assessment of the business potentials and cash flows
iii. Aligning the capital structure and debt servicing obligations to
realistically projected cash flows

Guidelines issued by the HO:IRD from time to time be meticulously followed in

respect of restructuring.

78
B.3.4 In respect of cases referred to BIFR, more efforts have to be made towards improving
controls and preventing further deterioration of assets charged to the Bank because
legal action for recovery/regularization can‟t be taken in isolation without formulating
a rehabilitative restructuring/one time settlement scheme as common approach
(in case of consortium advances) and without the approval of BIFR.

B.3.5 However, for initiating recovery action under SARFAESI Act, 2002, BIFR permission
is not required if consent of secured creditors representing not less than three-fourth
in value of the amount outstanding against financial assistance disbursed to the
borrower, is available. After secured creditors, representing not less than three-fourth
in value of the amount outstanding against financial assistance disbursed to the
borrower, have taken any measures under section 13(4) of SARFAESI Act, 2002 BIFR
reference gets abated.

B.3.6 Follow-up, therefore, in such accounts is directed towards:

a. Preventing borrowers from disposal of primary and collateral securities.
b. Avoiding further increase in credit exposure and minimizing funding
dues to the bank.
c. Obtaining additional securities (Primary and/or collateral) and personal
guarantees.
d. Strengthening existing securities by completing pending documentation
formalities, creation/registration of charges on movable and immovable assets
of the borrower(s)/guarantor(s), but in quick time when the account is running
satisfactory.

B.4 Up-gradation through Realignment of existing exposure

Many a times, the cases come up where without increasing any exposure, but with
realignment of the Availed Limits/Existing Exposure, the irregularity in a particular
facility can be wiped off and the A/c can be upgraded e.g.

i). FDRs held as collaterals, if encashed pre-maturely and appropriated to the

A/c.
ii). Releasing the Cash Margin/Reducing the Cash Margin in outstanding Non
Fund Based Facilities and appropriating to the account to wipe off/reduce the
irregularities.
iii). Converting Due Date Default outstandings as Term Loan/Loan against IP
etc.
iv). Converting CC Hyp. Limit to CC BD Limit or vice versa.
v). Converting Bills Purchased Limit to CC or vice versa.
vi). Allowing surplus unproductive assets/collaterals to be disposed off to reduce
the liabilities and improve Cash Flows.

B.5 Recovery Through Govt. Agencies

For the purpose of recovery in non-performing borrowal accounts, services of
Government Officials such as District Collector, Tehsildar, Revenue Recovery
Officers, Panchayat Officers, etc., wherever available, shall be availed of fully at the

79
 prescribed rate of fees under respective State Recovery Act, so that dues are
recovered as early as possible.

B.6 NPA A/Cs under CGFT/CGTMSE Guarantee Cover

B.6.1 The CGTMSE scheme is being administrated by MSME Division, Head Office and
the detailed guidelines are issued by them from time to time. The guidelines issued by
this Division be meticulously followed to obtain guarantee cover.

B.6.2 Guidelines/Instructions regarding Accounting Treatment to claims received from

CGFT under CGTMSE Guarantee Cover have been issued vide Recovery Division
Circulars No.32/2013 dated 06.07.13 and 39/2014 dated 10.11.14. Further,
guidelines issued from time to time by MSME Division be meticulously complied
with.

Timely and correct identification of such accounts or NPA, quickly lodging the claims
with CGTMSE and ensuring their settlement in terms of their Guarantee Cover and its
appropriation as above should be ensured.

B.7 Companies under Liquidation/Official Liquidator

In cases where part recovery made in consortium accounts is lying with the lead bank
and/or with Official Liquidator (OL) and our bank has not received claim
towards its share from the recovered amount, bank should get pro-rata share in
recovery expeditiously. If OL is not selling the assets, or does not distribute the
proceeds, directions of company court should be obtained by filing proper
applications. If worker‟s dues are not paid, the court be requested to set aside/set
apart an estimated sum and distribute the balance proceeds to the bank/secured
creditors.

B.8 NPA A/cs under Consortium/Multiple Banking Arrangement

Vide Recovery Division Circular No. 37/2013 dated 31.07.13, detailed guidelines to
handle/tackle NPA A/cs under Consortium/Multiple Banking Arrangements have been
laid down viz:

 In case of consortium advances, where our bank is Lead Bank or the 2 nd largest
participating bank, meeting would be attended by the Circle Heads/Second in
command. In case of limits under LCBs power, the Branch Head /other senior
officials, not below the rank of Scale-IV after having mandate from Branch Head
of LCBs would attend the meeting.

 Where the Bank is neither the Lead Bank nor the 2nd largest participating bank,
the meeting to be attended by second in command from the Circle Offices and in
case of advances under LCBs power, senior officer not below the rank of Scale-
IV from LCBs to attend the meeting.

 An official who is participating in the consortium meetings should be well versed

with the history of the account. The officer attending consortium meetings should
do necessary ground work like preparation of notes etc. before attending the
meeting.
80
  Branch/Circle Office should obtain/provide in principle approval/mandate from the
competent authority in advance on the Agenda item.

 Consortium meetings should be held regularly.

 On receiving the minutes of the meetings, CH/representative who attended the

meeting should ensure that Bank‟s viewpoint has been adequately and properly
incorporated. If not, the matter should be taken up immediately with the Lead
Bank.

 In order to have effective participation in Joint Lenders Meet convened by the

respective lead bank/FI in respect of High Value NPA A/cs (say having
outstanding of Rs.25 crore & above) a Senior Level functionary from the
Recovery Division should also be attending such meetings. Further it should be
ensured that such meetings are attended by Zonal Manager/Circle Head himself
also.

