Income Recognition, Asset Classification and Provisioning Norms PDF

Back to INDEX Income Recognition, Asset Classification and Provisioning Norms Recommendation made by the Committee on the Financial System (Chairman Shri M. Narasimham), The policy of income recognition should be objective and based on record of recovery rather...

Back to INDEX Income Recognition, Asset Classification and Provisioning Norms Recommendation made by the Committee on the Financial System (Chairman Shri M. Narasimham), The policy of income recognition should be objective and based on record of recovery rather than on any subjective considerations. The classification of assets of banks has to be done on the basis of objective. The provisioning should be made on the basis of the classification of assets based on the period for which the asset has remained non-performing and the availability of security and the realisable value thereof. Non-performing asset (NPA) is a loan or an advance where: Interest / Principal overdue >90 days for term loan CC out of Order for more than 90 days, Out of order means either outstanding is more than sanctioned limit / DP or credits are not enough to cover the interest debited during the previous 90 days period. In case of Bill purchased / discounted, bill remains overdue >90 days. In case of Agri loans, Instalment / interest is overdue for two crop seasons for short term duration crop and one crop season for long term duration crops. The amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitisation transaction undertaken. In respect of 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. An account where the regular/ ad hoc credit limits have not been reviewed/ renewed within 180 days from the due date/ date of ad hoc sanction will be treated as NPA. - Any amount due to the bank is not paid on the due date fixed by the bank. Income Recognition Policy: The policy of income recognition has to be objective and based on the record of recovery. Therefore, the banks should not charge and take to income account interest on any NPA. This will apply to Government guaranteed accounts also. However, interest on advances against Term Deposits, National Savings Certificates (NSCs), Kisan Vikas Patras (KVPs) and life insurance policies may be taken to income account on the due date, provided adequate margin is available in the accounts. Fees and commissions earned by the banks as a result of renegotiations or rescheduling of outstanding debts should be recognised on an accrual basis over the period of time covered by the renegotiated or rescheduled extension of credit. In cases of loans where moratorium has been granted for repayment of interest, income may be recognised on accrual basis for accounts which continue to be hall be evaluated against the definition of Page | 659  Back to INDEX ASSET CLASSIFICATION Sub Standard First 12 Months from Date of NPA. Doubtful- Next 12 Months in DA 1, Next 24 months in DA 2, thereafter DA 3. Loss - A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection, but the amount has not been written off wholly. Advances under consortium arrangements: Asset classification of accounts under consortium should be based on the record of recovery of the individual member banks and other aspects having a bearing on the recoverability of the advances. Accounts where there is erosion in the value of security/frauds committed by borrowers: If realisable value is less than 50% - Direct classification to Doubtful Asset If realisable value is less than 10% - Direct classification to Loss Asset Advances against Term Deposits, NSCs, KVPs, etc. - Advances against term deposits, NSCs eligible for surrender, KVPs and life insurance policies need not be treated as NPAs, provided adequate margin is available in the accounts. Advances against gold ornaments, government securities and all other securities are not covered by this exemption. Agricultural advances - A loan granted for short duration crops will be treated as NPA, if the instalment of principal or interest thereon remains overdue for two crop seasons. A loan granted for long duration crops will be treated as NPA, if the instalment of principal or interest thereon remains overdue for one crop season. Project Under Implementation: DCCO to be clearly spelt out and should be documented in appraisal note. In case DCCO is deferred and revised DCCO falls within 2 years for infrastructure projects and 1 year in case of non-infrastructure projects (including CRE), it will not be treated as restructuring provided all other terms & conditions remain unchanged. The same may be explained as: Particular Infrastructure Non- Commercial Real Provision Projects Infra Estate Projects Revised 2 Years 1 Year 1 Year 0.40% i.e. equal to DCCO falls std assets within Delay due Another 2 -- --- 5% From the date to Court years i.e. total of such Case 4 Year restructuring till the Delay due Another 1 Another Another 1 year i.e. revised DCCO or 2 to reason year i.e. total 1 year total 2 Years provided years from the beyond 3 Years i.e. total that the revised date of control of (except 2 Years repayment schedule restructuring, promotors Court Case) is extended only by a whichever is later period equal to or shorter than the extension in DCCO In case of infrastructure projects, where Appointed date is shifted due to the Page | 660  Back to INDEX inability of the Concession Authority to comply with the requisite conditions, conditions. In case of banks may permit extension of the DCCO of the project up to two years in addition to the periods quoted in above table. Credit Card will be treated NPA if the minimum amount due, as mentioned in the statement, is not paid fully within 90 days from the payment due date mentioned in the days. Provisioning Standard Assets Type of Asset Provisioning Farm Credit to agricultural activities, 0.25% individual housing loans and SMEs sectors CRE 1% CRE RH 0.75% Housing Loan at Teaser Rate 2% 0.40% (After 1 year from the date on which the rates are reset at higher rates Advances restructured and classified as 5% standard in terms of the Master Direction Reserve Bank of India (Relief Measures by Banks in Areas affected by Natural Calamities) Directions 2018 SCBs All other loans and advances 0.40% Provisioning - Non-Performing Assets Asset Time Period Provisioning Classification Sub Std First 12 months from Date 15% - General of NPA 20% - Infrastructure (Unsecured Portion) 25% - Unsecured other than infrastructure Doubtful Asset I Next 12 Months 25% - Secured Portion + 100% Unsecured Portion Doubtful Asset II Next 24 Months 40% - Secured Portion + 100% Unsecured Portion Doubtful Asset III 5th Year onwards from 100% Date of NPA Loss -- 100% In case of advance guaranteed by ECGC / CGTMSE / CRGFTLIH / NCGTC no Page | 661  Back to INDEX provision need be made towards the guaranteed portion. The amount outstanding, in excess of the guaranteed portion, should be provided for as per the extant guidelines on provisioning for non-performing assets. Provisioning Norms are borrower wise and not facility wise. SMA Classification: For Term Loans SMA Sub- Basis for classification Principal or interest payment or categories any other amount wholly or partly overdue between SMA 0 Up to 30 Days SMA - 1 31 60 days SMA - 2 61 90 days SMA Classification: For Revolving Facilities like CC / Overdraft etc SMA Sub- Basis for classification Outstanding balance remains categories continuously in excess of the sanctioned limit or drawing power, whichever is lower, for a period of: SMA - 1 31 60 days SMA - 2 61 90 days Central Repository of Information on Large Credits (CRILC): all borrowers having aggregate exposure of 5 crore and above CRILC-Main Report shall be submitted on a monthly basis a weekly report of instances of default by all borrowers by close of business on every Friday, or the preceding working day if Friday happens to be a holiday RBI MASTER CIRCULAR - PRUDENTIAL NORMS ON INCOME RECOGNITION, ASSET CLASSIFICATION AND PROVISIONING PERTAINING TO ADVANCES dated 02.04.2024 can be downloaded by Clicking Here Page | 662  Back to INDEX SARFAESI Act,2002 SARFAESI stands for - The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, I. Before issuance of Demand Notice u/s 13(2): It shall be ensured that Documents are in force, properly executed and are without any discrepancies. CERSAI registration is there. Mortgages are valid and enforceable. Properties secured are identifiable and clearly demarcated. Borrower(s) / Guarantor(s) / Mortgagor(s) (individuals) are alive Liability is above one Lakh and more than 20% of the debt payable by the parties Securities sought to be realized are not agricultural properties. All liquid securities are appropriated. Any other liabilities against the same properties are there to be verified and mentioned in the Demand Notice. II. While Issuing demand notice Branches/Regional Offices shall ensure the following: Demand Notice shall be issued to the Borrower(s) / Guarantor(s)/ Mortgagor(s) within a maximum period 15 days from the date of NPA. Notice shall be sent to Borrower(s)/Guarantors)/Mortgagor(s) at the last known addresses available with the Branch. Once Demand Notice is issued by Regd. Post it shall be verified for service on all the parties. For any reason, if it is not served in normal course, a decision to be taken for substitute service of demand notice within 10 days of issuance of demand notice. Statutory period of 60 days has to be computed from the date of service of the demand notice on all parties/publication of demand notice excluding the date of service/Publication If any reply/ objection is received from the Borrower(s)/Guarantor(s)/ Mortgagor(s), the same shall be replied immediately however not beyond 15 days of the receipt without fall). III. Possession stage Branches/ROs shall complete the formalities of taking symbolic possession immediately after completion of statutory period of 60 days. However, within a maximum period 10 days of completion of statutory period of 60 days and publication of possession notice shall be done within 