CH 9 - Npa

CHAPTER 9
NON PERFORMING ASSETS

IRAC Norms
Restructuring
SARFAESI, DRT, LOK ADALAT
OTS Policy Guidelines
PRUDENTIAL NORMS ON INCOME RECOGNITION, ASSETS CLASSIFICATION &

PROVISIONS PERTAINING TO ADVANCES (NPA)
BACKGROUND: Prudential norms for NPA were introduced by RBI w.e.f. 1/4/92, and norms for
NPA classification the delinquency period were of 4 quarters (non-recovery of
interest/instalment up to 4 quarters) and the same was reduced to 3 quarters in 1994, 2
quarters in 1995 and 90 days w.e.f. 31.03.2004.
INCOME RECOGNITION:
Classification of account as non-performing asset is based on record of recovery.
Availability of security or net worth of borrower/guarantor is not to be taken into account.
Interest on advances against term deposits, NSCs, IVPs, KVPs and Life policies may be
taken to income account on the due date, provided adequate margin is available in the
account.
Fees/Commission earned by banks as a result of reschedulement of outstanding debts,
should be recognized on accrual basis over the period of time covered by
reschedulement.
On an account turning NPA, the interest already charged and not collected is to be
reversed by debiting Profit and Loss account, and further application of interest is to be
stopped. However, banks may continue to record such accrued interest in a
Memorandum account in their books.
For the sake of uniformity across banks, now the unrealized interest in the accounts classified
as NPA is not to be credited to Sundry Provision NPA. Instead, such interest will be credited in
the account itself by debiting Profit & Loss Account with the particulars: “Unrecovered Interest
reversed and recorded in Memoranda A/c”. Existing DI/SI of each NPA/PA a/c has been
credited back to the concerned NPA/PA account and simultaneously accounted for as Recorded
Interest in the memoranda account. [Ref: SAMD Cir. 06/2010].
ASSET CLASSIFICATION: FINANCIAL PARAMETERS: (IRAC Norms vide SAMD Cir.

31/2010 dated 15.09.2010, 36/2010 dated 15.10.2010 & 39/2010 dated 27.11.2010)
Sr. Category of account Criteria for classification of account as NPA

No.
1 Term Loan If interest and/or instalment of principal remain overdue for a
period of more than 90 days .
NPA - 9 Page 1 of 38
2 Cash Credits and i) If the account remains out of order for a period of more than 90
Overdrafts days
Conditions for treating the account as out of order:
(a) The outstanding balance remains continuously in excess of the
sanctioned limit/drawing power.
(b) Though the outstanding balance is less than the sanctioned
limit/drawing power but there are no credits continuously for 90
days as on the date of balance sheet or credits are not enough to
cover the interest debited during the same period
(ii) The outstanding in the account based on drawing power
calculated from stock statements older than three months, would
be deemed as irregular. A working capital borrowal account will
become NPA if such irregular drawings are permitted in the
account for a continuous period of 90 days even though the unit
may be working or the borrower’s financial position is satisfactory.
(iii) An account where the regular/adhoc credit limits have not
been reviewed/renewed within 180 days from the due date/date of
regular/adhoc sanction, will be treated as NPA.
3 Bills Purchased and If the bill remains overdue for a period of more than 90 days
Discounted
4 Direct Agricultural The installment of principal or interest thereon remains
Advances overdue for two Crop seasons for short duration crops (or
one crop season for long duration crop).
The crop season for each crop, which means the period
up to harvesting of the crops raised, would be as
determined by the State Level Bankers’ Committee in each
State.
5 Securitization Mmount of liquidity facility remains outstanding for more
transaction than 90 days
6 Derivative transactions The overdue receivables representing positive mark-to-
market value of a derivative contract, if these remain unpaid
for a period of 90 days from the specified due date for
payment.
7 Other Accounts If any amount to be received in respect of that facility
remains overdue for a period of more than 90 days
Overdue: Amount due to the bank under any credit facility is
overdue, if it is not paid on the due date fixed by the bank
8 Accounts where a Where the account indicates inherent weakness on the
solitary or a few credits basis of the data available, the account should be deemed
are recorded before the as a NPA. In other genuine cases, the banks must furnish
balance sheet date satisfactory evidence to the Statutory Auditors/Inspecting
Officers about the manner of regularisation of the account to
eliminate doubts on their performing status.
General Guidelines:
1. All the facilities granted by a bank to a borrower and investment in all the securities
issued by the borrower will have to be treated as NPA/NPI and not the particular
facility/investment or part thereof which has become NPA. There are a few exceptions for
this as under:
a. The bill discounted under LC favouring a borrower may not be classified as a Non
Performing Advances (NPA), when any other facility granted to the borrower is
classified as NPA.
b. Other direct loans and advances, if any, granted by the bank to the member
borrower of a PACS/FSS outside the on-lending arrangement will become NPA even
if one of the credit facilities granted to the same borrower becomes NPA.
2. Availability of security or net worth of borrower/guarantor should not be taken into account
for the purpose of treating an advance as NPA, as asset classification and income
recognition is based on record of recovery and compliance of other non-financial indicators
and not because of existence of some deficiencies which are temporary in nature.
3. When the realisable value of the security is less than 50 per cent of the value assessed by
the bank or accepted by RBI at the time of last inspection, the account may be straightway
categorised under doubtful category & provision made accordingly.
4. Advances against Term Deposits, NSCs eligible for surrender, Indira Vikas Patras, Kisan
Vikas Patras and Life Insurance Policies, need not be treated as NPAs although interest
thereon has not been paid for 90days provided adequate margin is available in the
accounts.
5. In respect of housing loans or similar advances granted to staff members where interest is
payable after recovery of principal, interest need not be considered as `overdue' from the
first quarter onwards. Such loans/advances should be classified as NPA only when there is
default in payment of interest on due date of payment.
6. In respect of consortium advances, each bank may classify the borrowal accounts according
to its own record of recovery and other aspects having a bearing on the recoverability of the
advances, as in the case of multiple banking arrangements.
7. The credit facility backed by the Central Government Guarantee though overdue may be
treated as NPA only when the Government repudiates its guarantee when invoked.
This exemption from classification of Government guaranteed advances as NPA is
not for the purpose of recognition of income.
8. A state Government guaranteed advance, where interest and/or installment of principal/or

any other amount due to the bank remains overdue for a period more than 90 days shall
become a non performing advance.
9. In case of bank finance given for industrial projects or for agricultural plantations, etc. where
moratorium is available for payment of interest, payment of interest becomes `due'
only after the moratorium or gestation period is over.
CLASSIFICATION OF NPA ACCOUNT & PROVISION
SR. No. Category of CRITERIA RATE OF PROVISION

NPA
1 Sub- If a/c is NPA for less A general provision @ of 10% on total
Standard than or equal to 12 outstanding be made without making any
months (wef 31/3/05). allowance for DICGC/ECGC/CGTMSE
Unsecured exposure is guarantee cover and securities available for
defined as an exposure advances secured by way of tangible
where the realisable assets.
value of the security,
as assessed by the
bank/approved For unsecured advances provision will be
Unsecured valuers/Reserve 20% of the outstanding.
exposure Bank’s inspecting
officers, is not more Infrastructure loan accounts which are
than 10 percent, ab- classified as Sub Standard will attract a
initio, of the provisioning of 15%
outstanding exposure.
2 Doubtful If a/c is Sub – Standard (i) Unsecured Portion: Provision @ 100% of
for 12 months (wef unsecured portion,
31/3/05) or when (ii) Secured Portion: On tangible security-
realizable value of ¾ Up to one year doubtful-20 %
security is less than ¾ One to three year doubtful-30%
50% of value assessed ¾ More than 3 year doubtful- 100%
at the time of last
inspection. Provision is to be made on outstanding net
of DI.
3 Loss asset If so identified by 100% of Net Outstanding.
bank/auditor or
realizable value of
security assessed by
bank/auditor is less
than 10 % of
outstanding in the a/c.
PROVISION ON STANDARD ACCCOUNT ON GLOBAL LOAN PORTFOLIO BASIS
(i) 0.25% for Direct agriculture and SMEs
(ii) 1.00% for Commercial Real Estate (CRE) sector and for standard
Project Loans during the third & fourth year after the original DCCO
for infrastructure sector and beyond 6 months but upto 12 months for
original DCCO for others.
[Ref : RBI notifications DBOD.No.BP.BC. 58 /21.04.048/2009-10 November 5,
2009 and DBOD.No.BP.BC. 85 /21.04.048/2009-10 March 31, 2010]
(iii) 2.00% for housing loans granted at “Teaser Rates”. (The provisioning
on these assets would revert to 0.40% after 1 year from the date on which
the rates are reset at higher rates if the accounts remain ‘standard’.)
(iv) 0.40% for all others advances (including for standard Project Loans upto
two years from the original Date of Commencement of Commercial
Operations (DCCO) for infrastructure sector and 6 months from
original DCCO for others.
The provision on Standard Accounts is not reckoned for arriving at net NPAs
and is not netted from gross advances but is shown separately as “Contingent
Provisions against standard assets under other liabilities and Provisions-others in
Schedule-5 of the balance sheet.
ABOUT EXEMPTIONS
1 Advances against TDR, NSCs eligible Exempted from provisioning requirement.
for surrender, IVP/KVP and LIPs
2 Advance against gold ornaments, Govt NOT EXEMPTED
Securities are not exempted.
3 For advances guaranteed by Provision should be made only for the
DICGC/ECGC, balance in excess of the amount guaranteed.
Further amount realizable from tangible
securities should be deducted from the
outstanding for arriving at the amount
covered.
4 For advances covered by CGTMSE No provision is required for the guaranteed
portion.
REVISED GUIDELINES IN RESPECT OF PROJECTS UNDER IMPLEMENTATION
[i.e. BEFORE COMMENCEMENT OF COMMERCIAL OPERATIONS]
“Project Loan” here means any term loan which has been extended for the purpose of
setting up of an economic activity. A Date of Commencement of Commercial Operation
(DCCO) must be fixed for all project loans at the time of sanction / financial closure.
A project loan will be classified as NPA during any time before commencement of commercial
operations:
(a) as per record of recovery (90 days overdue) unless it is restructured and becomes eligible
for classification as “standard asset”
or
(b) if it fails to commence operations within two years (infrastructure sector) / within six
months (other than infrastructure sector) from the original DCCO, unless it is
restructured and becomes eligible for classification as “standard asset”.
In addition to the conditions relevant for restoration/retention of “standard asset” classification

(regulatory concessions/relaxations) mentioned ahead for restructured advances, the
following stipulations have become applicable:
1.
Infrastructure Project Loans Other Project Loans
Standard asset classification can be retained if the fresh DCCO Standard asset
is extended classification can be
upto 4 years beyond the original DCCO in case the reason retained provided the
for extension is arbitration proceedings or a court case fresh DCCO does not
Upto 3 years beyond the original DCCO in other than court extend beyond a period of
cases. 12 months from the
original DCCO.
2. Application for restructuring should be received before the expiry of period of 2 years / 6
months from the original DCCO and when the account is still standard as per record of
recovery.
3. Where there is a moratorium for payment of interest, income should not be booked on
accrual basis beyond two tears / 6 months from the original DCCO considering the high risk
involved in such restructured accounts.
4. Mere extension of DCCO will also be treated as restructuring even if all other terms
and conditions remain the same.
5. Any change in the repayment schedule of a project loan caused due to an increase in
the project outlay on account of increase in scope and size of the project, would not be
treated as restructuring if:
(i) The increase in scope and size of the project takes place before commencement of
commercial operations of the existing project.
(ii) The rise in cost excluding any cost-overrun in respect of the original project is 25% or
more of the original outlay.
(iii) The viability of the project is re-assessed before approving the enhancement of scope
and fixing a fresh DCCP.
(v) On re-rating, (if already rated) the new rating is not below the previous rating by
more than one notch.
Provisions in case of Project Loan A/Cs be maintained as long as these are classified as
Standard Assets as under:
0.40% - Until two years from the original DCCO (Infrastructure Projects)
Until two years from the original DCCO (Non Infrastructure Projects)
1.00% - During the third and the fourth years after the original DCCO (Infrastructure Projects)
During the next six months (Non Infrastructure Projects)
GOVT GUARANTEED ACCOUNTS