 Therefore, it should be ensured that Agenda Notice along with Background

Papers and specific views/recommendations of the Circle Head/Branch Head
LCB are sent to the competent authority (in case of outstanding above Rs.25
crore to Recovery Division, HO also) in advance to enable to take in principle
approval to provide a mandate while attending the meeting on the stand to be
taken in such consortium/Jt. Lender Meetings.

 Immediately after an account becomes NPA, as a proactive measure, the

Branches irrespective of our share in the lending should press for convening the
Consortium/Joint Lenders Meet even in cases where we may not be the leader
and/or formal consortium may not exist like in case of Multiple Banking. Where
ever we are the leader and/or major shareholder, Branches should suo-motto
convene such meetings, with a view to discuss ways and means of bringing back
the Account to normalcy and/or taking further recovery measures.

 Obviously the initial efforts/actions should aim at helping the borrower to come
out of genuine business difficulties and help him draw out a plan for up-gradation
of the accounts through Tagging arrangements, Rescheduling/ Restructuring/
Rehabilitation etc. either through CDR mechanism or otherwise.

 A specific mandate from the competent authority to support or not to

support such plans should be obtained in advance, based on the merits of
the case. If normalcy cannot be brought out in near future, a common consensus
needs to be developed in a time bound manner for initiating measures viz
Restructuring/CDR, SARFAESI Action, Filing Recovery Suit with DRT, exploring
negotiated settlement, declaring them as Wilful Defaulters, filing of FIRs/Criminal
complaints declaring the account as Fraud.

B.9 Insolvency & Bankruptcy Code-2016

This Act has come into force and functional regulations have been made effective with
effect from 01.12.2016 and National Company Law Tribunals (NCLTs) have been
bestowed with the powers to act as the adjudicating authority for corporate persons.
81
 The Insolvency Resolution process will be carried by Insolvency Resolution
Professionals (IRPs) who are registered with Insolvency and Bankruptcy Board of
India.

B.9.1 The operational guidelines have been issued by the Law Division vide their Circulars
no. 4/2016 dated 23.09.16 & 2/2017 dated 18.01.2017.

 There must be a default apparent of Rs. 1 lac and above, against the corporate
debtor.
 In absence of any previous notice, a demand notice of the amount due with a
reasonable period, minimum 14 days, must be given to the corporate debtors
etc.

A Draft of the Demand notices to be sent to the Borrower/Guarantor is also given in the
said Law Division‟ Circular for ready reference, which may be modified as per the
requirement, based on merits of the case.

B.9.2 Detailed guidelines pertaining to powers vested with different competent authorities
and various modalities involved have been stipulated in the Recovery Division
Circular no. 9/2017 dated 21.02.2017 & 10/2017 dated 27.03.2017.

B.10 Engagement of Recovery Agencies

Guidelines for engagement of Recovery Agencies are circulated from time to time by
Recovery Division, which must be meticulously complied with, latest being available in
Recovery Division Circular no. 12/2017 dated 30.03.2017. NPA accounts (whether
non-suit filed, suit filed or decreed) with outstanding upto Rs. 10 lac are eligible under
the scheme. Moreover, written off accounts can also be entrusted to Recovery
Agencies to effect recovery. The progress of the Recovery Agencies is monitored at
CO level and shall be reviewed by the Board on annual basis. There is a need to
implement the scheme with greater vigour and proper planning. It should also be
ensured that optimum number and proper mix of accounts is allotted to each Recovery
Agent and their bills are settled promptly.
B.11 Engagement of Resolution Agents
In order to overcome the difficulties being faced in the field, guidelines on Engagement
of Securitization/ Reconstruction Companies (SC/RCs)/ Firms/ companies other
than SC/RCs/Retired bank (PNB) Employees as Resolution Agent are being
circulated by Recovery Division, which must be meticulously complied
with, latest being available in Recovery Division Circular No. 14/2016 dated
02.04.16. Wherever required, the filed officials to utilize the professional services of
Resolution Agents (which include Asset Reconstructions Companies, Other
Firms and PNB Retired Employees) for tackling high value NPAs.

B.12 Engagement of Supporting Agencies

As per provisions of the SARFAESI Act, apart from the appointment of „Valuers‟
for taking assistance to enforce the security interest, bank may also avail outsource
various types of services from approved Supporting Agencies viz.
i). Pre-take over examination of identified units/assets including survey.
ii). Facilitating bank in seizure of securities/taking possession of
movable and immovable assets.
82
 iii). Obtaining assistance of District Magistrate/Metropolitan Magistrate for
taking over possession of securities.
iv). To provide security for preservation and protection of assets taken in
possession.
v). To act as a custodian of secured assets.
vi). Assisting bank for sale of assets taken in possession through auction
or otherwise.
Guidelines for Engagement/Empanelment of Supporting Agencies under SARFEASI
Act are circulated from time to time which must be meticulously complied with, latest
being available in Recovery Division Circular No. 13/2017 dated 30.03.2017.

