chapter 9 - npa.pdf

Non-Performing Assets: of 98 � �

CHAPTER- 9

NON PERFORMING ASSETS

IRAC NORMS RESTRUCTURING LEGAL REMEDIES SARFAESI, DRT, LOK ADALAT OTS POLICY GUIDELINES

PRUDENTIAL NORMS ON INCOME RECOGNITION, ASSETS CLASSIFICATION & PROVISIONS PERTAINING TO ADVANCES (NPA) BACKGROUND: In the wake of the financial reforms undertaken by the Government of India based on the Narasimham Committee Report I and II, Prudential Norms for the advances portfolio of the banks and financial Institution were introduced by Reserve Bank of India in Phased manner w.e.f. 1/4/92 to address the credit monitoring process being adopted and pursued by the banks and financial institutions. The norms for NPA classification the delinquency period was of 4 quarters (non-recovery of interest/instalment up to 4 quarters) and the same was reduced to 3 quarters in 1994, 2 quarters in 1995 and 90 days w.e.f. 31.03.2004.

To strengthen further the recovery of dues by banks and financial institutions, Government of India promulgated The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

INCOME RECOGNITION: The policy of income recognition should be objective and based on record of recovery

rather than on any subjective considerations. Interest on advances against term deposits, NSCs, IVPs, KVPs and Life policies may be

taken to income account on the due date, provided adequate margin is available in the account.

Income from non performing assets is not recognised on accrual basis but is booked as income only when it is actually realized.

Fees/Commission and any similar income earned by banks on NPA a/c should not be recognized until it is actually realized.

Charges/Expenses/Insurance etc on NPA Borrowal account should not be debited to the account unless recovered. The same needs to be recorded in the memoranda account after charging to Bank’s revenue.

On an account turning NPA, the interest already charged and not collected is to be reversed by debiting Profit and Loss account at the end of quarter/half year/year, and


further application of interest is to be stopped. However, accrued interest is to be recorded in a Memoranda account.

Fees, Commission and Similar income that have accrued should cease to accrue in current period and should be reversed with respect to past period, if uncollected.

Interest on advance guaranteed by Central Government irrespective of its assets classification status is not to be taken to income account unless the interest has been actually realized.

Fees and commission earned by Bank as a result of renegotiations or re-scheduling of outstanding debts should be recognized on an accrual basis over the period of time covered by the re-negotiated or rescheduled extensions of credit.

For the sake of uniformity across banks, now the unrealized interest in the accounts classified as NPA will be credited in the account itself by debiting Profit & Loss Account with the particulars: “Unrecovered Interest reversed and recorded in Memoranda A/c”. Existing DI/SI of each NPA/PA a/c has been credited back to the concerned NPA/PA account and simultaneously accounted for as Recorded Interest in the memoranda account. ASSET CLASSIFICATION: FINANCIAL PARAMETERS: (IRAC Norms vide RD Cir. 36/2014 DATED 13.10.2014): An asset, including a leased asset, becomes non performing when it ceases to generate income for the bank. A non performing asset (NPA) is a loan or an advance where:

Sr. No.

Category of account Criteria for classification of account as NPA

1 Term Loan If interest and/or installment of principal remain overdue for a period of more than 90 days.

2 Cash Credits and Overdrafts

i) If the account remains out of order for a period of more than 90 days. Conditions for treating the account as out of order: (a) The outstanding balance remains continuously in excess of the sanctioned limit/drawing power. (b) Though the outstanding balance is less than the sanctioned limit/drawing power but there are no credits continuously for 90 days as on the date of balance sheet or credits are not enough to cover the interest debited during the same period (ii) The outstanding in the account based on drawing power calculated from stock statements older than three months, would be deemed as irregular. A working capital borrowal account will become NPA if such irregular drawings are permitted in the account for a continuous period of 90 days even though the unit may be working or the borrower’s financial position is satisfactory. (iii) Regular and ad-hoc credit limits need to be reviewed / regularized not later than three months from the due date / date of ad-hoc sanction. In case of constraints such as non


General Guidelines:

availability of financial statements and other data from the borrower branch should show that renewal/ review of the facility already on. In any case delay beyond 6 months is not considered desirable as a general discipline. An account where the regular/ad hoc credit limits have not been reviewed /renewed within 180 days from the due date/date of regular/ad hoc sanction will be treated as NPA.

3 Bills Purchased and Discounted

If the bill remains overdue for a period of more than 90 days.

4 Direct Agricultural Advances

The installment of principal or interest thereon remains overdue for two Crop seasons for short duration crops or one crop season for long duration crop. The crop season for each crop, which means the period up to harvesting of the crops raised, would be as determined by the State Level Bankers’ Committee in each State.

5 Securitization transaction Amount of liquidity facility remains outstanding for more than 90 days

6 Derivative transactions The overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment.

7 Other Accounts If any amount to be received in respect of that facility remains overdue for a period of more than 90 days.

8 Payment of Interest In case of default in payment of interest only an account should be classified as NPA if the interest charged during any quarter is not serviced fully within 90 days from the end of the quarter.

9 Accounts where a solitary or a few credits are recorded before the balance sheet date.

If the accounts of the borrowers have been regularised before the balance sheet date by repayment of overdue amounts through genuine sources (and not by sanction of additional facilities or transfer of funds between accounts) the accounts need not be treated as NPA Where the account indicates inherent weakness on the basis of the data available, the account should be deemed as a NPA. In other genuine cases, the banks must furnish satisfactory evidence to the Statutory Auditors/Inspecting Officers about the manner of regularization of the account to eliminate doubts on their performing status.

10 Overdue Amount due to the bank under any credit facility is overdue, if it is not paid on the due date fixed by the bank.


1. Branches should, classify an account as NPA only if the interest charged during any quarter is not serviced fully within 90 days from the end of the quarter.

2. All the facilities granted to a borrower /investments in securities issued by the borrower will have to be treated as NPA and not a particular facility/ investment or part thereof which has become NPA. If the amount in default of any borrower is outstanding in default account i.e. LC-default account/ LG-default account / DPG default account/ Co-accepted bills default account, the balance outstanding in that account also should be treated as a part of the borrower’s principal operating account for the purpose of application of prudential norms on income recognition, asset classification and provisioning i.e. all the facilities granted to a borrower / investment made have to be classified as NPA/NPI if one of them becomes NPA. There are a few exceptions for this as under:

a. Commonality of a Collateral Security has no role in determining the Asset Classification.

b. The bill discounted under LC favoring a borrower may not be classified as a Non Performing Advances (NPA), when any other facility granted to the borrower is classified as NPA. However, in case documents under LC are not accepted on presentation or the payment under the LC is not made on the due date by the LC Issuing Bank for any reason and the borrower does not immediately make good the amount disbursed as a result of discounting of concerned bills, the outstanding bills discounted will immediately be classified as NPA with effect from the date when the other facilities had been classified as NPA.

c. In respect of agricultural advances, as well as advances for other purposes granted by banks to ceded PACS / FSS under the on lending system, only that particular credit facility granted to a Primary Agricultural Credit Society (PACS) / Farmers Service Societies (FSS) which is in default for a period of two crop seasons in case of short duration crop & one crop season in case of long duration crop, as the case may be, after it has become overdue, will be classified as NPA and not all the credit facilities sanctioned to a PACS/FSS. However, other direct loans and advances, if any, granted by the bank to the member borrower of a PACS/FSS outside the on-lending arrangement will become NPA even if one of the credit facilities granted to the same borrower becomes NPA.

d. In case of bank finance given for industrial projects or for agricultural plantations, etc. where moratorium is available for payment of interest, payment of interest, becomes ‘due' only after the moratorium or gestation period is over. They become overdue after due date for payment of interest, if uncollected.

3 Availability of security or net worth of borrower/guarantor should not be taken

into account for the purpose of treating an advance as NPA, as asset classification and income recognition is based on record of recovery and compliance of other non-financial indicators.


4 The classification of an asset as NPA should be based on the record of recovery.

An account need not classify as NPA merely due to the existence of some deficiencies which are temporary in nature such as non availability of adequate drawing power based on the latest available stock statement, balance outstanding exceeding the limit temporarily non-submission of stock statements and non renewal of the limits on the due date etc.

5 Advances against Term Deposits, NSCs eligible for surrender, Indira Vikas Patras, Kisan Vikas Patras and Life Insurance Policies, need not be treated as NPAs although interest thereon has not been paid for 90days provided adequate margin is available in the accounts. However, advances against gold ornaments, Govt. securities and all other securities are not covered by this exemption. Accounts covered under above exemption are exempted from application of principle of percolation (i.e. principle of classifying all accounts of the Borrower are to be classified as NPA if one account becomes NPA).

6 In respect of housing loans/Car loans or similar advances granted to staff members where interest is payable after recovery of principal, interest need not be considered as overdue from the first quarter onwards. Such loans/advances should be classified as NPA only when there is default in payment of interest on due date of payment.

7 In respect of consortium advances, each bank may classify the borrowal accounts

according to its own record of recovery and other aspects having a bearing on the recoverability of the advances, as in the case of multiple banking arrangements.

8 Agriculture Advance: A loan granted for short duration crops will be treated as

NPA if the instalment of principal or interest thereon remains overdue for two crop seasons. A loan granted for long duration crops will be treated as NPA if the instalment of principal or interest thereon remains overdue for one crop season. Long duration crops where crop season longer than one year and the crops which are not long duration crops will be treated as short duration crops. The crop season for each crop which means the period up to harvesting of the crops raised, would be as determined by the state level bankers’ committee in each state.

9 Direct Agriculture Finance : (a) Loans to individual farmers including self help groups (SHGs) or Joint liability Groups (JLGs) i.e. groups of individual farmers provided banks maintain disaggregated data on such loans engaged in Agriculture only. (b) Loans to corporate including farmers producer companies of individual farmers, partnership firms and co-operatives of farmers directly engaged in Agriculture activities up to an aggregate limit of 2 crore per borrower for the following purpose:


(i) Short term loans for raising crops which includes traditional / non traditional Plantations and horticulture. (ii) Medium and long term loans for agriculture (e.g. purchase of agricultural implements and machinery, loans for irrigation and other developmental activities undertaken in the farm). (iii)Loans for pre-harvest and post harvest activities viz, spraying, weeding, harvesting, grading and sorting. (iv) Export credit for exporting their own farm produce.

10 KCC would be deemed NPA if it remains out of order for a period of two crop/one crop season (as the case may be). A KCC account will be treated as out of order if : a) There are no credits in the account continuously for two crop seasons/one crop season (as the case may be) as on the date of balance sheet b) The outstanding remains continuously in excess of the limit for two crop seasons /one crop season (as the case may be) as on the date of balance sheet c) The credits in the account are not sufficient even to cover the interest debited in respect of the account for two crop seasons/one crop season (as the case may be).

11 In respect of agricultural loans other than those specified above and term loans given to non-agriculturists identification of NPAs would be done on the same basis as non-agricultural advances which at present are the 90 days delinquency norms.

12 Where natural calamities impair the repaying capacity of agricultural borrowers, relief measures are decided by bank/ branches like - conversion of the short-term production loan into term loan or reschedulement of the repayment period and sanctioning of fresh short-term loan subject to guidelines issued by PS&LB HO. In such cases of conversion or re-schedulement, the term loan as well as fresh short-term loan may be treated as current dues and need not be classified as NPA. The asset classification of these loans would thereafter be governed by the revised terms & conditions.

13 Rural Housing Advances: While fixing the repayment schedule in case of Rural housing advances granted to agriculturists under Indira Awas Yozana and Golden Jublee Rural Housing Finance scheme it is to ensure that interest / installment payable on such advances are linked to crop cycle.

14 The credit facility backed by the Central Government Guarantee, though overdue may be treated as NPA only when the Government repudiates its guarantee when invoked. This exemption from classification of Government guaranteed advances as NPA is not for the purpose of recognition of income.


15 A state Government guaranteed advance, where interest and/or instalment of principal/or any other amount due to the bank remains overdue for a period more than 90 days, shall become a non performing advance

16 Take-out Finance: Take out finance is the product emerging in the context of the funding of long term infrastructure projects. Under this arrangement the institution / the bank financing infrastructure projects will have an arrangement with any financial institution for transferring to the latter the outstanding in respect of such financing in their books on a pre-determined basis. The norms of asset classification will have to be followed by the concerned bank/ financial institution in whose books the account stands as balance sheet item as on the relevant date. The taking over institution on taking over such assets should make provisions treating the account as NPA from the actual date of it becoming NPA even though the account was not in its books as on that date.

17 Post shipment supplier’s credit: In respect of post-shipment credit extended by the banks covering export of goods to countries for which the ECGC’s cover is available. EXIM Bank has introduced a guarantee-cum-refinance programme whereby, in the event of default, EXIM Bank will pay the guaranteed amount to the bank within a period of 30 days from the day the bank invokes the guarantee after the exporter has filed claim with ECGC. To the extent payment has been received from the EXIM Bank, the advance may not be treated as a non-performing asset for asset classification and provisioning purposes.

18 In case of bank finance given for industrial projects or for agricultural plantations, etc. where moratorium is available for payment of interest, payment of interest becomes ‘due' only after the moratorium or gestation period is over.

19 In case of EXPORT PROJECT FINANCE, Where the lending bank is able to establish through documentary evidence that the importer has cleared the dues in full by depositing the amount in the bank abroad before it turned into NPA in the books of the bank, but the importer’s country is not allowing the funds to be remitted due to political or other reasons, the asset classification may be made after a period of one year from the date the amount was deposited by the importer in the bank abroad.

20 The net lease rentals (finance charge) on the leased asset accrued and credited to income account before the asset became non-performing, and remaining unrealized, should be reversed or provided for in the current accounting period. The term Rs.net lease rentals' would mean the amount of finance charge taken to the credit of P&L account and would be worked out as gross lease rentals adjusted by amount of statutory depreciation and lease equalization a/c.

21 Advances to Staff members, under staff welfare Scheme In respect of Housing/Car loans or similar advances granted to staff members where interest is payable after recovery of


principal, interest need not be considered as `overdue' from the first quarter onwards. Such loans/advances should be classified as NPA only when there is default in repayment of installment of principal or payment of interest on due date of payment.

RECOGNITION OF INCOME & APPROPRIATION OF RECOVERY IN NPA A/C 1) Income from non-performing assets is not recognised on accrual basis but is booked

as income only when it is actually realized. Branches should not charge and take to income account interest on any NPA. This will apply to Govt. guaranteed accounts also. For this purpose simultaneous transfer of account to General Ledger Head: NPA is a pre-requisite. Interest realized on NPAs may be taken to income provided the credits in the account are not out of fresh/additional credit facilities sanctioned to the borrower concerned.

2) Branches should not take to income any fees/ commission and any similar income on non- performing assets until it is actually realized. Charges/expenses/insurance etc. on such a Borrowal account should not be debited to the Borrower’s account unless recovered, the same need to be recorded in the Memoranda Account after charging to Bank’s Revenue.

3) Interest on advances against term deposits, NSCs, IVPs, KVPs and Life Policies should be taken to income account on the due date, provided adequate margin is available in the accounts.

4) When a credit facility is classified for the first time as NPA the interest accrued & credited to the income account in the past periods, which has not been realized should be ascertained and same should be reversed and should be credited back in the respective account itself at the close of the year/half year/Quarter at the branch level by debiting Profit & Loss Account with following particulars:

“Unrecovered Interest reversed and recorded in Memoranda A/c”

This will apply to Govt. guaranteed accounts also.

5) For operational convenience and future records, it is necessary that Branches should first charge interest (including Penal Interest, if any) up to the date of classification of account as NPA and then simultaneously ascertain the quantum of interest not realized (DI) which is required to be reversed as above. This amount will be recorded separately in Memorandum Account. 6) In respect of NPAs, fees, commission and similar income that have accrued should cease

to accrue in the current period and should be reversed with respect of past periods, if uncollected.

7) Interest on advance guaranteed by Central Government, irrespective of its assets classification status is not to be taken to income account unless the interest has been actually realized.


FUTURE INTEREST APPLICATION 1) On an account becoming NPA, further application of interest has to be stopped. However Accrued Interest (including Penal Interest, if any) will continue to be recorded in Memorandum accounts. 2) Fees and commission earned by Bank as a result of renegotiations or rescheduling of outstanding debts should be recognized on an accrual basis over the period of time covered by the re-negotiated or rescheduled extensions of credit. APPROPRIATION OF RECOVERIES (Recovery Division Cir. No. 26/13 and 36/14) The appropriation of Recoveries in NPA Accounts (irrespective of the mode/status/stage of recovery actions) shall be regulated in the following order of priority:

Firstly towards-(i) Expenditure/Out of Pocket Expenses incurred for Recovery (earlier recorded in Memorandum Dues); Secondly towards-(ii) Principal irregularities i.e. NPA outstanding in the account gets updated / adjusted, whichever is earlier; Thirdly towards-(iii) The interest irregularities /accrued interest.

