NPA Recovery, Receivables Management & Stressed Asset PDF

U H R A N H AK M O G H K U O H H...

U H R A N H AK M O G H K U O H H M r T A N S I N H A M G M M N r T A N S IN UR H A M M N K O H U R H A M T HA N M I N G A K M O G H M r Reference M A study material S for T H promotion N exercise of I N R A N r M A S U H officers H M 2025-26 R A N K O H M T HA N M I N G A KU M O G H M r M A S T H N IN R A N r M A S U H M R AN A K M O G H U H M r T H A N S I N H AK M O G H M M N r T A N S IN UR H A M M N K O H R H A M T HA N M I N G A KU M O G H Mr M A S T H N I N R A N r M A S U H M R A N A K M O G H U H M T H N I N A K M O G H M r M A S T H N IN R A N r M A S U H M R A N K O H U H M T HA N M Baroda I N GAcademyAK M O G H M r M A S T H N IN N Bank of Baroda r A S K UR HA ForOinternal H M circulation only R M A N M HA M G KU O H H r T A N S I N H A M G M Do Not Print Munless extremely Nrequired. SaverPaper, T Save TreesAand N preserve SIN U R H A M M N A K O H Environment. U R H A M H N M N G K O H r T A S I H A M G M M N r T A N S IN A UisRto supplementOtheHlearning efforts ofHtheMpromotion aspirants. M N A K U R H A M M This booklet Topics incorporated are H in nature and Apex N I N G A K of Instructions, SOPs, OCirculars, GH T indicative A Academy advises the readers to refer to Book M Mr M S TH N IN Master Circulars, Policy guidelines, etc. for updated information. N A promotion exam within r A S U isRfocusing mainly onHthe M the Bank (based M N K This booklet O shouldAnot be considered as an instruction manual. H U R A on previous trends) and H by M H M G K Employees are supposed to update O themselves H r T reading Bank’s A N circulars, guidelines and latest S IN banking industry/ H A other general awareness M related news. G M M N r T A N S IN R A M M A K U O H H U R H AN M G r T H A N S I N H AK M O M R M A N M rT M AN K U O H H R A M G K U r TH A N S IN H A M M N T U R H A Mr H AK M O G H rT AN SIN  U H R A N H AK M O G H K U O H H M r T A N S I N H A M G M M N r T A N S IN UR H A M M N K O H U R H A M T HA N M I N G A K M O G H M r NPA RECOVERY, M A RECEIVABLES S MANAGEMENT T H & STRESSED N ASSET I N R A NMANAGEMENT r M A S U H M R A N K O H H M T HA N M I N G A KU M O G H r Income Recognition,AAssets Classification S H M M N & Provisioning r T A N S IN R A M M K Definitions: A U O H H U R H AN M Masset, becomesNNon GPerforming when r An H T asset, including a leased A N S I H AKit ceases to generate M Oincome for G H M the bank. M N r T A N S IN OVERDUE:U Any A Ramount due to theHbank under any credit facility M is ‘overdue’ ifRit isMnot paid on the dueAdate N K O H H M HA M G KU O fixed by the bank. T N I N A M G H Mr A Non-Performing M A Asset (NPA) is a loan S or an advance T where: H N I N R A N r A Mthan 90 days in respect S Utermand/ or instalmentH M for a period of R A N A K Interest M O of principal remain overdue G H U more H M K O of a loan. H N T In respect ofAOverdraft/Cash Credit I N A H r S H remains “Out ofM G M M Sheet for reasons N as given belowr: T (OD/CC), if the account A N Order” as on S IN R date of Balance U If the outstanding H A M M N K O H U R H A M HA M G AKoperating account M O I. balance remains continuously in excess of the sanctioned limit/drawing T power forN 90 days, or I N G H r A S H N N M M Tcredits continuously A for 90 days as on date SI II. In cases where the outstanding limit/drawingN balance in the principal is less than the Rof Balance Sheet,HorA sanctioned M power but there are no r M K U O R A N H H M HA M during the current G KU enough to cover O III. Credits are not enough to cover the interest debited during the same period, i.e., turnover T N in the account I N A quarter must be sufficient M the interest G H M r M A S T H N IN N charged during the same quarter. R A M r M A S K U O H because of technical R A N A Drawing Power M G H H Uon the basis of stockOstatement M K An account may also be NPA reasons say: T H N I N A H which is A are permitted in theM G in case of working capital account is determined M r M older than 3 monthsS T H N IN N and irregular drawings account for a R continuous A period of 90 days. r M A Mhave not been reviewed/renewed S  U K An account where theH O R A N H regular/Adhoc credit limit U within 180 H M HAIn the case of bills M G the bill remains Koverdue for a periodMofOmore than GH days from the due