7 days. Caveats have to be filed in appropriate High Court and DRTS immediately after taking symbolic possession. Valuation Reports must be obtained within a maximum period of 10 days. Branches/ROs shall file application for physical possession under Sec.14 of SARFAESI Act with District Collector / CMM court as the case may be immediately after taking symbolic possession. Branch/Authorized Officer shall send a notice to the tenant(s) / debtors Page | 663  Back to INDEX under section 13(4)(d) for remittance of the amount due by them to the borrower, to our Bank. IV. Sale Stage: a. Branches/ROs shall put the properties for sale with symbolic possession on case-to-case basis immediately after fixing of Reserve Price without waiting for physical possession. b. It shall be ensured that the caveats are in force at the time of sale. (Caveats are valid for 90 days only and after expiry of 90 days fresh caveats have to be filed) c. The minimum reserve price for the auction will be fixed as under: i. For first auction, reserve price is to be fixed at 95% of FMV. ii. For next auction, reserve price is to be fixed at 100% of FSV and one sale is to be conducted. iii. For next auction, reserve price is to be fixed at 90% of the FSV and one sale is to be conducted. iv. For next auction, reserve price is to be fixed at 80% of the FSV and one sale is to be conducted. v. For next auction, reserve price is to be fixed at 70% of the FSV and one sale is to be conducted. vi. For next 2 auctions, reserve price is to be fixed at 60% of the FSV and one sale is to be conducted. d. CO SARFAESI Committee shall consider fixation of reserve price below 60% of the FSV on case-to-case basis depending upon the merits of the recommendations. General Instructions: If any Borrower(s) / Guarantor(s) / Mortgagor(s) approaches Branch or Regional Office with upgradation / OTS requests till OTS has been sanctioned with upfront amount and payment is commenced as per sanction terms or Account is upgraded in the Finacle system, SARFAESI Actions including issuance of sale notice and conducting of sale shall be continued. SARFAESI actions should not be stopped on the grounds of Part payments Intermittent remittances / OTS negotiations / upgradation requests. Negotiations for OTS / Upgradation shall be continued simultaneously without stopping the SARFAESI Actions till the OTS proposal is sanctioned, and initial payment is received, or full overdue amount received for upgradation of the account. In the case of Branches headed by Senior Managers and below, it is the responsibility of the AGM / Chief Manager / Senior Manager who are in charge of NPA recovery at Regional Office to ensure that recovery actions are initiated and continued till their logical conclusion as per the timelines. specified in the Annexure. In the accounts which are admitted for CIRP in NCLTs, moratorium is not applicable for the properties mortgaged by individual or corporate guarantors and those properties can be sold under SARFAESI Act. However, if the personal insolvency or CIRP is initiated against the personal guarantors or corporate guarantors as the case may be, then moratorium will be applicable against the properties mortgaged by them also. Page | 664  Back to INDEX RO SARFAESI Committee while fixing the reserve price shall verify and record the compliance of below annexed timelines. If there is any deviation from the timeline prescribed, the reasons shall be enquired and recorded. If the reasons are not valid, the Chairman of RO SARFAESI Committee (SRM / CRM) shall take appropriate corrective measures with suitable action against the staff members responsible for the delay. Annexure TIMELINES FOR SARFAESI ACTIONS Trigger Date (T) = Date of NPA / MOC Date S. No. Action Timeline (Outer Limit) 1 Issuance of Demand notice u/s.13(2). T + 15 days 2 Verification of service of Demand Notice on T + 25 days Borrower(s) / Guarantor(s) / Mortgagor(s). If Demand Notice is not served on any of the T + 30 days parties, Publication of abridged version of Demand Notice in 2 News Papers. 3 Sending reply to the objections / requests made by Within 15 days the Borrower(s) / Guarantor(s) / Mortgagor(s) in from the date of response to Demand Notice, if any. receipt of objections / reply 4 Taking Symbolic Possession after completion of 60 T + 95 Days days from the date of normal service / substitute service. 5 Publication of possession Notice in two News T + 102 Days Papers 6 Applying by Authorized officer or engagement of T + 105 Days Advocate for applying to DM / CMM for Physical Possession 7 Filing of Caveats in DRT(s) / High Court wherever applicable 8 Obtention of Valuation Report(s) 9 Fixation of Reserve Price by RO SARFAESI T + 110 Days Committee 10 Issuance of Sale Notice to the parties and T + 115 Days publication of Sale Notice 11 Date of Sale T + 150th Day Page | 665  Back to INDEX SARFAESI Simplified Our Bank vide circular dated 11.01.2017 issued SARFAESI simplified booklet which has helped the branches in recovering the amount under SARFAESI Act by providing all guidelines and format at one place. Subsequently Law Department vide circular dated 13.01.2023 issued modification in existing clauses and new clauses were added. The gist of new clauses added in existing SARFAESI simplified booklet is as below: FIXING OF RESERVE PRICE OF PROPERTIES (MOVABLE AS WELL AS IMMOVABLE ASSETS) BY RO SARFAESI COMMITTEE ON EXPIRY OF ONE YEAR VALIDITY PERIOD OF THE VALUATION REPORT: Fresh valuation of the property is to be taken if the validity of the present valuation report is more than one year Irrespective of the value in the old valuation, reserve price for subsequent auction sales is to be fixed at FSV of new valuation and one sale is to be conducted. For next auction, reserve price is to be fixed at 90% of the FSV of new valuation and one sale is to be conducted. For next auction, reserve price is to be fixed at 80% of the FSV of new valuation and one sale is to be conducted. For next auction, reserve price is to be fixed at 70% of the FSV of new valuation and one sale is to be conducted. For next 2 auction, reserve price is to be fixed at 60% of the FSV of new valuation and one sale is to be conducted. CO SARFAESI Committee shall consider fixation of reserve price below 60% of the FSV on case-to-case basis depending upon the merits of the recommendations. RO SARFAESI Committee to consider the Government value/Guideline value for fixing reserve price of movable as well as immovable secured assets in first auction only when such Government/Guideline value is more than FMV of the security. Page | 666  Back to INDEX Special OTS/OCS Scheme 2024 Special OTS / OCS Scheme 2024 is applicable for Resolution of Non NCLT NPA accounts up to Rs. 25.00 Crore of a) Substandard unsecured Education Loans (Not covered by any Central/State Govt Guarantee). b) Substandard Agri KCC Loans (Without collateral security). c) Doubtful and Loss Assets. Delegation of powers: Sanctioning authority for Compromise Settlement proposal for Non NCLT NPA accounts with Net Book outstanding up to Rs. 25.00 Crore will be one level higher in hierarchy than the authority vested with power to sanction the credit/investment exposure, as below: Sanctioning Authority for Limit last sanctioned by Compromise Settlement Branch RLCC OTS (For Accounts with Net Book (Under Special OTS/OCS Scheme outstanding up to Rs. 20.00 Lakh) 2024) Branch RLCC (CRM/SRM) (For Accounts with Net Book outstanding above Rs. 20.00 Lakh) RLCC (CRM/SRM) HLCC (GM) HLCC (GM) HLCC (ED) Provided that any official who was part of sanctioning the loan (as individual or part of a committee) shall not be part of approving the proposal for compromise settlement of the same loan account, in any capacity. Group accounts - Delegation power for Compromise Settlement proposals in a Group will be determined based on the higher of the authority of the following: a) Authority under whose discretionary powers the single as well as group exposure of the proposed account falls. b) The highest sanctioning authority of the existing borrowers in the group. CONSTITUTION OF RLCC-OTS COMMITTEE RLCC OTS Committee (under Special OTS/OCS Scheme 2024) RLCC-OTS Committee to be constituted at Regional Office for sanction of Compromise Settlement for NPA Accounts with Net Book outstanding up to Rs. 20.00 Lakh under Special OTS/OCS Scheme 2024. Proposed members of RLCC-OTS Committee are as follows. a) RO Second Line Officer / Chief Manager (Chairman) b) Senior Manager / Manager at RO c) Senior Manager / Manager at RO d) RO Risk Manager Page | 667  Back to INDEX Convener: Manager/ Senior Manager of SAMD, RO. Quorum: 3 members including Chairman & RO Risk Manager whose presence will be compulsory. Committee members will be nominated by concerned Regional Manager. In case of absence of any member, Looping Chief Manager/Officer should attend. If any of the above members had handled the referred account as recommending or sanctioning authority, he/she shall recuse himself/herself from the Committee. Compromise Settlement proposals for NPA Accounts with Net Book outstanding above Rs. 20.00 Lakh under Special OTS/OCS Scheme 2024 will be sanctioned by respective sanctioning authority from RLCC (CRM/SRM) and above without reference to RLCC OTS (under Special OTS/OCS Scheme 2024). INELIGIBLE ACCOUNTS FOR OTS/OCS CONSIDERATION 1. In respect of NPA accounts with Net Book outstanding of above Rs. 1.00 Crore and up to Rs. 25.00 Crore, if the NPV of securities is more than 125% of the higher of the Net Book outstanding or Notional dues, such accounts to be considered for settlement only under Recovery Policy. 2. Jewel Loans, Housing Loan, Mortgage Loan (Loan against Property (LAP)), Liquirent, Miscellaneous Cash Credit (MCC), Loan against NSC/IVP/LIC policies, shares and loans against Deposits with the following exceptions: a) If the securities are already exhausted and the account is existing without any security and there are no linked accounts with security or the linked accounts have inadequate security, OTS/OCS can be considered for such accounts under Special OTS/OCS Scheme 2024. b) All subsidy eligible Housing Loans and Housing Loan accounts under any Govt. Sponsored Scheme like Indira Awas Yojana, Rajiv Gandhi Awas Yojana, etc., with Net Book outstanding up to Rs.10.00 Lakh are eligible to be considered under Special OTS/OCS Scheme 2024. 