B.13 Engagement of Detective/Investigating Agencies

Presently, Bank has been utilizing services of the Recovery Agencies, Resolution
Agents & Supporting Agencies for resolution of NPAs. However, efficacy of these
Agencies is dependent on the following two important factors:
 Borrowers/Co-Borrowers/ Guarantors are traceable
 The securities if any, are known

Over a period of time, it has been noted that there is sharp rise in number of accounts in
which either the borrowers/guarantors are not traceable and/or the securities available
are not known and/or the documents related to secured assets are not enforceable in
the court of law. In such a scenario the above mentioned outsourced agencies fail to
provide any respite to the Bank and it becomes quite essential to utilize services of the
Detective Agencies. For the first time, guidelines on Detective Agencies, have been
circulated through Recovery Division Circular no. 14/2017 dated 30.03.2017 with the
following objective:

To locate the borrower(s)/ co-borrower(s)/ guarantor(s)/ mortgagor(s), (in/outside

India) including their legal heirs who are either untraceable or not available at the
addresses given in Bank‟s records;

To ascertain latest information about their present address(es)/ occupation(s),

business(es), income streams, details of their all assets, whether charged or
uncharged, their location(whether in India or abroad), value and ownership, etc.;

To give details of bank accounts maintained by the defaulting

borrower(s)/guarantor(s), including their legal heirs;

To give details of credit facilities availed/to be availed by defaulting borrower(s)/

guarantor(s) from other Banks;

To confirm present state of ownership of the secured assets by personal

visit(s)/market report, duly confirmed by the documents. To furnish information
about their attachable assets.

To gather any other information which the Bank cannot access by utilizing normal
channels like CIBIL/internet/local enquiries and which may be considered
necessary by the Bank for recovery of the Bank‟s dues

83
 The field officials must utilize the services of detective agencies, wherever required, in
pursuit of desired results.

B.14 Securitization, and Reconstruction of Financial Assets &

Enforcement of Securities Interest Act-2002 (SARFAESI-2002)
SARFAESI Act is an enduring tool for expeditious resolution of NPAs but its success is
dependent on the fact that one action follows the other till it is taken to the logical end.

Wherever, conciliatory methods of recoveries fail to evoke positive response from the
obstinate borrowers, notices under SARFAESI Act must be immediately served, in the
eligible cases. This action should not be kept in abeyance merely on account of the
false promises made by the borrowers. They must be given a time bound schedule for
depositing the overdue amount, failing which the action must be initiated.

B.14.1 The Act facilitates enforcement of security interest by secured creditors without
intervention of courts. There is provision of transfer of NPAs to ARCs which will
realize the impaired assets within a time frame. The Act provides legal frame work for
securitization of assets. Government of India has also notified the Security
Interest(Enforcement) Rules 2002 which prescribe the manner of exercise of
rights of secured creditors under the Act.

B.14.2 Field functionaries should make effective use of the rights of enforcement of security
interest as provided in the Act for quicker resolution of NPAs. The steps that are
required to be taken for this purpose are given in detail in the Bank‟s Manual (2008)
on Enforcement of Security Interest and other important aspects have been
stipulated in the Recovery Division Circular no. 37/2015 dated 29.12.15.

B.14.3 In case, serving of the Notice under Section 13(2) fails to bring the borrower to the
negotiating table, action must be initiated under Section 13(4) for taking possession
(Symbolic/Physical). There is no substitution to the Physical Possession, which is
a time tested tool to put pressure on the chronic borrowers to deposit the overdue
amount and is always preferred over Symbolic Possession. Wherever resistance is
anticipated in taking physical possession, applications be filed with the DM/CMM,
without delay.

B.14.4 After taking the possession (symbolic/physical), the next course of action to sell the
secured assets through E-Auctions/Tenders to fetch the maximum price. For success of
the sale process, proper publicity be made through Posters, Banners, Pamphlets, TV
Media etc. and the Recovery Agencies/Resolution Agents/Supporting Agencies must be
mobilized to rope in more and more bidders. Further, while going for sale of the secured
assets realistic Reserve Price be fixed to minimize the probability of failed attempts.
Before going for sale through Private Treaty, attempts must be made to dispose
of the same through public invitation (say auctions/tenders).

B.14.5 In all those case where the borrower(s)/obligant(s) have been successful in getting the
stay from DRTs/DRATs/Courts against the SARFAESI action initiated by the Bank,
immediate appeals be lodged for vacation of the stay.

B.14.6 As per the amendments in the SARFAESI Act, in case immovable properties are placed
for sale, possibilities be explored for self-bidding to derive the maximum benefits.
84
B.14.7 In case where secured creditors representing not less that 75% in value of amount
outstanding decide to enforce their security under SARFAESI, further proceedings
under SICA (Sick Industrial Companies Act) shall abate.

As such JLMs be called in the eligible cases to get mandate for action under 13(4) of
lenders representing not less than 75% in value.

B.15 Recovery through Legal Action

B.15.1 Where SARFAESI Act-2002 is not applicable or where bank‟s dues are not fully
recoverable through action under SARFAESI Act, legal action shall be initiated
immediately without loss of further time. In terms of Recovery of Debts due to
Banks and Financial Institutions Act 1993, Debt Recovery Tribunals have been
established to adjudicate claims involving an amount of Rs.10 lakh and over in respect
of amounts due to Banks and FIs. Suit/Claim filed before Civil Courts/DRTs shall be
pursued effectively. As per the decision of Supreme Court in the matter of M/s
Transcore Vs. Union of India & Others SARFAESI action can continue/be
proceeded with, without withdrawal of the DRT application and that the remedies
under SARFAESI Act and DRT Act are complimentary to each other and can be taken
up simultaneously.