date/ date of adhoc sanction. T A N I purchased and discounted,N A Mr 90 days. M N S r H Toverdue A Nseasons for short SIN UR crops. HA M M N The installment of principal or interest thereon remains for two crop K duration O H R H A M HAduration crops (Crops The installment N of Mwith crop seasonNlonger principal or interest I G than one year).AKU thereon remains overdue for one crop O season for long H r T Project LoanA S been extended for H M G M Mbe classified as A N (any term loan which has r T the purpose of settingN A up of an economic S IN R M and/ or R M AN venture) will NPA: (i) U As per record of recovery K O H (i.e., 90 days H overdue) A M G U H ForH AK Operations (DCCO), O (ii) On account of non-achievement of commercial operations. r T Within two years fromA Infrastructure sector N S I N H M M For Non Infrastructure M sector AN rT AN the original Date of Commencement of Commercial U R H M M A K O H U R M G K r TH A N S IN H A M M N T U R H A Mr H AK M O G H rT AN SIN  U H R A N H AK M O G H K U O H H M r T A N S I N H A M G M M N r T A N S IN UR H A M M N A K O H U R H A M H N M N G K Operations (DCCO) Oeven if it is GH T A I A M Mr regular as perRrecord M of recovery. AN S TH N IN Within One year from the original Date of Commencement of Commercial r M forbymore M A S Uamount of liquidityOfacility However, above periods are subject K Hto further extension specified RBI. R 90 days, in respectAof a N H U of India (Securitization H of M HAsecuritization M undertaken inNterms G of the Reserve The remains outstanding than T N transaction I A K Bank M O G H M r Standard Assets) In respectM A Directions 2021. S H T representing positive N mark-to-marketSIN R A of derivative transactions,N r the overdue receivables A Mfrom the specifiedAdue Ufor payment. OH value of a derivative contract, if these remain unpaid Mfor a period of 90Rdays N A K date H M in respectNofGterm loans, an account U H M T H Ininterest N case of interest payments I A K90willdays. be classified asO M NPA if the G H r M Income Recognition M A applied at specified rests S remains overdue for T H more than N IN A N r A S UR (Income Recognition Policy): H M R M A N A The policyK of income recognition M O has to be objective H G and based on the record U H of recovery. Therefore, the M TH accountsAalso. banks should not charge N and take to income IN account interest on any A K NPA. This will apply M to O Government G H r guaranteed M However, interest Mon advances against N S Term Deposits, NationalT H Savings CertificatesA N Indira Vikas SI N Patras (IVPs),R A M r M (NSCs), K U O H Kisan Vikas Patras (KVPs) and Life policies may be taken to R income account A N on the due A date, provided adequate M margin is available in the G H accounts. U H M H T and commissions N I N A K or reschedulingM O G H r Fees M debts should be M A earned by the banks S H T of time covered byAthe as a result of renegotiations N renegotiated or SIN of outstanding R recognized A on an accrualN basis over the period r M U of income OH rescheduled extension of credit. M R A N K H U H M H AIfandanycredited M bills purchasedNand Gdiscounted, becomes Reversal N K NPA, the entire interest O accrued GH T I beAreversed if the sameM advance, including M r M A to income account in the S past periods, shouldH T N is not realized. IN N r A S UR HA This will apply to Government guaranteed accounts also. M R M A N K O H H M A of NPAs: M G KU Asset Classification T H Categories Banks are required toA N I N A M O G H r M the period for R Mthe asset has remained classify Non-performing S assets further into H Tthe realisability of theAN the following three categories based on IN which A N non performing and r M dues: S U Assets OH Substandard Assets M R A N K ALoss Assets M Doubtful G H U H M T H N I N A K M O G H r M Substandard R M A S T H N IN Assets: A N isM r A M NPA for a periodAless S With effect from 31st March 2005, H K Uto 12 months. O a Sub Standard asset R one, which has remained N theA than or equal Mrelevant in Sub Standard H G Assets also.AIf the U H M All H T recovery measures are N I N K entire over duesMareOrecovered GH Mr account is classified by way of cash M A recovery, the account can S reasons, the account be upgraded to T StandardH shall beimmediately. category N clearance of SIN Similarly, if an N r A URRehabilitation may