3. Educational loans where the income of borrower/co-borrower/guarantor either single or jointly exceeds Rs.12.00 Lakh per annum. 4. Substandard Education loans sanctioned on or after 31.03.2018. 5. Substandard Agri KCC loans sanctioned on or after 31.03.2018. 6. Nil restructured accounts under Substandard Education loans and Agri KCC (without collateral security) category. 7. In the case of NPAs with Net Book outstanding of Rs. 1.00 Crore and above, the accounts where the net worth of the borrowers or guarantors as on 31.03.2024, either singly or jointly exceeds Net Book outstanding by 200% or more, are excluded from being considered for OTS/OCS under the Special OTS/OCS Scheme 2024. 8. Accounts where a minimum of one e auction has not been conducted for accounts with Net Book outstanding of above Rs. 20.00 Lakh, wherever securities enforceable under SARFAESI Act are available. 9. Page | 668  Back to INDEX of wilful default/fraud/malfeasance. 10. Net Book outstanding in respect of Suit filed accounts, where part payment is made pursuant to any Court Order and accounts where OTS/OCS is sanctioned and part payment is made and OTS/OCS is in force, such accounts shall be guided by the respective Court Order and OTS/OCS sanction terms as decided by the sanctioning authority. 11. Accounts which are under Rehabilitation/Restructuring process are not eligible. However, if Rehabilitation/Restructuring has failed, the account can be considered for OTS/OCS under Special OTS/OCS Scheme 2024. MINIMUM OTS/OCS SETTLEMENT AMOUNT FOR ALL THE ELIGIBLE NPA ACCOUNTS (1) Doubtful and Loss Accounts with Net Book outstanding up to Rs. 20.00 Lakh - Settlement under RLCC OTS Committee Discretionary Powers I. All Agricultural loans under Doubtful and Loss category with Net Book outstanding up to Rs. 10.00 Lakh with or without security. DA1 & DA2 accounts Minimum 40% of Net Book Outstanding as at the end of as at the end of the the previous quarter less repayments made in current previous quarter* quarter. DA3 & Loss accounts Minimum 30% of Net Book Outstanding as at the end of as at the end of the the previous quarter less repayments made in current previous quarter* quarter. II. All Agricultural loans under Doubtful and Loss category with Net Book outstanding above Rs. 10.00 Lakh up to Rs. 20.00 Lakh with or without security. All Doubtful & Loss Minimum 60% of Secured portion + 40% of Unsecured accounts as at the portion of Net Book outstanding as at the end of the end of the previous previous quarter less repayments made in current quarter* quarter. III. Other NPA accounts with Net Book outstanding up to Rs.20.00 Lakh including Education loans: ACCOUNTS WITHOUT SECURITY Minimum 40% of Net Book outstanding as at the end of the previous quarter less repayments made in current All Doubtful & Loss quarter. accounts as at the end ACCOUNTS WITH SECURITY of the previous quarter* Minimum 60% of Secured portion + 40% of Unsecured portion of Net Book outstanding as at the end of the previous quarter less repayments made in current quarter. Page | 669  Back to INDEX (2) Doubtful and Loss Accounts with Net Book outstanding above Rs. 20.00 Lakh and up to Rs. 25.00 Crore - Settlement under RLCC (CRM/SRM), HLCC (GM) & HLCC (ED) Discretionary Powers All Doubtful & Loss Minimum 60% of Secured portion + 40% of Unsecured accounts as at the portion of Net Book outstanding as at the end of the end of the previous previous quarter less repayments made in current quarter* quarter. (3) Substandard Accounts a) Net Book outstanding up to Rs. 20.00 Lakh - Settlement under RLCC OTS Committee Discretionary Powers b) Net Book outstanding above Rs. 20.00 Lakh up to Rs. 25.00 Crore Settlement under RLCC (CRM/SRM), HLCC (GM) & HLCC (ED) Discretionary Powers Substandard assets a) Unsecured Education loans (Not covered by any Central/State Govt Minimum 60 % of Net Book outstanding Guarantee) as at the end of the as at the end of the previous-to- previous-to-previous quarter* previous quarter less repayments made in the previous & current and quarters. b) Agri KCC loans (Without collateral security) as at the end of the previous-to-previous quarter COMMON TERMS AND CONDITIONS FOR ALL NPA ACCOUNTS 1. The maximum period for settlement for OTS/OCS amount is three months only from date of communication of OTS/OCS sanction, which should not be later than two days from the date of sanction by the authority. 2. Special OTS/OCS Scheme 2024 is valid up to 31.03.2025. However, the OTS/OCS sanctioned in the fourth quarter (period from 01.01.2025 to 31.03.2025) of FY 2024 25 will remain valid after 31.03.2025 up to the maximum time limit of three months permitted for payment of OTS/OCS amount. 3. The Special OTS/OCS scheme 2024 is non-discretionary and non-discriminatory. 4. Task Force Meeting (TFM) is mandatory for HLCC (GM) & HLCC (ED) discretionary powers and Task Force Meeting (TFM) to be conducted in the presence of Regional Head/Second line functionary of RO and copy of TFM minutes to be submitted along with the OTS/OCS proposal. For RLCC OTS & RLCC (CRM/SRM) discretionary powers, Task Force Meeting (TFM) is not mandatory. 5. SARFAESI action: In respect of accounts with Net Book outstanding of above Rs. 20.00 Lakh and up to Rs. 25.00 Crore with SARFAESI enforceable securities, at least one e Page | 670  Back to INDEX auction should have been conducted. However, in case of agricultural advances granted under various Agri credit schemes where at the time of sanction, the classification of the security is Agri land and subsequently any residence is constructed in partial/full in the Agri land by the borrower/guarantor and continue to be Agri land in the Revenue records of the Government then the above condition is not applicable. 6. Before deciding on OTS/OCS, Branch Head shall visit the borrower(s)/co- borrower(s)/guarantor(s) & the unit and submit unit visit report. The visit report should be a supporting document for Special OTS/OCS Scheme 2024. 7. Wherever the calculation of minimum required amount involves secured portion of Net Book outstanding, the secured portion is based on the FMV of the security. The valuation of securities must be in accordance with the guidelines available in Recovery Policy. To recapitulate, a) Valuation should be less than one year old as on the date of offer of compromise settlement. b) If the value (FMV) of a security assessed is Rs. 5.00 Crore and above, one more valuation must be obtained and if the difference between the two valuations is more than 10%, a third valuation must be obtained and the highest among the valuations will prevail. c) Valuation must be obtained from a panel valuer other than the one who has assessed at the time of grant of credit facilities. d) The Branch Head must visit the securities and ascertain, assess the value of the security based on local enquiries with residents/property dealers and certify the reasonability of valuation. Format for the same is available in Recovery Policy. 8. 10% of the OTS/OCS amount to be remitted by the borrower(s)/co- borrower(s)/guarantor(s) as upfront amount (mandatory) for NPA accounts in Doubtful & Loss category with Net Book outstanding above Rs. 20.00 lakh. In respect of Substandard accounts, 10% upfront amount is mandatory for all the accounts irrespective of the Net Book outstanding. Balance 90% of the OTS/OCS amount to be paid within three months. 9. In all cases if borrower/co-borrower/guarantor pays the OTS/OCS amount within 30 days instead of three months period permitted, an incentive of 1% (for Doubtful and Loss accounts), 5% (for Substandard accounts) of the OTS/OCS amount can be considered for waiver. 10. In all cases, if the borrower is deceased, 5% discount on the OTS/OCS amount to be considered. This is applicable only in accounts where the borrowers are Individuals or Proprietary concerns. 11. Maximum incentive for point No. 9 &10 is restricted to 5% only. 12. The OTS/OCS shall stand automatically cancelled if the sanction terms and conditions are not complied with, at any point of time. A letter advising the cancellation will be issued to the borrower. Page | 671  Back to INDEX 13. of Law, DRT as well as under SARFAESI Act, if the sanction terms and conditions are not complied within the time stipulated. 14. 15. Branch should ensure that staff accountability has been initiated before conveying sanction of OTS/OCS and is completed within the stipulated time as per Central Office Permanent Circular No. MISC/124/2023-24 dated 18.10.2023 and subsequent modifications there to. 16. All compromise settlement proposals sanctioned by RLCC OTS & RLCC (CRM/SRM) Committees is to be reported to HLCC (GM) through SAMD, CO on monthly basis. Compromise settlement proposals sanctioned by HLCC (GM) at CO to be reported to HLCC (ED) and HLCC (ED) at CO to be reported to CAC on quarterly basis by SAMD, CO. RO to report the Compromise Settlement approved by both RLCC Committees to SAMD, CO then and there through NPAWAR portal or any other mechanism added by SAMD, CO from time to time. RO to submit sanctioned by RLCC Committees to SAMD, CO as per the format attached in Annexure XI. 17. In respect of Compromise Settlement Proposals with Net Book outstanding up to Rs. 20.00 Lakh settled by RLCC-OTS committee, Write-off amount and interest waiver amounts to be claimed through HOTS menu in Finacle. In respect of OTS/OCS proposals with Net Book outstanding above Rs. 20.00 Lakh settled by RLCC (CRM/SRM) Committee, Write-off amount to be claimed directly from BSMD, Central Office (as per Process Flow mentioned in Annexure IX) along with the following documents. a) OTS/OCS sanction letter. b) Minutes of sanctioning authority. In respect of compromise settlement proposals sanctioned by various authorities at CO, Write-off amount to be claimed by Branch/RO from BSMD, CO through SAMD, CO (as per Process Flow mentioned in Annexure X). Terms and conditions to be incorporated in sanction advice of Out of Court Compromise Settlement (OCS) a) Consent decree is to be obtained, as per RBI guidelines, before/while settling the dues, with default clause that in the event of default to make payment as per the agreed terms, the Bank is entitled to recover the entire dues as per the original terms of contract claimed in the plaint/OA. b) While recording the terms and conditions of the settlement in a consent order to be stating that the settlement agreed between the parties shall not in any way affect or be construed as settlement of ongoing criminal cases/proceeding pending in -borrower(s)/guarantor(s). Page | 672  Back to INDEX EXTENSION OF TIME FOR PAYMENT OF OTS/OCS AMOUNT Some of the NPA borrowers may not be able to pay the OTS/OCS amount within the stipulated three months period, due to unavoidable circumstances such as family issues, unemployment, failure in agriculture due to weather conditions like drought, monsoon, etc., and especially when borrowings from the market and sale of properties are involved. 