State Govt guaranteed advances:-. W e f 31/3/06, these advances would attract asset
classification norms if principal and/or interest is overdue for more than 90 days.
Central Govt guaranteed advances: The advance will become NPA only when Guarantee,
when invoked, is repudiated by the Govt. This exemption from classification of an advance
into NPA is not for the purpose of recognition of income.
TAKE OUT FINANCE

If an asset has become NPA before taking over by another institution, the lending institution in
whose books at present the asset is outstanding should treat it NPA for all purposes irrespective
of the fact that it ultimately is to be taken over by another institution. When the asset is actually
taken over, the lending institution should reverse the provisions earlier made in its books.
Whereas the taking over institution, should make provision from the actual date the asset
became NPA and not from the date of taking over of the asset.
EXPORT PROJECT FINANCE

In respect of export project finance where importer has actually made the payment to his bank
but the bank is unable to remit the amount due to political developments such as war, strike etc,
the asset classification may be made after a period of one year from the date of the amount
was deposited by the importer in his bank abroad.
Reserve for Exchange Rate Fluctuations Account (RERFA)

When exchange rate movements of Indian rupee turn adverse, the outstanding amount of foreign
currency denominated loans (where actual disbursement was made in Indian Rupee) which
becomes overdue, goes up correspondingly, with its attendant implications of provisioning
requirements. Such assets should not normally be revalued. In case such assets need to be
revalued as per requirement of accounting practices or for any other requirement, the following
procedure may be adopted:
The loss on revaluation of assets has to be booked in the bank's Profit & Loss Account.
Besides the provisioning requirement as per Asset Classification, banks should treat the full
amount of the Revaluation Gain relating to the corresponding assets, if any, on account of
Foreign Exchange Fluctuation as provision against the particular assets.
PROVISIONING FOR COUNTRY RISK
With effect from 31 March 2003, banks are to make provisions on the net funded country
exposures as per the following schedule:
Risk category ECGC Classification Provisioning Requirement (per cent)
Insignificant A1 0.25
Low A2 0.25
Moderate B1 5
High B2 20
Very high C1 25
Restricted C2 100
Offcredit D 100
Banks are required to make provision for country risk in respect of a country where its net
funded exposure is one per cent or more of its total assets.
The provision for country risk shall be in addition to the provisions required to be held
according to the asset classification status of the asset.
In the case of ‘loss assets’ and ‘doubtful assets’, provision held, including provision held for
country risk, may not exceed 100% of the outstanding.
Banks may not make any provision for ‘home country’ exposures i.e. exposure to India.
The exposures of foreign branches of Indian banks to the host country should be included.
Foreign banks shall compute the country exposures of their Indian branches and shall hold
appropriate provisions in their Indian books. However, their exposures to India will be
excluded.
Banks may make a lower level of provisioning (say 25% of the requirement) in respect of
short-term exposures (i.e. exposures with contractual maturity of less than 180 days).
PRUDENTIAL TREATMENT IN RESPECT OF FLOATING PROVISIONS

DBOD.No.BP.BC. 33 /21.04.048/2009-10 dated August 27, 2009
[Banks are permitted to use the floating provisions only for contingencies under extraordinary
circumstances for making specific provisions in impaired accounts after obtaining Board’s
approval and with prior permission of RBI]
The Financial Stability Board (FSB), Basle Committee on Banking Supervision (BCBS) and
Committee on Global Financial System (CGFS), along with accounting standard setters, are
working out detailed measures to mitigate procyclicality, including a counter cyclical provisioning
regime based on macro-prudential considerations. This work is likely to take some more time.
Meanwhile, Banks had been advised that, with effect from the financial year 2009-10, floating
provisions cannot be netted from gross NPAs to arrive at net NPAs, but could be reckoned as
part of Tier II capital subject to the overall ceiling of 1.25% of total Risk Weighted Assets.
Pending modification of provisioning norms based on FSB/CGFS works in progress, RBI has
decided to defer the implementation of the above quoted guideline.
Accordingly, banks will continue to have the choice between deducting their existing
floating provisions from gross NPAs to arrive at net NPAs or reckoning it as part of Tier II
capital subject to the overall ceiling of 1.25% of total Risk Weighted Assets.
Agricultural Debt Waiver and Debt Relief Scheme, 2008 – Prudential Norms
1. The accounts of the farmers, eligible for debt relief, were bifurcated into two accounts – one
representing overdue/eligible amount under the scheme and second the remaining portion of
the dues outstanding against the eligible farmers on the relevant date. Both the accounts
were reclassified as Standard Assets. There was a onetime settlement Scheme under which
the farmer was to be given a rebate of 25% of the ‘eligible amount’ subject to the condition
that the farmer pays the balance of 75% of the ‘eligible amount’.
2. Later on the Banks/lending institutions were allowed to receive even less than 75% of the
eligible amount under OTS provided the Banks/lending institutions bear the difference
themselves and do not claim the same either from the Govt. or from the farmer. However, the
government was to pay only 25% of the actual eligible amount. The last date for
implementation of the scheme had been extended by the Government of India from time to
time and has now been finally closed w.e.f. 30.06.2010.
3. In case of accounts settled through OTS Scheme circularized vide HO SAMD Circulars dated
26.02.2010 and 16.06.2010, both parts of farmer’s account stand closed to the satisfaction of
the bank through OTS. Therefore, the farmer is entitled to get mortgaged securities released;
and also is eligible for fresh lending as per provisions of the ADWDRS – 2008.
4. Further enhancement of relief to the residual eligible accounts under Debt Relief was
permitted vide HO SAMD Circular No. 23/2010 dated 29.06.2010 in respect of the eligible
amount overdue as on 31.12.2007 (for the amounts disbursed upto 31.03.2007 and
remaining unpaid till 29.02.2008). Here the relief was with reference to the 75% portion of
the eligible amount, i.e., with reference to the farmer’ share, adjustment of which by either
recovery from borrower and / or grant of relief by the bank made the ‘other farmer’ eligible for
receiving 25% of the eligible amount from Government of India as relief under ADWDRS –
2008. It was also clarified that the other account, if and when turned NPA, shall be
governed by the General OTS Guidelines of the Bank.
5. Therefore, in case of accounts dealt with under provisions of HO SAMD Circular dated
29.06.2010, only the part account relating to overdue/eligible amount stands settled / closed.
As such, the mortgaged securities can be released or fresh loan sanctioned in such
cases only after the other remaining account is closed / settled to the satisfaction of
the Bank.
6. Borrower’s subsisting account comprising of the portion other than the
overdue/eligible amount is to be treated as any other agricultural advance subject to
usual IRAC norms. Further recoveries from borrower shall be utilized towards
liquidation of dues in this account.
7. If and when such an account turns NPA, asset classification, provisioning and appropriation
of recoveries etc. shall be as per bank’s general guidelines in force.
Prudential Guidelines for Restructured Advances

(Restructured after August 27, 2008)
1 Restructuring is the situation where the Bank, for economic or legal reasons relating to
the borrower’s financial difficulty, grants to the borrower concessions that the Bank
would not otherwise consider. Restructuring would normally involve modification of
terms of the advances/securities, which would generally include, among others, alteration
of repayment period / repayable amount / the amount of instalments / rate of interest (due
to reasons other than competitive reasons).
2 Eligibility criteria Accounts classified under ‘Standard’, ‘Sub-standard’ and Doubtful
are eligible. Rescheduling / Restructuring / renegotiation cannot be
with retrospective effect.
Frauds and malfeasance will continue to remain ineligible
Willful default cases may be taken up with Board’s approval, while
for such accounts the restructuring under the CDR Mechanism
may be carried out with the approval of the Core Group only
Restructuring in BIFR cases cannot be implemented without
express approval of BIFR.
No account will be taken up for restructuring unless the financial
viability is established and there is a reasonable certainty of
repayment from the borrower, as per the terms of restructuring
package.
3 Process While a restructuring proposal is under consideration, the usual
asset classification norms would continue to apply.
Normally, restructuring cannot take place unless alteration /
changes in the original loan agreement are made with the formal
consent / application of the debtor. However, the process of
restructuring can be initiated by the bank in deserving cases
subject to customer agreeing to the terms and conditions.
4 Asset The asset classification status as on the date of approval of the
Classification restructured package by the competent authority would be relevant to
Norms – General decide the asset classification status of the account after restructuring
/ rescheduling / renegotiation
Special key concepts/terms with reference to Restructuring
Specified Period : A period of one year from the date when the first payment of interest or
instalment falls due under the terms of restructuring.
Satisfactory Performance during the specified period means that there are no overdues at
the end of the specified period, non-agricultural cash credit accounts have not been out of
order any time during the specified period for a duration of more than 90 days, in case of non-
agricultural term loan accounts no payment has remained overdue for a period of more than 90
days and the account should be regular at the end of specified period in case of all agricultural
accounts.
Fully secured : When the amounts due to Bank (present value of principal and interest
receivable as per restructured loan terms) are fully covered by the duly charged tangible
securities (primary as well as collateral). State Govt./Central Govt./Bank guarantees will be
treated at par with tangible security, but not the guarantees of promoter/others.
Repeatedly restructured accounts: When restructured on second (or more) time(s). If
second restructuring takes place after the period upto which the concessions were extended
under the terms of first restructuring, that will not be treated as “repeatedly restructured”
account.
ASSET CLASSIFICATION NORMS FOR RESTRUCTURED ACCOUNTS

