RBI Guidelines on the Restructuring of Advances by Banks

The Reserve Bank of India (RBI) issued comprehensive guidelines to enable the restructuring of advances by banks in response to the financial distress caused by the COVID-19 pandemic. These guidelines allow for a one-time modification of loan terms for eligible borrowers without necessitating a downgrade in asset classification, provided that specific regulatory conditions are met.…

Personal guarantors to corporate debtors comes under IBC regime

On Friday (15th November 2019), the Ministry of Corporate affairs notified “Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019”. [WAS PUBLISHED IN THE GAZETTE OF INDIA, PART II, SECTION 3, SUBSECTION (i)]. The new rule called in short as “Insolvency and Bankruptcy rule 2019” shall come into…

Strategic Options Available to Banks for the Resolution of Stressed Assets

Stressed assets, primarily comprising non-performing loans (NPLs), represent a significant challenge for banks and financial institutions. Effective resolution of such assets is crucial to preserving financial stability, optimizing asset quality, and ensuring capital adequacy. To this end, banks employ a range of recovery strategies, including debt restructuring, asset reconstruction, legal proceedings, and one-time settlements, among…

No relief to personal guarantors under bankruptcy code: Supreme Court

The Supreme Court on Thursday in a significant ruling upheld the constitutionality of Insolvency and Bankruptcy Code (IBC), including allowing creditors to initiate insolvency proceedings against personal guarantors. The Court dismissed over 200 petitions that challenged the legal validity of the code. The provisions relating to personal guarantors were introduced under the Insolvency and Bankruptcy…

Insolvency and Bankruptcy Code (IBC): List of restraints on FSPs during the moratorium period

Today (29.11.2019) RBI has filed an application under insolvency and liquidation proceeding against “ Dewan Housing Finance Corporation Limited” under Section 227 read with clause (zk) of sub-section (2) of Section 239 of the Insolvency and Bankruptcy Code (IBC), 2016, read with Rules 5 and 6 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings…

Understanding Credit Default, Stressed Assets, and Non-Performing Assets (NPAs)

Credit Default, Stressed Assets, and Non-Performing Assets (NPAs) are interrelated concepts within the domain of credit risk management. While often used interchangeably, each term has a distinct meaning and relevance in assessing the financial health of lending institutions and borrowers. Credit DefaultCredit default refers to the failure of a borrower to fulfill the repayment obligations…

Restructuring, Rehabilitation, and Recovery of Loans: A Comprehensive Overview

Introduction Loan restructuring, rehabilitation, and recovery are critical components of credit risk management within the banking and financial services sector. These processes aim to support borrowers experiencing financial distress, preserve the economic value of assets, and ensure the stability of the financial system. This article provides an in-depth overview of the mechanisms and regulatory frameworks…

What is NCLT?

The National Company Law Tribunal (NCLT) is the adjudicating authority (quasi-judicial authority) for the insolvency resolution process of companies and limited liability partnerships under the Insolvency and Bankruptcy Code, 2016.    Previously, there were four different legal forums viz. High Courts, Company Law Boards, Board for Industrial and Financial Reconstruction (BIFR), and Debt Recovery Tribunal (DRT)…

Credit Monitoring Tools: The Role of Loan Review Mechanism (LRM) in Strengthening Credit Risk Management

IntroductionIn a dynamic and increasingly complex financial environment, ensuring the soundness and quality of a bank’s credit portfolio is critical. One of the key instruments in achieving this objective is the Loan Review Mechanism (LRM), also referred to as Credit Audit. This structured process plays a vital role in detecting early signs of stress in…