1. Extension of time for payment of Compromise Settlement amount for Special OTS/OCS scheme shall be permitted by Regional Head and GM (SAMD) as follows to extend the time up to a maximum of three months from the due date on a case- to-case basis and strictly on merits of each case. This includes all OTS/OCS sanctions under RLCC OTS & RLCC (CRM/SRM) Committees and various authorities at CO as below: a. Regional Heads for OTS/OCS sanctions, where at least 25% of the sanctioned OTS/OCS amount for Substandard accounts and 50% of the sanctioned OTS/OCS amount in the case of Doubtful and Loss accounts has already been deposited, irrespective of the OTS/OCS sanctioning authority and b. GM (SAMD) for OTS/OCS sanctions, where at least a minimum of 20% of OTS/OCS amount but less than 50% of OTS/OCS amount has been deposited in respect of sanctions by any layer of authority, subject to the following terms and conditions. i. The total time for OTS/OCS payment does not exceed six months from the date of OTS/OCS sanction and ii. Simple interest @ 12% is collected for the period of delay from the due date to till payment of entire OTS/OCS amount. 2. GM (SAMD) is also empowered to ratify and confirm the action of Regional Heads for recovery of OTS/OCS amounts past due date without prior sanction of extension in exceptional cases, provided that a. The OTS/OCS amount is recovered within the time permitted for extension as per provisions for extension stated above. And b. Simple interest @ 12% for the delayed period is also recovered. 3. Such extensions under respective sanctioning authority are also permissible in the case of OTS/OCS sanctioned in the last quarter of FY 2024-25 where validity exists beyond the date of expiry of Special OTS/OCS Scheme 2024, by virtue of the time available for payment of OTS/OCS, provided the extension is in accordance with the norms stated above. For example, if an OTS/OCS has been sanctioned on 15.02.2025 to be repaid within 3 months, valid till 14.05.2025, one time extension of 3 months from expiry date of previous OTS/OCS can be permitted i.e. from 15.05.2025 up to 14.08.2025. Page | 673  Back to INDEX OTHER GENERAL GUIDELINES Individual borrowers If a borrower has more than one category of accounts mentioned in the Special OTS/OCS Scheme 2024, separate formula for each category of accounts can be applied and OTS/OCS may be settled. But it shall be ensured that the securities and personal guarantees shall not be released till the borrower closes the entire liability. However, if an individual borrower has several NPA accounts, the total liability should be reckoned to determine the authority under whom the discretionary powers for OTS/OCS sanction are vested with, even if minimum required amount for each account can be computed separately to arrive at the OTS/OCS amount. All NPA accounts of an individual borrower must be settled together unless the account is upgraded and is backed by adequate enforceable and marketable security as per norms. Group borrowers In case of group accounts, all the NPA accounts in group must be settled together. However, continuation of the standard account/s in a group may be considered/permitted on merits by the respective layer of authority subject to a) Concurrence of the concerned sanctioning authority of standard account(s). b) The sanction of credit limits should be in force. c) The standard account should not be in SMA at the time of OTS/OCS sanction by the Competent Authority. If the securities are common for STANDARD and NPA accounts, the securities should not be released. OTS/OCS can be considered by the respective layer of authority based on Net Book outstanding in individual account of the Group. For e.g. If there are two accounts in a Group, one with Net Book outstanding of Rs. 3.00 Crore and the other one is with Net Book outstanding of Rs. 5.00 Crore, the first account can be considered by RO and the second can be settled by HLCC (GM). Even if combined offer is received for total expsoure of the group, OTS/OCS can be settled by considering individual outstanding of the borrowers in the group by the respective layer of authorities. Wherever there is a common security in the Group accounts, the security value has to be apportioned to those accounts proportionately, as assigned at the time of sanction of Credit facility(s), while considering OTS/OCS under Special OTS/OCS Scheme 2024. If the Group accounts have a common guarantor or common borrower without any common security, the worth of the borrower and the guarantor alone have to be considered while considering OTS/OCS under Special OTS/OCS Scheme 2024. To download full circular of Special OTS / OCS Scheme, 2024- Click Here. Page | 674  Back to INDEX Customer Online Special OTS Application in www.iob.in for NPA accounts with Net Book outstanding up to Rs. 1.00 Lakh We have Special OTS Schemes, as per which, discretionary powers have been given to various layers for settlement of NPA accounts. Currently, the borrower is visiting the branch for submitting OTS application manually and settlement of OTS is done by various committees as per delegated powers conferred to them. Now, we are launching Customer Online Special OTS Application in our website www.iob.in which will enable the borrower to apply for One Time Settlement through online in NPA accounts with Net Book outstanding up to Rs. 1.00 Lakh and to make online payment. To download full circular Click Here. Page | 675  Back to INDEX POLICY FOR EMPANELMENT OF DEBT RECOVERY AGENT AND DETECTIVE/INVESTIGATING AGENCY 2024 EMPANELMENT OF DEBT RECOVERY AGENT (DRA) - Power to empanel Debt Recovery Agent vests with RLCC. Empanelment of Retired Officers of the Bank as Recovery Agent i. Retired Officials of the Bank may be engaged as Recovery Agents subject to clearance from Vigilance Department. ii. However, in case of retired executives there shall be a cooling period of one year from the date of retirement and their request shall be considered only on expiry of the cooling period. iii. The Recovery Agent particularly the retired executives empaneled as Recovery Agent should not be entrusted with accounts where they are involved directly or indirectly in the process of sanction/ enhancing /renewal etc. of the account. iv. The Retired officials are exempted from passing the exam for Debt Recovery Agents and producing IIBF certificate as per IBA circular. Retired officials engaged as DRA should be entrusted only with accounts under Doubtful, Loss and Written off category for recovery of dues. It should be ensured that no Substandard account is entrusted to the retired officials. Accounts eligible for entrustment to DRAs 1. All NPA accounts where symbolic possession under SARFAESI is taken or Substandard accounts more than three months old (Other than unsecured Education Loan NPA accounts) 2. All Unsecured Education loan NPA accounts without any minimum time limit are eligible for entrustment. 3. Technically written off accounts. Discretionary Powers for Engaging Debt Recovery Agents: The power to entrust works to Debt Recovery Agents shall be as under: Layer of Authority Amount - Book O/s as on the date of recommendation for entrustment Non-Corporate Corporate Region Head (SRM) Upton Rs. 10.00 Crore up to Rs. 12.00 Crore Region Head (CRM/GM) up to Rs. 15.00 Crore up to Rs. 20.00 Crore GMs Committee at CO Above SRM/CRM/GM Powers up to Rs.50 Crore Above Rs.50 Crore Committee Page | 676  Back to INDEX Engagement of Detective / Investigating Agency (DIA): A. Guidelines for empanelment of Detective/Investigating Agencies (DIA) for tracing borrowers/ guarantors and identifying their personal assets: In the recent past RBI has been insisting the Banks to identify the Willful Defaulters among the NPA borrowers who have capacity to repay but do not pay and many of the borrowers flee the country without informing the Banks to avoid repayment. There are possibilities that these borrowers/ guarantors have created assets by diversion, and it requires investigation of personal assets for attachment through DRT/Courts. This Policy gives the guidelines for engaging DIA for the following purposes: a. Locate the borrower(s)/ co-borrower(s)/ mortgagor(s), (inside /outside India) including their legal heirs who are either untraceable or not available at the b. Ascertain latest information about their present address(es)/ occupation(s), business(es), income streams, details of their all assets, not charged to the Bank, their location (whether in India or abroad), value and ownership, etc. c. Give details of Bank accounts maintained by the defaulting borrower(s)/ guarantors(s), including their legal heirs. d. Give details of credit facilities availed/ to be availed by defaulting borrower(s)/guarantor(s) from other Banks. e. Confirm present state of ownership of the secured assets by personal visit/market report, duly confirmed by