The Reserve Bank of India (RBI) on Monday placed stringent guidelines in place for recovering bad loan for commercial banks by setting timelines for resolving large NPAs, failing which banks will have to mandatory refer them for insolvency proceedings.
The Ape bank also withdrew existing debt restructuring schemes such as SDR and S4A.
RBI has issued definitions of different resolution plans and an indicative list of financial difficulty, and directed lenders to share data on certain defaulted borrowers with the central bank’s database on large exposures on every Friday.
The large accounts are mainly those where banks have initiated resolution and are classified as restructured standard assets. Indian banks are sitting on a stressed assets pool of over Rs 10 trillion.
According to the new rules, for such accounts, where the banking sector’s aggregate exposure is Rs2,000 crore above, lenders must implement a resolution plan within 180 days, starting 1 March 2018.
“If a RP (resolution plan) in respect of such large accounts is not implemented as per the timelines specified, lenders shall file insolvency application, singly or jointly, under the Insolvency and Bankruptcy Code 2016 (IBC) within 15 days from the expiry of the said timeline,” the RBI said in notification issued late on Monday.
This circular comes at a time when banks are finalizing resolution plans for 11 of the 12 accounts in RBI’s first defaulter list under the insolvency and bankruptcy code. They are also filing insolvency petitions for some of the 28 accounts which were part of central bank’s second defaulter list.