General Guidelines Special Regulatory Concessions
1. The accounts classified as At the outset, it is to be noted that the special
'standard assets' should be concessions (mentioned ahead) are not to be
immediately re-classified as 'sub- extended to the following categories of advances:
standard assets' upon Consumer and personal advances
restructuring. Advances classified as Capital market exposures
2. The non-performing assets, upon Advances classified as commercial real estate
restructuring, would continue to have exposures;
the same asset classification as prior The special regulatory treatment has the following two
to restructuring and slip into further components:
lower asset classification categories A. Incentive for quick implementation of the
as per extant asset classification restructuring package.
norms with reference to the pre- B. Retention of the asset classification of the
restructuring repayment schedule. restructured account in the pre - restructuring
3. All restructured accounts which have asset classification category.
been classified as non-performing A. Incentive for quick implementation of the
assets upon restructuring, would be restructuring package – Restoration of Asset
eligible for Up-gradation to the Classification Status
‘standard’ category after As an incentive for quick implementation of the
observation of ‘satisfactory package, if the approved package is implemented by
performance’ during the ‘specified the bank as per the following time schedule, the asset
period’ classification status may be restored to the position
4. If satisfactory performance after the which existed when the reference was made to the
specified period is not evidenced, the CDR Cell in respect of cases covered under the CDR
asset classification of the restructured Mechanism or when the restructuring application was
account would be governed as per the received by the bank in non-CDR cases:
applicable prudential norms with i. Within 120 days from the date of approval
reference to the pre-restructuring under the CDR Mechanism.
payment schedule. ii. Within 90 days from the date of receipt of
5. Any additional finance will be treated application by the bank in cases other than
as ‘standard asset’ during the those restructured under the CDR
“specified period”. However, in the Mechanism.
case of accounts where the pre- B. Incentive of Retention (Pegging) of Asset
restructuring facilities were classified classification
as ‘sub-standard’ and ‘doubtful’, An existing 'standard asset' will not be downgraded to
interest income on the additional the sub-standard category upon restructuring and,
finance should be recognised only on during the specified period, the asset classification of
cash basis. the sub-standard/doubtful accounts will not
6. If the restructured asset does not deteriorate upon restructuring, if satisfactory
qualify for upgradation at the end of performance is demonstrated during the specified
the above specified one year period, period.
the additional finance shall be placed
in the same asset classification Further, these benefits will be available subject to
category as the restructured debt. compliance with the following conditions:
7. In case a restructured asset, which is A) The dues to the bank are ‘fully secured’ However,
a standard asset on restructuring, is The condition of being fully secured by tangible
subjected to restructuring on a security will not be applicable in the following cases:
subsequent occasion, it should be SSI borrowers, where the outstanding is up to `25
classified as sub-standard. If the lakh.
restructured asset is a sub-standard or Infrastructure projects, provided the cash flows
a doubtful asset and is subjected to generated from these projects are adequate for
restructuring, on a subsequent repayment of the advance, the financing bank(s)
occasion, its asset classification will be have in place an appropriate mechanism to
reckoned from the date when it escrow the cash flows, and also have a clear and
became NPA on the first occasion. legal first claim on these cash flows.
However, such advances restructured B) The unit becomes viable in 10 years, if it is
on second or more occasions may be engaged in infrastructure activities, and in 7 years in
allowed to be upgraded to standard the case of other units.
category after the “specified period”
(subject to satisfactory performance). C) The repayment period of the restructured advance
8. The debt/equity instruments, in case of including the moratorium, if any, does not exceed 15
conversion of part of outstanding years in the case of infrastructure advances and 10
principal amount, will be classified in years in the case of other advances.
the same asset classification category
in which the restructured advance has The ceiling of 10 years, over the repayment period of
been classified. Further movement in the restructured advances, would not be applicable
the asset classification of these for restructured housing loans (for being eligible for
instruments would also be determined special regulatory treatment). Our Bank has
based on the subsequent asset prescribed the maximum repayment period for
classification of the restructured restructured residential housing loans as 30 years
advance. from the date of original sanction. or till the
9. The FITL/debt or equity instrument borrower attains 65 Years of age.
created by conversion of unpaid
interest will be classified in the same D) Promoter’s sacrifice and additional fund brought by
asset classification category in which them should be a minimum of 15% of bank’s sacrifice
the restructured advance has been The promoters’ sacrifice and additional funds
classified. Further movement in the required to be brought in by the promoters should
asset classification of FITL/ debt or generally be brought in upfront. However, if banks
equity instruments would also be are convinced that the promoters face genuine
determined based on the subsequent difficulty in bringing their share of the sacrifice
asset classification of the restructured immediately and need some extension of time to fulfill
advance. their commitments, the promoters could be allowed to
bring in 50% of their sacrifice, i.e. 50% of 15%,
upfront and the balance within a period of one year
Further, it has also been clarified that contribution
by the promoter need not necessarily be brought in
cash and can be brought in the form of de-rating of
equity, conversion of unsecured loan brought by the
promoter into equity and interest free loans.
In case the promoters fail to bring in their balance
share of sacrifice within the extended time limit of one
year, the relaxation of asset classification status
would revert back.
(SAMD 36/2010, 15.10.2010)
E) Personal guarantee is offered by the promoter

except when the unit is affected by external factors
pertaining to the economy and industry.
F) The restructuring under consideration is not a

'repeated restructuring'
INCOME RECOGNITION NORMS FOR RESTRUCTURED ACCOUNTS
Interest income in respect of restructured accounts classified as 'standard assets' will be
recognized on accrual basis and that in respect of the accounts classified as 'non-performing
assets' will be recognized on cash basis.
In the case of restructured accounts classified as ‘standard’, the income, if any, generated by debt /
equity instruments created on conversion of dues may be recognized on accrual basis. In the case
of restructured accounts classified as non-performing assets, the income, if any, generated by
these instruments may be recognized only on cash basis.
PROVISIONING NORMS FOR RESTRUCTURED ACCOUNTS
Normal provisions will be made against the restructured advances as per the existing provisioning
norms, based on asset classification.
In addition, provisions shall be made for diminution in fair value of restructured advances,
as reduction in the rate of interest and /or reschedulement of the repayment of principal amount, as
part of the restructuring, will result in diminution in the fair value of the advance; which is an
economic loss to Bank.
The erosion in the fair value of the advance should be computed as the difference between the fair
value of the loan before and after restructuring.
Fair value of the loan before restructuring will be computed as the present value of cash flows
representing the interest at the existing rate charged on the advance before restructuring and the
principal.
Fair value of the loan after restructuring will be computed as the present value of cash flows
representing the interest at the rate charged on the advance on restructuring and the principal.
For computing the present value in both cases (I.e. pre-restructuring and post-restructuring cash
flows), the discount rate to be applied shall be equivalent to the current BPLR as on the date of
restructuring + appropriate term premium + credit risk premium applicable to the borrower as on
the date of restructuring.
In the case of working capital facilities, the diminution in the fair value of the cash credit /overdraft
component may be computed by reckoning the higher of the outstanding amount or the limit
sanctioned as the principal amount and taking the tenor of the advance as one year.
The fair value of the term loan components( Working Capital Term Loan and Funded Interest Term
Loan) would be computed as per actual cash flows and taking the term premium in the discount
factor as applicable for the maturity of the respective term loan components.
In the event any security is taken in lieu of the diminution in the fair value of the advance, it should
be valued at ` 1/- till maturity of the security.
The diminution in the fair value may be re-computed on each balance sheet date till satisfactory
completion of all repayment obligations and full repayment of the outstanding in the account.
As an alternative to the above methodology, till the financial year ending March 2011, the amount
of diminution in the fair value may be notionally computed at five percent of the total exposure, in
respect of all restructured accounts where the total dues to bank(s) are less than ` one crore.
The total provisions required against an account (normal provisions plus provisions in lieu of
diminution in the fair value of the advance) are capped at 100% of the outstanding debt amount.
In case of conversion of dues into debt/equity instruments, the instruments should be held under
AFS and valued as per usual valuation norms. Equity classified as standard asset should be
valued either at market value, if quoted, or at break-up value, if not quoted (without considering the
revaluation reserve, if any,) which is to be ascertained from the company’s latest balance sheet. In
case the latest balance sheet is not available the shares are to be valued at ` 1/-. Equity
instrument classified as NPA should be valued at market value, if quoted, and in case where equity
is not quoted, it should be valued at ` 1/-. Depreciation on these instruments should not be offset
against the appreciation in any other securities held under the AFS category.
The unrealised income represented by FITL/Debt or equity instrument should have a
corresponding credit in an account styled as "Sundry Liabilities Account (Interest Capitalization).
OTHER GUIDELINES
Under the Debt Restructuring Mechanism for SMEs, in exceptional cases Circle Heads may
permit Restructuring of debt in accounts where the bank has initiated recovery action (under
SARFAESI / filing recovery suit).
Extension of moratorium period may be permitted by the competent authority such that the
total repayment period of the restructured debt falls within the RBI norms. However, the
change in the moratorium is to be linked to the projected/ accepted cash flows.
Restructuring within one year of enhancement may be permitted by the competent authority.
However, the powers for restructuring within one year of sanction of WC/ term loan shall
continue to be vested one level higher
DISCLOSURE
Banks are required to disclose in their published annual Balance Sheets, under "Notes on
Accounts", information relating to number and amount of advances restructured, and the amount of
diminution in the fair value of the restructured advances. The information on advances restructured
under CDR Mechanism, SME Debt Restructuring Mechanism and other categories are required to
be disclosed separately.
APPROPRIATION OF RECOVERY IN NPA ACCOUNTS: [Ref: SAMD Cir. 16/2009]

RBI guidelines provide that, in the absence of any arrangement between borrower and banker,
bank should exercise right of appropriation of recoveries in a uniform and consistent manner.
Our Bank’s revised policy of appropriation of Recovery in NPAs, having come into effect from
01.10.2009, is summarized below:
Category of NPA Mode/Order of appropriation

(a) Suit filed & Decreed A/Cs Principal amount/suit claim, Interest, cost of suit
(b) OTS/ compromise cases Principal, Interest or as per the terms of settlement
(c) NPAs where recovery is Principal/Arrears of Installments, Payment of cost
under SARFAESI ACT (properly incurred expenses incidental there to), then
interest ((De-recongised/ Memorandum interest ).
(d) Other NPAs Interest (De-recongised/ Memorandum interest ), Arrears
of installments (current & previous year) / principal
irregularity .
Recovery in the borrowal account towards interest taken to income should not result in increase
in exposure, i.e. interest realized in NPA account can be taken to income if credits in the
account are not due to fresh/additional sanction of credit facility.
COMPUTATION OF NPA LEVELS

Keeping in view the need for uniformity across banks in reporting of Advances and NPAs, so as
to avoid any scope for different interpretations by the auditors/public, as also to improve the
comparability of Advances position of banks, RBI has recently advised Banks to compute their
Gross Advances, Net Advances, Gross NPAs and Net NPAs, as per the format given below:
(` in crores up to two decimals)

Particulars Amount
1. Standard Advances
2. Gross NPAs *
3. Gross Advances ** ( 1+2 )
4. Gross NPAs as a percentage of Gross Advances ( 2/3 ) (in %)
5. Deductions
(i) Provisions held in the case of NPA Accounts as per asset classification
(including additional Provisions for NPAs at higher than prescribed
rates).
(ii) DICGC/ECGC claims received and held pending adjustment
(iii) Part payment received and kept in Suspense Account or any other
similar account
(iv) Balance in Sundries Account (Interest Capitalization – Restructured
Accounts), in respect of NPA Accounts
(v) Floating Provisions***
(vi) Provisions in lieu of diminution in the fair value of restructured accounts
classified as NPAs
(vii) Provisions in lieu of diminution in the fair value of restructured accounts
classified as standard assets
6. Net Advances( 3-5 )
7. Net NPAs {2 - 5( i + ii + iii + iv + v +vi)}
8. Net NPAs as percentage of Net Advances ( 7/6 ) (in %)
* Principal dues of NPAs plus Funded Interest Term Loan (FITL) where the corresponding
contra credit is parked in Sundries Account (Interest Capitalization – Restructured Accounts), in
respect of NPA Accounts.
** For the purpose of this Statement, ‘Gross Advances’ mean all outstanding loans and
advances including advances for which refinance has been received but excluding rediscounted
bills, and advances written off at Head Office level (Technical write off).
*** Floating Provisions would be deducted while calculating Net NPAs, to the extent,
banks have exercised this option, over utilising it towards Tier II capital.
For the purpose of computing Gross Advances, interest recorded in the Memorandum account
should not be taken into account.
Supplementary Details
(` in crores up to two decimals)
Particulars Amount
1. Provisions on Standard Assets excluding 5(vi) in Part A above
2. Interest recorded as Memorandum Item
3. Amount of cumulative Technical Write – Off in respect of NPA accounts
reported in Part A above
Provisioning Coverage Ratio for Advances [PCR]

