RBI revises NPA norms, gives banks 30 days to review stressed loans

All lenders must put in place board-approved policies for resolution of stressed assets, RBI said.

The Reserve Bank of India (RBI) on June 7 issued a revised circular on the resolution of stressed assets. RBI has said that lenders must resolve non-performing assets (NPA) over Rs 2,000 crore within 180 days.


In February 2018, RBI had issued a framework on the resolution of stressed assets under which banks were asked to initiate resolution or restructuring of loans worth Rs 2,000 crore or more even if there was a single day of default.

However, the Supreme Court had called this framework 'ultra vires'.  Following this, RBI has revised the circular.

The central bank has said that a lender should initiate a resolution plan before the loan default.

RBI said that it should have a board approved policies for resolution of stressed assets.

In the revised prudential norms on stressed assets, RBI has said that in case of a default by a borrower, lenders have to undertake a prima facie review of the borrower account within 30 days from such default (called the review period).

During this Review Period of 30 days, lenders may decide on the resolution strategy, including the nature of the resolution plan and how it will be implemented.  The lenders can also choose to initiate legal proceedings for insolvency or recovery.

In cases where a resolution plan is to be implemented, all lenders have to enter into an inter-creditor agreement (ICA), during the above-said Review Period.

The ICA shall provide that any decision agreed by lenders representing 75 percent by value of total outstanding credit facilities (fund based as well non-fund based) and 60 percent of lenders by number shall be binding upon all the lenders.

RPs involving restructuring or change in ownership in respect of accounts where the aggregate exposure of lenders is Rs 100 crore and above, will require independent credit evaluation (ICE). This ICE of the residual debt has to be done by credit rating agencies (CRAs) specifically authorized by RBI.

RBI said that if the borrower fails to demonstrate satisfactory performance during the monitoring period, asset classification upgrade will be subject to the implementation of a fresh restructuring/ change in ownership under this framework.

In this case, lenders will have to make an additional provision of 15 percent for such accounts at the end of the review period.

The central bank said that borrowers who have committed frauds or wilful default will remain ineligible for restructuring. However, in cases where the existing promoters are replaced by new promoters, the lenders can take a view on restructuring such accounts based on their viability. This has to be done without prejudice to the continuance of criminal action against the erstwhile promoters.

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