Following guidelines shall be complied with meticulously:

i). Recorded interest is not to be taken into account for the purpose of cut off
point while permitting filing of suit.

ii). It should be ensured that the officer who had sanctioned the credit
facilities irrespective of the level of his position, shall not approve filing of
suit. Such cases shall be approved by the next higher authority. Branches,
while making references, should, therefore, indicate the date of sanction and
the sanctioning authority in each case.

iii). While permitting filing of suit, approving authority should ensure to identify
factors responsible for adverse conduct of account and it becoming doubtful
of recovery. It is further to be ensured that process of identifying staff
side lapses has been initiated and action against the erring official(s) should
be taken to logical end.

iv). It should also be ensured by the approving authority that

simultaneous action under SARFAESI Act has already been initiated and
persuaded in all eligible cases, irrespective of filing suit.

B.15.2 Financial Powers relating to Law matters e.g filing of suits, defending suits, appeals
etc. are circulated by Law Division, from time to time, which must be meticulously
complied with, latest being available in Law Division Circular no. 6/2014 dated
30.01.2014- Financial powers relating to Law matters.

85
B.15.3 For filing of Recovery Suits in NPA accounts within stipulated time limits, the field
officials may refer to Recovery Division Circular no. 28/2015 dated 20.10.2015.

B.16 Recovery/execution of Decrees through Bank‟s approved Advocates

B.16.1 Detailed guidelines regarding payment of fees etc. to the advocates for execution of
decrees are being issued by Law Division, Head Office. In view of the references
being made by the field functionaries that advocates do not encourage recovery
through compromise or take active interest in execution of decrees as the fee payable
to them is linked with the stage of the proceedings, it was clarified that if the Counsel
has played positive role in bringing about compromise by taking initiative or
coordinating in the matter, competent authority may consider paying a higher fee not
more than the applicable fee as per bank schedule under the suit/application/legal
proceedings, irrespective of the stage of the case.

B.16.2 It has been observed that a large number of decrees are still lying pending at the
branches for execution/recovery. For speedy execution/recovery in such decreed
accounts, where recovery is expected through execution of decree, branches should
follow up the matter with the advocates.

B.17 Assignment/Sale of Decrees

B.17.1 Assignment/Sale of Decree can be adopted as a measure of recovery in those cases

where borrowers do not pay decreed amount in terms of decree in maximum one
Year‟s time.

B.17.2 Important guidelines on the matter are given below:

i). For the purpose of assignment/sale of decree, the decreed amount along-
with interest as per decree is to be treated as recoverable dues. The
difference between assignment/sale value and the recoverable dues as per
decree will be treated as sacrifice.

ii). For authorizing such assignment/sale of decree, competent authority can

use the powers delegated to him for writing off of bad debts/losses, entering
into compromise/negotiated settlement.
iii). Assignment/sale of decree shall be done in consultation with the Law
Officer/approved Advocate to ensure observance of
provisions/procedure of Law.

iv). The amount for which assignment/sale of decree can be done will
depend on merits and attendant circumstances of each individual case like
available securities, assets of Judgment Debtors (JDs), age of decree
etc. Thus, a general yardstick cannot be provided. Branch Manager
(BM)/Circle Head/Competent Authority may, therefore, negotiate with
the intending buyers.

v). The decree should not be assigned till the entire amount of
assignment/sale is received.
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 vi). Stamp duty, if any, required to be paid under the Indian Stamp Act for
assignment/sale of decree, shall be borne by the purchaser of decree.

B.18 Transfer/Sale of Financial Assets to ARCs/FIs/NBFCs/Banks

Securitization and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (SARFAESI Act) provides also for sale of financial assets (NPAs)
by banks / FIs to Asset Reconstruction Companies (ARCs)/FIs/ NBFCs/Banks.
When all conciliatory efforts fail to evoke positive response, „Sale of NPAs‟ is an
important mechanism available to lenders for quicker resolution of NPAs proving
difficult of recovery and cleansing the balance sheet. This tool is effective especially in
those cases where other Banks have already sold their share to the ARCs/FIs etc.
Provisions of this policy should be put to optimum use by field functionaries for
reduction in NPAs by marketing thee assets appropriately during due diligence by
ARCs. Policy guidelines in this respect are issued by Recovery Division from time to
time, latest being available in Recovery Division Circular no. 5/2017 dated
17.01.17.
B.19 Recovery Through Lok Adalats
Lok Adalat is an important tool for resolution of NPAs upto Rs.20 lacs as every award
made by Lok Adalat shall be final and binding on all the parties to the dispute
and no appeal shall lie to any court against the Award. Circles are required to utilize
this forum pro-actively, for which the guidelines are issued from time to time by
Recovery Division, latest being available in the Recovery Division Circular no.
12/2013 dated 25.03.2013.

B.20 One to one Dialogue with NPA Borrowers/Guarantors (Knocking the doors)
In High Value NPAs a dialogue/meeting with borrowers/guarantors is necessary
not only to facilitate to resolve the account but other issues related to their accounts
may also be discussed for smooth conduct of the accounts and/or finding alternatives
for resolution of the account.

Notwithstanding bank‟s right to recover its dues through legal remedies and/or
contentions raised by the borrowers, such High Value NPA borrowers may be
formally invited directly by Circle Offices for special OTS camps/meetings to be
held by CH himself and/or by ZO/HO representatives. Such letters may also be
issued directly from CO/ZO/HO whenever a Senior Executive is visiting the circles for
this purpose. Such visits by the senior officials have a demonstrative effect and
motivates the Branch Branch Heads to follow the same path, in pursuit of recoveries.