the documents. f. Gather any other information which the Bank cannot access by utilizing normal channels like CIBIL/internet/local enquires and which may be considered B. Accounts Eligible for allocation to DIAs All NPA accounts under any category i.e. Sub-Standard, Doubtful and Loss (whether non suit filed, suit filed or decreed) shall be covered by the Policy in which engagement of detective/ investigating agency is deemed appropriate, as per the requirement. C. Competent Authority for empanelment of DIAs: Power to empanel Detective/ Investigating Agency vests with RLCC. D. Eligibility Criteria for DIAs: Agencies (partnership Firms, Companies, Corporations, etc.) with sufficient means/ resources/ field experience will be considered for engagement. Since, there are no regulatory and statutory guidelines for Detective/ Investigating Agencies, preferably the The Agency must have minimum 3 years of experience in this activity. Page | 677  Back to INDEX E. Discretion for engaging DIAs: The power to entrust works to DIAs shall be as under: Layer of Authority Amount - Book O/s as on the date of recommendation for entrustment Non-Corporate Corporate Region Head (SRM) up to Rs. 10.00 Crore up to Rs. 12.00 Crore Region Head (CRM/GM) up to Rs. 15.00 Crore up to Rs. 20.00 Crore GMs Committee at CO Above SRM/CRM/GM Powers up to Rs.100 Crore Above Rs.100 Crore Committee Empanelment of Seizure & disposal agents / Agency (SDA) Engagement of Seizure & Disposal Agents (SDA): Seizure & disposal agents to be engaged for Seizure of vehicle till disposal of vehicle including safe keeping of seized vehicles, valuation of seized vehicles & resolution of accounts without seizure / Sale of vehicle Empanelment of Seizure & Disposal Agents: The Seizure & Disposal Agents can be an individual or a registered partnership firm or a company or similar entity with the required infrastructure. The individual/ the partners/ the persons engaged by the company should have past experience and expertise in Seizure and Disposal of Vehicles for recovering our dues, including safe keeping of seized vehicles till auction/sale of vehicle. They should also have expertise in recovering the dues in NPA accounts without seizure / Sale of vehicle Powers to empanel Seizure & Disposal Agents (SDA): Power to empanel Seizure & Disposal Agents (SDA) shall vest with RLCC. Accounts eligible for entrustment 1. All NPA accounts where Vehicle is offered as prime / collateral security. 2. Technically written off accounts. Code of Conduct for the SDAs Borrowers/ guarantors would be contacted ordinarily at the place of their choice and in the absence of any specified place at the place of their residence in case of retail customers, for others either in place of their business or their residence as the case may be. Seizure & Disposal Agents (SDA) do not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the privacy of the debtors' family members, referees and friends, sending inappropriate messages either on mobile or through social media, making threatening and/ or anonymous calls, persistently calling the borrower and/ or calling the borrower before 8:00 a.m. and after 7:00 p.m. for recovery of overdue loans, making false and misleading representations, etc. Page | 678  Back to INDEX Discretionary Powers for Engaging Seizure & Disposal Agents: The Delegation power to entrust the account to Seizure & disposal Agents shall be as under: Layer of Authority Book O/s as on date of NPA Regional Head (GM/CRM/SRM) No Limit RO can utilize the services of existing DRAs, if DRAs are already having experience in Seizure of Vehicles and recovery of loans, through Sale of seized vehicles. To download full circular Click Here Fee Structure A. For Recovery - Fee Structure: (Below fees payable are excluding GST) On upgradation of account - Fees - 5% of overdue amount On Closure of account without any write off / interest waiver Unsecured Loans Up to Rs. 2 Lac 10% of amount recovered More than Rs. 2 lac & up to Rs. Rs. 20,000 + 5% of amount recovered over and 1 Crore above Rs. 2 lacs (Maximum fee payable is Rs. 5.10 Lakhs) More than Rs. 1.00 Cr Rs. 5.10 Lakhs + 3% of amount recovered over and above 1.00 Cr (Maximum fee payable is Rs. 20.00 Lakhs) Secured Loans Up to Rs. 1.00 Cr 5 % of amount recovered More than Rs. 1.00 Cr up to 5 Rs. 5.00 Lakhs + 3% of amount recovered over and Crores above 1.00 Cr (Maximum fee payable is Rs. 17.00 Lakhs) More than Rs. 5 Crores Rs. 17.00 Lakhs + 2% of amount recovered over and above 5.00 Cr (Maximum fee payable is Rs. 30.00 Lakhs) B. Recovery Through OTS/OCS Unsecured Loans Up to Rs. 1.00 Cr 5 % of OTS amount recovered More than Rs. 1.00 Cr Rs. 5.00 Lakhs + 2% of OTS amount recovered over and above 1.00 Cr (Maximum fee payable is Rs. 12.00 Lakhs) Page | 679  Back to INDEX Secured Loans Up to Rs. 1.00 Cr 2 % of OTS amount recovered More than Rs. 1.00 Cr Rs. 2.00 Lakhs + 1% of OTS amount recovered over and above 1.00 Cr (Maximum fee payable is Rs. 10.00 Lakhs) Fee Structure for Seizure: Nature of Asset Maximum Fee payable Seizure of 2-Wheeler Rs.3000.00 per vehicle including Parking fee and other expenditures Seizure of Auto rickshaw Rs.5000.00 per vehicle including Parking fee (3-wheeler) and other expenditures Seizure of Car (4-wheeler) Between Rs.7500.00 to Rs.10000.00 based on the size and depreciation value of the security including Parking fee and other expenditures Seizure of Tractor Rs.8000.00 per vehicle including Parking fee and other expenditures Seizure of Bus/Lorry Rs.12000.00 per vehicle including Parking fee and other expenditures C. Fee Structure for SARFAESI Action: Nature of service Maximum fee payable Taking physical possession of the 1 % of the amount Outstanding with securities including filing petition a maximum of up to Rs.2.00 lakhs before District magistrate besides any advocate fee payable Arranging for sale and mobilizing * 2% of the amount recovered with a maximum of up to Rs.15.00 lakhs bidders Any other miscellaneous work that Up to Rs.50,000/- for each such may be entrusted action The fee payable is in addition to reimbursement of actual expenditure There is no bar for any of the Regions to utilize the Recovery Agents of other regions. No specific permission is required from Central Office to utilize their services since they are already empanelled to our Bank. However, the Regional Office which requires the services of the DRA/SDA of other Region shall have to execute an agreement with the Agent as per the Annexure VIII & Annexure XVI (for SDA). PART- II Engagement of Detective/Investigating Agency (DIA): Tenure of Empanelment A Detective Agency once empanelled, one year, which may be further extended on yearly basis, subject to satisfactory performance. Submission of Reports by the Detective Agencies The empanelled agencies will submit their report along with the supporting papers, photographs, audio/video recording etc., if any, collected by them to the respective Regional Office. Page | 680  Back to INDEX Time Frame for submission of reports - A time frame of maximum 60 days will be allowed to the Agency for submission of report. However, if requested by the DIA under exceptional circumstances, further extension of 30 days (total frame will be 90 days) may be permitted by the GM SAMD, CO in all cases irrespective of amount keeping in view complexity of the case. Discretion for engaging DIAs The power to entrust works to DIAs shall be as under: S.No Amount - Book O/s as on the date Layer of Authority of recommendation for entrustment 1 Up to Rs.10.00 Crore Regional head 2 Above Rs.10 Crore to Rs.100 Cr GMs committee at CO 3 Above Rs.100 Cr. committee Fee Structure: The agency will be paid fees on the following rates: Sl.No. Nature of Task Assigned Fee payable 1 On receipt of information about Rs.7500.00 per person subject whereabouts of the to maximum fee of missing/absconding borrower/ Rs.30000.00 under this guarantor/ co-borrower/ director category, per account. etc. subject to production of documentary proof/evidence. 2 For locating properties other than Rs.20,000.00 for each property details of which are available in located, subject to maximum fee of rs.1.50 lakhs under this attachment of the same along with category per account. the documentary proof. (All the properties in one title deed to be considered as one property) 3 For providing any other information, Rs.2500.00 per piece of which may be helpful for recovery of information, with maximum amount of Rs.10,000.00 per other businesses, credit facilities from account. other Banks, accounts with other Banks including verification of present position of properties as per Ban subject to production of documentary proof/evidence. 4 Payment of reasonable out of pocket expenses may also be sanctioned subject to maximum of Rs.10000.00 per account. GM SAMD, CO will be the Competent Authority to take decision for payment of such out of pocket expenses. The Detective Agency to give details of visits/proof of expenditure. 5 In case the Detective Agency fails to Maximum fee of Rs.3000.00 trace the borrower/guarantor etc. per account can be paid. Proof of having taken steps and incurred expenses should be obtained and preserved Page | 681  Back to INDEX on record. 