Provisioning Coverage Ratio (PCR) is essentially the ratio of provisioning to gross non-
performing assets and indicates the extent of funds a bank has kept aside to cover loan losses.
At present, the provisioning requirements for NPAs range between 10 per cent and 100 per cent
of the outstanding amount, depending on the age of the NPAs and the security available. Banks
can also make additional specific provisions subject to a consistent policy based on riskiness of
their credit portfolios, because the rates of provisioning stipulated for NPAs are the regulatory
minimum.
To enhance the soundness of individual banks and the stability of the financial sector, RBI has
has asked the banks to augment their provisioning cushions (consisting of specific provisions
against NPAs as well as floating provisions) and ensure that their total provisioning coverage
ratio, including floating provisions, is not less than 70 per cent by 30.09.2010. Also, the PCR is
to be disclosed in the Notes to Accounts to the Balance Sheet.
Particular Amount in ` Crore
1 Gross NPAs plus technical / prudential write-off.
2. Specific Provisions held including provisions for
diminution in fair value of the restructured
accounts classified as NPAs plus technical /
prudential write-off.
3. Floating Provisions for Advances (only to the
extent they are not used as Tier II Capital).
4. DICGC / ECGC claims received and held pending
adjustment.
5. Part payment received and kept in Suspense
account or any other similar account
6. Total (2 to 5)
7. Provision Coverage Ratio [( Row 6/ Row 1) *
100%)]
Technical or prudential write-off is the amount of non-performing loans which are
outstanding in the books of the branches, but have been written-off (fully or partially) at
Head Office level.
SECURITIZATION & RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT

OF SECURITY INTEREST (SARFAESI)
BACKGROUND: In order to help banks and FIs to resolve the NPAs , the Govt. of India
promulgated Securitization and Reconstruction of Financial Assets and Enforcement of Security
Interest (SARFAESI) Ordinance, 2002 on 21.06.2002 , which was later replaced by Act 54 of
2002.
It has 42 sections divided into VI chapters. The act is applicable to whole of India including J&K.
Supreme Court vide its judgement dated 8.04.2004, in the case of M/s. Mardia Chemicals Ltd. &
others Vs Union of India & Others, upheld the validity of the Act except subsection 2 of the
Section 17 of the Act (deposit of 75% of the amount claimed with DRT along with the
application), which was declared ultra virus of Article 14 of the Constitution of India and directed
the Govt. of India to make certain amendments/modifications in the Act. As a result, the
Enforcement of Security Interest and Recovery of Debts (ESI & RD) Laws (Amendment) Act
2004 came into force w.e.f. 11.11.04
Salient provisions of the act are as Under:-
ENFORCEMENT OF SECURITY INTEREST:
1) Powers to the secured creditor: Any secured creditor having security interest by way of
Mortgage, Charge, Hypothecation and assignment (not by lien/pledge) may exercise powers
under the Law to take possession of secured assets (U/s 13-4), appoint a person to manage
the secured assets, require any person who has acquired secured assets, to pay to the secured
creditor and if a secured creditor is a Securitization Company, it can exercise power of takeover
of management of business of borrower
2) Conditions for exercising powers under the act: Such power can be exercised provided:
¾ The Asset is classified as NPA as per RBI norms
¾ Value of Financial Assets is more than ` One lac;
¾ Security Interest is not created on agriculture land, an aircraft or a
shipping vessel; iv) Amount due is 20% or more, of principal and interest
thereon;
¾ Debt is not time barred;
¾ Loan is not secured by way of pledge, lien & by security of bank deposits;
¾ Asset is not on conditional sale or hire purchase or lease;
¾ Property is not liable to attachment or sale under code of Civil Procedure.
¾ The assets though exempted U/s 60 CPC (One residential house etc), if
it is charged to secure the debts, can be enforced under SARFAESI act.
3) Possession Notice: U/s 13(2) of the act, a secured creditor has to give a notice in writing to
the borrower to discharge the debt/liability in full within sixty days from the date of notice. It is
not legally necessary to make a recall of the facility and invocation of guarantee
separately. These can be included in the notice Under Section 13(2) itself.
4) Representation by the borrower: (U/S 3A) if, on receipt of the notice under sub-section (2)
the borrower makes any representation or raises any objection, the secured creditor considers
such representation or objection as not acceptable or tenable, he shall communicate to the
borrower within one week of receipt of such representation or objection along with the reasons
for non acceptance of the representation or objection.
SALE OF ASSET:
1) Minimum Notice Period: A minimum 30 days notice be given to the owner after taking
possession by the authorized officer and the eventual sale of both movable and immovable
properties. In a recently concluded case, Supreme Court held that it is left at the discretion of
the Authorized Officer to take or not to take the possession of the immovable property before
effecting the sale as per Rule 9 framed under the act.
2) Designated official: The authorized officer has to be an officer in the Rank of the Chief
Manager of a Public Sector Bank or such other person authorized as such by the board of the
lenders.
3) Mode of sale: After taking possession, lender can sale the asset both through private treaty
or public auction. If it is by public auction, it should be backed by public notice in two
newspapers.
4) Reserve Price: Reserve price would be arrived at after making proper valuation. For
movable assets authorized officer will take estimated value & for immovable assets, authorized
officer will obtain valuation from board approved valuer. Sale below the reserve price can be
done only if both borrower and lender agree except when there is a natural decay or cost
of possession may exceed the sale price.
5) Confirmation of Sale: Sale will be confirmed after deposit of 25% by the highest bidder,
balance will be paid within 15 days of confirmation of sale.
6) Charge of security to more than one Creditor/ Jointly financed projects: Where the
security is charged in favor of more than one Creditor, the right can be exercised only if exercise
of such right is agreed by secured creditors being not less than three fourth (75%) in value
outstanding on a record date and the action will be binding on all.
APPEAL PROVISIONS:
1) Appeal to DRT: The borrower may appeal to DRT without depositing any amount. Such
appeal has to preferred within 45 days (U/s 17) from the date on which such measures had
been taken. The appeal can be made only if secured creditor takes possession of the securities
or any other action U/s 13(4) and not merely on notice U/s 13(2). Since the act has not given
any limit for filing appeal before DRT, therefore appeal can be made even for amounts below
`10 lacs. The court fee as applicable for filing suit before DRT in general cases, shall be
applicable.
2) Appeal to DRAT: The borrower has to deposit 50% of the amount decreed by the DRT or
claimed by the secured creditor, whichever is less, before making application at the 2nd stage
i.e. DRAT. DRAT, however, may reduce it to 25%. This appeal should be made within 30 days
(U/s 18) from the date of receipt of orders of DRT.
3) Time Limit: It has also been made mandatory that the DRTs would dispose of the cases
within 60 days & may extend the period upto 4 months after recording the reasons in writing
else any party may move to DRAT which may direct DRT for expeditious disposal.
4) Provisions for J & K: In the state of Jammu & Kashmir the borrower may move to the court
of District Judge and against his order to the High Court after depositing 50% of the amount
decreed by the District Judge which has power to reduce this amount to 25%.
CONTRAVENTION:-
1) Imprisonment: Any person who contravenes or attempts to contravene or abets to
contravene the provisions of this act or any rules made under the act can be punished with
imprisonment for a term which may extend to one year or with fine or both.
2) Penalty: Contravention or non-compliance may attract fine which may extend to `5000/- for
every day of default.
3) Additional Fine: U/s 28, if Securitization/Reconstruction company or any of its officers fail to
comply with the directions given by Reserve Bank, they can be fined upto an amount of `5 lacs
and in case of continuing offence they can be charged with additional fine of `10000/- for every
day during which the offence continues.
SARFAESI AND OTHER RECOVERY MEASURES:

1) Cases under BIFR/SICA: Protection under SICA is not available once a secured creditor
takes action under this act. In case any reference is pending before BIFR/SICA, it will abate and
SARFAESI will prevail.
2) Action under Civil Courts: U/s 37, the remedy available under this act is in addition to all
remedies available under any other law. Hence creditor can proceed under this act even in the
matters which are under consideration by any Court Of Law.of sub-judice. However, if the
competent court has already passed any order, bank can proceed under this act only after
taking prior permission from the court of competent jurisdiction.
3) Cases already pending before DRT: In Transcore V/s Union of India and IOB, Supreme
Court has decided that even if proceedings is pending with DRT, the bank can proceed against
the borrower under this act.
CENTRAL REGISTRY:- Central Govt. may set up a Central Registry. After its set up,
particulars of every transaction of creation of security interest be filed within 30 days of creation.
Any modification be also filed.
COMPANY UNDER LIQUIDATION: In case of company under liquidation, notice U/s 13(2) of
SARFAESI act is to be served on to the official liquidator and if no response is received, bank to
obtain leave of the Company Court under section 537 of Companies Act to take measure under
section 13(4) of the SARFAESI act.
DEBT RECOVERY TRIBUNALS (DRT)

DRTs were established in 1993 under “Recovery of debts due to Banks and Financial institution
act 1993”, on recommendations of Narsimham committee. The act came into effect on 25th
June 1993 and extends to whole of India except J & K. It contains 37 sections spread over 6
chapters.
Composition: DRT is headed by Presiding Officer called “President” (appointed by Central

Govt). The Presiding Officer will hold office for a period of 5 years or until he attains the age of
62 years, whichever is earlier. It does not go with CPC, but act on the principal of natural
justice.
Recovery Officer: Once the claim is upheld, DRT issues a certificate to the Recovery Officer
who has various powers in execution such as attachment, arrest and may also require debtor to
declare on affidavit his assets and liabilities. Appeal against order of recovery officer to DRT can
be made within 30 days from the date of order.
Amount: It deals with cases of `10 lacs & above (Central Govt. can reduce the amount to `1
lacs). All the accounts of a borrower can be combined and one application can be made.
Nature of Debts covered: All lawful debts (not time barred by limitation), which have arisen
during ordinary course of business of Banks/FIs, are eligible to be filed. Cases relating to
misappropriation of any amount of a bank by an employee are not covered.
Civil Imprisonment: The tribunal can issue orders of attachment and can also order for
detention of the defendant for a term not exceeding 3 months.
Time Frame: of 6 months from the date of application has been stipulated for decision in a
case..
Appellate Tribunal (DRAT):- The appellate tribunal consists of the Chairperson, appointed by
the Central Govt. He will hold office for a period of 5 years or until he attains the age of 65
years, whichever is earlier.
Appeal: (i) Appeal against DRT is to be filed to Appellate Tribunal within 45 days of receipt of
order. (ii) The Appellate Tribunal should dispose of the appeal within a period of 6 months from
the date of appeal. (iii) Appeal to be made after depositing 75 % of amount due as determined
by the Tribunal (DRT). DRAT may wave/relax this condition on merits.
LOK ADALATS
ACT: Lok Adalats are created under Legal Services Authority Act-1987.
Category of accounts: All NPA accounts both suit filed and non suit filed, which are in doubtful
or loss category. Existing suit filed accounts are also eligible
Amount ceiling: Eligible category of accounts with outstanding up to & inclusive of ` 20 lakhs
(increased from `5 lacs), without any cut-off date. For coverage under Lok Adalat, the claim
amount should not exceed ` 20 lakh.
Banks may also participate in Lok Adalats organized by DRT/DRAT for settlement in accounts
where outstanding are above ` 20 lakhs.
Policies: Lok Adalat cases are examined by the Compromise Committee formed at various
levels to arrive at a “range” within which compromise can be considered in a given case and the
decision regarding waiver can be considered by competent authority keeping in view the
sacrifice involved in the settlement.
Payment: The down payment of the compromise amount is preferred. On merits of the case,
monthly/quarterly instalments (maximum upto 2 years) may be agreed with the default clause
providing for the failure of the compromise in case of non deposit of OTS amount as per the
terms of award.
Interest: Future interest may be agreed to as per General Guidelines for settlement of NPAs
through Negotiated settlement.
Benefits: (i) No court fee is involved. (ii) If no settlement is arrived, parties may go/continue with
legal proceeding.
Legal status: Its decrees have legal status and are binding on both the parties, however,
decree being in nature of ‘consent decree’, no appeal against the decree is allowed. If no
settlement is arrived at, the parties can continue with court proceedings, if already initiated.
Limitation clause: Pendency of matters with the Lok Adalat does not save limitation; therefore
care must be taken for filing suits with civil courts within the limitation period, if need be.
Transfer/Sale of Financial Assets to Securitization Companies/reconstruction Cos.