TREATMENT IN CASH CREDIT- NPA ACCOUNTS WITH TAGGING FACILITY: Debits in Cash Credit - NPA account with tagging facility can be allowed dependent upon extent of tagging permitted by appropriate authority. The proceeds received through tagging arrangement would also be utilized in the following order of priority: (i) Expenditure/Out of pocket Expenses incurred for recovery. (ii) Principal outstanding balance in Working Capital Facility till it is brought within the DP/Limit (Whichever is lower) (iii) Installments in arrear in Term Loan Account. (iv) Recognition of Recorded Interest. CLASSIFICATION OF NPA ACCOUNT & PROVISION. SR. No. Category of

Accounts CRITERIA RATE OF PROVISION

1 Sub- Standard

A sub-standard asset is one, which has remained NPA for a period less than or equal to 12 months; such an asset will have well defined credit weaknesses. If after commencement of commercial production and classifying a/c as sub-standard a/c will continue in SS category for specified period provided facility is fully secured. (Specified period means 1

A general provision @ of 15% on total outstanding be made without making any allowance for ECGC guarantee cover and securities available. The unsecured exposures which identified as ‘Substandard’ would


year period from first payment of interest.

attract additional provision of 10% i.e. total of 25% on O/S balance. Infrastructure loan accounts which are classified as Sub Standard will attract a provisioning of 20% (escrow a/c)

2 Doubtful If a/c is Sub – Standard for 12 months such an asset will have well defined credit weaknesses with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. Straightway classification When realizable value of security is less than 50% of value assessed by the bank or accepted by RBI at the time of last inspection, such a/c may be straightaway classified under doubtful

(i) Unsecured Portion: Provision @ 100% of unsecured portion, (ii) Secured Portion: On tangible security-

Up to one year doubtful- 25 %

One to three year doubtful-40%

More than 3 year doubtful- 100%

Provision is to be made on outstanding net of DI.

3 Loss asset A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI Inspectors but the amount has not been written off, wholly. Realisable value of security as assessed by bank’s approved valuer / RBI is less than 10% of outstanding in the a/c then a/c straightaway classified as loss asset

100% of the Outstanding.

Provision on Standard Account on Global Loan Portfolio basis 1 STANDARD

ACCCOUNT (Other than Restructured Advances)

ON GLOBAL LOAN PORTFOLIO BASIS

1) Direct Agriculture & SME - 0.25% 2) Commercial Real Estate (CRE) – 1% 3) Commercial Real Estate – Residential

Housing (CRE-RH)* – 0.75% 4) Housing loans granted at ‘Teaser

Rates’** – 2% 5) All other loans not included above –

0.40%

* CRE-RH would consist of loans to


builders/developers for residential housing projects (except for captive consumption) under CRE ** The provisioning on these assets would revert to 0.40% after 1 year from the date on which the rates are reset at higher rates if the accounts remain ‘standard’

2. 2a. From 01.06.13 new standard account upon Restructuring I. In the first Two years from the date of restructuring. II. In case of moratorium on payment of interest/principal after restructuring –period covering moratorium and two years thereafter. III. The Restructured a/cs classified as NPA but later upgraded to Standard category in first year from date of Up-gradation

5%

Standard Restructured Advances

2b) Restructured Standard accounts existing as on 31.05.2013

These accounts will attract provision of 5% in phased manner as :- w.e.f 31.03.2015 4.25% w.e.f 31.03.2016 5% The impact of higher provisions as above will be spread over the four quarters of each financial year i.e.2013-14, 2014-15 and 2015-16 respectively

The provision on Standard Accounts is not reckoned for arriving at net NPAs and is not netted from gross advances but is shown separately as “Contingent Provisions against standard assets” under other liabilities and Provisions-others in Schedule-5 of the balance sheet.

Advances under rehabilitation package approved by BIFR/ Term Lending Institutions: Banks are not permitted to upgrade the classification of any advance in respect of which the terms have been negotiated unless the package of renegotiated terms has worked satisfactorily for a period of one year. While the existing credit facilities sanctioned to a unit under rehabilitation packages approved by BIFR/Term Lending Institutions will continue to be classified as Sub standard or doubtful as the case may be, in respect of additional facilities sanctioned under the rehabilitation packages, the Income Recognition, Asset Classification norms will become applicable after a period of one year from the date of disbursement. So provision on additional facilities


sanctioned need not be made for a period of one year from date of disbursement. Accounts with outstanding balance of Rs. 5 crore and above With a view to bring down divergence arising out of difference in assessment of the value of security in cases of high value NPAs (A/Cs with outstanding balance of Rs.5 crore & above and also to enhance the reliability on stock valuations, stock audit at annual intervals by external agencies appointed as per bank’s extant guideline, be got done mandatorily. Valuation of Securities for Provisioning Purposes (i) Wherever the Incumbent feels that realisable value of IPs is significantly lower than the one on bank’s record in accounts with aggregate limits/ outstanding of Rs.10 lakhs & above but less than Rs.1 crore and value of immovable property mortgaged/charged to the bank is Rs.20 lakhs & above, he may get the property re-valued from the bank’s approved valuer provided the valuation is more than one year old. (ii) As regards borrower accounts having aggregate limit of Rs.1 crore & above, valuation of immovable properties charged/mortgaged to the Bank be got done from approved valuer once in three years. However, valuation in such accounts shall be got done from Bank’s approved valuer and fees payable to the valuer be recovered from borrower. (iii) However, where the value of immovable property to be mortgaged/charged is Rs. 5 crore & above, branches shall get valuation of such IPs done from minimum two valuers on the Bank’s approved panel. In case the difference in valuation is less than 15% the average value may be taken. (iv) The branches while getting the valuation of IPs charged / mortgaged to the bank, from approved valuer must take the Market and Realisable Value of the property separately. (v) In case of Plant & Machinery only Realisable Value should be mentioned in the report and considered for calculation of provision in the account. Valuation report should mention the brand names of the Plant & Machinery, Year of Installation, Original cost etc. (vi) While getting the value of securities assessed by approved valuers, valuation report should clearly specify the assumptions/ circumstances for having arrived at the given realisable value. (vii) In case there is substantial variation in the realizable value of charged security(ies) now being reported and as reported at the last time/ last sanction or renewal, reasons for the same should be clearly spelt out, preferably the earlier valuations may also be co-related/commented in the latest valuation report. GUIDELINES IN RESPECT OF PROJECTS UNDER IMPLEMENTATION INVOLVING TIME OVERRUN. “Project Loan” here means any term loan which has been extended for the purpose of setting up of an economic activity. The date of completion of the project and date of commencement of Commercial Operations (DCCO) should be clearly spelt out at the time of financial closure of the project and formally documented. Legal and other extraneous reasons which are beyond the control of the promoters, may lead to delay in project implementation and involve restructuring /reschedulement of loans by banks. Infrastructure sector is a sector as defined by RBI in its circular on ‘Definition of Infrastructure Lending’


All project loan have been divided into two category: (a) Project Loans for infrastructure sector (b) Project Loans for non-infrastructure sector Project Loans for Infrastructure Sector Projects Loans for Non-Infrastructure

Sector 1. Classified as NPA during any time before

commencement of commercial operations as per record of recovery (90 days overdue) unless it is restructured and becomes eligible for classification as “standard asset”

2. if it fails to commence commercial operations within two years from the original DCCO, even if it is regular as per record of recovery, unless it is restructured and becomes eligible for classification as “standard asset”.

1. Classified as NPA during any time before commencement of commercial operations as per record of recovery (90 days overdue) unless it is restructured and becomes eligible for classification as ‘standard asset.

2. if it fails to commence commercial operations within one year from the original DCCO, even if it is regular as per record of recovery, unless it is restructured and becomes eligible for classification as ‘standard asset’.

Projects involving Time Overrun – Asset Classification If Project Loan classified as ‘standard asset’ is restructured any time during the period up to two years from the original DCCO, in accordance with the provisions of restructuring guidelines, it can be retained as a standard asset if the fresh DCCO is fixed within the following limits, and further provided the account continues to be serviced as per the restructured terms.

Upto another 2 years (beyond the existing extended period of 2 years i.e. total extension of 4 years) in case the reason for extension is arbitration proceedings or a court case.

Upto another 1 year (beyond the existing extended period of 2years i.e. total extension of 3 years) in other than court cases.

In case of non-infrastructure projects, if the delay in commencement of commercial operations extends beyond the period of one year from the date of completion as determined at the time of financial closure, banks can prescribe a fresh DCCO, and retain the "standard" classification by undertaking restructuring of accounts in accordance with the Restructuring Guidelines, provided the fresh DCCO does not extend beyond a period of two years from the original DCCO

Application for restructuring should be received before the expiry of period of 2 years from the original DCCO and when the account is still standard as per record of recovery.

Application for restructuring should be received before the expiry of period of one Year from the original DCCO and when the account is still standard as per record of recovery.

Income Recognition Where there is moratorium for payment of interest, Where there is moratorium for payment


income should not be booked on accrual basis beyond two years from the original DCCO, considering the high risk involved in such restructured accounts.

of interest, income should not be booked on accrual basis beyond one year from the original DCCO, considering the high risk involved in such restructured accounts.

Provision: DCCO revised upto 2 years from the original DCCO prescribed at the time of financial closure: 0.40%. DCCO extended from the original DCCO prescribed at the time of financial closure: (Beyond 2 years and up to 4 years or 3 years , as the case may be, depending upon the reasons for such delay ):-

Project loans restructured with effect from June 1, 2013 : 5.00% – From the date of such restructuring till the revised DCCO or 2 years from the date of restructuring, whichever is later. Existing Stock of project loans classified as restructured as on June 1, 2013: - 3.50 % - with effect from March 31, 2014 (spread over the four quarters of 2013-14) - 4.25 % - with effect from March 31, 2015 (spread over the four quarters of 2014-15) - 5.00 % - with effect from March 31, 2016 (spread over the four quarters of 2015-16) The above provisions will be applicable from the date of restructuring for 2 years.

DCCO revised upto 1 year from the original DCCO prescribed at the time of financial closure : 0.40%. DCCO extended from the original DCCO prescribed at the time of financial closure (beyond one year and upto two years)

Project loans restructured with effect from June 1, 2013 : 5.00 % – From the date of such restructuring for 2 years Existing Stock of project loans classified as restructured as on June 1, 2013: - 3.50 % - with effect from March 31, 2014 (spread over the four quarters of 2013-14) - 4.25 % - with effect from March 31, 2015 (spread over the four quarters of 2014-15) - 5.00 % - with effect from March 31, 2016 (spread over the four quarters of 2015-16) The above provisions will be applicable from the date of restructuring till the revised DCCO or 2 years from the date of restructuring, whichever is later.

Other common guidelines for Asset Classification 1) Dispensation is subject to adherence to the provisions regarding restructuring of accounts, which would inter alia require that the application for restructuring should be received before the expiry of period of two years (Infrastructure Sector) or 1 year (Non-Infrastructure Sector) from the original DCCO and when the account is still standard as per record of recovery.


2) For the purpose of these guidelines, mere extension of DCCO would not be considered as restructuring, if the revised DCCO falls within the period of two years (Infrastructure Sector) or 1 year (Non-Infrastructure Sector) from the original DCCO. In such cases the consequential shift in repayment period by equal or shorter duration (including the start date and end date of revised repayment schedule) than the extension of DCCO would also not be considered as restructuring provided all other terms and conditions of the loan remain unchanged. As such project loans will be treated as standard assets in all respects; they will attract standard asset provision of 0.40 per cent. 3) Any change in the repayment schedule of a project loan caused due to an increase in the project outlay on account of increase in scope and size of the project, would not be treated as restructuring if :

a) The increase in scope and size of the project takes place before commencement of Commercial operations of the existing project.

b) The rise in cost excluding any cost-overrun in respect of the original project is 25% or more of the original outlay.

c) The viability of the project is reassessed before approving the enhancement of scope and fixing a fresh DCCO.

d) On re-rating, (if already rated) the new rating is not below the previous rating by more than one notch.

4) Funded Interest: Income recognition in respect of the NPAs, regardless of whether these are or are not subjected to restructuring/ rescheduling/ renegotiation of terms of the loan agreement, should be done strictly on cash basis, only on realisation and not if the amount of interest overdue has been funded. If, however, the amount of funded interest is recognised as income, a provision for an equal amount should also be made simultaneously. In other words, any funding of interest in respect of NPAs, if recognised as income, should be fully provided for. 5) Conversion into equity, debentures or any other instrument: The amount outstanding converted into other instruments would normally comprise principal and the interest components. If the amount of interest dues is converted into equity or any other instrument, and income is recognised in consequence, full provision should be made for the amount of income so recognised to offset the effect of such income recognition. Such provision would be in addition to the amount of provision that may be necessary for the depreciation in the value of the equity or other instruments, as per the investment valuation norms. However, if the conversion of interest is into equity which is quoted, interest income can be recognised at market value of equity, as on the date of conversion, not exceeding the amount of interest converted to equity. Such equity must hereafter be classified in the “available for sale” category and valued at lower of cost or market value. In case of conversion of principal and /or interest in respect of NPAs into debentures, such debentures should be treated as NPA, ab initio, in the same asset classification as was applicable to loan just before conversion and provision made as per norms. This norm would also apply to zero coupon bonds or other instruments which seek to defer the liability of the issuer. On such debentures, income should be recognized only on realization basis. The income in respect of unrealized interest which is converted into debentures or any other fixed maturity instrument should be recognised only on redemption of


such instrument. Subject to the above, the equity shares or other instruments arising from conversion of the principal amount of loan would also be subject to the usual prudential valuation norms as applicable to such instruments.

GOVT GUARANTEED ACCOUNTS

State Govt guaranteed advances:-. A state Government guaranteed advance, where interest and/or instalment of principal/or any other amount due to the bank remains overdue for a period more than 90 days shall become a non performing advance.

Central Govt guaranteed advances: The credit facility backed by the Central Government Guarantee though overdue may be treated as NPA only when the Government repudiates its guarantee when invoked. This exemption from classification of Government guaranteed advances as NPA is not for the purpose of recognition of income. Accordingly Central Govt. guaranteed advance, if become overdue, be classified as Standard asset (Govt Guaranteed) (unless Govt. repudiate its guarantee when invoked) though interest on such advance is not to be taken to income account if it is not realized.

TAKE OUT FINANCE

Take out finance is the product emerging in the context of the funding of long-term infrastructure projects. Under this arrangement, the institution/ the bank financing infrastructure projects will have an arrangement with any financial institution for transferring to the latter the outstanding in respect of such financing in their books on a pre-determined basis .If an asset has become NPA before taking over by another institution, the lending institution in whose books at present the asset is outstanding should treat it NPA for all purposes irrespective of the fact that it ultimately is to be taken over by another institution. When the asset is actually taken over, the lending institution should reverse the provisions earlier made in its books. Whereas the taking over institution, should make provision from the actual date the asset became NPA and not from the date of taking over of the asset.

Reserve for Exchange Rate Fluctuations Account (RERFA) When exchange rate movements of Indian rupee turn adverse, the outstanding amount of foreign currency denominated loan (where actual disbursement was made in Indian Rupee) which becomes overdue goes up correspondingly, with its attendant implications of provisioning requirements. Such assets should not normally be revalued. In case such assets need to be revalued as per requirement of accounting practices or for any other requirement, the following procedure may be adopted:

The loss on revaluation of assets has to be booked in the bank's Profit & Loss Account. Besides the provisioning requirement as per Asset Classification, banks should treat the full

amount of the Revaluation Gain relating to the corresponding assets, if any, on account of Foreign Exchange Fluctuation as provision against the particular assets.

PROVISIONING FOR COUNTRY RISK With effect from 31 March 2003, banks are to make provisions on the net funded country


exposures as per the following schedule: Risk category ECGC Classification Provisioning Requirement (per cent) Insignificant A1 0.25 Low A2 0.25 Moderate B1 5 High B2 20 Very high C1 25 Restricted C2 100 Offcredit D 100 Banks are required to make provision for country risk in respect of a country where its net

funded exposure is one per cent or more of its total assets. The provision for country risk shall be in addition to the provisions required to be held

according to the asset classification status of the asset. In the case of ‘loss assets’ and ‘doubtful assets’, provision held, including provision held for

country risk, may not exceed 100% of the outstanding. Banks may not make any provision for ‘home country’ exposures i.e. exposure to India. The exposures of foreign branches of Indian banks to the host country should be included.

Foreign banks shall compute the country exposures of their Indian branches and shall hold appropriate provisions in their Indian books. However, their exposures to India will be excluded.

Banks may make a lower level of provisioning (say 25% of the requirement) in respect of short-term exposures (i.e. exposures with contractual maturity of less than 180 days).

OPERATING INSTRUCTIONS AND ACCOUNTING 1) For treating an irregular account as NPA some branches wrongly mention the date as at the end of financial year i.e. 31st March. For example, in case an account becomes out of order or irregular from 26.01.2013, it shall be treated as NPA as on 26.04.2013, in case default persists. The date of NPA in this account will be 26.04.2013 (and not 30.06.2013). 2) Surplus security available in one facility of an account should be considered in another facility

of the same borrower where there is shortfall. 3) Net means of borrowers and guarantors are not to be included as security. 4) In all accounts identified as NPAs including Govt. guaranteed accounts under standard assets, the unrealized interest (earlier termed as Derecognized Interest) and future interest is to be recorded only. Recorded Interest should be calculated, checked and recorded under authentication of the concerned official. Further, in NPA accounts (except where operations are allowed under tagging arrangement & accounts covered under Credit Guarantee scheme) expenses like Insurance Premium, Stamp Duty, Legal Expenses, Emoluments paid to the Godown Keeper or such other expenses incurred for safeguarding the interest of the bank should not be debited to the concerned NPA account. Instead, such expenses should be charged to revenue and recorded in the NPA Memoranda Account. The same may be claimed by the branch from the borrower at the time of filing the suit or entering into Negotiated Settlement. If recovered, the same may be taken to revenue at the time of actual recovery’. In NPA Accounts


where operations are allowed as per the tagging arrangement by the competent authority, such charges are to be recovered in addition to tagging. 5) Whenever any payment through cheque is collected in any NPA account, except where operation is being allowed, the credit entry pertaining to such payment should only be credited after realization of the cheque. (Till realization, such credit be kept in ‘Sundry’ account). Collection of any cheque /Transfer Instruments in NPA accounts is strictly prohibited. 6) Updation and maintenance of GL Head ‘NPA’ The ‘Due Date Defaults’ in

advances attract 90 days NPA norms as per the extant guidelines. The NPAs in ‘Due Date Defaults’ will be transferred to NPA

Heads as under: 64100 LC-Defaults : NPA-DL 76100 64110 DPG-Defaults : NPA-TL 76120 64120 LG-Defaults : NPA-DL 76100 64130 CO-Accepted Bills-Default : NPA-TL 76120 Prudential Guidelines on Restructuring of Advances by banks. (RD cir 36/2014 dated 13.10.2014) 1 Restructuring is the situation where the Bank, for economic or legal reasons relating to

the borrower’s financial difficulty, grants to the borrower concessions that the Bank would not otherwise consider. Restructuring would normally involve modification of terms of the advances/securities, which would generally include, among others, alteration of repayment period / repayable amount / the amount of installments / rate of interest (due to reasons other than competitive reasons).