B.21 Close & Focussed Monitoring of Branches with high NPA incidence
Vide Recovery Division Circular letter No.2/2012 dated 06.03.2012 the
directions/concerns of Deptt. of Financial services MOF-GOI were conveyed that due
to lack of focus, only walk-in defaulting Borrowers get tackled and other such
recalcitrant borrowers go scot free. Therefore it was decided that Circle Heads shall
be personally responsible for:
• Top 5% Branches with Highest NPAs (amount-wise)
&
• Top 5% Branches with Highest Percentage of NPAs (other than
87
 ARMBs)

Circle Heads are required to monitor these 5% Branches very closely with
an objective to reduce the NPAs and submit fortnightly reports to HO.

B.22 Recovery Camps/Rin Mukti Shivirs

B.22.1 For faster and quicker resolution of NPAs, besides taking legal actions and/or
enforcing the charged securities under SARFAESI or otherwise, establishing a one to
one dialogue with such defaulting/NPA borrowers with a view to explore
the possibilities of OTS/Negotiated Settlement/Compromise on mutually
acceptable terms, is perceived to be an effective and useful tool.

B.22.2Therefore, “Recovery Camps/Rin Mukti Shivirs” particularly for

Agriculture/Retail Loans in Small/Mid Cap NPAs (i.e. accounts with balance below
Rs.10 lacs) are to be conducted periodically in an effective and structured manner
after doing proper spade work so as to explore the possibilities of OTS with a view to
Maximize the Recoveries in Minimum Time.

B.22.3 Every month each circle should endeavour to hold at-least 3-4 Mega Recovery
Camps/Rin Mukti Shivirs in each quarter by clustering 9-10 branches at one camp,
where Circle Head and/or his Deputy (concerned AGM/CM) should personally be
present to accord on the spot approvals of OTS, preferably with immediate payments.
ZMs may also participate in such Rin Mukti Shivirs for better results.

B.22.4 The following additional steps be taken to ensure the effectiveness of such camps:

i). Publicity of such Rin Mukti Shivirs/Recovery Camps be done

effectively by way of public announcements (muniyadi), press release in
local newspapers, strips on cable TV etc, stressing on “RIN MUKTI”.
ii). In rural areas help of Gram Panchayat/Gram Pradhan/Social Pressure
Groups be solicited to motivate the borrowers for their “Rin Mukti”.
Help of revenue authorities i.e. Ameens/SDM be also solicited, particularly
in RC Filed cases.

iii). Recovery Agents be also sensitized and informed the date and venue
of such camps well in advance so that they may also pursue the borrowers
to attend these Recovery Camps/Rin Mukti Shivirs in respect of accounts
already allocated to them.

iv). Some Sr. Officer from Circle Office should attend such camps so as to
generate larger number of OTS proposals and take on the spot decisions
as far as possible.

v). Recovery in Written Off Accounts may be focused as a final

Resolution of the Account through One Time Settlement for which a
special Policy exists.

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 vi). Notices be sent by the branches in vernacular in advance and their
delivery ensured.

vii). Incentives available under „PRAYAAS‟ Scheme (whenever applicable) for

recovery be popularized/publicized among the staff.

viii). ABC analysis of all written off accounts be done and accounts which are
soft targets be taken up for resolution more aggressively.

B.22.5 Keeping in view the feedback received from the Circles, benchmarks for
these Mega Rin Mukti Shivirs have been defined as follows:
Benchmarks Per MRMS Number /
Amount
Minimum borrowers 200
Overall Cash Recoveries including in the written off A/Cs Rs. 50 lacs
and OTS approved cases at the camp itself
Cash Recovery in written-off accounts (out of 2 above) Rs. 2 lacs
OTS Proposals approved in camp itself (O/s in NPA A/Cs) Rs.150 lacs

B.23 Recovery through OTS

B.23.1 The past experience reveals that the conventional means of recovery do not yield the
desired results in the desired time. Legal remedies are not only costly and time
consuming, but at times create hassles and multiplicity of litigations resulting
into dead locks, hardening of attitudes and delay in resolving the NPAs.

B.23.2 It is in this background that Resolution of Non Performing Assets through

Compromise/Negotiated settlement is accepted as an effective non-legal remedy by
the Bank due to twin advantages of availability of immediate liquidity and income
generation by recycling of funds otherwise blocked. Compromise settlement refers
to a negotiated settlement under which Bank endeavors to recover maximum
amount in minimum time with minimum expenses. Normally under a Negotiated
Settlement, a borrower offers to pay and the Bank agrees to accept in full and final
settlement of its dues an amount less than the total amount due to Bank under the
relative contract. Thus, the settlement invariably involves certain sacrifice by
the Bank (by way of write off and/or waiver) of a portion of its dues. Each offer of
compromise is unique in the context of circumstances necessitating its consideration
as a viable and commercial recovery option.

B.23.3 Bank‟s approach to compromise as a recovery option is based on analysis of

strengths and/or weakness in a particular given case. The basic parameters for such
an analysis are:

i). Quality of primary assets charged to the Bank, their realisability/

marketability.
ii). Collateral cover i.e. its value, marketability. realisability and
enforceability.

89
 iii). Means/other attachable assets of the Borrower/guarantor(s).
iv). Status of legal action/SARFAESI action and time involved.

B.23.4 Thus to step up the pace of reduction of NPAs is entering into

compromise/negotiated settlement with the Borrowers out of Courts. This is one of
the speedy ways of recovery of dues by which blocked funds can be easily and
promptly made available for:-
i) Recycling at favourable rates and earning profits;
ii) Reducing capital adequacy requirements; and
iii) Saving the cost of funds so blocked up as NPAs.
iv) Release of Provisions

Detailed guidelines are circulated by Recovery Division from time to time in

the shape of Bank‟s OTS/Compromise policy.