Under SARFAESI Act, 2002
(SAMD Cir. 12/10 dt. 21.04.2010)
A financial asset may be sold to Securitization/Reconstruction Cos. registered with RBI under
SARFAESI Act in an attempt to resolve NPAs. The highlights of policy are as under:
All accounts (including bonds/debentures, devolved LC and guarantee) classified as
NPA are eligible for sale.
A written off account can also be sold.
A standard asset under consortium/multiple banking arrangement may also be
considered for sale, if at least 75%(by value) of asset is classified as NPA by other
banks or at least 75%(by value) of the bank/FIs under consortium agree to sale.
NPAs where OTS is already concluded or where restructuring is approved shall not
be considered for sale.
Asset Sale Committee shall consider the highest bid offer.
A financial asset in respect of which any case is pending before a Court/DRT/BIFR
etc. may also be considered for sale.
If obligants /co-obligants come forward for OTS before submission of financial bid,
the concerned account be withdrawn from sale process provided the party deposits
50% cash as upfront money and remaining within 3 Months of approval of OTS and
the minimum offer of OTS will be as under:
Where outstanding is up to 10 lac 115% of Reserve price

More than 10 lac up to 50 lac 110% of Reserve price
More than 50 lac 105% of Reserve price
Securities/bonds offered by Securitization Company be treated as investment in
bank’s books. The due date of payment should not exceed 6 years and the interest
on bonds should not be below 1.5% above bank rate.
Financial assets could also be transferred by an agreement of assignment of rights
to Securitisation Company / Reconstruction Company to act as ‘Manager’ and/or
‘Agent’ for the purpose of recovering dues from the borrower on payment of fees /
charges as may be mutually agreed upon between the Bank and the SC / RC
Fixation of Reserve Price

NPRV less than O/s or Principal NPRV shall be minimum Reserve price
NPRV more than memoranda dues Reserve price will be between principal o/s and
memoranda dues
NPRV more than principal o/s but Reserve price will be up to principal o/s or book
less than memoranda dues o/s.
(The valuation of securities to be considered based on valuation report which should
not be more than one year old)
Securities already sold by the Reserve Price will be as per our expected claim to
liquidator. be released, out of the amount available with
Official Liquidator.
Units which are in operation and are The present valuation of financial assets will be
potentially viable/unit which are considered by using discounted cash flow
closed but are potentially viable. technique on future earning projections or NPRV
of assets/collateral securities whichever is higher
will be taken for fixation of Reserve Price.
In order to obtain maximum/competitive price for the sale of financial assets and making the
sale process successful, the system of ‘inter-se bidding’ may be adopted wherein the bids are
opened in the presence of all bidders so that highest one is known to everyone and inter-se
bidding is allowed amongst top three bidders.
STRATEGY FOR UPGRADATION OF VIABLE NPAs – TAGGING ARRANGEMENT

In certain viable cases, operations may be allowed in NPA accounts with a view to upgrade
the accounts by appropriating a certain part of the credits in the accounts (i.e. tagging a part of
credit) for regularization of the overdues/irregularities and allowing the borrower to utilize the
balance amounts for operating activities.
Tagging of 15% and above may be sanctioned by Incumbents Incharge, and 10% to less
than 15% by Circle Head, for credit facilities sanctioned by any authority. If tagging is to
be fixed at less than 10%, the sanctioning authority is GM(HO).
Transfer/Sale of Financial Assets to Other Banks/NBFCs (other than Securitization

Companies/reconstruction Cos.)
(SAMD Cir. 12/10 dated 21.04.2010)
All NPAs including accounts under consortium/multiple banking arrangement, classified as

NPAs of not less than 2 years old including bonds/debentures, devolved LCs and guarantees
are eligible for sale. The decision to sell will be taken by Asset Sale Committee. The process will
help in resolving NPAs.. NPAs in which case is pending before a court/DRT/BIFR and Non
performing investments are also eligible for sale. Other important guiding factors are as under:
Sale be made only on “Without Recourse basis”.
Bids will be called. Reserve price will be fixed as per procedure given above in case
under SARFAESI given above and highest offer will be accepted.
In the meantime, if the obligants/co-obligants comes forward for OTS, the sale will be
stopped provided the party deposits 50% cash as upfront and remaining in 3M. The
minimum offer of OTS is same as under SARFAESI given above.
15 days’ notice will be served upon borrower and he shall be heard within the period.
Sale will be made on cash basis only. Entire amount be received as up front.
Such Asset can be resold only after 15 months. The seller can not repurchase the
same asset.
Asset will be treated as Standard Asset up to 90 days of purchase. Risk weight
shall be 100%.
System of ‘inter-se bidding’ may be adopted.
RBI GUIDELINES AND PRUDENTIAL NORMS ON SALE OF FINANCIAL ASSETS TO

SC/RC AND TO BANKS/FIs
Particular SALE OF FINANCIAL ASSETS TO SALE OF FINANCIAL

SC/RC ASSETS TO BANKS/FIs
Assets which can NPAs (incl. Bonds/Debentures) NPAs/NPIs (at least 2 years
be sold Standard Assets if: old) in the books of selling
Under consortium /multiple bank. If homogeneous pool of
banking arrangement retail NPFA, each of the NPFA
At least 75% by value is classified should have been such for at
as NPA least 2 years in the books of
At least 75% by value of the the selling bank. The pool of
banks/FIs agree to sale assets will be treated as a
single asset in the books of
purchasing bank.
Procedure for sale Asset is taken off the books of Sale price should generally
banks/FIs and after the sale there not be lower than the NPV
should not be any known liability of estimated cash flows
devolving on selling banks/FIs. associated with the
Banks/FIs to ensure that they do realizable value of available
not assume any operational, legal securities net of cost of
or any other type of risk relating to realization.
the financial asset sold. Estimated cash flows are
Cannot sell at a contingent price normally expected to be
whereby in the event of shortfall realized within a period of 3
in realization by the purchasing years and at least 10%
bank, the selling banks would should be realized in the
have to bear a part of the first year and at least 5% in
shortfall. each half year thereafter,
If 75% by value of Banks/FIs subject to full recovery
decide to accept offer, remaining within 3 years.
will be obligated to accept. Sale must be on “without
May receive cash or bonds or recourse” basis and sold
debentures as sale consideration. asset should not enjoy the
May also invest in security support of credit
receipts, pass-through certificates enhancement / liquidity
or other bonds/debentures issued facilities in any form or
by SC/RC. manner.
Each bank will make its
own assessment of the
value offered by purchasing
bank to accept or reject the
offer.
Sale cannot be made at a
contingent price.
Sale must be on cash basis
and entire sale
consideration should be
received upfront.
NPA should be held by
purchasing bank in its
books at least for a period
of 15 months before it is
sold to other banks. Cannot
sell it back to the bank from
whom purchased.
Prudential Norms On transfer, the asset will be NPFA will be Standard for
for removed from books of bank. 90 days in the books of
Provisioning/Valuati If the sale to SC/ RC is at a price purchasing bank from date
on below the net book value (NBV - of purchase, thereafter as
book value less provisions held), per record of recovery.
the shortfall should be debited to Other existing exposure of
the profit and loss account of that same obligor will be dealt
year. separately and so
If the sale is for a value higher classification can be
than the NBV, the excess different.
provision will not be reversed but If sale/purchase does not
will be utilized to meet the satisfy any of prudential
shortfall/ loss on account of sale requirements, the asset
of other financial assets to SC/RC classification of the selling
When banks/ FIs invest in the bank will continue from the
security receipts/ pass-through date of purchase and
certificates, the sale shall be thereafter will be
recognised in books of the banks determined with reference
/ FIs at the lower of the to the date of NPA in the
redemption value of the security selling bank.
receipts/ pass-through certificates Any restructure /
and the NBV of the financial reschedule / rephrase of
asset. the repayment schedule of
The above investment should be the estimated cash flow of
carried in the books of the bank / the NPFA by the
FI at the price as determined purchasing bank shall
above until its sale or realization render the account as NPA.
and the loss or gain must be dealt For Selling Bank:
with in the same manner as If the sale is at a price
indicated above. below the NBV, the
shortfall should be debited
to the profit and loss
account of that year.
If the sale is for a value
higher than the NBV, the
excess provision will not be
reversed but will be utilized
to meet the shortfall/ loss
on account of sale of other
NPFAs.
For Purchasing Bank:
Provision appropriate to
asset classification status.
Conditions for Must not have a term in excess of
securities 6 years.
(bonds/debentures) Rate of interest must not be lower
offered by SC/RC than 1.5% above the Bank Rate
Must be secured by an
appropriate charge on the assets
transferred
Must provide for part or full
prepayment in the event the
SC/RC sells the asset before
maturity date of security
SC/RC to give unconditional
commitment to redeem the
securities
If transferred to any other party,
SC/RC must be notified.
Investment in Will be in the nature on non-SLR
debentures / bonds / securities and valuation/classification
SRs / PTC as Sale norms applicable to non-SLR
consideration securities will apply.
Prudential Norms For Credit Risk : 100% 100%.
for Capital For Market Risk : 2.5% If NPFA is an investment, it
Adequacy (Risk Applicable risk weight : 102.5%. would attract capital charge for
weight) market risk also.
Prudential Norms As only a few SC/RC in existence The purchasing bank will
for Exposure now, banks/FIs will be allowed in the reckon exposure on the obligor
initial years to exceed exposure of the specific financial asset
ceiling on a case-to-case basis. and should ensure compliance
with prudential credit exposure
ceilings (both single and
group).
Other issues If the assets cannot be revived,
SC/RC will act as an agent for
recovery on fee basis and these
assets will not be removed from the
books of the banks/FIs but
realizations, as and when received,
will be credited to the asset account.
Provisioning for the asset will
continue to be made by the bank/FI.
Policy for Engagement of Recovery Agencies
(SAMD Cir. 15/10 dated 13.05.2010)
Eligible All Doubtful and Loss category accounts (whether non-suit filed, suit
accounts filed or decreed) with ledger outstanding not exceeding `10 lac.
All written off accounts shall be covered by the scheme except accounts
where compromises have been approved (including those reached at in
Lok Adalats) and have not been treated as failed.
Empanel- Recovery Agencies shall be empanelled for the entire District or Cluster
ment of of Districts. Only agencies (companies, corporations, firms,
Recovery NBFCs etc.) with sufficient means/ resources/ field experience will be
Agencies considered for empanelment. Factors such as past experience, financial
soundness, business reputation, standards of performance, market
feedback and external factors e.g. political, social, legal & economic
environment should also be kept into consideration while empanelling
the recovery agencies.
Applications would be invited at the concerned Circle Offices, from
interested parties through advertisements to be placed in two local
newspapers, out of which one should be vernacular. Committee
comprising of 2nd in command of Circle Office, Chief Manager and Sr.
Manager/ Manager (SAM Deptt.) will interview the applicants and
recommend the empanelment.
Competent Authority to approve the empanelment of Agency will be
respective Head of the Circle Office. The decision of Head of Circle
Office would be final. There would be no review process by any higher
authority.
The panel of Recovery Agency will be reviewed by Circle Office on
annual basis. However, bank has right to terminate the contract at any
time without assigning any reason.
The up to date details of the Recovery Agency firms/companies
engaged by Circle Office shall also be posted on the bank’s website.
Guarantee The Agency shall furnish to the Bank’s Circle Office, a Bank guarantee
for an amount of ` 1,00,000/-. Alternatively, the Agency shall make a
security deposit (by way of term deposit) for equivalent amount which
shall be returned to the Agency on termination of the arrangement.
If reputed recovery agencies having good track of effecting recoveries of
the Banks and desirous of getting empanelled with other Circle Offices
shall provide Bank Guarantee/ Security deposit of `1 lac in each Circle
Office subject to maximum of `3 lac.
Every field staff of the Recovery Agency shall be issued a temper-proof
Identity Card (with in-built photo as in Electronic Photo Identity Card
issued by Election Commission) at the cost of Recovery Agency, to be
signed by 2nd in command of Circle Office and authorized signatory of
Recovery Agency.
Mode of Recovery Agents shall not accept cash. Cash recoveries, if any, shall be
Settlement directly deposited by the borrower or his representative in the branch.
The field staff of Recovery Agency shall not receive any cheque/draft in his
name or in the name of the Agency. The cheques / drafts should be drawn
in favour of PNB A/c ___________ (title of the account for which collection
is made) and crossed ‘A/c Payee only’.
When recoveries are made in suit-filed / decreed accounts, satisfaction to
the extent of the realization made shall be got recorded by appropriate
application / statement before the Court.
RBI’s Guidelines on Fair Practices Code for Lenders and IBA’s Model Code
for Collection of Dues and Repossession of Security (CDRS Code) shall be
adhered to, wherever required, by the Recovery Agency.
Supreme Court has cautioned the Banks against use of coercive methods
for recovery of loans and in the other case on the same issue State
Consumer Forum of New Delhi has given stern warning to Banks that if any
complaint is received against any Bank alleging use of force by recovery
agents, the punishment of minimum one month imprisonment shall be
imposed under section 27 of the Consumer Protection Act 1986.
The branch should inform the borrower the details of Recovery Agency
firms/companies while forwarding default cases to the Recovery Agency.
Commission For NPA accounts (suit filed / non suit filed)
Age of NPA Commission payable on amount of