6 In case the Detective Agency fails to Maximum fee of Rs.7000.00 trace the property. per account. Proof of having taken steps and incurred expenses should be obtained and preserved on record. In exceptional circumstances, keeping in view complexities of the case, in case Detective Agencies bring to the notice of the Regional Office beforehand, any special efforts/expenses required, the GMC may consider sanction of maximum of 25 % extra fees/reimbursement of expenses. hours and 19.00 hours unles occupation demands otherwise. Page | 682  Back to INDEX POLICY ON TRANSFER OF LOAN EXPOSURES, 2023 Introduction Transfer/ sale of financial assets to ARCs is governed by provisions of SARFAESI Act and also subject to RBI Prudential and other guidelines issued from time to time. Chapter 1: General conditions General Requirements As per RBI master directions on Transfer of Loan Exposures dated 24.09.2021 policy must ensure independence of functioning and reporting responsibilities of the units and personnel involved in transfer / acquisition of loans from that of personnel inv In our Bank, Committee level approach is being followed for sanctioning of loans at RO & CO. Further transfer/assignment of loans are also approved through committee level approach. Thus, no individual officer can be specified/ identified as originator of loans or assignor of loans. Therefore, the above RBI guidelines are in place. Chapter 2: Transfer of NPA Exposures In order to improve assets quality, maximize returns and profit, Bank has to effect maximum recovery of its impaired assets. Transfer of NPAs is one of the various modes of recovery available with the Bank to boost asset quality. Recovery of NPAs through transfers including transfer to ARCs is accepted as an effective non-legal resolution of the Bank. General Requirements The transfer of NPAs must be done through assignment or novation only; loan participation is not permitted in the case of stressed loans. In general, Bank shall transfer stressed loans, including through bilateral sales, only to permitted transferees and ARCs. However, when negotiated on a bilateral basis, such negotiations must necessarily be followed by an auction through Swiss Challenge method. Accounts not eligible for Transfer The following financial assets are not eligible for Transfer: (i) a) Accounts where restructuring has been approved and terms of approval are being complied with. Page | 683  Back to INDEX b) Accounts where OTS is sanctioned and is in force. However, if for any reason the restructuring terms are not being complied with by the borrower / guarantor or OTS fails, then it may be offered for transfer after advising the borrower / guarantor that restructuring / compromise has failed as the case may be. (ii) Accounts where there are counter claims by the borrowers/guarantors, the counter claims have to be followed up by the Bank / respective branch. However, such accounts may be transferred if the transferee/ assignee agrees to acquire accounts along with counter claims. (iii) Quick Mortality accounts under substandard category. Exemptions: a) QMR accounts can be transferred if it is moved to doubtful category and staff accountability process initiated. b) In portfolio sale/ transfer of Retail/ Agri/ MSME NPAs, the above condition is not applicable. (iv) NPA accounts where SARFAESI action including one auction has not been tested. Exemptions: a) This restriction is not applicable to consortium accounts where consent of creditors representing not less than 60% of the amount outstanding is required for sale under SARFAESI Act (U/s 13(4)). b) In portfolio sale/ transfer of Retail/ Agri/ MSME NPAs the above condition is not applicable. (v) Accounts covered under ECGC/CGTSME guarantee. However, such accounts can be transferred with prior approval of ECGC/CGTMSE. (vi) If the restructuring has been decided outside IBC i.e., through Inter Creditor Agreement (ICA), then the Bank will not transfer such assets to ARC without arranging for its share of additional finance to be provided by a new or existing creditor(s). However, in respect of accounts where restructuring has been sanctioned by our Bank only and if the restructuring plan is not implemented due to default on the part of the borrower, the same can be transferred to ARCs etc. Transfer of Fraud Loans to ARCs: NPAs which are classified as fraud as on the date of transfer are permitted to be transferred to ARCs provided that the responsibilities of the Bank with respect to continuous reporting, monitoring, filing of complaints with law enforcement agencies and proceedings related to such complaints shall also be transferred to the ARC. Identification of NPAs for transfer: At least once in a year, preferably at the beginning of the financial year, Bank shall, with the approval of MCB, identify and list internally the specific NPAs identified for transfer to other institutions, including ARCs. In respect of the NPA accounts of Rs 50.00 Cr & above, recommendation for identification of accounts shall be done by GM (SAMD). In respect of other accounts, recommendation shall be made by ROs. The list of accounts identified Page | 684  Back to INDEX for transfer shall be placed to the MCB for approval through TMC and the list will be valid for one year. Generally, the assets will be transferred/ assigned on full Cash basis. However, for transfer on portfolio basis and in exceptional cases, where the unit is viable for restructuring by way of additional funding and if there is an offer from ARC to acquire the account on Cash + SR basis, we may consider transferring the account on Cash + SR basis either after examining the probabilities of redemption of SRs in a short time. If the reserve price is to be fixed on cash+SR basis, GMC is empowered to approve the same. Transfer of NPAs to non-ARCs shall be on full cash basis only. Transfer / Sale Process: Two methods of sale/ transfer process are to be followed as mentioned below: (i) Swiss Challenge method: Where Bank (Branch/RO/CO) receives a binding offer from ARCs, etc. RBI has advised that the Banks shall put in place Board approved Policy on adoption of Swiss Challenge Method for transfer of their loan exposures in order to bring down vintage of NPAs sold by banks as well as to enable faster debt aggregation by ARCs. Detailed process of Swiss Challenge is given in SOP which forms part of this Policy. (ii) Open Auction method: Where there is no binding offer from any ARC; Reserve price is to be fixed based on valuation as discussed below and same to be communicated to all ARCs who have executed NDA with Bank. Inter-se bidding will be allowed among all bidders and highest bidder will be declared as H1. Detailed process of the transfer of loan exposures under open auction is given in SOP. 2.11 Valuation of Assets: As per RBI master directions on Transfer of Loan Exposures dated 24.09.2021, in case the credit exposure of Bank in the account to be transferred is Rs. 100.00 crores and above, two valuation reports shall be obtained. However, we will continue to obtain two valuation reports from panel valuers if credit exposure in the account is Rs. 50.00 crores and above irrespective of value of the property. The following should be noted specifically: For Sole Banking: (i) In case of exposures in the account is Rs.50 crores and above and where individual secured assets are valued Rs. 5 crores and above, two valuation reports shall be obtained from the panel valuers. (ii) The valuation report shall not be more than one-year-old. (iii) Where there is difference of more than 10% between the Realizable value in the two valuation reports, a third valuation report has to be obtained and the higher of the value among the three shall be reckoned. Page | 685  Back to INDEX For Consortium / Multiple Banking accounts: (i) In case of exposures in the account is Rs.50 crores and above and where individual secured assets are valued Rs.5 crores and above, two valuation reports shall be obtained from the panel valuers. (ii) The valuation report shall not be more than one-year-old. However, if one of the available valuation reports is less than one-year-old, the second Valuation Report can be less than 3 years old. (iii) Where there is a difference of more than 10% between the Realizable value in two valuation reports, the higher of the two shall be reckoned. (iv)Wherever valuation reports taken by other bank [s] are available, the same can be relied upon to arrive at the reserve price. (v) In case of NCLT admitted account, latest valuation reports obtained by RP/ Liquidator can be considered. If two valuation reports are available then average liquidation value of two valuation reports can be considered as per the Regulation 35 IBBI (Liquidation process) Regulations, 2016. For Portfolio of Retail / Agri / MSME Loans: Valuation reports within 1 year as on the date of approval for identification of the portfolio by TMC will be valid till assignment of the same portfolio. Exception: For NCLT admitted accounts (where obtaining fresh valuation reports every year is not possible) valuation reports obtained by RP during CIRP / Liquidator during liquidation can be considered provided the same is within three years. Any other exception/ deviation can be referred to the Management Committee of the Board (MCB) with proper justification for approval. In case of exigencies, TMC is empowered to approve the same and thereafter it will be put up to MCB for confirmation/ ratification. Fixation of Reserve Price and other terms of transfer of assets: Fixation of Reserve Price shall be done by SARFAESI Committee of Regional Office. Reserve Price will be fixed based on calculation of following values/dues. a. Realizable value b. Net Present Value of securities c. Net Book value [Book O/s minus provision] d. Notional Dues & Contractual Dues e. Minimum acceptable amount as per prevalent special OTS Policy, if any. The Reserve Price shall not GENERALLY be less than Net Present Value [NPV] of the securities or Contractual Dues whichever is lower. However, reserve price can be fixed below NPV by GMC: If NPV is higher than notional dues/ contractual dues Reserve price can be fixed at notional dues. If account is already put up for ARC sale/ transfer and sale had failed due to non-participation of any ARCs in the e-auction Revised reserve price can be reduced up to 10% of last approved reserve price, provided valuation reports are within 1 year. Page | 686  Back to INDEX In other cases, if the Reserve Price is to be fixed below NPV and below notional dues, such proposals shall be placed to MCB for approval with proper justifications for acceptance. Wherever NPV is less than the Net Book Value, Reserve Price shall be the Net Book Value. While fixing reserve price, minimum acceptable amount as per special OTS policy of Bank may also be taken into consideration, if any. For accounts admitted under NCLT, Reserve Price shall be fixed