2 Eligibility criteria Accounts classified under ‘Standard’, ‘Sub-standard’ and Doubtful are eligible. Rescheduling / Restructuring / renegotiation cannot be with retrospective effect.

Frauds and malfeasance will continue to remain ineligible Willful default cases may be taken up with Board’s

approval, while for such accounts the restructuring under the CDR Mechanism may be carried out with the approval of the Core Group only

Restructuring in BIFR cases cannot be implemented without express approval of BIFR.

No account will be taken up for restructuring unless the financial viability is established and there is a reasonable certainty of repayment from the borrower, as per the terms of restructuring package. Any restructuring done without looking into cash flows of the borrower and assessing the viability of the projects / activity financed by bank would tantamount to an attempt at ever greening a weak credit facility and would invite supervisory concerns / action.

3 Broad bench mark for Return on capital employed should be at least equivalent


Viability Parameters to 5 year Government security yield plus 2 per cent. The debt service coverage ratio should be greater than

1.25 within the 5 years period in which the unit should become viable and on year to year basis the ratio should be above 1. The normal debt service coverage ratio for 10 years repayment period should be around 1.33.

The benchmark gap between internal rate of return and cost of capital should be at least 1per cent.

Operating and cash break even points should be worked out and they should be comparable with the industry norms.

Trends of the company based on historical data and future projections should be comparable with the industry. Thus behavior of past and future EBIDTA should be studied and compared with industry average.

Loan life ratio (LLR), as defined below should be 1.4, which would give a cushion of 40% to the amount of loan to be serviced.

LLR= (Present value of total available cash flow (ACF) during the loan life period (including interest and principal) / (Maximum amount of loan).

4 Process While a restructuring proposal is under consideration, the usual asset classification norms would continue to apply.

Normally, restructuring cannot take place unless alteration / changes in the original loan agreement are made with the formal consent / application of the debtor. However, the process of restructuring can be initiated by the bank in deserving cases subject to customer agreeing to the terms and conditions.

5 Asset Classification Norms – General

Restructuring of advances can take place in the following stages: a) before commencement of commercial production / operation; b) after commencement of commercial production / operation but before the asset has been classified as 'sub-standard'; c) after commencement of commercial production / operation and the asset has been classified as 'sub-standard' or 'doubtful'. 1) The accounts classified as 'standard assets' should be immediately re- classified as 'sub-standard assets' upon restructuring 2) The non-performing assets, upon restructuring, would continue to have the same asset classification as prior to restructuring


and slip into further lower asset classification categories as per extant asset classification norms with reference to the pre-restructuring repayment schedule except as allowed as per para G9.2.2. 3) Standard accounts classified as NPA and NPA accounts retained in the same category on restructuring by the bank should be upgraded only when all the outstanding loan/facilities in the account perform satisfactorily during the specified period’ i.e. principal and interest on all facilities in the account are serviced as per terms of payment during that period. (Specified Period means a period of one year from the commencement of the first payment of interest or principal, whichever is later, on the credit facility with longest period of moratorium under the terms of restructuring package) Satisfactory Performance means: a) Non-Agricultural Cash Credit Accounts In the case of non-agricultural cash credit accounts, the account should not be out of order any time during the specified period, for a duration of more than 90 days. In addition, there should not be any overdues at the end of the specified period. b) Non-Agricultural Term Loan Accounts In the case of non-agricultural term loan accounts, no payment should remain overdue for a period of more than 90 days. In addition there should not be any overdues at the end of the specified period. c) Housing & other personal Loan accounts: It is observed that in a rising interest rate scenario, the repayment period is normally extended by keeping the EMI constant. However, in a few cases this results in extending the repayment period much beyond the retirement age or the revenue generating capacity of the borrower. Therefore, it is advised that (i) While extending repayment period in respect of housing loans to keep the EMI unchanged, branches should satisfy themselves about the revenue generation / repaying capacity of the borrower during the entire repayment period including the extended repayment period. (ii) Branches should not extend the repayment period of such borrowers where they have concerns regarding the repaying capacity over the extended period, even if the borrowers want to extend the tenor to keep the EMI unchanged. (iii) Branches should provide the option of higher EMI to such


borrowers who want to repay the housing loan as per the original repayment period. d) All Agriculture Accounts In case of agriculture accounts, at the end of the specified period the account should be regular.

At the outset, it is to be noted that the special concessions (mentioned ahead) are not to be extended to the following categories of advances:

Consumer and personal advances Advances classified as Capital market exposures Advances classified as commercial real estate exposures;

The special regulatory treatment has the following two components: A. Incentive for quick implementation of the restructuring package. B. Retention of the asset classification of the restructured account in the pre - restructuring

asset classification category. A. Incentive for quick implementation of the restructuring package – Restoration of Asset Classification Status As an incentive for quick implementation of the package, if the approved package is implemented by the bank as per the following time schedule, the asset classification status may be restored to the position which existed when the reference was made to the CDR Cell in respect of cases covered under the CDR Mechanism or when the restructuring application was received by the bank in non-CDR cases:

i. Within 120 days from the date of approval under the CDR Mechanism. ii. Within 90 days from the date of receipt of application by the bank in cases other than those

restructured under the CDR Mechanism. B. Asset classification benefits An existing 'standard asset' will not be downgraded to the sub-standard category upon restructuring and, during the specified period, the asset classification of the sub-standard/doubtful accounts will not deteriorate upon restructuring, if satisfactory performance is demonstrated during the specified period. Further, these benefits will be available subject to compliance with the following conditions: A) The dues to the bank are ‘fully secured’ However, The condition of being fully secured by tangible security will not be applicable in the following cases:

MSE borrowers, where the outstanding is up to Rs. 25 lac. Infrastructure projects, provided the cash flows generated from these projects are adequate for

repayment of the advance, the financing bank(s) have in place an appropriate mechanism to escrow the cash flows, and also have a clear and legal first claim on these cash flows.

B) The unit becomes viable in 8 years, if it is engaged in infrastructure activities, and in 5 years in the case of other units. C) The repayment period of the restructured advance including the moratorium, if any, does not exceed 15 years in the case of infrastructure advances and 10 years in the case of other advances. The ceiling of 10 years, over the repayment period of the restructured advances, would not be applicable for restructured housing loans (for being eligible for special regulatory treatment). Our


Bank has prescribed the maximum repayment period for restructured residential housing loans as 30 years from the date of original sanction. or till the borrower attains 70 Years of age. Circle head may relax the period till the borrower attains the age of 75. D) Promoters' sacrifice and additional funds brought by them should be a minimum of 20 per cent of banks‟ sacrifice or 2 per cent of the restructured debt, whichever is higher. This stipulation is the minimum and bank may decide on a higher sacrifice by promoters depending on the riskiness of the project and promoters‟ ability to bring in higher sacrifice amount. Further, such higher sacrifice may invariably be insisted upon in larger accounts, especially CDR accounts. The promoters‟ sacrifice should invariably be brought upfront while extending the restructuring benefits to the borrowers. The term 'bank's sacrifice' means the amount of "erosion in the fair value of the advance" or “total sacrifice”. Prior to May 30, 2013, if banks were convinced that the promoters face genuine difficulty in bringing their share of the sacrifice immediately and need some extension of time to fulfill their commitments, the promoters could be allowed to bring in 50% of their sacrifice, i.e. 50% of 15%, upfront and the balance within a period of one year. However, in such cases, if the promoters fail to bring in their balance share of sacrifice within the extended time limit of one year, the asset classification benefits derived by banks will cease to accrue and the banks will have to revert to classifying such accounts as per the asset classification norms specified. E) Promoter’s contribution need not necessarily be brought in cash and can be brought in the form of de-rating of equity, conversion of unsecured loan brought by the promoter into equity and interest free loans. F) The restructuring under consideration is not a 'repeated restructuring'. Elements of Special Regulatory Framework w.e.f. 1.4.15 In line with the recommendation of the Working Group (Chairman: Shri B. Mahapatra) to review the existing prudential guidelines on restructuring of advances by banks/financial institutions, the extant incentive for quick implementation of restructuring package and asset classification benefits available on restructuring on fulfilling the conditions will however be withdrawn for all restructurings effective from April 1, 2015 with the exception of provisions related to changes in DCCO in respect of infrastructure as well as non-infrastructure project loans. It implies that with effect from April 1, 2015, a standard account on restructuring (for reasons other than change in DCCO) would be immediately classified as sub-standard on restructuring as also the non-performing assets, upon restructuring, would continue to have the same asset classification as prior to restructuring and slip into further lower asset classification categories as per the extant asset classification norms with reference to the pre-restructuring repayment schedule. INCOME RECOGNITION NORMS FOR RESTRUCTURED ACCOUNTS


Interest income in respect of restructured accounts classified as 'standard assets' will be recognized on accrual basis and that in respect of the accounts classified as 'non-performing assets' will be recognized on cash basis. In the case of restructured accounts classified as ‘standard’, the income, if any, generated by debt / equity instruments created on conversion of dues may be recognized on accrual basis. In the case of restructured accounts classified as non-performing assets, the income, if any, generated by these instruments may be recognized only on cash basis. PROVISIONING NORMS FOR RESTRUCTURED ACCOUNTS Normal provisions Branches will hold provision against the restructured advances as per the existing provisioning norms . Similarly if so decided, HO Recovery Division too may hold account specific additional provision even on Restructured Advances like other accounts.

Restructured accounts classified as non-performing advances, when upgraded to standard category will also attract a higher provision (as prescribed from time to time) in the first year from the date of upgradation.

The above-mentioned higher provision on restructured standard advances has been enhanced from previous 2.75% to 5% in respect of new restructured standard accounts (flow) with effect from June 1, 2013 and increase in a phased manner for the stock of restructured standard accounts as on May 31, 2013 as under :

i)3.50% - with effect from March 31, 2014 (spread over the four quarters of 2013-14) ii)4.25% - with effect from March 31, 2015 (spread over the four quarters of 2014-15) iii)5.00%- with effect from March 31, 2016 (spread over the four quarters of 2015-16) Provision for diminution in the fair value of restructured advances Reduction in the rate of interest and /or reschedulement of the repayment of principal amount, as part of the restructuring, will result in diminution in the fair value of the advance. Such diminution in value is an economic loss for the bank and will have impact on the bank’s market value of equity. It is, therefore, necessary for banks to measure such diminution in the fair value of the advance and make provisions for it by debit to Profit & Loss Account. Such provision should be held in addition to the provisions as per existing Provisioning norms, and in an account distinct from that for normal provisions. For this purpose, the erosion in the fair value of the advance should be computed as the difference between the fair value of the loan before and after restructuring Fair value of the loan before restructuring will be computed as the present value of cash flows representing the interest at the existing rate charged on the advance before restructuring and the principal, discounted at a rate equal to the bank’s BPLR as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring. Fair value of the loan after restructuring will be computed as the present value of cash flows representing the interest at the rate charged on the advance on restructuring and the principal, discounted at a rate equal to the bank’s BPLR as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring. In the case of working capital facilities, the diminution in the fair value of the cash credit /overdraft component may be


computed as above, reckoning the higher of the outstanding amount or the limit sanctioned as the principal amount and taking the tenor of the advance as one year. The term premium in the discount factor would be as applicable for one year. The fair value of the term loan components (Working Capital Term Loan and Funded Interest Term Loan) would be computed as per actual cash flows and taking the term premium in the discount factor as applicable for the maturity of the respective term loan components. In the event any security is taken in lieu of the diminution in the fair value of the advance, it should be valued at Rs. 1/- till maturity of the security. This will ensure that the effect of charging off the economic sacrifice to the Profit & Loss account is not negated. The diminution in the fair value may be re-computed on each balance sheet date till satisfactory completion of all repayment obligations and full repayment of the outstanding in the account, so as to capture the changes in the fair value on account of changes in BPLR, term premium and the credit category of the borrower. Consequently, banks may provide for the shortfall in provision or reverse the amount of excess provision held in the distinct account. If due to lack of expertise/ appropriate infrastructure, a bank finds it difficult to ensure computation of diminution in the fair value of advances extended by small/rural branches, as an alternative to the methodology prescribed above for computing the amount of diminution in the fair value, banks will have the option of notionally computing the amount of diminution in the fair value and providing therefore, at five percent of the total exposure, in respect of all restructured accounts where the total dues to bank(s) are less than rupees one crore till the financial year ending March 2013. Further The total provisions required against an account (normal provisions plus provisions in lieu of diminution in the fair value of the advance) are capped at 100% of the outstanding debt amount. The provisions required for Restructured A/cs (including the provision for Diminution in Fair Value will be maintained/updated/adjusted by Credit (Industrial Rehabilitation) Division at HO, who in turn will provide an account-wise list of NPA A/cs to Recovery Division before finalization of Balance Sheet, so as to ensure that in respect of NPA A/cs, the Total Provisions do not exceed 100% outstanding Debt amount. OTHER GUIDELINES

Under the Debt Restructuring Mechanism for SMEs, in exceptional cases Circle Heads may permit Restructuring of debt in accounts where the bank has initiated recovery action (under SARFAESI / filing recovery suit).

Extension of moratorium period may be permitted by the competent authority such that the total repayment period of the restructured debt falls within the RBI norms. However, the change in the moratorium is to be linked to the projected/ accepted cash flows.

Restructuring within one year of enhancement may be permitted by the competent authority. However, the powers for restructuring within one year of sanction of WC/ term loan shall continue to be vested one level higher

DISCLOSURE Banks are required to disclose in their published annual Balance Sheets, under "Notes on Accounts", information relating to number and amount of advances restructured, and the amount


of diminution in the fair value of the restructured advances. The information on advances restructured under CDR Mechanism, SME Debt Restructuring Mechanism and other categories are required to be disclosed separately. IRAC NORMS-AGRICULTURAL ADVANCES Income Recognition, Asset Classification, Provisioning & Related Aspects-Agricultural Advances- Kisan Credit Card Scheme ( RD 36/2014 DATED 13.10.2014) (i) Kisan Credit Card Schemes aim at providing adequate and timely credit support from the banking system under a single window to the farmers for their cultivation & other needs as indicated below: a) To meet the short term credit requirements for cultivation of crops b) Post harvest expenses c) Produce Marketing loan d) Consumption requirements of farmer household e) Working capital for maintenance of farm assets and activities allied to agriculture, like dairy Animals, inland fishery etc. f) Investment credit requirement for agriculture and allied activities like pumpsets, sprayers, dairy animals etc. (While the aggregate of components a) to e) above forms the short term credit limit portion, the aggregate of components under f) forms the long term credit limit portion.) (ii) Kissan Card Cash Credit limits are being sanctioned and opened in CBS under scheme code – CCAKC and all the operative guidelines for opening of these guidelines in the system have to be meticulously followed. (iii)RBI has prescribed that “the repayment period may be fixed by banks as per the anticipated harvesting and marketing period for the crops for which a loan has been granted and the extant prudential norms for income recognition, asset-classification and provisioning will continue to apply for loans granted under revised KCC Scheme.” (iv) Income Recognition & Asset Classification (IRAC) Norms as prescribed by RBI are being circulated by HO Recovery Division interalia explaining applicability of IRAC norms to the Agriculture Advances as follow: “A loan granted for short duration crops will be treated as NPA, if the installment of principal or interest thereon remains overdue for two crop seasons. A loan granted for long duration crops will be treated as NPA, if the installment of principal or interest thereon remains overdue for one crop season. For the purpose of these guidelines, “long duration” crops would be crops with crop season longer than one year and crops, which are not “long duration” crops, would be treated as “short duration” crops. The crop season for each crop, which means the period up to harvesting of the crops raised, would be as determined by the State Level Bankers’ Committee in each State. Depending upon the duration of crops raised by an agriculturist, the above NPA norms would also be made applicable to agricultural term loans availed of by him. The above norms should be made


applicable to all direct agricultural advances as listed below:” (v) Thus, the KCC facility being essentially in the nature of Cash Credit accommodation for agricultural purposes, the prudential norms as applicable to Cash Credit facilities would apply to the KCC accounts in other words, the Kisan Credit Card Account would be deemed to be a Non-Performing Asset (NPA) if it remains out of order for a period of two crop seasons/one crop season (as the case may be). Therefore a KCC account can be treated as out of order in the following circumstances: a) There are no credits in the account continuously for two crop seasons/one crop season (as the case may be) as on the date of balance sheet. b) The outstanding remains continuously in excess of the limit for two crop seasons/one crop season (as the case may be) as on the date of balance sheet. c) The credits in the account are not sufficient even to cover the interest debited in respect of the account for two crop seasons/one crop season (as the case may be). (vi) The following relaxations in assets classification norms in credit facilities granted to borrowers affected by Cyclones or other natural calamities in District & Block Notified by State Government are available: (Where natural calamities impair the repaying capacity of agricultural borrowers, relief measures are decided by bank/ branches like - conversion of the short-term production loan into term loan or re-schedulement of the repayment period; and the sanctioning of fresh short-term loan subject to guidelines issued by PS & LB HO. Such cases of conversion or re-schedulement, the term loan as well as fresh short-term loan may be treated as current dues and need not be classified as NPA. The asset classification of these loans would thereafter be governed by the revised terms & conditions and would be treated as NPA if interest and/or instalment of principal remains overdue for two crop seasons for short duration crops and for one crop season for long duration crops. For the purpose of these guidelines, “long duration” crops would be crops with crop season longer than one year and crops which are not long duration would be treated as “short duration” crops.) (vii) The norms prescribed under para iv above are also applicable to all direct agricultural advances as listed in below : DIRECT FINANCE 1.1 Finance to individual farmers (including self help group (SHGs) or Joint Liability Group

(JLGs), i.e. groups of individual farmers provided banks maintain disaggregated data on such finance) for agriculture.