B.24 Prayaas Staff Incentive Scheme

Staff Incentive Scheme to boost recovery of NPAs is also in place. The Circles are
required to advocate for the same by highlighting its benefits for the entire field staff.
Even, the staff at Circles including the Circle Head can get the financial benefit if their
own job profile of monitoring and motivating the staff is done with full concentration
and they own the job of Recovery & Resolution of NPAs.

As per Govt. of India guidelines, in case Net NPA level of the Bank exceeds 3%,
no incentive is payable to its employees. Thus applicability of this policy is
dependent on this principle.

B.25 Wilful Defaulter

There are several NPA cases where the borrower has the capacity to repay the loan
but does not come forward due to malafied intention. In such cases the borrower
resorts to siphoning off the funds, disposal of Banks secured assets without depositing
the amount in the loan account and other unethical practices.

When reconciliatory efforts fail to produce the desired results, efforts may be made to
declare such eligible defaulters as Wilful Defaulters. Branches may refer to
Circulars/Circular Letters issued by the HO: Recovery Division from time to time
(latest circular being 22/2015 dated 31.08.15).

B.26 Invocation of Pledge of shares/ Sale of Pledged Shares in NPA accounts

In a number of loan accounts, the promoters / guarantors / other persons, pledge
shares of substantial value held by them either in the borrower company or in any other
company, in favour of Bank as collateral security. Pledged shares being easily saleable
liquid security should be enforced at first instance after classification of account as NPA.
However, it is observed that pledge of shares is not invoked immediately after
classification of account as NPA. Such non-invocation of pledge in time, not only results
in uncalled for delays in recovery of bank‟s dues, but also results in loss to Bank as
value of pledged shares often falls drastically with the passage of time on account of
various reasons such as adverse changes in the net worth position of the companies /
loss of reputation consequent to NPA tag etc.

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B.26.1 Pledged shares are either in physical form or in dematerialized form. The detailed
procedure for invocation of pledge of shares in both the forms has been provided under
Annexure 8 to Loans & Advances Circular No. 66/2014 dated 16.06.2014. Recovery
Division has also issued guidelines in respect vide Circular no. 23/2016 dated
26.05.2016. The applicable instructions contained in above circular, as modified from
time to time, be meticulously followed.

B26.2 Further, in case the pledged shares are of a listed company, the same are to be sold
through concerned stock exchange. In such cases, assistance of Treasury Division,
Mumbai, may be taken. In case the pledged shares are of unlisted company/ies, Bank
may proceed for sale of pledged shares by inviting quotations from public through news
papers / Bank‟s web site etc.. Before sale of pledged shares, a notice of invocation of
pledge be issued to the pledgor of shares. In case of any difficulty in this regard,
guidance from Law Division, HO may be obtained.

B26.3 A draft format of the Notice to be issued to the pledgors (Annexure–I of this circular)
as well as the notice to be published in the newspaper/s inviting quotations for sale of
shares (Annexure–II of this circular), as aforesaid, are attached herewith. These draft
notices be used after confirming the factual position vis-a-vis the shares pledged. The
notices may be suitably modified at yours keeping in view the facts of the matter.

B26.4 In all the cases where Bank is having security by way of pledge of shares, steps for
invocation of pledge / sale of pledged shares need to be taken immediately upon
classification of account as NPA to expedite recovery of Bank‟s dues. Keeping in view
the above, all field functionaries are advised as under:

 In case our Bank is sole lender, the steps for invocation of pledge / sale of pledged
shares be initiated immediately, and in all eventuality, not later than a week from
the classification of the account as NPA.

 In case of consortium accounts where our Bank is leader, the consortium meeting be
immediately called after slipping of account to NPA to initiate steps to invoke pledge
of shares / sale of pledged shares.

 In case of consortium accounts where PNB is not the lead bank, the lead bank be
requested to call consortium meeting immediately upon classification of such
account as NPA for initiating steps to invoke pledge of shares / sale of pledged
shares.

 The steps initiated for invocation of pledge / sale of pledged shares be taken to
logical end without time gaps.

B26.5 As pointed out above, delay in invoking pledge of shares / sale of pledged shares in
time may result in loss to Bank, and for any unreasonable delay, the erring officials will
be answerable. The Inspectors while inspecting the branches / Circle Heads and other
inspecting officials during their branch visits, shall view and point out this aspect also.

---------------------------------------------

91
 Govt. of India Guidelines- Invoking personal guarantee in case borrower company
defaults

It has been observed that there are a less number of cases where action has been taken for
recovery against guarantors for attachment of assets owned by them and sell the same for
recovery of defaulted loan.

2. While sanctioning credit facilities to Companies, it is a standard practice to obtain

personal guarantees from promoter directors holding controlling shares in the company
in addition to any other individual or corporate guarantees. In the event of default in
repayment or the loan by the borrower company, all the guarantors are liable to repay
the guaranteed loan with interest as the liability of the guarantor is co-extensive with the
principal-debtor (borrower). The action can be taken against guarantor even without
suing the principal debtor for recovery and even if the decreed amount is covered by
mortgaged decree.

3. It is the prevailing practice to obtain full particulars of assets owned by the guarantors to
assess to net-worth of the guarantors and such particulars are kept updated while
review/renewal of credit facilities of the company.