recovery
A/cs with O/s A/cs with O/s
upto `1 lac above `1 lac
Upto 3 years 7.5% 5%
3 years upto 5 years 10% 7.5%
Beyond 5 years 15% 10%
For decreed accounts

Age of decree Commission payable
Upto 3 years 5% of amount recovered
Above 3 years upto 5 years 7.5% of amount recovered
Above 5 years 10% of amount recovered.
The allocated accounts may be withdrawn from Recovery Agencies after six
months from the date of allocation in case no effective result is achieved by
Recovery Agencies within this period subject to approval of Circle Head.
Training The number of hours of training for various categories of Recovery Agent
w.e.f. 01.06.09:
Sl. Educational Qualification No. of hours

Training
1. Below 12th Pass 100 hours.
2. 12th pass and above and below 70 hours.
graduation
3. Graduation and above 50 hours.
Monitoring / The progress shall be monitored on weekly basis by 2nd in command of
Supervision Circle Office.
& Control The progress under the scheme shall be monitored by SAMD HO on
quarterly basis and review note will be placed before Executive Director on
annual basis.
An officer shall be designated as Nodal Officer at Circle Office.
Any complaint arising in the matter to be addressed by the Nodal Officer
within 10 days of receipt of complaints.
Policy ON ENGAGEMENT OF SECURITISATION/ RECONSTRUCTION COMPANIES

(SCs/RCs)/FIRMS/COMPANIES/ (other than SCs/RCs)/ RETIRED BANK (PNB)
EMPLOYEES AS RESOLUTION AGENT
(SAMD Cir. 13/10 dated 01.05.2010, 34/10 dtd.10.09.2010 & 38/10 dtd. 06.11.2010)
Bank has decided to empanel SC/RC, Other Firms /d companies, Retired Bank employees to
act as resolution agents for resolving NPAs for more than ` 10 lacs also. The guidelines are as
under:
1. Securitization / Reconstruction Companies:
Scope 1.1 Securitization Companies/ Reconstruction Companies may be

empanelled as Resolution cum Recovery Agents and all Retail Loans
under Doubtful/Loss Asset category may be allocated to them Circle
wise on portfolio basis in addition to NPAs (Doubtful/Loss) of Rs.1
crore and above.
1.2 The financial assets where non funded facilities are yet to be
crystallized are not to be allocated.
1.3 A financial asset in which any case is pending before a
Court/DRT/BIFR/Action under SARFAESI may also be considered for
resolution.
Empanelment The Securitization/Reconstruction Companies (SCs/RCs) who have
of Resolution obtained the certificate of registration from RBI under Sec.3 of the
Agents SARFAESI Act shall be eligible to be empanelled as Resolution Agent
provided their Object clause of Memorandum of Association permits them to
act as Resolution Agent for the bank.
2.1 Initially, bank may invite the request from Securitization/Reconstruction
Companies for the empanelment as Resolution Agent. Subsequently, any
SC/RC’s requests the bank for empanelment, shall also be considered.
However, the approval of SC/RC for Resolution Agent shall be vested with
the Executive Director.
2.2 The Resolution Agent shall execute a Non-Disclosure Agreement
(already drafted by Law Division, HO) with PNB at Head Office New Delhi.
System & 3.1 Each Resolution Agent shall be required to execute an Agreement at
Procedure Head Office and on behalf of PNB, Agreement shall be signed by
DGM/AGM/Chief Manager-SAMD (Any two officials). The agreement shall
be drafted by HO: Law Division containing the Terms & Conditions of PNB
including Indemnity Clause and contemplating RBI guidelines on Fair
Practice Code for Lenders, guidelines on managing risk and Code of
Conduct in outsourcing of Financial services by the Bank, IBA model code
for collection of dues and repossession of security (CDRs Code), and the
decision of Supreme Court in the matter of ICICI Bank Ltd. Vs Prakash Kaur
& others. The copy of agreement shall be circulated all the Circles for their
information and records.
3.2 Circle Head/FGM/ED shall identify the accounts for allocation to
Resolution Agents.
3.3 The powers of approval for the allocation of identified accounts to
Resolution Agents shall be vested as under:
S.No. Ledger outstanding* Approving Authority
1. `1 crore – `5 crore Field General Manager

2. Above `5 crore ED (Incharge of Circle)
*In case of written off account, outstanding balance at the time of write off
shall be taken as notional outstanding.
Accounts identified by Circle Head/Field General Manager falling under the
power of Executive Director shall be forwarded to HO:SAMD and the same
shall be placed by the Division for approval from the concerned Executive
Director.
3.4 Maximum period for resolution of allocated accounts shall be 12 months
if Resolution Agent fails, accounts will be taken back. However, same can
be extended upto 18 months by Field General Manager and 24 months with
the permission of Executive Director on merits of case keeping in view the
steps taken by the Agent for recovery.
4. The commission payable to Agency shall be as under:
Commission payable Commission payable on
Outstanding on amt of recovery (if amount of recovery (if the
the age of NPA is upto age of NPA is more than 3
3 yrs) years)
` 1 crore - ` 5 6% 7%
crore
Above ` 5 crore 5% 6%
(subject to maximum (subject to maximum of `1
of `75 lacs) crore)
4.1 For resolution/recovery of accounts, expenses on
conveyance/travelling, salary to staff employed by Resolution Agent/fee
paid to Supporting Agency for taking possession/other out of pocket
expenses shall be borne by Resolution Agent. However, Insurances
charges, Security/Valuation charges after taking possession by
Bank/Official Liquidator /DRT Receiver, legal expenses including fee to
advocates, charges relating to auction shall be borne by the Bank.
MISCELLA- 5.1 Borrowers/co-obligants shall be informed of the engagement of
NEOUS Resolution Agent at the time of assigning the job for resolution to the
concerned SC/RC.
5.2 The Circle Office where the account is located shall provide to
Resolution Agent all information including Dues of the borrower/claim
lodged with the liquidator in case of liquidation, complete address of
borrowers/co-obligants and copies of plaints in case of suit filed and the
details of the charged securities, attachments if any. if desired by the
Resolution Agents. Further, Circle office shall coordinate the job of
Resolution Agent through a Nodal Officer not below the rank of Chief
Manager.
5.3 In case Resolution Agents desire Power of Attorney from Bank to act on
behalf of the Bank, the same shall be provided as per format approved by
Head Office Law Division.
5.4 For the legal matters, Resolution Agent may appoint their own advocate
to tackle the cases for recovery at their own cost.
5.5 Agent shall ensure that while acting as Resolution Agent, they do not
give rise to any pecuniary liability to bank otherwise they shall be held liable
for their action.
5.6 Bank has right to withdraw any financial asset allocated to the
Resolution Agent without assigning any reason subject to approval of Field
General Manager.
5.7 Bank has right to terminate the empanelment of Resolution Agent at any
time without assigning any reason subject to approval of Executive Director
and the financial assets allocated to them will also be withdrawn.
5.8 A Resolution Agent shall be allocated 10 to 15 accounts at a time for
the resolution and it may be allocated more accounts based on
performance.
5.9 The recovery effected by the Resolution Agent shall be deposited with
the branch concerned immediately and a statement of account of the
recovery duly certified by Chartered/Cost Accountant shall be submitted by
the Agent on quarterly basis.
5.10 In case Borrower/co-obligants approaches the bank for OTS in the
accounts allocated to SC/RC and the same is accepted by the competent
authority, Resolution Agent shall also be entitled for the commission on
actual amount of recovery.
5.11 In case any dispute arises the matter cannot be taken to Civil Court.
5.12 The object clause of SC/RC is to permit to act as Resolution Agent for
bank/banks..
Monitoring 6.1 The list of approved SC/RC as Resolution Agent shall be placed on
and Review bank’s website.
of the 6.2 Circle Office shall monitor the progress in the matter of Resolution of
Scheme NPAs through Resolution Agents on quarterly basis and FGM shall monitor
the performance on the basis of the progress received from Circle offices on
half yearly basis and HO shall monitor the performance on annual basis and
same shall be placed before Executive Director .
2. Firms / Companies Other Than SC/RC:
Scope 1.1 All NPA accounts categorized as Doubtful/Loss whether non suit filed,
suit filed or decreed with the ledger outstanding more than `10 lacs but less
than `1 crore and also written off (provided at the time of writing off the
outstanding was more than `10 lacs but less than `1 crore) shall be
covered under the scheme.
1.2 The financial assets where non funded facilities are yet to be
crystallized are not to be allocated.
resolution.
Empanelment 2.1 A Firm/Company promoted by a professional person/persons like
of Resolution Chartered Accountant/Company Secretary/Cost Accountant and/or
Agents honourably retired Senior Executives of the Banks (not less than DGM/GM).
Minimum 3 years experience of the firm in the resolution of NPAs be
considered for the empanelment. ED may permit lower than 3 years also.
2.2 The concerned Field General Manager shall invite applications or
requests received from the concerned Firm/Company and shall approve the
name for the empanelment of Resolution Agents.
(already drafted by Law Division, HO) with PNB at focal point of Field
General Manager.
System & 3.1 Each Resolution Agent shall be required to execute an Agreement
Procedure containing the Terms & Conditions of PNB including Indemnity Clause and
on behalf of PNB Agreement shall be signed by DGM/AGM/Chief Manager
at the focal point of Field General Manager (Any two officials). The draft of
the Agreement shall be framed by the Law Division HO in the light of RBI
guidelines on Fair Practice Code for Lenders, guidelines on managing risk
and Code of Conduct in outsourcing of Financial services by the Bank, IBA
model code for collection of dues and repossession of security (CDRs
Code), and the decision of Supreme Court in the matter of ICICI Bank Ltd.
Vs Prakash Kaur & others. The copy of agreement shall be circulated to all
FGMs for their information and taking further action as per requirements.
3.2 The copy of executed Agreement at Field General Manager office shall
also be circulated to the circle offices under the control of Field General
Manager.
Sl.N Ledger outstanding* Approving Authority
o.
1. More than `10 lac but less than `50 lac Circle Head
2. Above `50 lac but less than `1 crore Field General
Manager
be extended upto 18 months by Field General Manager on merits of case
keeping in view the steps taken by the Agent for recovery.
Ledger Commission payable Commission payable on
outstanding on amt of recovery (if amount of recovery(if the
the age of NPA is age of NPA is more than
upto 3 yrs) 3 years)
Above `10 lac 10% 12.5%
but less than `
50 lac
Above ` 50 lac 7.5% 10%
but less than
`1 crore
4.1 Agent shall be entitled for commission on the amount of recovery