1.1.1 Short term loans for raising crops, i.e. for crop loans. This will include traditional / non-traditional plantations and horticulture

1.1.2 Advances upto Rs.50 lac against pledge / hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months, irrespective of whether the farmers were given crop loan for raising the produce or not.


1.1.3 Working capital and term loans for financing production and investment requirements for agriculture.

1.1.4 Loans to small and marginal farmers for purchase of land for agriculture purpose. 1.1.5 Loans to distressed farmers indebted to non-institutional lenders against

appropriate collateral or group security. 1.1.6 Loans granted for pre-harvest and post-harvest activities such as spraying,

weeding harvesting, grading, sorting, processing and transporting undertaken by individuals, SHGs and cooperatives in rural areas.

1.1.7 Loans granted for agricultural activities, irrespective of whether the borrowing entity is engaged in export or otherwise.

1.2 Finance to others (such as corporate, partnership firms and institutions) for agriculture

1.2.1 Loans granted for pre-harvest and post harvest activities such as spraying, weeding, harvesting, grading, sorting and transporting.

1.2.2 Finance upto an aggregate amount of Rs. One crore per borrower for the purposes listed at 1.1.1, 1.1.2, 1.1.3 and 1.2.1 above

1.2.3 One third of loans in excess of Rs. One crore in aggregate per borrower for agriculture.

In respect of agricultural loans, other than those specified in the said Annexure and term loans given to non-agriculturists, identification of NPAs would be done on the same basis as non-agricultural advances which, at present, is the 90 days delinquency norm.

APPROPRIATION OF RECOVERY IN NPA ACCOUNTS: [Ref: RD Cir. 26/2013 dtd. 04.06.2013] W. e. f .01.01.2013 Recoveries in NPA Accounts (irrespective of the mode / status / stage of recovery actions), henceforth shall be appropriated in the following order of priority: i) Expenditure/Out of Pocket Expenses incurred for Recovery ii) Principal irregularities i.e. NPA outstanding in the account gets updated / adjusted, whichever is earlier? iii) There after towards the interest irregularities/accrued interest. A menu option “NPACHRG” has been customized in the CBS system to capture/recover/waive the charges incurred for recovery of dues in the NPA account. System will check the credits made in the NPA accounts from the last recovery date and create transaction, for the outstanding charge amount or recovery made in the account whichever is lower, debit the loan account and credit the expenditure head whichever has been debited earlier Report PNBRPT-28/7 has also been customized, which will show all the NPA accounts wherever recoveries have been received but appropriation of the same for the charges made in the expenditure account has not been done. Ref: R.D. Cir No. -13/2014 dated 06.03.2014 – Recoveries in WO/Non WO NPA A/cs – Correct Accounting Procedures:- To facilitate the Branches to maintain and see at a glance the true and correct position of the account, to produce the same as an evidence to courts etc. under Bankers Book of Evidence Act, and to plug the instances of wrong reporting of Cash Recoveries either in Written Off A/cs or in Non Written Off Accounts and to facilitate the branches to follow correct accounting procedure, It


has been reiterated that all transactions in the NPA A/cs have to be necessarily routed through the Borrowal Loan A/cs in the CBS System. Any other Accounting procedure adopted by the Branches does not carry procedural sanction and may be viewed as a serious infringement of Bank Guidelines Recovery in Written Off A/cs is required to be credited to P&L A/c. Income under its sub Code “Income: Bad Debts Written Off Realized (Code 21199)”. Similarly Recovery of Delayed Period Interest on OTS approved cases is also required to be credited to “Income: Bad Debts Written Off Realized” instead of “Income: Interest on Advances”. COMPUTATION OF NPA LEVELS Keeping in view the need for uniformity across banks in reporting of Advances and NPAs, so as to avoid any scope for different interpretations by the auditors/public, as also to improve the comparability of Advances position of banks, RBI has recently advised Banks to compute their Gross Advances, Net Advances, Gross NPAs and Net NPAs, as per the format given below: PART A (Rs. in crores up to two decimals) Particulars Amount 1. Standard Advances 2. Gross NPAs * 3. Gross Advances ** ( 1+2 ) 4. Gross NPAs as a percentage of Gross Advances ( 2/3 ) (in %) 5. Deductions (i) Provisions held in the case of NPA Accounts as per asset classification

(Including additional Provisions for NPAs at higher than prescribed rates).

(ii) DICGC/ECGC claims received and held pending adjustment (iii) Part payment received and kept in Suspense Account or any other

similar account

(iv) Balance in Sundries Account (Interest Capitalization – Restructured Accounts), in respect of NPA Accounts

(v) Floating Provisions*** (vi) Provisions in lieu of diminution in the fair value of restructured accounts

classified as NPAs

(vii) Provisions in lieu of diminution in the fair value of restructured accounts classified as standard assets

6. Net Advances( 3-5 ) 7. Net NPAs {2 - 5( i + ii + iii + iv + v +vi)} 8. Net NPAs as percentage of Net Advances ( 7/6 ) (in %) * Principal dues of NPAs plus Funded Interest Term Loan (FITL) where the corresponding contra credit is parked in Sundries Account (Interest Capitalization – Restructured Accounts), in respect of NPA Accounts.


** For the purpose of this Statement, ‘Gross Advances’ mean all outstanding loans and advances including advances for which refinance has been received but excluding rediscounted bills, and advances written off at Head Office level (Technical write off). *** Floating Provisions would be deducted while calculating Net NPAs, to the extent, banks have exercised this option, over utilizing it towards Tier II capital. For the purpose of computing Gross Advances, interest recorded in the Memorandum account should not be taken into account. Supplementary Details (Rs. in crores up to two decimals) Particulars Amount 1. Provisions on Standard Assets excluding 5(vi) in Part A above 2. Interest recorded as Memorandum Item 3. Amount of cumulative Technical Write – Off in respect of NPA

accounts reported in Part A above

Provisioning Coverage Ratio for Advances [PCR] Provisioning Coverage Ratio (PCR) is essentially the ratio of provisioning to gross non-performing assets and indicates the extent of funds a bank has kept aside to cover loan losses. At present, the provisioning requirements for NPAs range between 15 per cent and 100 per cent of the outstanding amount, depending on the age of the NPAs and the security available. Banks can also make additional specific provisions subject to a consistent policy based on riskiness of their credit portfolios, because the rates of provisioning stipulated for NPAs are the regulatory minimum. To enhance the soundness of individual banks and the stability of the financial sector, RBI has has asked the banks to augment their provisioning cushions (consisting of specific provisions against NPAs as well as floating provisions) and ensure that their total provisioning coverage ratio, including floating provisions, is not less than 70 per cent by 30.09.2010. Also, the PCR is to be disclosed in the Notes to Accounts to the Balance Sheet. Particular Amount in Rs. Crore 1 Gross NPAs plus technical / prudential write-off. 2. Specific Provisions held including provisions for

diminution in fair value of the restructured accounts classified as NPAs plus technical / prudential write-off.

3. Floating Provisions for Advances (only to the extent they are not used as Tier II Capital).

4. DICGC / ECGC claims received and held pending adjustment.

5. Part payment received and kept in Suspense account or any other similar account

6. Total (2 to 5) 7. Provision Coverage Ratio [( Row 6/ Row 1) *

100%)]


Technical or prudential write-off is the amount of non-performing loans which are outstanding in the books of the branches, but have been written-off (fully or partially) at Head Office level. SECURITIZATION & RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST (SARFAESI) BACKGROUND: In order to help banks and FIs to resolve the NPAs , the Govt. of India promulgated Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Ordinance, 2002 on 21.06.2002 , which was later replaced by Act 54 of 2002. It has 42 sections divided into VI chapters. The act is applicable to whole of India including J&K. Supreme Court vide its judgment dated 8.04.2004, in the case of M/s. Mardia Chemicals Ltd. & others Vs Union of India & Others, upheld the validity of the Act except sub section 2 of the Section 17 of the Act (deposit of 75% of the amount claimed with DRT along with the application), which was declared ultra virus of Article 14 of the Constitution of India and directed the Govt. of India to make certain amendments/modifications in the Act. As a result, the Enforcement of Security Interest and Recovery of Debts (ESI & RD) Laws (Amendment) Act 2004 came into force w.e.f. 11.11.04 Salient provisions of the act are as Under:- ENFORCEMENT OF SECURITY INTEREST: 1) Powers to the secured creditor: Any secured creditor having security interest by way of Mortgage, Charge, Hypothecation and assignment (not by lien/pledge) may exercise powers under the Law to take possession of secured assets (U/s 13-4), appoint a person to manage the secured assets, require any person who has acquired secured assets, to pay to the secured creditor and if a secured creditor is a Securitization Company, it can exercise power of takeover of management of business of borrower 2) Conditions for exercising powers under the act: Such power can be exercised provided:

The Asset is classified as NPA as per RBI norms Value of Financial Assets is more than Rs. One lac; Security Interest is not created on agriculture land, an aircraft or a shipping

vessel; Amount due is 20% or more, of principal and interest thereon; Debt is not time barred; Loan is not secured by way of pledge, lien & by security of bank deposits; Asset is not on conditional sale or hire purchase or lease; Property is not liable to attachment or sale under code of Civil Procedure. The assets though exempted U/s 60 CPC (One residential house etc), if it

is charged to secure the debts, can be enforced under SARFAESI act.


3) Possession Notice: U/s 13(2) of the act, a secured creditor has to give a notice in writing to the borrower to discharge the debt/liability in full within sixty days from the date of notice. It is not legally necessary to make a recall of the facility and invocation of guarantee separately. These can be included in the notice Under Section 13(2) itself. (LAW Division Cir - 04.2011) -- Under Section 31(i) of the SARFAESI Act, it has been provided that the provisions of the Act shall not apply to any security interest created in agricultural land.

However, instances have come to our notice where IPs charged to the Bank by way of mortgage are shown as agricultural land in the revenue records but the same are not being used for the purposes of agriculture and are being used for purposes other than agriculture.

In this regard, attention is invited to the decision the of the Hon’ble High Court of Andhra Pradesh in the case of Gajula Exim (P) Ltd. Vs. Authorized Officer, Andhra Bank, Main Branch and two Others (AIR 2008 AP 184), wherein it has been held that -

‘The present characteristics and not the potentialities of a land are the proper criterion (to decide whether the land is agricultural or not). If a land is ordinarily used for purposes of agriculture or for purposes subservient to or allied to agriculture it would be agricultural land. If it is not so used, it would not be agricultural land. The question, how a land is ordinarily used, would be one of fact depending on the evidence in each case’.

The Hon’ble Court, after going through the entire material in the case took the view that the land on which the factory is situated cannot be treated as an agricultural land. Therefore, it is not exempted under the Act.

It may also be added that the aforesaid view of the Hon’ble Court was challenged before the Hon’ble Supreme Court by way of SLP (Civil) No.17714/2008 but the same was dismissed by the Supreme Court vide its order dated 04.08.2008 with the observations that “We do not find any ground to interfere with the impugned order”.

In view of the above legal position, it is advised that whenever the Bank’s action under the SARFAESI Act is challenged in a similar situation, the aforesaid legal position can be of assistance to the Bank to contest the same.

In other cases, where the mortgaged IP is being used for agriculture purpose, recovery proceedings be initiated by filing suit in DRT/Court, as the case may be, and the property in question be got attached and sold through the DRT/Court. 4) Representation by the borrower: (U/S 13(3A) if, on receipt of the notice under sub-section (2) the borrower makes any representation or raises any objection, the secured creditor considers such representation or objection as not acceptable or tenable, he shall communicate to the borrower within one week of receipt of such representation or objection along with the reasons for non acceptance of the representation or objection. This has been recently increased to 15 days.


In consortium accounts consent of 60% of the secured creditors (in BIFR reference consent of 3/4th of secured creditors ) need to be taken before taking possession/other measures u/s 13(4) of SARFAESI Act. SALE OF ASSET: 1) Minimum Notice Period: A minimum 30 days notice be given to the owner after taking possession by the authorized officer and the eventual sale of both movable and immovable properties. In a recently concluded case, Supreme Court held that it is left at the discretion of the Authorized Officer to take or not to take the possession of the immovable property before effecting the sale as per Rule 9 framed under the act. 2) Designated official: The authorized officer has to be an officer in the Rank of the Chief Manager of a Public Sector Bank or such other person authorized as such by the board of Directors of the Bank. 3) Mode of sale: After taking possession, lender can sell the asset through public auction/inviting tenders or by private treaty. If it is by public auction/tender, it should be backed by public notice in two newspapers out of which in vernacular language having sufficient circulation. 4) Reserve Price: Reserve price would be arrived at after making proper valuation. For movable assets authorized officer will take estimated value & for immovable assets, authorized officer will obtain valuation from board approved valuer. Sale below the reserve price can be done only if both borrower and lender agree except when there is a natural decay or cost of possession may exceed the sale price. 5) Confirmation of Sale: Sale will be confirmed after deposit of 25% by the highest bidder, balance will be paid within 15 days of confirmation of sale. STRATEGIES FOR SUCCESSFUL SALE PROCESS UNDER SARFAESI ACT (RD 42/2014 dated 18.12.2014) SARFAESI Act prescribes various chain of actions to be taken by the Bank against the defaulting borrower/guarantor/mortgagor, till it is taken to its logical end.

After serving the Notice under Section 13(2) of the Act, in case there is no positive response from the borrower/guarantor/mortgagor, the Authorized Officer (i.e Officer not less than a Chief Manager) after taking Symbolic and/or Physical Possession may further initiate action for sale of the secured assets.

Under the SARFAESI Act, sale may be made by any of the following modes: (a) By obtaining quotations from parties dealing in secured assets or otherwise

interested in buying the secured assets (b) By inviting tenders from public (c) By holding public auction or (d) By private treaty The aim is to secure maximum price for the assets to be sold.

The most transparent and effective methods of sale of the secured assets are: 1) Public Auction and 2) Inviting Tenders

For free, fair and transparent auctions, Ministry of Finance directed the Banks


to adopt the Electronic medium for conducting auctions also known by the name “E-Auctions”.

Steps for making E-Auctions successful High failure rate of E-Auctions, clearly and categorically indicate that still there is lot of scope in initiating the desired steps for making an E-Auction a successful endeavor. A list of such desired steps is given below as a ready reckoner/checklist to facilitate the field officials to ensure to adopt the same and accelerate the process of recoveries through sale of secured assets:

1) Valuation of secured assets Valuation of securities is an important and sensitive issue in the process of enforcement of security interest, as it forms the base for fixation of Reserve Price, before proceeding for sale. Valuation Report relied upon should normally be not more than a year old. Branch Incumbent, besides relying upon the Valuation Report submitted by the Valuer(s), as per extant guidelines, should involve him/herself in the process and make discreet enquiries from the Property Dealers/Real Estate Agents/Residents of that area etc. so that a fair assessment may be made, before fixing the Reserve Price.

2) Fixation of Reserve Price A realistic Reserve Price will always improve the chances of successful sale process. Reserve Price needs to be fixed by taking into cognizance, various factors e.g. location of the property, multiple tenancy, IPs not demarcated, various Government obligations/litigations/attachments etc. Thus a pragmatic and rational approach is the key to success.

3) Publicity Publicity can be bifurcated mainly into two parts:

(1) As per statutory/regulatory guidelines and (2) General practices for fetching better quotes/price

(a) Statutory/Regulatory Requirements (i) For statutory compliance, “Sale Advertisement” is to be compulsorily published in two leading Newspapers, one of which should be in vernacular language. Further, in addition to giving 30 days Notice to the borrower/mortgagor/guarantor, Sale Notice is also required to be affixed on the conspicuous part of the property.

(ii)The Sale Notice is to be loaded at the following two websites, compulsorily: www.pnbindia.in and www.tenders.gov.in (b) Other Important Steps for Publicity In addition to the above mentioned modes of publicity which are more or less statutory/regulatory in nature, in order to brighten the prospects of successful Auctions and fetch better price, following Publicity measures may also taken:

(i) Sale Notice can be displayed on Notice Boards of all the branches of the Circle/ATM Cabins etc.

(ii) Other than the statutory requirement of publishing the Sale Notices in two Newspapers, it can be published in some additional Newspapers, having good circulation in that particular area.

(iii) To give wider publicity, a Strip can be displayed on the Local Cable TV/Other


TV Channels for some period say a week/fortnight/month. (iv) Hand Bills/Pamphlets can be circulated through Newspaper Vendors, which a

low cost publicity medium with wider reach. (v) For sale of properties with high Reserve Price (1 crore & above),

pamphlets/brochures containing description and photos of the property (wherever possible) can also be considered for circulation.