at the average price of two liquidation values less costs likely to be incurred during the resolution. No further discounting to be given on this price. Calculation of Net Present Value of Securities [NPV]: To arrive at Net Present Value, all the assets have to be examined for any possible appreciation or depreciation for a maximum period of five years based on the status of recovery proceedings Net Present value of the secured assets is arrived at by giving a discount at 1-year MCLR rate reckoning the number of years approximately it may take to realize the asset with a maximum cap of five years. Net Realizable Value Net Present Value (NPV) = NPV Factor @ 1 Year MCLR Calculation of NPV for Road Projects Normally these types of accounts are not backed by tangible securities but secured by annuities receivable from NHAI/ or secured by Toll collections. NPV for such cases shall be calculated for both the Enterprise Value as well as annuities receivable / projected toll collection and higher of the NPV shall be considered for fixation of Reserve Price. B. Discount rate/ NPV Factor: Generally, discount rate shall be 1year MCLR. However, for Road Projects discount rate can be present contract interest rate. Formula for NPV factor = (1 + R/100)n Where, R = Discount rate i.e. 1 Year MCLR, presently 8.70% n = Discount period (i.e. time taken for realization of securities should generally be as given in table under discount period with maximum cap of 5 years) C. Discount period: Time period for realization of securities shall generally be considered not exceeding the time limit given below and shall be considered on case-to-case basis with a maximum cap of five years. Page | 687  Back to INDEX Maximum 1. SARFAESI cases Discount period If SARFAESI proceedings have not been challenged in 1.1 2 years any forum If SARFAESI proceedings have been challenged in any 1.2 3 years forum & there is no restraint order If SARFAESI proceedings have been challenged in any forum and there is interim restraint order, time required- 1.3 4 years rounded off number of years to get the same vacated / proceed further (case to case basis) If auction has failed 2 or more times or there is any 1.4 peculiar reason impeding realization like land locked / 5 years no independent access / other constraints 2. DRT / Civil Court Cases 2.1 Final order / decree passed stage 3 years 2.2 Trial stage 3 years 2.3 Initial stage 4 years If auction has failed 2 or more times or there is any 2.4 peculiar reason impeding realization like land locked / 5 years no independent access / other constraints 3. NCLT Cases 3.1 Under Resolution stage 0 year 3.2 Under CIRP 1 year 3.3 Under liquidation order 2 years Exception cases where resolution is not expected in near future such as; litigated matter pending in NCLAT/ High Court / 3.4 5 years Supreme Court or account under liquidation for more than 2 years or any other complex cases 4. Agricultural Property Whether Suit Filed or not 5 Years Net Book Value [NBV]: Net book value is book outstanding minus provision held. Wherever NPV is less than the NBV, reserve price shall be the NBV. - The Reserve Price of the accounts & Portfolios will be approved by GMC along with terms of transfer / assignment like management fee, incentive, upfront fee, cash portion, SR portion, upside sharing and any other related issues. If the Reserve Price is to be fixed below NPV and Notional dues, such proposals shall be placed to MCB for approval with proper justification for acceptance. However, GMC can approve reserve prices below NPV if: NPV is higher than notional dues/ contractual dues Reserve price can be fixed at notional dues. Account was already put up for ARC sale/ transfer and was failed due to non- participation of any ARCs in the e-auction Revised reserve price can be reduced up to 10% of last approved reserve price, provided valuation reports Page | 688  Back to INDEX are within 1 year. Any deviation in the process of transfer of loan exposures from the stipulations made in the policy will be submitted to MCB for approval. In case of exigencies, TMC is empowered to approve the same and thereafter it will be put up to MCB for confirmation/ratification. restructuring) is given below: GM / HOD - Corporate Credit a) GM / HOD MSME b) GM / HOD - Inspection c) GM / HOD - BSMD d) GM / HOD - Treasury/International e) GM / HOD - SAMD (Chairman) f) Convener: AGM/DGM, SAMD GM / HOD - RMD being CRO shall participate as an advisor and will not be counted for the purpose of quorum. Quorum: 3 members including Chairman whose presence is compulsory. GM SAMD will be the Chairman and, in his absence, the senior most GM / HOD of the proposed committee shall be the Chairman. In case of absence of any member, Looping GM / HOD should attend. If any of the above GMs / HODs had handled the referred account during the last 5 years as recommending or sanctioning authority, he/she shall recuse himself/ herself from the committee. Vetting of Reserve Price by the External Settlement Advisory Committee (SAC): The Reserve Price approved by GMC (or recommended to MCB for approval in case of deviations) shall be vetted by the External Settlement Advisory Committee (SAC). The vetting of reserve price will be valid for 2 years from date of approval, if reduction in reserved price is not proposed. However, if reduction in reserve price is proposed, then such cases to be referred to SAC again. Approval of Transfer of loan exposures by TMC: Upon receipt of bids and after the bidding process, the Top Management Committee shall approve the transfer/ assignment in favor of the successful bidder. Composition of the Top Management Committee (TMC) for the purpose of transfer of financial assets is given below: 1. MD & CEO 2. ED 3. ED 4. GM / HOD Treasury 5. GM / HOD Credit Monitoring Convenor of the Committee-- GM / HOD: SAMD Page | 689  Back to INDEX Different layer of recommendations / approval. S. Layer of recommendations Matter no. / approvals Identification of NPAs for Transfer/sale 1. MCB (Annual Exercise) 2. Submission of PIM with valuation reports Branch Manager 3. Recommendation of Reserve Price SARFAESI Committee of RO Recommendation of proposal for 4. Regional Manager Transfer/ Sale along with certificate Approval of Reserve Price without 5. deviation (or in case of deviation GMC recommendation to MCB) Vetting of Reserve Price approved by 6. GMC (or recommended to MCB for External (SAC) approval in case of deviation) Approval of Reserve Price below NPV & MCB 7. Notional Dues. Any deviation in the process of transfer MCB from the stipulation made in the policy (In case of exigencies, TMC will be approved by is empowered to approve 8. (Other than sly no.7, viz: valuation reports the same and thereafter it more than 1 year old, non-identified will be put up to MCB for accounts & portfolio sale/ transfer, confirmation) recovery actions etc.) Supervision of e-auction process. And for sale under open auction process: 9. - If no bid received, declaration of sale GM -SAMD as failed, - If only one bid received, re-auction under Swiss Challenge method Declaration of Successful Bidder and 10. approval of transfer/ assignment of loan TMC in favor of ARCs etc. Issuance of Letter of acceptance in 11. GM -SAMD favour of successful bidder Cancellation of Transfer process: In General, transfer/sale process will not be cancelled. However, TMC is the authority to cancel the transfer/ sale process at any point of time before acceptance given by the Bank in favour of the Successful bidder. A condition will be stipulated in auction Page | 690  Back to INDEX giving any reasons. Provisioning Requirements: Regarding provisioning for the assets sold with effect from April 1, 2018, the following guidelines are given: Where the investment by the Bank in SRs is more than 10% and issued under the securitization, the provision for those SRs will be as per extant asset classification and provisioning norms assuming the account has remained without recovery of principal i Sale of Security Receipts (SRs) Issued by the Trusts: The Bank can sell Security Receipts (SRs) of the Trusts of accounts assigned to ARCs on SR basis. The SRs for sale to QIBs / QBs shall be identified by TMC. The reserve price for sale of SRs will be approved by Investment Committee as per the Funds Management and investment Policy. The sale process will be conducted by SAMD, CO as per the procedure given in SOP. Treatment of SRs on expiry of trusts: SRs which are not redeemed as at the end of the resolution period (i.e., five years or eight years as the case may be) shall be treated as loss asset in books of the lenders and fully provided for. MD & CEO will be competent authority for approval of extension of validity period of expired trusts. Upon extension of trusts, note shall be placed to MCB for information. Buy back of financial assets: RBI guidelines permit take-over of standard assets from ARCs where they have successfully implemented the restructuring plan for the stressed asset acquired by them. However, the Bank cannot at any point of time take over the asset they have already sold to ARC. Engagement of Advisors for Transfer of Loan Exposures: Bank shall either on its own or through specialized agencies on fee basis, can proceed with putting up accounts for sale/ transfer on portfolio basis. The appointing authority for such agency will be GMC. The same will be reviewed by TMC. The commission payable to such agencies would not exceed 1% of the cash portion of the sale consideration received by the Bank subject to a maximum of Rs 50 lakhs. Chapter 3 - Price Discovery through Swiss Challenge Method For considering the transfer/ sale of financial assets under Swiss Challenge Method, Binding offer submitted by ARCs etc must not be less than Net Book Value (NBV) of e to get the minimum offer of NPV from the ARCs. Minimum mark-up over the base bid (Binding offer) required for the challenger bid shall not be less than five percent (5%) and shall not be more than Page | 691  Back to INDEX fifteen percent (15%) depending upon the Loans & portfolio proposed