effected.
4.2 For resolution/recovery of accounts, expenses on
conveyance/travelling, salary to staff employed by Resolution Agent/fee
paid to Supporting Agency for taking possession/other out of pocket
expenses shall be borne by Resolution Agent. However, Insurances
charges, Security/Valuation charges after taking possession by
Bank/Official Liquidator /DRT Receiver, legal expenses including fee to
advocates, charges relating to auction shall be borne by the Bank.
MISCELLA- 5.1 Borrowers/co-obligants shall be informed for the engagement of
NEOUS Resolution Agent at the time of assigning the job for resolution to the
concerned Firm/Company.
borrowers/co-obligants and copies of plaints in case of suit filed, if desired
by the Resolution Agents. Circle office shall coordinate the job of
Manager.
5.3 In case Resolution Agents desire for Power of Attorney from Bank to act
on behalf of the Bank for the resolution of the account, they may be
provided as per format approved by Head Office Law Division.
5.4 The Resolution Agent shall be allocated maximum 50 accounts and
based on their performance they shall be entitled to get more accounts for
resolution subject to ceiling of 50 accounts.
5.5 For the legal matters, Resolution Agent may appoint their own advocate
to tackle the cases for recovery at their own cost.
5.6 Resolution Agent shall ensure that while acting as Resolution Agent,
they do not give rise to any pecuniary liability to bank otherwise they shall
be held liable for their action.
General Manager.
5.8 Bank has right to terminate the empanelment of Resolution Agent at
any time without assigning any reason subject to approval of Field General
Manager and the financial assets allocated to them will also be withdrawn.
recovery duly certified by Chartered/Cost Accountant shall be submitted by
the Agent on quarterly basis.
5.10 In case Borrower/co-obligants approaches the bank for OTS proposal
in the accounts allocated to Firm/Company and the same is accepted by the
competent authority, Resolution Agent shall also be entitled for the
commission as mentioned above after recovery of the OTS amount.
5.11 In case any dispute arises the matter cannot be taken to Civil Court.
5.12 The object clause of the Company should permit the concerned
company to act as Resolution Agent for a bank.
Monitoring 6.1 The list of approved Firms/Companies as Resolution Agent shall be
and Review placed on bank’s website.
Scheme NPAs through Resolution Agents on quarterly basis and Field General
Manager shall monitor the performance on the basis of the progress
received from Circle offices on half yearly basis. However, HO, SAMD shall
monitor the progress on annual basis and same shall be placed before
Executive Director .
3. Retired PNB Employees:
Scope 1.1 All NPA accounts categorized as Doubtful/Loss whether non suit filed,
suit filed or decreed with the ledger outstanding less than Rs.1 crore and
also written off (provided at the time of writing off the outstanding was less
than Rs.1 crore) shall be covered under the scheme.
resolution.
Empanelment 2.1 Human Resources Development Division of concerned Circle office
of Resolution shall invite applications from the honourably retired bank employees
Agents (including Voluntarily Retired Employees) for empanelment as Resolution
Agent and the panel shall be approved by the Circle Head for the
employees upto Scale-III and Scale-IV & V by the concerned Field General
Manager and Scale-VI & VII through HRD, HO by the Executive Director.
This panel shall be circulated to all the offices for the utilization of their
services for resolution of non performing accounts under the scheme.
However, Board has desired that retired employees be not given such
accounts for resolution which they handled while in service.
(already drafted by Law Division, HO) with PNB at concerned Circle Office
for employees upto Scale-III and above scale-III at the focal point of Field
General Manager.
System & 3.1 Each Resolution Agent shall be required to execute an Agreement
Procedure containing the Terms & Conditions of PNB including Indemnity Clause and
on behalf of PNB Agreement shall be signed by AGM/Chief Manager/Sr.
Manager at the Circle Office (Any two officials). The draft of the Agreement
shall be framed by the Law Division HO in the light of RBI guidelines on
Fair Practice Code for Lenders, guidelines on managing risk and Code of
Conduct in outsourcing of Financial services by the Bank, IBA model code
for collection of dues and repossession of security (CDRs Code), and the
decision of Supreme Court in the matter of ICICI Bank Ltd. Vs Prakash Kaur
& others.
Sl. Ledger outstanding* Rank of retired Approving

No. officials Authority
1. Upto `1 lac Scale-I Circle Head
1. Above ` 1 lac but Scale-II & III Circle Head
Upto `50 lacs
2. Above ` 10 lacs but Scale IV & Field General
less than `1 crore above Manager
be extended upto 18 months on the merits of the case by Field General
Manager.
Commission payable Commission payable
Outstanding on amount of recovery on amount of
(if the age of NPA is recovery(if the age of
upto 3 years) NPA is more than 3
years)
Upto `1 lac 7.5% 10%
Above `1 lacs but 6% 8.5%
Upto `50 lacs
Above `50 lacs 5% 7.5%
4.1 Resolution Agent shall be entitled for commission on the amount of

recovery effected and no reimbursement of any expenses incurred by the
Resolution Agent for resolution of the account.
MISCELLA- 5.1 Borrowers/co-obligants shall be informed for the engagement of
NEOUS Resolution Agent at the time of assigning the job.
borrowers/co-obligants and copies of plaints in case of suit filed, if desired
by the Resolution Agents. Circle office shall coordinate the job of
Manager.
5.3 In case Resolution Agents desire for Power of Attorney from Bank to act
on behalf of the Bank for the resolution of the account, they may be
provided as per format approved by Head Office Law Division.
5.4 A Resolution Agent shall be allocated maximum 25 accounts which may
be increased by the Allocating Authority subject to the performance of the
Resolution Agent.
5.5 Resolution Agent shall ensure that while acting as Resolution Agent,
they do not give rise to any pecuniary liability to bank otherwise they shall
be held liable for their action.
General Manager.
5.7 Bank has right to terminate the empanelment of Resolution Agent at any
time without assigning any reason subject to approval of Circle Head/ Field
General Manager who has approved the allocation of identified accounts to
Resolution Agents and the financial assets allocated to them will also be
withdrawn.
recovery duly certified by Branch Manager shall be submitted by the Agent
on quarterly basis.
5.9 In case Borrower/co-obligants approaches the bank for OTS proposal in
the accounts allocated to Resolution Agent and the same is accepted by the
competent authority, Resolution Agent shall also be entitled for the
commission as mentioned above after recovery of the OTS amount.
Monitoring 6.1 The list of approved Agents as Resolution Agent shall be placed on
and Review bank’s website.
Scheme NPAs through Resolution Agents on quarterly basis and FGM shall monitor
the performance on the basis of the progress received from Circle offices on
half yearly basis and H.O. shall monitor the performance on annual basis
and same shall be placed before Executive Director.
Compromise / One Time Settlement

Definitions:
BASE AMOUNT is gross outstanding as on date of NPA (inclusive of SI/DI) duly adjusted for
recovery/further debits in the account (except interest), irrespective of the fact whether recovery
was appropriated towards income or reduction in outstanding. In case interest already
recovered exceeds principal, the excess amount shall be deducted from gross outstanding
NET PRESENT REALISABLE VALUE (NPRV) OF SECURITIES: is the Present Market Value
of the charged securities, net of cost of realization, discounted as under:
A General Discount 10%

B Specific Discount
B-I IPs having old/multiple tenancy/multiple suits 20%
B-II Dispute about validity/enforceability of the mortgage/charge 20%
B-III More than 1 year old stay against SARFAESI action 10%
B-IV Attachment of IP by Tax/Revenue authorities (if no priority charge)** 10%
B-V IP not demarcated / Undivided share mortgaged / no independent access 10%
B-VI Mortgagor is dead 5%
B-VII Large / Big Units / Estates 10%
Maximum discount restricted to 40%. (f more than one attendant factors).
** In case of priority charge, deduction of full dues / amount of attachment. Also, if proof exists
of IPs having statutory encumbrances like Property Tax, Lease Rent, Development charges etc.
the deduction shall be 50% of such dues, apart from the above discounts.
GENERAL GUIDELINES ON ONE TIME SETTLEMENT OF NPAs
Coverage All accounts (borrowal) identified as Non Performing Assets (NPAs) in terms of
RBI guidelines would be eligible. All NPA accounts with o/s balance upto ` 1 lakh
not covered by the Special OTS Scheme for such category of accounts.
RBI reported OTS in accounts having o/s balance upto ` 10 lakh shall be considered by
Willful ED/CMD. However, where amount higher than NPRV/Book o/s is being recovered,
default/Fraud case may be considered by CH provided staff side case, if any, has been decided.
cases Cases, where o/s balance is above ` 10 lakh, shall be considered by MC/Board.