(vi) While giving the advertisement in the Newspapers/Hand Bills/Pamphlets etc. positive features of the property be highlighted e.g posh locality, near to Market/Schools etc., having modern kitchen. Such features enhance the chances of receiving better quotes. Thus proper description of the security is very important.

4) Preparation of list of potential buyers and Mobilisation of bids A database of the prospective Valuable Customers/Real Estate Agents/Property Dealers etc. may be prepared and kept hand for future sale transactions also. In case of any fresh sale process, E-Mails/Invitation letters may be sent to such prospective buyers to make the event successful.

5) Spot Inspection of the property and Enquiries by the Prospective Buyers No bidder would be inclined to bid until and unless the property placed for sale, is personally inspected by the bidder. Therefore such request of the bidders needs to be complied with and spot inspection may be arranged as per their convenience. Further, at the time of Due Diligence by the prospective buyers, it is quite obvious and natural that certain queries are raised by them, for which it is essential that they are properly, correctly and honestly responded to so that no complications arise at a later stage, which may have an adverse effect on the entire sale process.

6) Facelift of the Properties Generally after taking possession, the condition of the property deteriorates due to closure or lack cleanliness, whitewash etc. and sometimes it is difficult to have access through the property due to growing of weeds, grass etc. in the open area of the premises. Thus, before opening the property to spot inspection, wherever possible, efforts must be made for giving them a face lift by spending a nominal amount and taking help of the labor for whitewash, removal of weeds/grass, cleaning the premises etc.

7) Actual /Physical/Symbolic Possession In case Bank has actual/physical possession of the property, the chances of success of the auction/sale increase. However, where there is only Symbolic Possession, Bidders will be interested to know when will he/they will get the possession, in case the sale is finalized. Thus all possible efforts must be made to obtain the DM/CMM orders so that Bank may give delivery of the property after the sale.

8) Utilization of services of Supporting Agencies Bank permits utilization of services of Supporting Agencies for procuring bidders. Through their professional approach and local contacts such Agencies can play an effective role for getting the bidders. For utilization of services of Supporting Agencies, Circle Heads may take a final call in this regard and wherever required, services of such Agencies may be utilized.


CONFIRMATION OF SALE AND ISSUE OF SALE CERTIFICATE (RD 38/2014 – 05.11.2014) Confirmation of Sale : “On payment of initial deposit, the sale shall be confirmed. Confirmation of sale be recorded and conveyed to the highest bidder. The steps needs to be taken immediately but within 15 days from the date of Auction for getting the sale confirmed from the secured creditor i.e. Committee of Officers and confirmation be conveyed to the highest bidder. 1) IMMOVABLE ASSETS– Confirmation by the ‘Authorised Officer’ and confirmation by the secured creditor are necessary only in respect of sale of immovable assets. Sale of immovable property is to be got confirmed (Form SI-22 of SARFAESI Manual) by the Authorized Officer from the Secured Creditor. In terms of SARFAESI Rules, 2002 {Rule 9(6)}: “On confirmation of sale by the secured creditor (Committee of Officers) and if the terms of payment have been complied with, the Authorized Officer exercising the power of sale shall issue a “Certificate of Sale” of the immovable property in favor of the purchaser.” (Form SI-17 of the SARFAESI Manual)” 2) MOVABLE ASSETS Confirmation of sale by the Authorized Officer/ Secured Creditor (i.e Committee of officers) may be dispensed with/may not be followed, as in case of movable assets, sale confirmation is not required. In case of sale of movable assets, on payment of full sale price, Authorized Officer shall issue “Certificate of Sale” (Form SI-15 of the SARFAESI Manual). Certificate of Sale may attract stamp duty. If the purchaser does not insist for a Certificate of Sale, he can be given a receipt (Refer Appendix B- Form SI – 16 of the SARFAESI Manual) for the sale price received. 3) NON CONFIRMATION OF SALE If it is found by the Committee of Officers that sale is not to be confirmed, the reasons for not confirming the sale be recorded in the minutes of the meeting and should be immediately conveyed to the purchaser and initial deposit be returned. 4) COMMITTEE OF OFFICERS FOR CONFIRMATION OF SALE S.No. Particulars Committee to sale

confirmation Members of committee

1 For branches other than LCBs

COCESI ( Circle office committee for enforcement of security interest

1.Circle Head (Chairperson) 2.Second in command at CO 3.Chief/Sr. Manager of Recovery 4.Sr.Manager/Manager Law

2 For LCBs Committee of LCB for 1.Head of the LCB


enforcement of security interest

2.Second in command 3.Relationship manager

The above Committees will confirm the sale of secured assets (compulsorily for immovable property), in the capacity of secured creditor. In this regard, provisions of Rule 9(2) of The Security Interest (Enforcement) Rules, 2002, provide as under: “The sale shall be confirmed in favor of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authoried officer and shall be subject to confirmation by the secured creditor.”

5) EXTENSION OF TIME LIMIT FOR PAYMENT OF BALANCE AMOUNT Rule 9(3) of The Security Interest (Enforcement) Rules, 2002 states that: “On every sale of immovable property, the purchaser shall immediately pay a deposit of 25% of the amount of the sale price, to the Authorized Officer…” Further Rule 9(4) provides that: “The balance amount of 75% of the purchase price payable shall be paid by the purchaser to the Authorized Officer on or before the fifteenth day from date of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties.” Supreme Court in its Judgment in the case of J.Rajiv Subramaniyan & Anr. Vs. Pandiyas and Ors. Decided on 14.3.2014, held that sale by any other method in terms of Rule 8(8) of SARFAESI Rules other than public auction or tender shall be on such terms as may be settled between the parties in writing. According to the Court, the parties mean the borrower (mortgagor), purchaser and the bank. Thus “Extension in the time period (i.e beyond 15 days, as specified in Rule 9(4) of the SARFAESI Act), for depositing of the balance amount be permitted only when: (i) It is mutually agreed upon by the Borrower(mortgagor), Bank and purchaser OR (ii) Consent is given by the borrower/mortgagor for doing so. “ CONSENT OF MORTGAGOR REQUIRED FOR SALE BY PRIVATE TREATY AND ON FAILURE/CANCELLATION OF SALE- ENTIRE PROCESS BE FOLLOWED AFRESH (RD 17/2014 DATED 22.04.2014) ------------------------------------------------------------------------------------------------------------ After failure/cancellation of sale process, which may be through any of the four modes prescribed under the SARFAESI Act i.e Auctions/Tenders/Quotations/Private Treaty, before making another attempt the whole procedure is to be started afresh e.g issue of 30 days’ notice to the borrower, publication in the two newspapers etc. as if the sale process has been started for the first time.

APPEAL PROVISIONS:


1) Appeal to DRT: The borrower may appeal to DRT without depositing any amount. Such appeal has to be preferred within 45 days (U/s 17) from the date on which such measures had been taken. The appeal can be made only if secured creditor takes possession of the securities or any other action U/s 13(4) and not merely on notice U/s 13(2). Since the act has not given any limit for filing appeal before DRT, therefore appeal can be made even for amounts below Rs. 10 lac. The court fee as applicable for filing suit before DRT in general cases, shall be applicable. 2) Appeal to DRAT: The borrower has to deposit 50% of the amount decreed by the DRT or claimed by the secured creditor, whichever is less, before making application at the 2nd stage i.e. DRAT. DRAT, however, may reduce it to 25%. This appeal should be made within 30 days (U/s 18) from the date of receipt of orders of DRT. 3) Time Limit: It has also been made mandatory that the DRTs would dispose of the cases within 60 days & may extend the period upto 4 months after recording the reasons in writing else any party may move to DRAT which may direct DRT for expeditious disposal. 4) Provisions for J & K: In the state of Jammu & Kashmir the borrower may move to the court of District Judge and against his order to the High Court after depositing 50% of the amount decreed by the District Judge which has power to reduce this amount to 25%. RD CIR 9/2014 dt. 25.02.2014 :- “Issue notices u/s 13(2) and 13(4) of SARFAESI Act separately for the securities situated outside the State of J&K and separately for the securities situated in the state of J&K” CONTRAVENTION:- 1) Imprisonment: Any person who contravenes or attempts to contravene or abets to contravene the provisions of this act or any rules made under the act can be punished with imprisonment for a term which may extend to one year or with fine or both. 2) Penalty: Contravention or non-compliance may attract fine which may extend to Rs. 5000/- for every day of default. 3) Additional Fine: U/s 28, if Securitization/Reconstruction company or any of its officers fail to comply with the directions given by Reserve Bank, they can be fined upto an amount of Rs.5 lac and in case of continuing offence they can be charged with additional fine of Rs. 10000/- for every day during which the offence continues. SARFAESI AND OTHER RECOVERY MEASURES: 1) Cases under BIFR/SICA: Protection under SICA is not available once a secured creditor takes action under this act. In case any reference is pending before BIFR/SICA, it will abate and SARFAESI will prevail. 2) Action under Civil Courts: U/s 37, the remedy available under this act is in addition to all remedies available under any other law. Hence creditor can proceed under this act even in the matters which are under consideration by any Court Of Law.or sub-judice. However, if the competent court has already passed any order, bank can proceed under this act only after taking prior permission from the court of competent jurisdiction. 3) Cases already pending before DRT: In Transcore V/s Union of India and IOB, Supreme Court has decided that even if proceedings are pending with DRT, the bank can proceed against the borrower under this act.


REVISED GUIDELINES-DELEGATION OF POWERS (RD Cir 20/2012) “Incumbents Incharge of the branches including LCBs, irrespective of the Scale shall have full powers irrespective of amount of loan outstanding, to permit for initiation of SARFAESI Action and issue of Recall Notices through SI-1 and SI-1A. On taking an administrative decision to initiate action under SARFAESI, the matter shall be referred maximum within 3 working days to the competent/designated Authorized Officer by submitting the approved copy (by Incumbent) of SI-2 along-with the Draft Notice under Section 13(2) of the Act, who then shall issue the Notice under Section 13(2), maximum within 3 working days of receipt of such requisition from the Branch Incumbent. In the branches including LCBs, headed by the Scale IV and above officers, the Incumbent Incharge in his capacity as designated Authorized Officer, shall himself take action under the SARFAESI on the basis of the proposal prepared as per SI-2. However, they shall keep the respective Circle Head/FGM informed. All actions under SARFAESI however shall continue to be taken by such designated Authorized Officer. SARFAESI ACT 2002 - UPLOADING OF AUCTION NOTICES AT WEBSITES - GUIDELINES (RD 02/2015 dated 09.01.2015)

All Auction Notices are to be placed compulsorily on the following websites as per the procedure explained in the subsequent paragraphs, in addition to publication in the newspapers, as per the provisions of the SARFAESI Act 2002 :

(i) www.pnbindia.in (Regulatory Disclosure) -> Bank’s website (ii) www.tenders.gov.in -> The Indian Govt. Website

Besides above mentioned two websites, for further exploring the market of prospective buyers, FGM/Circle Head may decide to upload the Auction Notice on the following private website, approved by the Executive Committee in its meeting held on 20.11.2010 (Recovery Division’s Note dated 22.09.2010), where value of IP is Rs. 5.00 crore and above: www.foreclosure.com

For placing the information on the above mentioned optional website, matter may be taken up directly, with M/s Foreclosure India by e-mail. The contact details of the Company are given below: Fax No. : 040-23836405 Email : [email protected] Website : www.foreclosureindia.com For listing of Auction Notices on their website, the Company may be paid Rs. 800/- per account/borrower, inclusive of service Tax. In addition to this, Company shall also upload the same Auction Notice in vernacular language without any extra cost. In case of Auctions, new dates of auction shall be intimated to M/s Foreclosure India. However, no further charges shall be payable. Further, on sale of listed properties, no commission


etc. shall be payable to the Company. Procedure for uploading Auction Notices at www.pnbindia.in (RD 02/2015 dt. 09.01.2015) For uploading the Auction Notice at www.pnbindia.in, no extra information is required from the Circle Offices. The Auction Notice published/to be published in the newspapers, in the PDF format fulfills the requirement. Uploading any Notification/Notice etc. on the Bank’s website will take place in a centralized manner. Therefore, now onwards all the Auction Notices will be uploaded on the Bank’s website centrally by the HO: MASD and not by Recovery Division. Instead of sending these Auction Notices to Recovery Division, Head Office, New Delhi, Circles Offices will ssend copy of auction Notice published in the Newspapers to MASD, HO in PDF Format at following e-mail IDs (No Hard Copy) and only its copy be endorsed to Recovery Division, Head Office, New Delhi : S.NO. Division Email address 1 HO:MASD [email protected] 2. HO: RECOVERY DIVISION [email protected]

[email protected] [email protected]

Procedure for uploading Auction Notices at www.tenders.gov.in Circles would be responsible for uploading the Auctions on Government Website www.tenders.gov.in. For uploading the Auction Notices at www.tenders.gov.in, the required information is given in the Annexure-II-Summarized Information. Circle Offices may seek the required information from the concerned branch for uploading the Notice. Circles will also upload the Auction Notices for the Large Corporate Branches and Large Corporate Branches (LCBs) will get their Auction Notices uploaded through the respective Circle Offices. Executive Incharge, Recovery Section at the Circle Offices will be responsible for uploading of the Auction Notices at the Government website www.tenders.gov.in of the Branches of the Circle and of the Large Corporate Branch also located in their area. For uploading of such Auction Notices at the Govt. website, step by step work flow is stipulated in the Annexure-I-Work Flow & Annexure-IV-User Mannual {RD Cir 02/2015 dated 09.01.2015} Important Terms and Conditions


1. Auction Notice should be invariably placed on the Bank’s and Govt. of India

websites for at- least 30 days in advance. 2. Branches will send details of the Auction Notice(s) to its Circle Office (soft as

well as hard copy) and Circle Offices for placing the Auction Notices on the Government website www.tenders.gov.in after verifying the facts and completeness of requisite information.

3. Circle Office will maintain a record of such Auction Notices and allot/mark serial number starting from 1 (year-wise) e.g for 2014 the first Auction Notice sent to Recovery Division shall bear serial number 1. Similarly in 2015 it will again start from 1 and so on.

4. All other guidelines for enforcing the Security Interest under SARFAESI Act have to be complied with, meticulously.

5. Regarding creation of User IDs information on the prescribed format (RAD 02/2015) be submitted to recovery division HO New Delhi.

ADOPTION OF E-AUCTIONS-AMENDMENTS IN GUIDELINES (RD 04/2015 DATED 09.02.2015) BACKGROUND : As per extant guidelines following two Service Providers are conducting E-Auctions under SARFAESI Act and at DRTs, on behalf of the bank are being paid Rs. 5000/- per Event/ auction:

(i) M/s C-1 India (ii) M/s Nextenders

Till 31.03.2015 the e-auctions will continue to be conducted by existing two vendors. Amendments in the existing guidelines: All E-Auctions (i.e under SARFAESI Act & at DRTs) will be conducted at the Circles from 01.04.2015 onwards. Large Corporate Branches (LCBs) will also get their E- Auctions conducted through the respective Circle Offices, however their Authorized Officer will be invariably present in the Circle Office, carrying the mandate from the Incumbent of the LCB, to take any decisions related to the E-Auctions. In such cases Circle Office will provide only infrastructural facility to conduct E-Auction and rest of the activities and all other responsibilities associated with the conduct of E-Auction will be taken care by LCB. Charges Payable to the Service Providers The concerned Branch having the NPA account, for which E-Auction is being conducted, will make payment to the Service Provider by debiting Expenditure: General Law Charges (P & L Code No. 1081001) at the following rates: “Per successful E-Auction /Event @ Rs. 4000/- (Previously Rs. 5000/-) inclusive of Service Tax as applicable, with maximum of 10 items (movable items viz. Plant, Machinery etc. and/or immovable


properties) per borrower per auction, being conducted on the same day. For every additional 5 items additional charges @ Rs. 2000/- shall be paid to the Service Provider. For failed per E-Auction/Event only Rs. 1000/- will be paid. The above prices will be all-inclusive and TDS or any other statutory levies will be deducted by Bank as per Income Tax rules from time to time and are applicable, both for, E-Auctions to be conducted at DRTs and under SARFAESI Act and are applicable with immediate effect i.e E-Auctions conducted on or after 09.02.2015. For payment of above expenses, the Incumbent Incharge of the branch has full powers and no further reference needs to be made to the Circle Office. Clarification

If there are multiple properties in an NPA account and for which separate reserve Price has been fixed and timings of the Auctions are different (even if on the same day), each Auction will be considered as separate Event and payment is to be made to the Service Providers separately for each Event, despite the fact that properties belong to a single borrower. However, in case of multiple properties in an account (subject to the upper limit of 10 items), if a single reserve price has been fixed and timing of the Auction is only one, then only it will qualify for a single Auction.

CENTRAL REGISTRY:- Central Govt. has set up a Central Registry. After its set up, particulars of every transaction of creation of security interest be filed within 30 days of creation. Any modification be also filed. The Company is a Government Company with a shareholding of 51% by the Central Government .Select Public Sector Banks , National Housing Bank are also shareholders of the Company. Help Desk. * CERSAI has set up help desk at New Delhi for trouble shooting both in technical and functional areas through telephone (Nos. 011 26176847, 011-26176855, 011-26176856) and email (email ID [email protected]). * web based Helpdesk system w.e.f. 01.12.2011 and the same can be accessed at http://www.helpdesk.cesai.org.in through internet . Company under liquidation, notice U/s 13(2) of SARFAESI act is to be served on to the official liquidator and if no response is received, bank to obtain leave of the Company Court under section 537 of Companies Act to take measure under section 13(4) of the SARFAESI act. DEBT RECOVERY TRIBUNALS (DRT) DRTs were established in 1993 under “Recovery of debts due to Banks and Financial institution act 1993”, on recommendations of Narsimham Committee. The act came into effect on 25th June 1993 and extends to whole of India except J & K. It contains 37 sections spread over 6 chapters.