for transfer/ sale. The transfer shall be only on cash basis. The transfer consideration should be arrived at To download full circular, Click Here Page | 692 Back to INDEX Page | 693  Back to INDEX Insolvency and Bankruptcy Code, 2016 The Insolvency and Bankruptcy Board of India was established on 1st October, 2016 under the Insolvency and Bankruptcy Code, 2016 The four pillars of the Code are as follows: IPAs Insolvency Professional Agencies / IPs Insolvency Professionals IU Information Utility Nesl Adjudicating Authority NCLT / Appellate Authority NCLAT IBBI Insolvency & Bankruptcy Board of India (Regulator of IBC) Application to NCLT for Commencement of CIRP: Default of minimum Rs. 1 Cr for initiating CIRP Financial Creditors (Banks), Operational Creditors (including Government and employees/workmen) and Corporate Debtor can file an application for Insolvency Resolution. Persons eligible to apply for CIRP 1. Financial Creditor (sec 7) 2. Operational Creditor (sec 9) 3. Corporate Debtor (sec 10) As per the code the application will be admitted within 14 days from the date of filing. Moratorium by NCLT: Upon admission of the application, moratorium sets in. Moratorium shall prohibit: 1. Institution/continuation of suits/proceedings 2. Transfer of assets by the Corporate Debtor 3. Foreclosure, recovery or enforcement under SARFAESI 4. Recovery of property by the owner where the property is occupied by the Corporate Debtor as a tenant. Interim Resolution Professional (IRP)/ Resolution Professional (RP): IRPs/RPs are professionals (Company Secretaries/ Chartered Accountants/ Lawyers) registered under Insolvency & Bankruptcy Board of India (IBBI) after passing an exam conducted by IBBI. Once IRP is appointed, all powers of the Board and Management of the borrower shall vest with the IRP/RP. IRP shall make a publication within 3 days of his appointment calling for claims. The claim shall be submitted within the stipulated period of 14 days from the date of his appointment. Based on the claims received, the IRP will arrive at the percentage of voting of various Creditors. Unsecured creditors also will get voting rights. IRP shall conduct Meeting of Committee of Creditors (CoC)within 30 days from the date of commencement of CIRP. In the first CoC meeting, it will be decided whether to continue the IRP as RP or to appoint new RP. Role functions of RP: RP will be conducting CoC meetings periodically. RP will arrange for protecting the securities and for taking Going concern/liquidation value of properties of the Company Page | 694  Back to INDEX The RP shall issue publication calling for Resolution Plan from proposed investors which is called as Expression of Interest. The EOI publication will contain eligibility of prospective bidders including Net-worth, Experience, Turnover, etc. Resolution applicant shall submit Resolution Plans which may be One Time Payment or Restructuring Plan. If it is One Time Settlement, it has to be examined as to whether it is within the purview of our Recovery Policy. If it is a Restructuring Plan, it has to be examined the same way a Restructuring Proposal submitted to the Bank in the normal course will be examined and decide about the viability. RP has to verify the eligibility of applicant under Section 29A/Section 30 of IBC and he has to issue certificate in this regard. Sources of payments shall be verifiable. Acceptance or non-acceptance of the proposal shall be informed in the CoC meeting. Any Resolution Plan shall be approved by a vote of not less than 66% of voting share of the financial creditors. If it is approved by less than 66% voting share, it will not be approved by NCLT. If Resolution Plan is not approved by 66% majority, liquidation shall be ordered by NCLT. Persons disqualified to submit resolution plans (Sec 29A of IBC): The promoter or any connected persons shall not be eligible to submit a resolution plan if the person is: is an undischarged insolvent has been identified as Willful Defaulter whose asset is classified as NPA and a period of one year or more has lapsed from the date of such classification and who has failed to make the payment of all overdue amounts with interest thereon has been convicted under any act and imprisoned for two years or more (This clause will not be applied to a person after the expiry of a period of two years from the date of his release). Disqualified to act as a director under the Companies Act, 2013. Prohibited by the SEBI from trading in securities. has executed an enforceable guarantee in favor of a creditor in respect of a Corporate Debtor under CIRP. Has been promoter or in the management of control of a corporate debtor in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place and in respect of which an order has been made by the Adjudicating Authority. has a connected person not eligible under above clauses. For MSME unit, promoters are given relaxation from all the above clauses except first two points. Liquidation Process Liquidation Order will be passed if: The period of CIRP ends without any resolution plan. Plan not submitted to NCLT within the stipulated time. Plan not approved by the majority of 66% Plan not complied with the requirements of IBC. When liquidation is ordered, Liquidator will be appointed who will carry on the Page | 695  Back to INDEX liquidation process. Generally, RP will be continued as Liquidator unless he is changed by the CoC or NCLT. Once liquidation is ordered, the moratorium will get ceased. However, no suit can be filed against the Company. The Liquidator will arrange for sale of the assets of the Company and distribute the same among the various claimants. OR the secured creditor can decide to stand outside the liquidation proceedings and enforce the securities themselves. Priority Waterfall Mechanism under Sec 53 of the Code: Insolvency Resolution Process & Liquidation Costs Workmen dues (up to 24months) and Secured Creditors Other Employees dues up to 12 months Financial Debts of Unsecured Creditors Government dues up to 2 years and unpaid dues of Secured Creditors Any remaining debts and dues Preference Shareholders, if any Equity Shareholders or Partners as the case may be To download latest circular on Revision of Delegation Powers in NCLT Matters click here Page | 696  Back to INDEX Recovery Policy 2024 OBJECTIVES OF THE RECOVERY POLICY: To ensure arresting slippages by initiating timely remedial action whenever the advance becomes irregular. To ensure Considerable reduction in Non-Performing Assets by way of Upgradation and Recovery. To ensure that the recoveries in Prudentially Written off accounts are followed up ruthlessly, field level functionaries are given separate Target for recovery in such accounts. Where the accounts slip to Non performing status despite best efforts, the field functionaries of the Bank shall ensure considerable reduction in such assets by way of Upgradation, Recovery, Sale to ARCs, and/ or Write-off. Transparency in SARFAESI security sales: Properties valued up to Rs. 1 crore: Auction at least once before private treaty sale. Properties valued above Rs. 1 crore: Auction at least twice before private treaty sale. All property auctions through DRTs and SARFAESI must be conducted via e-auction, as advised by the Ministry of Finance. Exception: Manual auction allowed for SARFAESI cases with book outstanding at the time of auction or FSV of property is below Rs. 5 lacs. Ethical measures for Recovery Classifying account as wilful defaulter / publication of photograph as per laid down norms Submission of details of Wilful Defaulters to RBI / CICs Classification of borrowers as Non-Cooperative Borrowers where exposure is Rs 5 crore & above Service of Govt bodies / officials should be utilized for recovery of all Govt. Sponsored Loans. a. Timely action under SARFAESI ACT 2002: Actions under SARFAESI Act 2002 should be initiated immediately for all eligible accounts and subsequent actions should be followed on due dates without fail till the recovery is made. Regions to ensure that 100% SARFAESI actions are initiated on all eligible accounts immediately after the classification of NPA as per extant guidelines. (Please refer Law Dept., CO Circular no Transient series (File. F) Circular no 15/2022-23 dated 13.01.2023) b. Following up with Official liquidator / ECGC / CGTMSE: Submitting the timely notice to Guarantee Corporations as required and ensuring receipt of claim amount at the earliest. Follow-up with Official liquidators to ensure interim / full recovery of claim Page | 697  Back to INDEX amount at the earliest. c. Debt Recovery Agents and Detective /Investigating Agency Our Bank has framed a Policy for empanelment of Debt Recovery Agent and Detective/Investigating Agency issued by SAMD. Regional offices are advised to engage the services of Recovery Agents/Detective /Investigating Agency as per the policy to maximize Recovery. The performance of the Recovery Agents/ Detective/ Investigating agencies is to be reviewed periodically and remedial action to be taken without loss of time. d. Legal Actions and filing of suits at appropriate fora: Legal action through Court / DRT should be adopted for recovery of dues simultaneously along with other modes of recovery. In other words, simultaneous action for initiating SARFAESI action and filing of Suit to be taken. e. Lok Adalat: effective to take it to decreed stage. In the event of failure to honour the Lok Adalat commitments, EP proceedings should be initiated immediately. Settlement amount to be arrived at by considering various factors e.g. availability of securities, recovery prospects and cost & time involved in such recovery on case-to-case basis. Monetary ceiling for sacrifice conferred to various committees should be taken into account for arriving the delegation power to sanction the settlement under Lok Adalat. f. Special OTS Schemes: Special OTS schemes with attractive features are being introduced by our Bank from time to time for considering OTS/OCS by various committees at Regional Offices (RLCC-OTS & RLCC-CRM/SRM) and other CO l