4. Therefore, it would be prudent to take steps against guarantors immediately when no

sign of revival is visible:

(a) if any guarantor has created security interest over any property / asset owned by
him, the steps should be taken under section 13 of the SARFAESI Act, 2002 for
enforcement of security against the guarantors;

(b) if the guarantor has given any pledge of shares held by him, the steps should be
taken to sell the pledged shares, under section 176 of the Indian Contract Act,
1872;

(c) if the guarantor has not created any security interest over his property but owns
property and other assets in the application for recovery filed before the Debt
Recovery Tribunal, the bank should move application before DRT for attachment
and sale of such property under section 19(12) to (18) of the RDDB & FI Act,
1993;

(d) Usually, as a part of the working capital limits sanctioned by the banks, book
debts and receivable of goods and services sold by the borrower, are charged
and hypothecated to the bank. Such book debts therefore constitute secured
assets which can be enforced under Section 13(4) (d) of SARFAESI Act. The
banks should keep a watch on periodical statement of Book-debts and
Receivables submitted by the borrowers and the steps should be taken by the
bank for attachment and recovery of such book-debts under section 13(4) (d) of
the SARFAESI Act wherever necessary.

++++++

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 Enclosure- 1

Recovery Division Head Office:

BC Place :New Delhi

STATUS NOTE FOR NPA ACCOUNTS

PUNJAB NATIONAL BANK

CIRCLE OFFICE_______________

Name of the A/c: Branch :

Name of Branch Head and Dealing Officer with Mobile No.

Name of Dealing Officer at Circle Office with Mobile No.

As on As on the date of Status Note
________________
Asset Status(SS, D-I,
II, III Loss, if loss ,
since when)
(Rs. In lakh)
1. Address of the Unit
Office:
Works:
2. Name(s) and contact Number(s) of
key person(s)
3. Activity for which advance made
4. i) Date of original sanction/last
renewal/enhancement.
ii)Name of the recommending/
sanctioning officials with their
designation.
5. Status of the Account : Date Amount
NPA
Suit filed
Decreed
Previous and Next date of hearing
(with purpose of both the dates)
If non suit filed, Limitation available
upto

6. Whether Consortium advance Name : of Our % Present o/s

Yes/No (if yes, give details ) leader and share
other
members with
% share

93
 6.1 Date of last JLM/JLF held:

7. Present business activity of the

unit (if closed since when)

8. Detail of Prop./Partners/Directors/promoters
Name NMs IP CR dated
1
2
3
4
(It should be at the time of sanction and latest available)

9. Detail of Guarantors
Name NMs IP CR dated
1
2
(It should be at the time of sanction and latest available)

10. Nature and amount of facility sanctioned:

A.Fund Based :

Sr. No. Nature of facility (Also Limit Sanctioning Last renewed/ reviewed
mention under which Authority on_____ (Designation/name)
scheme of Retail
Banking, if applicable))
1
2
3

B. Non Fund Based:-

Sr. Nature of facility Limit Sanctioning Last renewed/ reviewed
No. Authority on_____ (Designation/name)
(Designation/
Name)
1
2
3

11 (a). Position of Account as on _____

(Rs. in lakh)
Nature of facility Book Outstanding Net Outstanding Provision
Cash Credit

94
 Term Loan
FITL
NFB
Total
11(b) Present Book Outstanding (as on date of submission
of status report )Total
11 (c) Outstanding Non Fund Based Facility i.e. LG/LC
issued but bank‟s liability yet not crystallized
11 (d) Memoranda Dues as on____

12. Details of Allied/Associate Concerns:

(i) With which Bank dealing :
-Status of account :
-Latest outstanding :
(ii) Whether dealing with Punjab National Bank, if yes, present position of their accounts.

13 (a). Position of Security Available:

(Full details alongwith our share(in % share) if consortium)
Particulars Value at the time of Market value at Basis & date of valuation
Sanction/last renewal present
Primary:
Stocks:
Book Debts:
Plant & Machinery:
Others:
Collateral:
Mortgaged IPs:
Block Assets:
Others:

Note:
1. Give complete description of IPs i.e. address, plot area, ownership, whether
commercial/residential etc.
2. Please ensure that Valuation is got done as per extant guidelines of the Bank
3. In case of Consortium Advance, total value of securities available vis-à-vis PNB‟s share be
mentioned invariably
4. If PNB is 2nd charge holder, then dues of 1st charge holder(s) as on _____, total value of
security and residual value of security available be mentioned and our Bank‟s share.

13 (b). Other Attachable Assets:

Particulars Present Value Basis & date of valuation

In suit filed a/c : Whether ABJ

obtained, if not reasons
thereof:
14. Date of Last verification of the securities by Branch Head(I/I)/Concurrent
Auditor(CA) and observations, if any:
Nature of Security Date Verified by (I/I)/(CA) Observations
95
Primary Security
Collateral Security

15. Position of DICGC/ECGC/ CGFT Claim

(Date and amount of claim filed &
present position )
16. Anticipated Shortfall Rs._____
Balance outstanding ______ SI/DI- Security
available – ECGC/CGFT Claim available –
Extent of Govt .Guarantee)

17. Convincing reasons of Account becoming NPA: (Specific reasons be given instead
of simply mentioning that interest/installments not deposited by the borrower):

18. If Wilful defaulter case/Fraud Reported to RBI : Yes/No (If yes, give details of fraud,
date of reporting to RBI, date of filing FIR and present status of investigation under
FIR/criminal proceedings initiated by CBI):

18.1 Whether notice of wilful default issued to the borrower, if not the reasons for the
same be informed:

19. Efforts made for upgradation:

-Date of meeting of the party with Circle Head/ZM:

-Prospects of Reschedulement/Restructuring examined:

-Prospects of Tagging arrangements examined :

-Efforts for regularization through cash recovery :

20. SARFAESI Action:

Recall Notice Issued on :