Composition: DRT is headed by Presiding Officer called “President” (appointed by Central Govt). The Presiding Officer will hold office for a period of 5 years or until he attains the age of 62 years, whichever is earlier. It does not go with CPC, but act on the principal of natural justice. Recovery Officer: Once the claim is upheld, DRT issues a certificate to the Recovery Officer who has various powers in execution such as attachment, arrest and may also require debtor to declare on affidavit his assets and liabilities. Appeal against order of recovery officer to DRT can be made within 30 days from the date of order. Amount: It deals with cases of Rs.10 lac & above (Central Govt. can reduce the amount to Rs.1 lac). All the accounts of a borrower can be combined and one application can be made. Nature of Debts covered: All lawful debts (not time barred by limitation), which have arisen during ordinary course of business of Banks/FIs, are eligible to be filed. Cases relating to misappropriation of any amount of a bank by an employee are not covered. Civil Imprisonment: The tribunal can issue orders of attachment and can also order for detention of the defendant for a term not exceeding 3 months. Time Frame: of 6 months from the date of application has been stipulated for decision in a case.. Appellate Tribunal (DRAT):- The appellate tribunal consists of the Chairperson, appointed by the Central Govt. He will hold office for a period of 5 years or until he attains the age of 65 years, whichever is earlier. Appeal: (i) Appeal against DRT is to be filed to Appellate Tribunal within 45 days of receipt of order. (ii) The Appellate Tribunal should dispose of the appeal within a period of 6 months from the date of appeal. (iii) Appeal to be made after depositing 75 % of amount due as determined by the Tribunal (DRT). DRAT may wave/relax this condition on merits. Disposal of Cases by DRTs – Non production of original documents in the cases, which are being investigated by outside Agencies Law Division vide its Circular No. 07/Law/2013 dated 23.01.2013 has issued the guidelines to the effect that in respect of seizure / production of document during investigation of case in terms of Section 91 of the Criminal Procedure Code, 1973, when any Officer Incharge of a Police Station considers that the production of any document is necessary for the purpose of any investigation, enquiry of a case, such officer can issue a written order to the person in whose possession such document is, to produce the same. Such an order of Police Officer be complied with after obtaining seizure memo and keeping a record the attested copies of the documents.

(RD 02/2014 dated 15.01.2014) Guidelines for filing & follow-up of Recovery cases before Civil Courts/ DRTs – Ref LAW DIVCIR 16/2013 dated 06.08.2013, Monitoring of DRT/DRAT matters- DRT Portal on CBS Screen- Ref : Rec Div Cir 46/2013 dt 09.10.2013.


LOK ADALATS ACT: Lok Adalats are created under Legal Services Authority Act-1987. Category of accounts: All NPA accounts both suit filed and non suit filed Amount ceiling: Eligible category of accounts with outstanding up to & inclusive of Rs. 20 lac (increased from Rs. 5 lac), without any cut-off date. For coverage under Lok Adalat, the claim amount should not exceed Rs. 20 lac. Banks may also participate in Lok Adalats organized by DRT/DRAT for settlement in accounts where outstanding are above Rs. 20 lac. Policies: Lok Adalat cases are examined by the Compromise Committee formed at various levels to arrive at a “range” within which compromise can be considered in a given case and the decision regarding waiver can be considered by competent authority keeping in view the sacrifice involved in the settlement. Payment: The down payment of the compromise amount is preferred. On merits of the case, monthly/quarterly installments (maximum upto 2 years) may be agreed with the default clause providing for the failure of the compromise in case of non deposit of OTS amount as per the terms of award. Interest: Future interest may be agreed to as per General Guidelines for settlement of NPAs through Negotiated settlement. Benefits: (i) No court fee is involved. (ii) If no settlement is arrived, parties may go/continue with legal proceeding. Legal status: Its decrees have legal status and are binding on both the parties, however, decree being in nature of ‘consent decree’, no appeal against the decree is allowed. If no settlement is arrived at, the parties can continue with court proceedings, if already initiated. Limitation clause: Pendency of matters with the Lok Adalat does not save limitation; therefore care must be taken for filing suits with civil courts within the limitation period, if need be. Policy for transfer / sale of financial assets to Securitization Companies (SCs) / Reconstruction Companies (RCs) /Other Banks/ FIs / NBFCs etc. (excluding RRBs) (RD Cir. 05/2015 dated 12.02.2015) Scope This policy is applicable to transfer / sale of financial assets by the

Bank to Securitization Companies / Reconstruction Companies, under the Securitization and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (SARFAESI Act)/Other


Banks/FIs/NBFCs (excluding RRBs). A financial asset may be transferred to Securitization Company /

Reconstruction Company on outright sale basis under Sections 5(1)(a) and 5(1)(b), or Agency basis under Section 10(1) of the SARFAESI Act.

Objective Resolution of NPAs by transfer / sale and also Non Performing Investments (NPIs) in case of sale to other Banks/FIs/NBFCs.

Swiftly realizing as much of total dues as possible depending upon valuation of underlying security interest.

Reduces expenditure on NPA maintenance (legal expenditure, follow-up requirements etc.) and releases resources for core operations.

Sends signals that the Bank is serious in resolution of NPAs, even by off-loading them.

helps in creating an active and vibrant market for NPA/ Restructured debt papers and To develop a healthy secondary market for NPAs/NPIs

Factors in favour of sale of FA

a) Realization of assets is expected over a longer period. b) Multiple litigations are involved. c) Outstanding towards workmen’s dues and/or government taxes etc are either large or cannot be estimated reasonably / accurately. d) Other contingent liabilities are existing. e) Sale is in the larger interest of the bank

Eligibility of SCs/ RCs for purchase of financial asset of bank

SCs/RCs who has / have obtained the Certificate of Registration from RBI under Section 3 of the SARFAESI Act before providing information in respect of a financial asset to them. Whenever Bank’s financial assets are placed for sale to the SCs/RCs/NBFCs/FIs/Banks etc. (whether Bank approaches them or they approach the Bank), it must be ensured that invitation is sent to minimum 5 SCs/RCs/Banks/NBFCs etc. in order to get better offers. Condition of giving invitation to minimum 5 buyers, will not be applicable in those cases, where a prospective buyer offers 100% Memoranda Dues. In that case Bank may consider the offer on bilateral basis, after taking permission of the HOCAC-III. Offers on bilateral basis will not be considered from those ARCs, where PNB is a sponsor Bank (Presently PNB is sponsor Bank in ARCIL, ACRE, PRIDHVI & ISARC)

Eligibility criteria for accounts to be placed for sale / transfer

Before considering transfer / sale of a financial asset, pros and cons of going for enforcement of the related security interest by the bank itself under SARFAESI Act vis-à-vis transfer / sale of the financial asset to a Securitization Company/ Reconstruction Company/Other Banks/FIs/NBFCs be analyzed. latest guidelines issued by the Recovery Division for valuation of


securities in NPA accounts be complied with along-with the other practical aspects e.g. the assets should be pooled on geographical basis for assessing the Stamp Duty implications and/or all assets with common underlying security/financial assets belonging to same group to be auctioned as part of same pool. List of Financial Assets which can be sold to

SCs/RCs Banks/FIs/NBFCs 1) A NPA, including a non- Performing bond/debenture. 2) Standard Asset, where: (a) The asset is under consortium /multiple banking arrangements, (b) At least 75% by value of the asset is classified as non-performing assets in the books of other Banks/FIs and (c) At least 75% by value of the banks/FIs who are under consortium/multiple banking arrangements agree to sale of the asset to SC/RC. 3) An asset reported as SMA-2 (Special Mention Account- where principal or interest payment is overdue between 61-90 days) by the Bank/FI to Central Repository for information on Large Credit (CRILC) in terms of DBOD.BP.BC.No.98 /21.04.132 /2013-14 dated 26.02.2014.

A financial asset, including assets under multiple/ consortium banking arrangements, would be eligible for sale to Banks/FIs/NBFCs etc. if it is non-performing asset / non-performing investment in the books of the Bank. Banks will be permitted to sell their NPAs to other Banks /FIs /NBFCs (excluding SC/RC) without any initial holding period. However, the non-performing financial asset should be held by the purchasing bank for a period of 12 months before it is sold to other Banks/FIs/NBFCs (excluding SC/RC).

Additional Sub-Category of accounts permitted for sale Category of Accounts Remarks Willful defaulters/Criminal Action (only non-fraudulent cases) cases. As per RBI guidelines, fraud cases cannot be considered for sale.

Proposal for approval shall be considered by the Management Committee on merits of the case.

Accounts backed by Govt. Guarantees

Such cases may also be considered for sale, subject to approval by the Board.

A written off NPA may also be considered for transfer / sale. A financial asset in respect of which any case is pending before a Court/DRT/BIFR etc. may also be considered for sale All the financial assets due from a single debtor shall be considered for transfer / sale. Similarly, financial assets having


linkages to the same collateral/common security shall be considered for transfer / sale simultaneously. Both fund and non-fund based financial assets may be included in the list of assets for transfer / sale. Retail NPAs of homogeneous nature may also be sold on portfolio basis to SCs/RCs/Other Banks/FIs/NBFCs etc. Exceptions: Pool of assets being sold does not contain any loan originated fraudulently or has been classified as fraud as on the date of sale.

Exempted category of advances for sale

Any loan originated fraudulently or has been classified as fraud as on the date of sale. This is equally applicable to standalone/bilateral sale of accounts. NPAs in respect of which OTS is already concluded and is under implementation. NPAs where restructuring is already approved and is under implementation. NPAs where DICGC/ECGC claim has already been received, should normally be avoided for Sale.

Authority / Delegation of power for identification & initiating sale process

Identification of accounts to be placed for sale to SCs/RCs/FIs/NBFCs etc. may be done at the Branch/Circle/FGMO/HO Level. Workflow be referred for sending the cases to HO. In case a Branch/Circle identifies account(s) and/or any buyer approaches Circle/Branch for purchase of account(s), in both the situations concurrence of the FGM be invariably be taken before proceeding further in the matter. The powers for permitting for initiation of sale of identified financial assets to SCs/RCs/Other banks/FIs/NBFCs etc. will be vested with HOCAC-III. In case of non-NPA accounts e.g Standard Accounts or Accounts under SMA-2 category, to start the sale process in such accounts, necessary permission from the HOCAC-III to start the process will be obtained by the concerned Head Office Division, dealing with such accounts and after obtaining the permission, rest of the modalities will be taken care by the Recovery Division, in terms of the extant Sale Policy.

Approving authority Looking to sensitivity involved in cases relating to sale of financial assets, the proposal(s) shall be considered for approval by the Management Committee (MC) through:

Circle Office Asset Sale Committee(COASC) Field General Manager Office Asset Sale Committee

(FGMOASC) Head Office Asset Sale Committee(HOASC) and Head Office Settlement Advisory Committee(HOSAC)

Withdrawl of The powers for withdrawal of the account due to any reason, e.g


accounts from the Sale Process- Authority & Criteria

non-availability of the latest valuation report, OTS/Compromise Offer received from the borrower/co-borrower, any regulatory/legal requirement/restriction etc. from sale process are vested with ED/CMD. In case obligant(s) and co obligant(s) come forwards, for OTS, before finalization of sale process by the proposed buyer(s), the concerned account may be withdrawn from the sale process considering account specific merits, provided: a) The minimum offer of OTS shall be as under: Where Outstanding is Percentage Upto Rs.10 lacs 115% of Reserved price More than 10 lacs upto 50 lacs 110% of Reserved Price More than 50 lacs 105% of Reserved Price

AND b) The party deposits 50% cash as upfront money immediately and remaining within 3 months of approval of OTS.

Sale Consideration for the Financial Assets Sold to SCs/RCs (only)

SCs/RCs shall, by transferring funds, invest a minimum of 15% of the SRs of each class issued by them under each scheme on an ongoing basis, till redemption of all the SRs, issued under such scheme.” i.e. minimum cash component will be 15% of the sale price and rest 85% in the form of Security Receipts/Bonds etc.

Bond & Debentures The Bank may receive cash or bonds or debentures as sale consideration for the financial assets sold to Securitization Companies/ Reconstruction Companies. The SCs/RCs can issue bonds or debentures or other similar security to the Bank on agreed terms and conditions [Section 5(1)(a) of SARFAESI Act 2002].

The securities (bonds and debentures) offered by Securitization Company/ Reconstruction Company as sale consideration should satisfy the guidelines issued by RBI presently (i) The securities must not have a term in excess of six years. (ii)The securities must carry a rate of interest which is not lower

than 1.5% above the Bank Rate in force at the time of issue. (iii)The securities must be secured by an appropriate charge on

assets transferred. (iv)The securities must provide for part or full prepayment in the

event the SCs/RCs sells the asset securing the security before the maturity date of the security.

(v) The commitment of the SC/RC to redeem the securities must be unconditional and not linked to realization of the assets.

(vi) Whenever the security is transferred to any other party, notice of transfer should be issued to the SC/RC.

Validity Period of SRs In terms of RBI guidelines SRs are redeemable within 5 years which can be extended upto 8 years with the approval of the Boards of the SCs/RCs. However, there is no guarantee of return on SRs.

Yield on Security Receipts


In case of sale by way of SRs, the expected yield for SRs to be in the range of 5-10% p.a.

Sale Consideration for the Financial Assets Sold to Other Banks/FIs/NBFCs etc. ( i.e other than the SCs/RCs)

Sale to other Banks/FIs/NBFCs etc, will be made only on cash basis. The entire sale consideration should be received upfront and the asset can be taken out of the books of the selling Bank only on receipt of the entire sale consideration. Under no circumstances can a sale to other banks be made at a contingent price.

Miscellaneous Bank will not use auction process for sale of NPAs as a price discovery mechanism for such assets, where the bids are invited from SCs/RCs and no bid is accepted without assigning any reason.

If a bid received is above the Reserve Price and a minimum 50% of sale proceeds is in cash and also fulfills the other conditions specified in Offer Document, acceptance of that bid would be mandatory for the Bank.

Fixation of Reserve Price

Important aspects associated with fixation of Reserve Price The Reserve Price for each account placed for the sale, in which

prospective buyers (ARCs/Banks/FIs etc.) have evinced interest, will be declared before hand, at the time of sending invitation to them to submit bids. For this, the HOASC will finalize the Reserve Price based on the recommendations received from FGMOASC. In those accounts where no interest has been shown by the buyers, the Reserve Price will not be disclosed.

Separate Reserve Price may be fixed for offers received on (a) 100% cash basis and (b) Other than 100% cash basis

Since sale on cash basis is always beneficial for the bank, the Reserve price fixed for 100% cash basis will be 10%-15% (to be decided by HOASC) less than that on other than 100% cash basis. Further, in case offers are received at the minimum Reserve Price fixed in both the cases, the offer at 100% cash basis will be preferred.

Pricing / Valuation The objectives of the valuation are essentially to: a) arrive at Net Present Realizable Value of the assets; b) provide a basis for fixation of Reserve Price, evaluation and acceptance of offer of Securitization Companies / Reconstruction Companies/ other banks/FIs/NBFCs etc for sale / transfer of assets

The bank shall make internal assessment to determine Net Present Realizable Value (NPRV), which will be preferably based on the latest valuation report obtained from the Bank’s approved valuer

Latest Valuation Report which should not be older than 1 year, as on the date of submission of PAIR to the intending buyer. Wherever it is not possible to have fresh Valuation Report i.e less


than 1 year old, such accounts must be immediately recommended for withdrawl from the sale process.

In case the value of immovable property to be mortgaged/ charged is Rs.5 crore & above, branches shall get valuation of such IPs done from minimum two valuers on the Bank’s approved panel

and In case the difference in valuation by the two valuers is less than 15%, the average value may be taken. Same procedure may be adopted while assessing the latest value of the securities, before going for sale of financial assets.

(a)Enterprise / Business Valuation – using discounted cash flow technique on the future earning projections in case of operating units / potentially viable units.

b) Net Present Realisable Value of Assets (NPRV)– Keeping in view the difficulties faced by the field staff and subjectivity involved in the calculation of NPRV, due to different percentage of discounting factors, a simpler and objective procedure is to be adopted in line with the Bank’s OTS Policy. The calculation of NPRV is to be done as per the Annexure-NPRV enclosed with the circular.

Resolution cost Besides discounting factors permitted under Bank’s OTS/compromise Policy on the market value of assets, further discounting factor of 30% in the form of Resolution Cost (which may include cost related to insurance, litigation etc. & Cost involved due to time factor for realization of securities etc.) is also applied for arriving at the NPRV.

Further, while adopting the sale of financial assets route for resolution of NPAs, application of Resolution Cost factor is not compulsory for calculation of the Net Present Value and must be use with prudence.

Evaluation of offer Intending buyers may be given 25-30 days period for doing due diligence and also submission of their Price bid offers.

There exists a well laid down policy in the Bank for calculation of recoverable dues (as per general guidelines of compromise) for considering OTS/Compromise in NPAs. Same procedure shall be adopted in calculation of recoverable dues for considering sacrifice.

The COASC shall fix the Reserve Price as per the latest present realizable value of available security net of cost of realization, as per Annexure-NPRV and recommend to the FGMOASC, which will review it and further recommend to the HOASC, for finalization. Sale price should not be lower than NPRV.