HA as NPA due to technical upgraded on M M A N Standard advances inR technical reasons. K O H H M HAon objective assessment/ M appraisal observing G extant guidelinesAand KUnorms. Restructuring/ be considered in Sub case turnaround is possible T based N I N M O G H r M Doubtful Assets: M A S T H N IN R A N r A S With effect from March 31, 2005, anH Uof 12 months. O asset is classified H M if it remainedRin M as doubtful, AN the substandard category A K for a period M G U H T H classified as doubtful N I N K Athat M O r A S H N– on the basis of M r T and A loan has all the weaknesses inherent in assets were classified as substandard, M with the addedRcharacteristic A N – highlymake that the weaknesses collection or liquidation in A full, U currently known facts, conditions and H values M questionable R improbable.M A K M O G H U TH N IN A K M r M A S T H N U R H A Mr H AK M O G H rT AN SIN  U H R A N H AK M O G H K U O H H M r T A N S I N H A M G M M N r T A N S IN UR H A M M N K O H U R H A M T HA N M I N G A K M O G H r M All the recovery M A S are relevantNfor Doubtful Assets also. H T Branches should,AN however, envisage I N R measures A M r M S U whether it is advisable H to restructure/ capabilityKto achieve a turnaround, rehabilitate the Unit. Looking O and also basedGonHthe objective assessment, to Promoters’ sincerity, N wherewithal, R branches shouldHdecide A A M U M r H of the Borrower. Tsickness whether it would be A N [ worthwhile to commit IN additional S finance after AK ascertaining H real factors M thatO contributed G H M to M N r T A N S IN R A If the restructuring/ rehabilitation is not possible, recovery M UAct/ legal action etc.,OisHto be considered.H action such as Compromise/ M OTS / actionAunder N A K U R H M SARFAESI M G r T HAssets: A N S I N H AK M O G H Loss M A Loss Asset isRoneMwhere loss has been N r N or in the RBI SIN Tinternal or externalAauditors A identified by the bank or inspection but the amount has not been written off wholly. M U H M N A K O H R Uvaluers/RBI is lessO H A M H value of theM security, as assessedG K H r T If the realisable A N S I N by the bank/ approved H A M than 10 per G cent of the outstanding M should be straightaway in the borrowal M classified as Loss accounts, NAsset. In other words,Tsuch an asset is considered the existence r of security should be N uncollectible SI ignored A and the asset N U R H A as a bankableM M there mayN A and of such little value that its continuance asset is not warranted although be AK O H U R H M some salvage H or recovery N M value. N G K O H r T A S I H A M G M Asset Classification It M to be Borrower-wise is difficult to envisageN and not Facility-wise r A N investment in SIN T facility to a borrower/one i) R U any A a situation when only one Hall the facilities granted Mbybecomes a problem M credit/investment andN and investmentAin all of the securities issued by the borrower not A K O H R U as NPA/NPI O H M H M others. Therefore, N G a bank to a borrower will have to beK Nfacility/investmentSorI part thereof which H H T hasAbecome irregular. M the securities issued by the borrower treated and not the r A N IN G T particular M M RAdvances underH A N r A S ii) UAsset Consortium M should be based Arrangements: R M A N K classificationO H U on the recoverability H of the M HA ofadvances.the individualM G aspects havingAa K of accounts under consortium on the record of recovery T N I member banks and other N bearing M O G H M r pooledM A Where the remittances with one bank and/orN S by the borrower under H N with the share SIN T remittances is notAparting consortium lending arrangements are R A where the bank receiving r M as not serviced M K Uofmember banks andO H other member banks, the account will be treated therefore, be treatedH R A in the books of the otherN A should, therefore,Marrange to get theirG U from the leadObank as NPA. The banks participating H or get in the consortium M T H N N I bank for the transfer A K share of recovery transferred M G H M r an express properM A consent from the lead S T H N of their share of recovery, to ensure IN A N r A S UR asset classification in their respective books. M Hin the Value of Security/Frauds M N K O H R by Borrowers: A M HA Intherespect Accounts where there is Erosion U M where thereNareGpotential threats forKrecovery on account