Revised RBI norms to fix NPA mess at one go

Framework has specified rules for "early identification" of stressed assets

Expressing the government’s firm commitment to deal with the NPA problem, Financial Services Secretary Rajiv Kumar said on Tuesday that RBI’s revised guidelines will help clean up the bad loan mess in one go within a strict timeframe.

“It is a wake-up call to defaulters. The government is determined to clean up things in one go and not defer it. Resolution now will happen within a timeframe,” he said.

The revised framework has specified norms for “early identification” of stressed assets, timelines for implementation of resolution plans, and a penalty on banks for failing to adhere to the prescribed timelines.

The latest notification issued by Reserve Bank of India (RBI) on Monday night has also withdrawn the existing mechanism which included Corporate Debt Restructuring Scheme, Strategic Debt Restructuring Scheme (SDR) and Scheme for Sustainable Structuring of Stressed Assets (S4A).

The Joint Lenders’ Forum (JLF) as an institutional mechanism for resolution of stressed accounts also stands discontinued, it said, adding that “all accounts, including such accounts where any of the schemes have been invoked but not yet implemented, shall be governed by the revised framework”.

“All four restructuring schemes were available earlier when IBC (Insolvency and Bankruptcy Code) was not in place.

The revised norms are a more transparent system for resolution,” he said. “We don’t see much impact on provisioning. Growth (loan) is intact as more capital will be available through sale of non-core assets,” he said.

Banks still have 180 days to resolve stressed assets.

Last year, the government had given more powers to the RBI to push banks to deal with nonperforming

assets (NPAs) or bad loans. Gross NPAs of public sector and private sector banks as on September 30, 2017 were Rs 7,33,974 crore, Rs 1,02,808 crore, respectively.

Commenting on the new norms, bankers said RBI wants IBC main tool for resolution where banks fails to reach a consensus.

“RBI now wants IBC to be the main instruments for the resolution of stressed assets where the banks are not able to work out any other resolutions,” SBI managing director (retail and digital banking) P K Gupta said.

Reporting will have to be done to CRILC for borrowers having aggregate exposure of Rs 5 crore and above.