Prudential norms When the bank sells its financial assets to Securitization Company/ Reconstruction Company, on transfer the same will be removed


from its books. If the sale to SCs/RCs is at a price below the Net Book Value

(NBV) (i.e Book Value less provisions held), the shortfall should be debited to the Profit & Loss account of that year.

Resolution of disputes

If there is any dispute between Securitization Company/Reconstruction Company/Other Banks/FIs/NBFCs etc. and PNB or Qualified Institutional Buyers in respect of securitization or reconstruction or non-payment of any amount due including interest, it shall be settled in accordance with Section 11 of the SARFAESI Act.

The disputes between Securitisation Company/ Reconstruction Company/Other Banks/FIs/NBFCs etc., Bank and Qualified Institutional Buyers cannot be taken to civil court.

Monitoring Recovery Division, Head Office shall monitor progress in the matter of sale of financial assets to Securitisation Companies / Reconstruction Companies/ /Other Banks/FIs/NBFCs etc..

STRATEGY FOR UPGRADATION OF VIABLE NPAs – TAGGING ARRANGEMENT In certain viable cases, operations may be allowed in NPA accounts with a view to upgrade the accounts by appropriating a certain part of the credits in the accounts (i.e. tagging a part of credit) for regularization of the over dues/irregularities and allowing the borrower to utilize the balance amounts for operating activities. Tagging of 15% and above may be sanctioned by Incumbents Incharge, and 10% to less than 15% by Circle Head, for credit facilities sanctioned by any authority. If tagging is to be fixed at less than 10%, the sanctioning authority is FGM Policy for Engagement of Recovery Agencies (RD Cir. 20/14 dt. 21.05.2014). Eligible accounts

All Doubtful and Loss category accounts (whether non-suit filed, suit filed or decreed) with ledger outstanding not exceeding Rs.10 lac.

All written off accounts shall be covered by the scheme except accounts where compromises have been approved (including those reached at in Lok Adalats) and have not been treated as failed.

Circle Office should ensure that proper mix of Doubtful/Loss accounts (difficult to resolve) is allocated to the Recovery Agencies. Circle Head shall ensure that reasonable number of accounts are allocated to each Recovery Agent to get optimum results. In case one branch is unable to provide requisite number of accounts, Recovery Agents be allocated accounts from nearby branches.

Empanel-ment of Recovery

Recovery Agencies shall be empanelled for the entire District or Cluster of Districts. Only agencies (companies, corporations, firms, NBFCs etc.) with sufficient means/ resources/ field experience will be


Agencies considered for empanelment. Factors such as past experience, financial soundness, business reputation, standards of performance, market feedback and external factors e.g. political, social, legal & economic environment should also be kept into consideration while empanelling the recovery agencies.

Applications would be invited at the concerned Circle Offices, from interested parties through advertisements to be placed in two local newspapers, out of which one should be vernacular. Committee comprising of 2nd in command of Circle Office, Chief Manager and Sr. Manager/ Manager (Recovery Deptt.) will interview the applicants and recommend the empanelment.

Competent Authority to approve the empanelment of Agency will be respective Head of the Circle Office. The decision of Head of Circle Office would be final. There would be no review process by any higher authority.

The panel of Recovery Agency will be reviewed by Circle Office on annual basis. However, bank has right to terminate the contract at any time without assigning any reason.

The up to date details of the Recovery Agency firms/companies engaged by Circle Office shall also be posted on the bank’s website.

Guarantee The Agency shall furnish to the Bank’s Circle Office, a Bank guarantee for an amount of Rs. 1,00,000/-. Alternatively, the Agency shall make a security deposit (by way of term deposit) for equivalent amount which shall be returned to the Agency on termination of the arrangement.

If reputed recovery agencies having good track of effecting recoveries of the Banks and desirous of getting empanelled with other Circle Offices shall provide Bank Guarantee/ Security deposit of Rs. 1 lac in each Circle Office subject to maximum of Rs. 3 lac.

Every field staff of the Recovery Agency shall be issued a temper-proof Identity Card (with in-built photo as in Electronic Photo Identity Card issued by Election Commission) at the cost of Recovery Agency, to be signed by 2nd in command of Circle Office and authorized signatory of Recovery Agency.

Mode of Settlement

Recovery Agents shall not accept cash. Cash recoveries, if any, shall be directly deposited by the borrower or his representative in the branch. The field staff of Recovery Agency shall not receive any cheque/draft in his name or in the name of the Agency. The cheques / drafts should be drawn in favor of PNB A/c ___________ (title of the account for which collection is made) and crossed ‘A/c Payee only’. When recoveries are made in suit-filed / decreed accounts, satisfaction to the extent of the realization made shall be got recorded by appropriate application / statement before the Court. RBI’s Guidelines on Fair Practices Code for Lenders and IBA’s Model Code for Collection of Dues and Repossession of Security (CDRS Code) shall be adhered to, wherever required, by the Recovery Agency.


Supreme Court has cautioned the Banks against use of coercive methods for recovery of loans and in the other case on the same issue State Consumer Forum of New Delhi has given stern warning to Banks that if any complaint is received against any Bank alleging use of force by recovery agents, the punishment of minimum one month imprisonment shall be imposed under section 27 of the Consumer Protection Act 1986. The branch should inform the borrower the details of Recovery Agency firms/companies while forwarding default cases to the Recovery Agency.

Commission For NPA accounts (suit filed / non suit filed) Commission payable on amount of recovery

Age of NPA

A/cs with O/s upto Rs.1 lac

A/cs with O/s above Rs.1 lac

Upto 3 years 7.5% 5% 3 years upto 5 years 10% 7.5% Beyond 5 years 15% 10%

For decreed accounts Age of decree Commission payable Upto 3 years 5% of amount recovered Above 3 years upto 5 years 7.5% of amount recovered Above 5 years 10% of amount recovered.

The allocated accounts may be withdrawn from Recovery Agencies after six months from the date of allocation in case no effective result is achieved by Recovery Agencies within this period subject to approval of Circle Head.

Training The number of hours of training for various categories of Recovery Agents

Sl. Educational Qualification No. of hours Training

1. Below 12th Pass 100 hours. 2. 12th pass and above and below

graduation 70 hours.

3. Graduation and above 50 hours. Monitoring / Supervision & Control

The progress shall be monitored on Monthly basis by 2nd in command of Circle Office. Circle Head him/herself shall review the performance of Recovery Agencies on Half-Yearly basis The progress under the scheme shall be monitored by RD HO on quarterly basis and review note will be placed to the GM (RD) on quarterly basis and to Executive Director on annual basis. An officer shall be designated as Nodal Officer at Circle Office. Any complaint arising in the matter to be addressed by the Nodal Officer within 7 days of receipt of complaints.


ENGAGEMENT OF SECURITISATION/ RECONSTRUCTION COMPANIES (SCs/RCs)/FIRMS/COMPANIES/ (other than SCs/RCs)/ RETIRED BANK (PNB) EMPLOYEES AS RESOLUTION AGENT (RD Cir. 22/14 dated 23.05.2014) Bank has decided to empanel SC/RC, Other Firms / companies, Retired Bank employees to act as resolution agents for resolving NPAs .The guidelines are as under: Particulars SCs/RCs Other Firms PNB Employees 2. Eligibility Criteria for empanelment of Resolution Agents

The Securitisation / Reconstruction Companies (SCs/RCs) which have obtained the certificate of registration from RBI under Section 3 of the SARFAESI Act and having Object Clause of Memorandum of Association permitting them to act as Resolution Agent for the bank.

A Firm/Company promoted by and/or employing professional person /persons like Chartered Accountant /Company Secretary / Cost Accountant and / or honorably retired Senior Executives of the Banks (not less than DGM/GM) with minimum 3 years experience in the resolution of NPAs. Firms/Companies not having 3 years’ experience but having professionals with minimum 3 years’ experience in resolution of NPAs, will also be eligible. For all other cases, the matter may be referred to the Head Office, Recovery Division to consider on merits of the case.

Honorably retired bank employees (including Voluntarily Retired Employees). PNB retired clerical staff has also been permitted to work as resolution agent.

Invitation of applications

Head office , Recovery Division shall invite applications from Scs/Rcs.

Concerned Field General Managers shall invite applications from Firms / Companies (other than SCs/Rcs)

HRD and/or Recovery Division of concerned Circle office shall invite applications from the honorably retired bank employees (including Voluntarily


Retired Employees).

Competent Authority for empanelment

ED for empanelment as Resolution cum Recovery Agents and allocation of NPAs under Retail Loans on portfolio basis

FGM, after engagement of Resolution agents CH may advise the dealing officials from the office to visit the site/office of the Firms/Companies

Upto scale-III

Circle Head

Scale IV & V

FGM

Scale VI & VII

Executive Director (through HRD)

This panel shall be circulated to all the offices for the utilization of their services for resolution of non performing accounts under the scheme

Eligibility of accounts for allotment to Resolution Agents

Following eligibility criteria are common for all the 3 categories of Resolution Agents i.e. SCS/RCs, Other Firms & PNB Retired employees: (i) NPA accounts categorized as Doubtful / Loss whether non suit filed, suit filed or decreed accounts shall be covered under the Scheme. (ii) A financial asset in which any case is pending before a Court / DRT / BIFR / Action under SARFAESI may also be considered for allocation under the Scheme. (iii) The financial assets where non funded facilities are yet to be crystallized are not to be allocated. (iv) In case of written off accounts, outstanding balance at the time of write off, shall be taken as Notional outstanding. Rs. 1Cr to 5 Cr.

Circle Head

Up to Rs. 25 Lac

Clerical staff

Circle head

More than Rs.10 lac And upto Rs. 1 crore

Circle Head

Above Rs. 1 Lac but up to Rs. 100 Lac

Scale I, II & III

Circle Head

Above Rs. 1 crore up to Rs. 5 crores

Field General Manager

5. Identification & Allocation of accounts –Delegation of Powers.

Above Rs.5 Crore.

Field General manager

Above 5 Executive

Above Rs. 10 Lac upto Rs.250 lacs

Scale IV & Scale-V

Circle Head


crores* (in emergent circumstances & with prior permission from ED)

Director Above Rs.10 lacs upto Rs.500 lacs

Scale VI & above

Circle Head

Criteria for allocation of accounts

Ledger outstanding of Rs.1 cr. & above (Further, all Retail Loans under Doubtful/Loss category may be allocated to them Circle-wise on portfolio basis in addition to NPAs (Doubtful/Loss) of Rs. 1 cr. & above.)

Ledger outstanding of more than Rs. 10 lacs.

Ledger outstanding upto Rs. crores, subject to thcondition that retireemployees be not given suchaccounts for resolution whichthey handled while in servici.e the accounts which wereither sanctioned by them otheir operations werhandled by them during theistay in that particulabranch.

Limit for number of Accounts to be allocated to the Resolution Agents.

A Resolution Agent shall be initially allocated 10 to 15 accounts for resolution and it may be subsequently allocated more accounts based on their performance. However, in case of eligible Retail Loan NPAs under portfolio basis, the limit will be restricted to 50 accounts per Circle with total ceiling of 8 Circles. Therefore at a time, a maximum of 400

The Resolution Agent shall be allocated maximum 50 accounts and based on their performance they shall be entitled to get more accounts for resolution subject to ceiling of 50 accounts at a time.

A Resolution Officer shall be allocated maximum 25 accounts and based on their performance, number of accounts may be increased by the Allocating Authority subject to the performance of the Resolution Agent.


NPA accounts will be allocated under Retail Loan Scheme on portfolio basis to a single SC/RC, in addition to eligible accounts with balance outstanding of Rs. 1 crore & above

Period of resolution of accounts (common for SCs/RCs/Other Firms/PNB Retired Employees.

Maximum period for resolution of allocated accounts shall be 12 months if Resolution Agent fails, accounts will be taken back. However, same can be extended upto 24 months by Field General Manager on merits of the case, keeping in view the steps taken by the Agent for recovery.

Commission For SCs/RCs/Other Firms/Companies

Fixed Component. SCs/RCs and Firms/Companies other than SCs/RCs may be paid commission at the rate of 5% of the recoveries, as fixed component. However, there are no changes in the other expenses payable e.g Insurance charges, Security/Valuation charges after taking the possession by Bank/Official Liquidator/DRT Receiver, legal expenses including fees to the advocates, charges relating to auction, which shall be borne by the Bank.

Commission For SCs/RCs/Other Firms/Companies

Variable Component S.No Distress value

of security Rec up to 90% of Principal

Recovery above 90% up to principal

Recovery above principal

1 Cases with distress value of tangible security more than principal amount.

No Incentive

No Incentive

5% of the recovery in excess of principal


2 Cases with distress value of tangible security between 50% to 90% of principal amount.

No Incentive

6% of recovery in excess of 90% of the principal

3 Cases with distress value of tangible security less than 50% of principal amount

7% of any recovery

4 Cases without tangible security

10% of any recovery

Note. A consolidated commission of 10% of recovery shall be payable to the SCs/RCs for resolution of Retail Loans under NPAs entrusted to them on portfolio basis. For PNB Retired Employees.

Outstanding If the Age of NPA is

up to 3 Years If Age of NPA is more than 3 years.

Up to Rs. 1 Lac 8% 10% Above Rs. 1 lac to Rs. 50 Lac

7% 9%

Commission

Above Rs. 50 Lac to 1 crore

6% 8%

Above Rs.1 core upto Rs.5 crore

5% (Max Rs.15 lacs)

6% (Max Rs.15 lacs)

• The above mentioned rates payable to all categories of Resolution Agents are all

inclusive of taxes whatsoever may be applicable.

• For resolution /recovery of accounts expenses on conveyance/travelling, salary to staff employed by the Resolution Agent/fee paid to the Supporting Agency for taking possession/ other out of pocket expenses shall be borne by the Resolution Agents. However, Insurance charges, Security/Valuation charges after taking the possession by Bank/Official Liquidator/DRT Receiver, legal expenses including fees to the advocates, charges relating to auction shall be born by the Bank.


• Commission is to be paid by the branches to the debit of Expenditure: Outsourcing of Financial Services {P & L- GL Report Code 11427 as mentioned in Inspection & Audit Division Circular no.51/08 dated 18.09.2008. Further as informed by IT Division vide their letter ITD/CBS dated 11.05.2011 that commission payable to the Resolution Agents, be debited to SGL Code 1142710-Payment to Resolution Agents, already opened and replicated to all Sols.

• Incumbent Incharge of the branch will be the competent authority to finalize the bill/claim submitted by the Resolution Agents and its payment, based on their record of recoveries and as per the Bank’s extant guidelines. In case of any dispute, Circle Head may take the final decision, considering facts of the case and for LCBs the concerned FGM shall be the competent authority for settlement of disputes Miscellaneous Terms & Conditions

Following terms and conditions are applicable to all the 3 categories of Resolution Agents.

• Borrowers/co-obligants shall be informed of the engagement of Resolution Agent at the time of assigning the job for resolution to the concerned SC/RC.

• The Circle Office where the account is located shall provide to Resolution Agent all information including Dues of the borrower/claim lodged with the liquidator in case of liquidation, complete address of borrowers/co-obligants and copies of plaints in case of suit filed and the details of the charged securities, attachments if any, if desired by the Resolution Agents. Further, Circle office shall coordinate the job of Resolution Agent through a Nodal Officer not below the rank of Chief Manager.

• Ensure that the agents engaged in the recovery process carry out verification of the antecedents of their employees, (police verification) Further, re-verification of antecedents should be resorted to at an interval of 2 years.

• In case Resolution Agents desire for Power of Attorney from Bank to act on behalf of

the Bank for the resolution of the account, they may be provided as per format- Annexure- POA enclosed as per Circular.

• Keeping in view the provisions of the RTI Act, salient features of the Policy e.g criteria

for empanelment, experience, fees/commission etc. may be placed on the Bank’s Website for the convenience of the Resolution Agents.

• Resolution Agent shall ensure that while acting as Resolution Agent, they do not

give rise to any pecuniary liability to bank otherwise they shall be held liable for their action.

• Bank has right to withdraw any financial asset allocated to the Resolution Agent

without assigning any reason subject to approval of Field General Manager.


• Bank has right to terminate the empanelment of Resolution Agent at any time without assigning any reason subject to approval of Field General Manager for SCs/RCs/Other Firms/PNB Retired Employees based on the inputs/information provided by the Circle Head. The financial assets allocated to them will also be withdrawn.

• The recovery effected by the Resolution Agent shall be deposited with the branch

concerned immediately and a statement of account of the recovery duly certified by the Branch Incumbent for all 3 categories i.e SCs/RCs, Other Firms and PNB Retired Employees, shall be submitted by the Agent on quarterly basis to the branch.

• In case Borrower/co-obligants approaches the bank for OTS in the accounts

allocated to SCs/RCs/Other Firms/PNB Retired Employees and the same is accepted by the competent authority, Resolution Agent shall also be entitled for the commission on actual amount of recovery.

• In case any dispute arises the matter cannot be taken to Civil Court.

• The object clause of SC/RC/Company (under category of Other Firms) is to permit to act

as Resolution Agent for bank/banks.

• The branch should inform the borrower, details of the Resolution Agent while forwarding default cases to the Resolution Agents, for which they may use Annexure-10.of the circular. Further, since in some of the cases, the borrower might not have received the details about the Resolution Agents due to refusal/non-availability /avoidance and to ensure identification, it would be appropriate if the agent also carries a copy of the notice and the authorization letter from the bank along with the identity card issued to him by the bank and the agency firm/company. Further, where the Resolution Agent is changed during the recovery process the borrower should be notified the change of Agent and new Resolution Agent should carry the notice and the authorization letter along-with his identity card.