ofOerosion in committed H H r T valueA N of accounts S I of security and H A of other factorsM G M of security or non-availability M by borrowers.AInNcases of such serious r Tcredit impairment,AtheNasset should be SI existence such as frauds N R committed Ustraightaway classifiedH as doubtful or loss asset M appropriate: R M as A N K O H U when the realisable Hvalue of M T HA a)theErosion in theM N value of security canG I N A K be reckoned as significant M O G H M r A security is less than 50 per S M of last inspection, H N T NPAs may be straightaway cent of the value assessed by the bank or accepted classified IN by RBI at R the time A N as the case may be.rSuch M A S Uunder doubtful category. H M R A N A K M O G Has assessed by the U H T H less than 10Nper cent of the outstanding b) If the realisable value of the I N security, A K bank/ approved M Oof security valuers/ RBI is Mr shouldM A Sshould be straightaway in the TH classified as lossAasset. borrowal accounts, the N existence R A be ignored and the asset N r M U H M R A K M O G H U TH N IN A K M r M A S T H N U R H A Mr H AK M O G H rT AN SIN  U H R A N H AK M O G H K U O H H M r T A N S I N H A M G M M N r T A N S IN UR H A M M N A K O H U R H A M H N M N G K O H r T A S I H A M G M Advances against M Term Deposits, Neligible for surrender,r TIVPs, KVPs and M NSCs, KVPs/IVPs, etc. A N S I N U R term deposits, H A M N A Advances against NSCs life policies need not be K O H R H M HA securities and Mother securities are G KU treated as NPAs, provided adequate margin is available in the accounts. Advances against gold ornaments, T government N all I N A not covered by this exemption. M O G H r M Agricultural advancesM A S T H N IN R A N r M A S U H M R AN A K M: O G H U H M r T IRACHnorms N norms for Agri advance A S I N per the belowH AK: M O G H TRepayment due date(fixed) N IN IRAC for short term & long term crops are as table M Sl. Cropping R M A N Crop cultivation r A S No. Upattern H (Loan disbursement) M R M A N K O H U H M 1.HA Short Term AllM round the year as G period Maximum 12 monthsKfrom the first disbursement O date in GH T A N I N A M Mr M S withdrawal date T Hafter renewal of N of I N Crops (Upto per crop needs case of new accounts or maximum 12 months from first R 12 months) A N r M A crop loan in case S U H renewed Maccounts (to be R synchronized A N of with harvesting A K M O G H crop) U H M H N I N T2. Long TermA All round the yearSas Maximum 18 months A K M O G H M r Crops M per crop needsN H Taccounts or maximum N18 months from the from the first disbursement date in IN R A case of new r M date after R A M of crop loan inAcase S K U than 12 (More O H first withdrawal renewal N of A months) M G H renewed accounts. U H M T H N I N A K M O G H M r M A S T H N IN N r A S K U The Repayment R due date, IRAC norms, O HA Agriculture H M subvention andROther Interest M Parameters forAShort N M HA Term/Long Term Crop Loans M under BKCC Scheme G are given below: KU O H H r T Particulars A N Short Term S I N H A M G M Sr. M N Crop r T Long Term Crop N A S IN R U Date H A M M N A 1 Scheme Code CC003 CC025 K O H U R H M 3 HA Repayment due dateM 31.03.2021 G 2 Sanction 01.04.2020 01.04.2020 T N I N A K 30.09.2021 M O G H M r M A (Maximum 12 S months from the H T disbursement date (Maximum 18 months N in case of newSIN from the first A N r A UR first disbursement date in case of Haccounts or first withdrawalM accounts orM first withdrawal date N K new O H renewal R U H A after M 4 HA M G date after renewal of crop loan) of crop loan) T5 Date of NPA AN 31.03.2023 SI Date of overdue 01.04.2021 N A K 01.10.2021 M O G H r M M 6 InterestRApplication At simpleN H T At simple interest 31.03.2023 Nup to 30.09.2021SI N andH A r interest up to 31.03.2021 Mat half and thereafter A M compounding Aat Nhalf K U O thereafter compounding H before due yearlyU R if not paid beforeH M H A M G yearly rests,if not paid K rests, O due date H r T7 Agri A N Up to 31.03.2021 date S INor actual date ofHA M interest NG M SubventionM interest paymentNwhichever is earlier, r T subvention is available N for short termSI As per RBI guidelines, A U R A H to maximum H Mof 12 crop loans. M interest subvention N A K O subject period and U R Hence, H A H N M months. N G K under this category. prompt subvention will O not be r T A S I H A available M M M rT