Criminal Cases, where criminal action initiated / FIR lodged, will be considered by
action cases MC/Board.
Recoverable Present Ledger outstanding + *interest @ 8% simple or contractual rate of interest
Dues whichever is lower.
*Interest shall be calculated on simple reducing balance basis starting from the
Balance outstanding as on the date of NPA. Recorded interest on classification as
NPA will be added in Recoverable Dues.
For NPAs Under direct agricultural advances with balance outstanding up to `10
lac (including Kisan Credit Cards but excluding Tractor Advances) recoverable
dues shall be calculated with interest @ 6% simple, irrespective of age of NPA.
In decreed accounts, recoverable dues shall be calculated as per the above rate or
decretal rate whichever is lower.
Minimum recoverable amount/recoverable dues shall be calculated, as at the close
of the quarter preceding the date of the proposal and shall include recorded
legal/other expenses also.
Indicative If NPRV is Indicative OTS Amount
OTS amount > Recoverable dues Recoverable dues
< Recoverable Dues but > Book Book Outstanding
Outstanding
< Book Outstanding 50% of Book O/s in case of Sub
Standard category of Direct Agriculture
Advances upto ` 10 lakh
40% of Book O/s in case of Doubful
category of Direct Agriculture Advances
upto ` 10 lakh
NPRV in all other cases
Where NPRV is Zero Whatever maximum can be recovered
If the borrower is unable to pay the indicative OTS amount, the best possible offer involving higher
sacrifice, depending upon merits and attendant circumstances of individual case, can be considered
by the next higher authority.
Upfront OTS offer up to `10 lac : Upfront 20%
Payment OTS offer >`10 lac to `50 lac : Upfront 15%
OTS offer >`50 lac : Upfront 10%
In genuine cases, competent authority may allow lower / NIL upfront payment
and/or may allow reasonable time of 7-10 days to deposit the amount.
Payment term OTS amount should normally be paid within a maximum period of 12 months.
Executive Director 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.
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 shall be charged @ 6-10% on simple basis on reducing
balance from the date of conveying approval by the branch. GM and above may
reduce/waive the interest.
Extension Cases not involving further sacrifice –
Respective sanctioning authorities at BO/CO may permit extension of time
provided the total period including extension period does not exceed 12 months.
In OTS cases approved by the Board/MC/CMD/ED/GM (Field/HO), extension of
time period for payment of OTS amount can be granted by the Circle Heads
subject to the condition that total period including extension period does not
exceed 12 months.
Cases involving extension of time period beyond 12 months and up to 24 months
(including original payment period) shall be considered by ED.
Cases involving extension of time period beyond 24 months (including original
payment period) shall be considered by MC.
Cases involving further sacrifice –
Shall be considered by next level authority than the one who had earlier
sanctioned the proposal provided the total period (including extension period) does
not exceed 12 months. Cases sanctioned by ED and above may be considered by
ED.
Rejection Any proposal submitted by the branch can be rejected by an authority one step
higher than the authority competent to approve the proposal. However, proposals
falling under the powers of Chairman & Managing Director and above may be
rejected at the level of Chairman & Managing Director itself.
Reopening of Proposals involving reduction in original OTS amount shall be considered by
failed OTS next higher authority as a fresh OTS proposal. In other cases, if borrower is willing
cases to pay the entire OTS amount with full/part interest, the proposal shall be
considered by competent authority as extension of time for payment of OTS
amount.
Other Compromise agreement to contain a specific clause that the settlement is subject
conditions to continuation of criminal proceedings against the borrowers/obligants.
Cases backed by Govt. Guarantee may be considered by Board.
Cases of PSUs may be considered by MC.
Staff/staff connected accounts shall be considered by GM and above. Cases
involving ex-staff to be considered by CH and above, if the facilities were
sanctioned prior to his retirement/resignation.
OTS offer should be accepted by borrower within 15 days.
If borrower proposes to pay an amount below the sanction, the case shall not be
considered as reduction in OTS amount. It shall be considered by competent
sanctioning authority again.
Discharge of liability of one or more obligants/release of Charge on Mortgaged
Property may be considered by competent authority (as per delegated powers to
approve sacrifice involved/book outstanding in the account), but not below the rank
of Circle Head. Sacrifice in such cases would be the Difference of Min.
Recoverable Dues and Offer Amount
Proposal for assignment of Debt as part of OTS shall be considered at the level of
Management Committee of the Board.
SPECIAL GUIDELINES FOR CONSIDERING OTS IN WRITTEN OFF ACCOUNTS
Coverage Borrowal NPA accounts, which were written off earlier duly approved by the
competent authority, whether by leaving a balance of `100/ - or not.
Relevant / The date on which the account was written off in the books of the branch, i.e. the
Materal date date on which the amount of revenue loss reimbursed by HO/CO was credited to
the account
Base amount 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 base amount. The base amount is to be duly adjusted for recoveries, if
any, subsequent to the relevant/ material date.
Recoverable The base amount (duly adjusted for recoveries if any, subsequent to write off), as
dues above, may be treated as Recoverable dues without applying any future interest.
Minimum A comprehensive view on the capacity of the borrower(s)/ Guarantor(s) shall have
indicative to be taken. Since these cases were already written off by competent authority in
amount the past in terms of Bank’s laid down policy on ‘write off’, whatever maximum can
be recovered under given circumstances shall be the amount to be recovered.
Sacrifice/ waiver in such cases may be calculated as the ‘Difference between Base
Amount and the Compromise Offer’
Payment term Preferably be paid in lump sum. Where the borrower is unable to pay the entire
amount in lump sum, 15-25% be recovered upfront and the balance amount within
a period of 3 months. In exceptional circumstances, longer repayment period (not
exceeding 12 months), together with interest at the existing Benchmark Prime
Lending Rate (*) from the date of settlement up to the date of final payment, can
be considered by the next higher authority.
Sanctioning Cases where the compromise offer is 50% or more of the base amount:
Powers ` lakh
Approval of Manager Manager Sr. Chief Asstt.
sacrifice/w Scale I Scale II Manager Manager General
aiver, Manager/D
not GM
exceeding:
1.00 2.00 3.00 5.00 10.00
Cases where the compromise offer is less that 50% of the base amount :
Next higher authority.
Write Off : In case of write off proposal involving ledger o/s of ` 20 lac and above, it should be backed

by report of detective agency/investigating agency with reference to traceability of
obligants/ascertaining the attachable assets of borrowers/guarantors.
Powers to write off at different levels is kept in abeyance; except final write off of accounts with
residual balance of ` 100/-; which may be written off after 1 year if o/s balance at the time of
write off was up to ` 25000/- and after 3 years in other cases.
Non-borrowal fraud cases / Cases of Theft and Dacoity

These cases will be considered for write off by FPIS, HO by the appropriate authority. For all
cases of loss of cash in theft/dacoity/robbery etc. and non-borrowal Fraud and non-borrowal
other Impaired Assets, powers upto GM level are to be exercised by AGM/DGM/GM, I&AD, HO.
Others.
Assignment of Debt can be accepted as part of OTS. Stamp duty to be borne by the assignee.
HO settlement Advisory Committee shall consider OTS proposals envisaging sacrifice more
than ` 75.00 lac under general guidelines, all OTS proposals falling under powers of
Board/MC/CMD/ED and proposals involving Debt Asset Swap and others. Retired High Court
Judge, One eminent person from society and 3 GMs will be members of Committee.
Monitoring and Review of NPA Accounts
Category of NPA Authority before whom

the Status Report will be
placed
Top 100 borrowal accounts of below ` 5.00 crore in each category MC (As per RBI Calendar
i.e. Sub standard, Doubtful and Loss Assets of reviews)
NPAs with o/s > 5 crore ED
Fresh slippage during the quarter >= ` 5 cr CMD
Fresh slippage during the quarter < ` 5 cr but >= ` 50 lakh ED
Fresh slippage during the quarter < ` 50 lakh but >= ` 10 lakh CGM/GM (SAMD)
NPAs with o/s balance of ` 10 lakh and above including fresh CH
slippages not covered in notes to be placed at HO
NPAs with o/s balance of below ` 10 lakh including fresh CH or AGM/Chief (SAMD)
slippages during the quarter
Prayaas Staff The scheme is in operation till 31.03.2011 for providing incentive to staff
Incentive that effect recovery in NPAs. Interested staff member will give consent to
Scheme for BM who will allocate eligible NPAs and write off accounts.
NPA recovery (SAMD Cir. No. 18/10 dt. 09.06.2010)
Eligible NPAs (Doubtful/Loss) with balance outstanding below ` 10 lakh and all
Accounts written off accounts.
Exceptions:
Accounts allocated to Recovery Agencies
OTS approved before 01.01.2010 and under implementation.
Recovery Category Eligible Amount Rate of incentive
eligible for Doubtful and Loss Amount recovered in 4% of eligible amount
Incentive Assets below 10 lac excess of floor level of in Doubtful and 6% in
10% (for the full year) Loss NPAs
of total outstanding of
the concerned branch
under the target
segment as on the
close of 31.3.2010.
Written off accounts Amount recovered in 6% of eligible amount
with amount written excess of floor level of
off below 10 lac 10% (for the full year)
of total outstanding
(kitty available) of the
concerned branch as
on the close of
31.3.2010.
The amount of total incentive received by any employee (under this

scheme and under performance linked incentive scheme announced by
MASD) should not exceed 20% of his gross annual salary.
Willful Willful defaulter is one:
Defaulters Who is nor repaying the debt despite capacity to pay
SAMD Cir. No. Who has not utilized the loan for specific purpose
5/10 dt. Who has siphoned off the funds
30.1.2010. Who has disposed of the security
Willful defaulters (NPAs) where o/s is ` 25 lac and above be reported to

CVC. If o/s comes below ` 25 lac on a/c of write off and not due to
settlement/recovery, the case is still to be reported.
No additional facilities should be granted by any bank/FI to the listed willful
defaulters. Further these are debarred from Institutional finance from
SCBs/FIs/ NBFCs for floating new ventures for a period of 5 years.
Branch may initiate criminal proceedings against such borrower/guarantor.
RBI will publicize the names of such persons/units. The consent should be
obtained.

CH 9 - Npa

Enviado por

Dados do documento

Descrição original:

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

CH 9 - Npa

Enviado por

Direitos autorais:

Formatos disponíveis

CHAPTER 9

NON PERFORMING ASSETS

PRUDENTIAL NORMS ON INCOME RECOGNITION, ASSETS CLASSIFICATION &

ASSET CLASSIFICATION: FINANCIAL PARAMETERS: (IRAC Norms vide SAMD Cir.

Sr. Category of account Criteria for classification of account as NPA

8. A state Government guaranteed advance, where interest and/or installment of principal/or

CLASSIFICATION OF NPA ACCOUNT & PROVISION

SR. No. Category of CRITERIA RATE OF PROVISION

In addition to the conditions relevant for restoration/retention of “standard asset” classification

GOVT GUARANTEED ACCOUNTS

TAKE OUT FINANCE

EXPORT PROJECT FINANCE

Reserve for Exchange Rate Fluctuations Account (RERFA)

PRUDENTIAL TREATMENT IN RESPECT OF FLOATING PROVISIONS

Prudential Guidelines for Restructured Advances

ASSET CLASSIFICATION NORMS FOR RESTRUCTURED ACCOUNTS

E) Personal guarantee is offered by the promoter

F) The restructuring under consideration is not a

The unrealised income represented by FITL/Debt or equity instrument should have a

APPROPRIATION OF RECOVERY IN NPA ACCOUNTS: [Ref: SAMD Cir. 16/2009]

Category of NPA Mode/Order of appropriation

COMPUTATION OF NPA LEVELS

(` in crores up to two decimals)

Provisioning Coverage Ratio for Advances [PCR]

SECURITIZATION & RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT

Salient provisions of the act are as Under:-

SARFAESI AND OTHER RECOVERY MEASURES:

DEBT RECOVERY TRIBUNALS (DRT)

Composition: DRT is headed by Presiding Officer called “President” (appointed by Central

Transfer/Sale of Financial Assets to Securitization Companies/reconstruction Cos.

Where outstanding is up to 10 lac 115% of Reserve price

Fixation of Reserve Price

STRATEGY FOR UPGRADATION OF VIABLE NPAs – TAGGING ARRANGEMENT

Transfer/Sale of Financial Assets to Other Banks/NBFCs (other than Securitization

All NPAs including accounts under consortium/multiple banking arrangement, classified as

RBI GUIDELINES AND PRUDENTIAL NORMS ON SALE OF FINANCIAL ASSETS TO

Particular SALE OF FINANCIAL ASSETS TO SALE OF FINANCIAL

Age of NPA Commission payable on amount of

For decreed accounts

Sl. Educational Qualification No. of hours

Policy ON ENGAGEMENT OF SECURITISATION/ RECONSTRUCTION COMPANIES

1. Securitization / Reconstruction Companies:

Scope 1.1 Securitization Companies/ Reconstruction Companies may be

1. `1 crore – `5 crore Field General Manager

2. Firms / Companies Other Than SC/RC:

4.1 Agent shall be entitled for commission on the amount of recovery

3. Retired PNB Employees:

Sl. Ledger outstanding* Rank of retired Approving

4.1 Resolution Agent shall be entitled for commission on the amount of

Compromise / One Time Settlement

A General Discount 10%

GENERAL GUIDELINES ON ONE TIME SETTLEMENT OF NPAs

SPECIAL GUIDELINES FOR CONSIDERING OTS IN WRITTEN OFF ACCOUNTS

Write Off : In case of write off proposal involving ledger o/s of ` 20 lac and above, it should be backed

Non-borrowal fraud cases / Cases of Theft and Dacoity

Category of NPA Authority before whom

The amount of total incentive received by any employee (under this

Willful defaulters (NPAs) where o/s is ` 25 lac and above be reported to

Você também pode gostar