The Reserve Bank of India (RBI), as the central monetary authority of the country, employs credit control as a critical tool of monetary policy to regulate the availability, cost, and direction of credit in the economy. The objective is to achieve key macroeconomic goals such as price stability, sustainable economic growth, and overall financial stability.…
The definition of Non-Cooperative Borrowers is originally defined in RBI circular dated 26.02.2014 on ‘Frame work for Revitalizing Distressed Assets in the Economy-Guidelines on Joint Lenders’ Forum (JLF) and Corrective Action Plan (CAP). The definition of a Non-Cooperative Borrower as contained therein is modified by RBI on December 22,2014, which reads as under: “A non-cooperative…
IntroductionCredit control is a structured approach employed by businesses and financial institutions to manage credit risk and ensure that customers meet their payment obligations in a timely manner. It plays a pivotal role in sustaining financial stability and optimizing cash flow. What is Credit Control?Credit control refers to the procedures used by businesses to determine…
[The identification of a ‘wilful defaulter’ is done on the basis of eventual conclusion that the default is intentional, deliberate and calculated. The process of categorizations of the ‘wilful defaulter’ is required to be done thoughtfully on the basis of track record of the borrower/guarantor and not on the basis of an isolated transaction or incident.…
Ratings are based on a comprehensive evaluation of the strengths and weaknesses of the company fundamentals including financials along with an in-depth study of the industry and macroeconomic, regulatory, and political environment. Some factors that may be considered for credit rating are the Issuer Company’s operational efficiency, level of technological development, financials, competence and effectiveness…
Credit rating agencies provide an objective and unbiased evaluation of the credit risk of diverse entities, including individuals, groups, businesses, non-profit organisations, governments, and even nations. They provide transparency and consistency in assessing institutions/borrowers’ creditworthiness, making it easier for lenders and investors to make informed decisions. The main characteristics of credit rating are that these…
(This post narrates the background of introducing the ‘bankruptcy law’ and in what way the new law is likely flags the problem loans and protects the interest of lenders.) The ‘Insolvency and Bankruptcy Code, 2016’ bill will be shortly enacted as an ‘ACT’ which will be dealing with resolutions of insolvency and bankruptcy. The fundamental…
Credit Rating is an opinion provided by a Credit Rating Agency regarding the ability and willingness of an entity (Government, corporate, municipality, Bank lending, etc. to fulfill its financial obligations in completeness and within the established due dates. Such ratings are based on a comprehensive analysis of various factors, including the issuer’s financial health, debt…
Article:The Reserve Bank of India (RBI) has issued a directive prohibiting banks and other regulated entities from levying pre-payment penalties on floating rate loans availed by individual borrowers for non-business purposes. The new framework, titled Reserve Bank of India (Pre-payment Charges on Loans) Directions, 2025, will come into effect from January 1, 2026. This move…
IntroductionCredit underwriting is a critical process through which lenders evaluate a borrower’s creditworthiness and ability to repay a loan. With the advent of technology, traditional manual underwriting methods are increasingly being replaced by automated solutions. One such innovation is Straight-Through Processing (STP), which enables end-to-end automation of financial transactions, thereby improving speed, accuracy, and customer…