AN 8 Charging of Normal From 01.04.2021 From 01.10.2021 R A N M M Rate of Interest K U O H H R A M G K U r TH A N S IN H A M M N T U R H A Mr H AK M O G H rT AN SIN  U H R A N H AK M O G H K U O H H M r T A N S I N H A M G M M N r T A N S IN UR H A M M N K O H U R H A M T HA N M I N G A K M O G H r M Government Guaranteed A M Advances AN S T H N IN R M r M A S K U facilities backed by O H Government thoughR A Nas A when the Government The credit M repudiates its guarantee guarantee of the Central H G when invoked. overdue may be treated H U exemption from classification M T NPA H only N I N A KThis M O G H r of Government guaranteed M The requirement A advances as NPA Minvocation of guarantee S is not for the purpose H has been delinkedTfor deciding the asset Nclassification and SIN of recognition of income. R of A N provisioning requirements in respect of State GovernmentM r guaranteed exposures.M A A K U O H H U R H AN M HeffectGovernment N M March 31, 2006NState G Government guaranteed K advances and O H r T With from the year ending A S I H A M investments G in State guaranteed M or any other A M interest and/orRprincipal securities would attract N due to the bank rremains amount asset T overdue for more classification and Nthan 90 days. SIN provisioning A norms if U Supplier's Credit:OH M R M A N K A of post-shipmentMcredit extended by the Post-shipment H Gbanks covering A Uof goods to countries H M T H 1) In respect N I N K export M O for whicha GH Mr guarantee-cum-refinance the Export Credit M A Guarantee Corporation’s S in the event of default, (ECGC) cover is TH EXIM Bank willApay available, EXIM Bank N the guaranteed SIN has introduced amount to the R N Adays from the day the Programme whereby, r M after the exporter has filed K Ubank within a period H of 30 Mbank invokes theRguarantee A N A O H U H M to the extentM G from the EXIM claim with ECGC. H T as a non-performing 2) Accordingly, N I N payment has been received A K Bank, the advance O M may not be G H M r treated M A asset for asset S T H classification and provisioning purposes. N IN R A N r M A S Uof export project finance, Export Project Finance H there could be instances M where the actual R importer has paid theA N A K 1) In respect O H U M in turn is unableNtoGremit the amount dueKto political developments H dues M T Hstrife, to the N bank abroad but the bank I A M O such as GH r war, UN M 2) In such cases, embargo, M A etc. S H is able to establishTthrough documentary Nevidence that the SIN N r A UofRthe bank, HAdepositing the amount where the lending bank importer has cleared the dues in full by M in the bank abroad M A before it turned into NPAN K O importer's country isH not allowing the funds R M H Areasons, the asset classification in the books M but the G after a period A of K Uyear from the dateOtheHamount to be remitted due to political H r T or other was deposited by theA N I N may be made S H one M G M M importer in the bank abroad. N r T A N S IN U R A H spent is billed H M M N a monthly statement A Credit Card Accounts K O R H or a M Adue date for repayment. M Banks give anNoption G to the card usersKtoU 1) In credit card accounts, the amount to the card users through with a H T of it, i.e., minimum definite N A I date and roll-overHthe balance amount to M O pay either the full amount G H r fraction M months’ billingRcycle. M A amount due, on the S due T N the subsequent IN A N r A M due, as mentioned S U is not paid fullyOwithin 2) A credit card account will be treated H as90non-performing Masset if the minimum amount R A N K days from H A shall report a creditMcard account as ‘past in the statement, G due’ to credit information U the payment due date mentioned H in the statement. M T H 3) Banks N I N A Kcard account companies (CICs) M O‘pastor due’ levy GH r penal charges, viz. A late payment M for more thanRthreeMdays. The number charges, S etc., if any, only when H a credit Tlate payment charges Nshall, however, be SI remains N A Nof ‘days past due’ andr M A U Norms: computed from the payment due date H mentioned in the M credit card statement. R A N A K Provisioning M O G H U H M T H i. General N I N A K diminution in the value M O G H r The primary responsibility M investment or R A for making adequate Massets is that of the S provisions for anyH Tthe statutory auditors. N of loan assets,