In the light of Hon’ble Supreme Court order dated April 2, 2019, which held the RBI circular dated February 12, 2018 on Resolution of Stressed Assets as ultra vires, the Reserve Bank of India on Friday (June 7, 2019) released fresh guidelines to deal with bad loans. The new directions shall be called the ‘Reserve…
(This post elucidates on recovery and monitoring process of NPA accounts,advantage and disadvantage of Compromise settlement, and gains of NPA recovery) The asset of the bank, classified as NPA ceases to generate income to the bank. In addition to stoppage of income generation to the banks, banks are required to make provision for NPA. Therefore,…
The assets of the bank, classified under NPA cease to generate income to the bank. In addition to stoppage of income generation to the banks, banks are required to make provision for NPA. Therefore NPA is a double edged razor; damaging the profit, weakening the capital structure and reducing the rating of the bank. Measures…
[This article elucidates the gains of NPA recovery and the difference between Gross NPA and Net NPA] An asset (loan and advances of the bank) becomes non-performing asset (NPA) when it ceases to generate income for the bank. If interest and or installment of principal amount of loan remain ‘overdue’* for a period of more…
(This article explains the definition of non-performing assets (NPAs), classification of assets, Income recognition and provisioning requirement under prudential norms for all type of accounts including NPA norms for Agricultural loan and specialy KCC) Internationally income from Non-Performing Assets (NPAs) is not recognized on accrual basis but is booked as income only when it is…
The notification dated September 6, 2018 of finance ministry, Government of India increased the monetary limit up to Rs.20 lakh for filing loan recovery application in the Debt Recovery Tribunals (DRT) by banks and financial institutions. It is reported that there are 38,376 cases pending in 39 debt recovery tribunals (DRTs) in the country, as…
The Reserve Bank of India on Monday (12.02.2018) scrapped all existing frameworks for revitalizing distressed assets such as Corporate Debt Restructuring (CDR) scheme , Flexible restructuring of long-term project loans(5/25) scheme, Strategic Debt Restructuring (SDR) scheme, Scheme for Sustainable Structuring of Stressed Assets(S4A). The Joint Lendes’ Foroum (JLF) as an institutional mechanism for resolution of…
At present, the Asset Reconstruction companies viz. the Securitization Companies / Reconstruction Companies (SC/RCs) are permitted to convert a portion of debt into shares of the borrower company as a measure of asset reconstruction subject to a condition that their shareholding does not exceed 26% of the post converted equity of the company under reconstruction.…
[This writing provides insight of internal and external causes of rural indebtedness, challenges before banks and financial institution in rural areas, operation of formal and informal lending system in rural areas and discusses experts’ suggestion on facing high level of delinquency in lending to agriculture sector especially to small and marginal farmers, oral lessees, tenant…
When a borrower defaults to make repayment of loan interest and or principal for more than 90 days, the bank and financial institutions classify such loan accounts as non-performing assets (NPAs). The NPA account causes multiple damages to the bank. It ceases to generate income to the bank. It reduces the recycling of funds for…