Notice u/s 13(2) issued on :
Notice u/s 13(4) issued on :
Symbolic Possession taken on :
Physical Possession taken on :
Steps taken for auction and other facts worth
mentioning:
If action not yet taken under SARFAESI Act,
reasons for the same be informed

21. Whether BIFR/AAIFR case : Yes/No (If yes, give present status)

22. Status of Compromise: Whether any compromise offer submitted by the party in
the account. If yes, details alongwith latest status of the same be mentioned:

22 (a) If compromise approved:

96
 Date of approval
OTS Amount
Entire amount payable by
Amount due and received up to date
If compromise declared failed, give reasons and further
steps initiated

22 (b) If not compromised:

Efforts made for compromise be mentioned in details

giving Dates meetings with Branch/CO/HO Officials and
Outcome of the meeting

23. Staff Accountability: 1.Whether examined, if yes, result and details;

2. If decided, Names & penalty imposed):

24. Brief History: (Please avoid repetition of facts already mentioned above)
Brief history should also include the following points:
(-When limits were sanctioned/enhanced/reviewed/renewed

-Upto which time a/c remained regular

-How it became irregular and since when

-Specific reasons of the a/c becoming irregular and then NPA

-Steps taken to safeguard/recovery/upgradation and its outcome)

25. Proposed Resolution Strategy:

Up-gradation through cash recovery; upgradation through reschedulement/restructuring
; adjustment through cash recovery; recovery through SARFAESI or legal action;
Recovery through simultaneous SARFAESI/ Legal action; recovery through OTS
(Delete whichever is not applicable)
It should also include :
(i) Amount of irregularity(CADU amount)
(ii) Strategy for resolution.

26. Expected time for resolution:.

27.A Information / Confirmation to be given by Circle Head:

97
 1. In case primary security (stocks etc.) disposed of without depositing sale proceeds in
the account. Whether FIR lodged and its present status. If not lodged, convincing
reasons for the same be given.
2. In case, 60 days have already been passed after issuance of SARFAESI notice
13(2) but further action with regard to 13(4) has not been initiated, the reasons for
the same be informed.
3. Position of suit filing. (if not filed, give reasons).
4. Whether Detective Agency has been appointed for tracing out other attachable
assets of the obligants (If not appointed, reasons be given)
5. Whether application moved at DRT for getting the passport of the party impounded.
(if not, reasons for the same)
6. Whether notice of wilful defaulter has been given. If yes steps taken to declare the
party as wilful defaulter. If not, reasons for not declaring the party as wilful defaulter.
7. What steps have been taken to declare the party as insolvent.

27.B. We confirm that:

1) All possible steps taken (including meeting with defaulting borrower at CO/ZO) to
avoid the a/c becoming NPA.

2) SARFAESI action initiated (It should be initiated within 7 days of classifying the
account as NPA) (if not, reasons for delay).

3) In case the account is covered under CGTMSE/ECGC, the claim has been lodged
as per bank‟s guidelines.

Date: Circle Head

Circle Office:_______

98
 Annexure-I

PUNJAB NATIONAL BANK

B/O ____________________

Mr. ______________
__________________
__________________

Dear Sir,

REG: NOTICE OF SALE OF SHARES PLEDGED WITH THE BANK.

M/s __________ having its Regd. Office at ________________, has availed certain
credit facilities to the tune of Rs. _______________ from the Bank. You as
____________ (capacity) have pledged _________ (mention number) equity shares
of M/s ________________, more fully described in the Schedule below, as security
in respect of the said credit facilities.

The loan account has since been classified as NPA w.e.f. _________ and a sum of
Rs. ________ as on ________ besides further interest thereon at the rate of ___%
is still outstanding and payable in the account. The aforesaid loan has since
been recalled by the Bank vide notice dated ________ . Despite the said notice,
the total outstanding dues in the loan account have not yet been paid to the
bank.

You are hereby called upon to pay the total outstanding amount of Rs. ________
within ____ days from the date of receipt of this notice. On your failure to do so
within ___ days, Bank will be selling the pledged shares and after adjusting the
expenses towards sale, the balance amount shall be credited to the account of
M/s __________.

SCHEDULE:
Details of pledged shares:

For PUNJAB NATIONAL BANK

(Name / Designation etc.)

Phone No._______________
Date: ____________

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 Annexure-II

PUBLIC NOTICE FOR SALE OF SHARES OF

M/S. ______________________________________

Notice inviting Sealed Quotations for purchase of __________ (No. of equity

shares) shares of M/S___________________________________, pledged with
PUNJAB NATIONAL BANK.

M/S _____________________________________ having its Registered Office at

__________________________, hereinafter referred to as ‘the company’ is a
borrower of Punjab National Bank, whose account has since become ‘NPA’.
Punjab National Bank, hereinafter referred to as ‘the bank’ proposes to sell
___________ (No. of equity shares) Equity Shares of the said company, which
are pledged in its favour by Shri ____________ (Promoter/ Director) of the
company as security towards repayment of the credit facilities granted to the
company.

The shares of the company are not being traded through the Stock Exchanges
and, as such, are being offered to the General Public. Bids are invited for
purchase of ___________ (No. of equity shares) shares of M/S ___________, by
way of Sealed Quotations, to be submitted to the bank at its Branch Office at
______________, on or before the ______ day of ______, 2016 _______ P.M.
Further details in this regard may be obtained from the Branch Office during
the working hours.

Details of Pledged Shares

( Give details)

Bank reserves its right to accept or reject any offer without assigning any
reason whatsoever.

For PUNJAB NATIONAL BANK

(Name / Designation etc.)

Phone No._______________
Date: ____________

100