• b Legal Action/Follow-up by the Resolution Agents

Circle Offices shall advise and ensure that branches, having their accounts allocated to Resolution Agents (ARCs/Other Firms/Retired PNB Employees), shall inform the concerned lawyers/advocates, about their engagement and wherever required, seek their services for expeditious resolution of NPAs. For this purpose, identity of the Resolution Agents can be verified by the concerned lawyers/advocates through identity cards issued to the Resolution Agents by the Bank.

This will facilitate the Resolution Agents to keep track of developments. However, any meeting of the Resolution Agents with the lawyers/advocates must be attended by the concerned branch official. In case any account is withdrawn from the Agencies, the same should also be promptly informed to the concerned lawyer.

• Involvement of Resolution Agents during negotiations with borrowers


Branches/Circles should generally involve the Resolution Agents to participate during settlement discussions with the borrowers. In fact, presence of Resolution Agents who are responsible for follow-up with the borrowers is beneficial for settlement through negotiations and can result into higher settlement. This facilitates to integrate the efforts of the Resolution Agents and Bank officials and avoids any communication gap. Circle Heads to ensure that: Police verification Reports of the antecedents of their employees, which may include pre-employment police verification, as a matter of abundant caution are available in the Circle Office records. Further, re-verification of antecedents should be resorted to at an interval of 2 years.

• It has been brought to the notice that branches, while providing the requisite information pertaining to allotted NPA accounts to the Resolution Agents, also part with the documents e.g the file, mortgage deeds etc., which may jeopardize the bank’s interest. It must be ensured that parting of documents to Resolution Agents is not permitted under any circumstances.

* Resolution Agents must ensure that: (i) There is a tape recording of the contents/text of the calls made by them to the customers, and vice versa. It may take reasonable precaution such as intimating the customer that the conversation is being recorded, etc. (ii) They preserve documents and/or data in accordance with the legal/regulatory obligation of the bank * . Monitoring & Review of the Scheme * The list of SCs/RCs/Other Firms/PNB Retired Employees as Resolution Agents, shall be placed on the Bank’s website.

• Circle Office shall monitor the progress in the matter of Resolution of NPAs through Resolution Agents on quarterly basis, and FGM on half-yearly basis and by HO on yearly basis and same shall be placed before ED.

POLICY FOR ENGAGEMENT OF SUPPORTING AGENCIES UNDER SARFAESI ACT 2002 (RD 21/2014 DATED 22.05.2014) Nature of services

The following services/activities/sub-activities need to be performed by such professional Supporting Agencies : 1)Pre-take over examination of identified units/assets including survey which shall include: (i) Location of the unit/asset, (ii) Its status i.e whether the unit is running or closed, whether the IP is vacant or occupied, if occupied by owner or by tenants etc. (iii) Requirement of manpower (security personnel) at the time of taking over the actual possession, (iv) Assessment as to whether the owner is likely to hand over the possession voluntarily and/or peacefully or offer resistance.


2) Facilitating the Bank in seizure of securities/taking possession of movable and immovable assets. 3) To provide security for preservation and protection of assets taken in possession. 4) To act as Custodian of secured assets. 5) Obtaining assistance of District Magistrate/Metropolitan Magistrate for taking over possession of securities. For this services of an advocate from Bank’s panel may be utilized 6) Assisting the Bank for sale of assets taken in possession through auction or otherwise.

Authority for engagement / empanelment

Circle Head is authorized for empanelment of a Supporting Agency. In case of LCBs the power for engagement of Supporting Agencies shall vest with the Incumbent of the LCB. Wherever required, FGM may permit to utilize the services of a Supporting Agency engaged by one of his Circle Offices, in the other Circle Offices also, under his jurisdiction.

Validity of panel The panel of Supporting Agencies will remain valid till the time revised/up-dated list is placed on the Bank’s website, preferably on yearly basis.

Addition / delisting

Circle head is authorized

Payment of fees Annexure II and III of the circular and are all inclusive of taxes whatsoever may be payable. The Fee Structure given in the Annexure does not cover the charges for Seizure of vehicles including Tractors”, for which there is separate Policy approved by the Board

• For obtaining assistance from DM / Chief metropolitan magistrate for taking over possession of securities the fees shall be paid in two stages:

50% at the beginning on moving the application Balance 50% after obtaining possession of secured assets.

Payment of commission revenue head

Expenditure: Outsourcing of Financial Services-Supporting Agencies {P & L- GL Report Code 11427 (Account No. <solid> 1142703) as mentioned in I&AD Cir no.51/08

Recovery through OTS

Where supporting agencies have played a proactive role in recovering bank’s dues through OTS or otherwise (normal recoveries) after taking possession under the Act but there is no sale of assets, Circle Head may approve fee to the Agency at the rate of 50% of normal fee (i.e. fee payable for sale of asset) with the ceiling of Rs.1,50,000/- (one lac fifty thousands) and payable to debit Expenditure: Outsourcing of Financial Services-Supporting Agencies {P & L- GL Report Code 11427 (Account No. <solid> 11427103) ( I&AD Cir no.51/08)

Competent Authority for payment and settlement of disputes

The payment will be made by the concerned branch as per the directions of the Authorized Officer. In case of any dispute, Circle Head may take the final decision, considering facts of the case and for LCBs the concerned FGM shall be the competent authority for settlement of disputes.


Monitoring Quarterly review meetings shall be held with the staff of Supporting Agencies by the Branch to review the progress of the Supporting Agencies for the task/job entrusted to them. The Circle Offices will submit the progress report to their FGMOs and a copy to be sent directly to the Head Office Recovery Division within a fortnight’s time from the end of the quarter. Circle-wise progress will be placed to the GM (Recovery Division) on quarterly basis. FGMOs to also analyze the Circle-wise progress and ensure that wherever required, services of the Supporting Agencies are utilized by the Circle Offices for expeditious resolution of NPAs.

POLICY ON SEIZURE AND SALE OF VEHICLES(INCLUDING TRACTORS)DEFAULTER BORROWERS (RD 23/2014 DATED 23.05.2014)

(1) For recovery of Bank’s dues in irregular and NPA vehicle loans (including Tractor advances), following procedure is to be followed by Branch Manager for repossession and disposal of the security of vehicle including Tractors: (a) Branches shall resort to repossession of security only for the purpose of realization of its dues in default as the last resort and not with whimsical intention of depriving the borrower of security / vehicle. (b) In addition to the usual / normal recovery reminders / notices / efforts, a 15 days’ notice calling upon the borrower to remedy the default shall be given (with copy to guarantor/s) in writing in local vernacular language. The notice shall state that in the event of failure on the part of the borrower / guarantor to do so within the prescribed time, the bank shall be entitled to seize the vehicle and proceed for selling it to recover its dues as per terms of the loan agreements and in consonance with the law. Draft notice is enclosed as Annexure-I of RD 23/2014. (c) In case the default persists, another possession-cum-sale notice of 10 days shall be given to borrower / guarantors in writing in local vernacular language intimating the date of taking over possession of the vehicle / tractor and conveying bank’s intention of selling it to recover its dues on a date to be specified in the notice. Draft Notice is enclosed as Annexure-II of RD 23/2014. (d) The borrower shall be at liberty to repay bank’s dues on any day before the date fixed for sale and get back possession of his vehicle. In such an eventuality further action of sale shall be stopped. (e) Estimated price of vehicle shall be ascertained and notified to the borrower / guarantor, and on the notified date for sale, the vehicle shall be sold by Public Auction/Tender/Quotations and/or through a private contract at the sole discretion of the bank in a fair and transparent manner, where borrower will also be advised to be present.


The depreciated value of the vehicle/tractor may be taken as estimated value. However, as an additional safeguard, estimated value may be got valued from a Surveyor. Draft Notice is enclosed as Annexure-III of RD 23/2014. (f) Proceeds of sale, net of expenses incurred in this regard, shall be promptly credited to borrower’s loan account towards liquidation. Any surplus shall be refunded to the borrower and for any deficit further recovery action shall be initiated as per our normal guidelines. (2) For taking possession and /or for sale, the BM may require services of a suitable Agency. Circle Heads may shortlist suitable Agencies out of the panels of approved Recovery Agencies and Supporting Agencies keeping in view their infrastructure, expertise, skills, storage space, past performance, area of operation etc as “Seizure & Disposal Agents” for undertaking the job of seizure, storage and disposal of tractors and of other vehicles. (a) While initiating action for seizure of vehicles (including tractors), intimation to the Police Authorities is neither regulatory nor mandatory requirement. However, it is advisable to send such communication to the Police Authorities, for information only. (b) Further, in case the borrower refuses to sign the paper/possession memo (document for establishing the fact that Bank has taken possession of the vehicle) when the vehicle is repossessed by the Bank, copy of same be sent to the borrower through Registered Post (Acknowledgement Due). Further, on repossession of the vehicle by the Bank, Immediate information be also provided to the local Police Authorities (Annexure- II of RAD 23/2014), intimating time and place when the vehicle was repossessed (Rajeev Raijyada versus S Ravindra Bhat, High Court decision dated 18.01.2005). (3) After seizure of the vehicle, prompt and quick steps shall be taken to dispose off / sell the vehicle but in any case not exceeding 60 days from the date of seizure, failing which the vehicle / tractor may be restored back to the borrower. S.No. Service rendered Fee payable A Seizure and transporting the vehicle

to a nearby godown Maximum Rs.2500/- per vehicle (Cars, Tractors, Trucks etc.)

B Acting as custodian of vehicle / Storage Charges

Maximum Rs.100/- per day for a maximum period of 60 days during which either the possession is to be restored to the borrower or the vehicle is sold.

C Sale of vehicle 5% of amount realized. D Recovery without seizure of

vehicle/Tractor 5% of amount recovered

(4) Sale proceeds net of these expenses shall be credited to the borrower’s account. If there is surplus, the same shall be remitted to the borrower(s) and in case of deficit, further recovery measures should be taken.


Compromise / One Time Settlement ( Ref: Cir No RD 16 /2012 dated 31.05.2012 Definitions: BASE AMOUNT is gross outstanding as on date of NPA (inclusive of SI/DI) duly adjusted for recovery/further debits in the account (except interest), irrespective of the fact whether recovery was appropriated towards income or reduction in outstanding. In case interest already recovered exceeds principal, the excess amount shall be deducted from gross outstanding NET PRESENT REALISABLE VALUE (NPRV) OF SECURITIES: is the Present Market Value of the charged securities, net of cost of realization, discounted as under: A General Discount 10%B Specific Discount B-I

IPs having old/multiple tenancy/multiple suits and/or dispute about validity/enforceability of the mortgage/charge.

20%

B-II More than 1 year old stay against SARFAESI action/Auction under Sarfaesi failed as no bidder came.

10%

B-III Attachment of IP by Tax/Revenue authorities (if no priority charge)** 10%B-V IP not demarcated / Undivided share mortgaged / no independent access. 10%B-VI Mortgagor is dead 10%

Maximum discount restricted to 40%. (if more than one attendant factors). ** In case of priority charge, deduction of full dues / amount of attachment. Also, if proof exists of IPs having statutory encumbrances like Property Tax, Lease Rent, Development charges etc. the deduction shall be 50% of such dues, apart from the above discounts. Net Present Value of the OTS amount:

• (OTS amount + Interest at BR) • If OTS amount is to be recovered without interest or at a rate lower than BR net present

value shall be calculated by adjusting difference in BR and charged rate of interest in the OTS sanction.

(Payment within 3 months without interest is considered immediate payment) . GENERAL GUIDELINES ON ONE TIME SETTLEMENT OF NPAs Coverage All Borrowal/Loan accounts identified as NPA in terms of extant RBI guidelines

outstanding as at the end of last quarter shall be eligible for considering under these Policy guidelines for compromise/negotiated settlement/one time settlement and/or write off..

RBI reported Willful default/Fraud cases

1 .OTS proposal in such NPA accounts having book outstanding of Rs. 25 lac & above shall be considered at the highest level i.e. Management Committee/ Board. 2. Cases involving outstanding balance of up to Rs. 10 lac where an amount higher than NPRV/Book Outstanding (whichever is higher) is being recovered may be considered at COCAC level within the delegated power of the sacrifice involved provided the staff side case, if any, has been decided against the erring official(s). 3 OTS proposals in accounts having outstanding balance of up to Rs. 10 lac where


OTS offer is lesser than the NPRV/Book outstanding shall be considered on case to case basis by HOCAC Level II as per their vested powers subject to post facto information to Management Committee on Quarterly basis. 4. Cases involving outstanding balance of Rs. 10 lac & above but below Rs. 25 lac where an amount higher than NPRV/Book Outstanding (whichever is higher) is being recovered shall be considered by HOCAC Level II. 5 OTS proposals in accounts having outstanding balance of Rs. 10 lac & above but below Rs. 25 lac where OTS offer is lesser than the NPRV/Book outstanding shall be considered on case to case basis by HOCAC Level III as per vested powers. 6 The criminal cases filed under Section 138 of Negotiable Instrument Act shall not be governed by these guidelines and OTS proposals in such cases shall be dealt in normal course as per vested powers.

Criminal action cases

Cases, where criminal action initiated / FIR lodged, will be considered by MC/Board. Present Ledger outstanding + *interest @ Base Rate simple or contractual rate of interest whichever is lower. (*Interest shall be calculated on simple reducing balance basis starting from the Balance outstanding as on the date of NPA. Recorded interest on classification as NPA will be added in Recoverable Dues. )

Recoverable Dues

For NPAs Under direct agricultural advances with balance outstanding up to Rs.10 lac (including Kisan Credit Cards but excluding Tractor Advances) recoverable dues shall be calculated with interest @ 6% simple, irrespective of age of NPA. In decreed accounts, recoverable dues shall be calculated as per the above rate or decretal rate whichever is lower. Minimum recoverable amount/recoverable dues shall be calculated, as at the close of the quarter preceding the date of the proposal and shall include recorded legal/other expenses also.

Minimum Indicative OTS amount

If NPRV is Min. Indicative OTS Amount > Recoverable dues Recoverable dues < Recoverable Dues but > Book Outstanding

NPRV

< Book Outstanding NPRV Where NPRV is Zero Whatever maximum can be recovered The basis for negotiation shall always be Memoranda Dues and should aim at recovering maximum share of the same.

Under Direct Agriculture Advances upto Rs. 10 lac,

the realizable value of primary/collateral security will exclude the agricultural land offered as security. However, security available other than agricultural land shall be taken into consideration for arriving at the NPRV


Minimum Indicative OTS Amount in case of Direct Agricultural Advances up to Rs. 10 lacs will be as under where NPRV is less than Book Outstanding Sub-Standard NPAs : Minimum 50% of Book outstanding Doubtful NPAs : Minimum 40% of Book outstanding

If the borrower is unable to pay the Min. indicative OTS amount, the best possible offer involving higher sacrifice, depending upon merits and attendant circumstances of individual case, can be considered by the next higher authority. Upfront Payment

Efforts should be made to get upfront payment in settlement of OTS proposal as under : OTS Offer up to Rs. 10 lac : Upfront 20% OTS offer >Rs.10 lac to Rs.50 lac : Upfront 15% OTS offer>Rs. 50 lac : Upfront 10% where it is considered that upfront amount is difficult to be insisted in advance (reasons to be recorded specifically), minimum amount to be deposited shall be insisted upon before considering the OTS proposal as follows: OTS Offer Upfront

Amount

Upfront Amount where it is difficult to provide prescribed upfront Amount

Upto Rs. 10 lacs 20% NIL Rs. 10 lacs to Rs. 50 lacs 15% Rs. 0.50 lacs Rs. 50 lacs to Rs. 100 lacs 10% Rs. 1.00 lacs Rs. 100 lacs to 500 lacs 10% Rs. 5.00 lacs Rs. 500 lacs & Above 10% Rs.10.00 lacs

In genuine cases, competent authority may allow lower / NIL upfront payment and/or may allow reasonable time of 7-10 days to deposit the amount. *Party to deposit remaining Upfront amt within 15 days. failing which OTS is treated as cancelled/withdrawn and conveyed to the borrower in writing

Payment term Generally it should be within 3 months without any interest. OTS amount should normally be paid within a maximum period of 12 months. HOCAC Level II may consider proposals under their powers with payment period up to 24 months. Cases where payment period is proposed to be more than 24 months shall be placed before the Management Committee for consideration irrespective of the amount of waiver involved. Cases where the OTS amount is to be paid beyond a period of 3 months from the date of conveying approval, and/ or payment in installments, future interest on the settlement amount shall be charged @ 6-10% on simple basis on reducing balance from the date of conveying approval by the branch. COCAC and above may consider at lower rate, in exceptional circumstances.


Cases not involving further sacrifice – . Without further sacrifice- (Not exceeding 12 M ).by - COCAC level 1. > 12 M but up to 15 M by -COCAC level II. > 15 M but up to 18 M by –HOCAC level II >18 M but up to 24 M by –HOCAC level –III MC- Full Powers.

Extension

Cases involving further sacrifice – By next higher authority keeping in view the original sacrifice and present sacrifice. (If OTS sanctioned by MC shall be placed to MC only). Amendment in T & C other than OTS amt, interest be granted by sanctioning authority. Cases of HO powers by HOCAC level II .

Rejection • Any proposal submitted by the branch can be rejected by an authority one step higher than the authority competent to approve the proposal. ( but should be put up in max 15 days to the SA/CO)

• Accordingly, competent authority should refer the case for rejection to his next higher authority, giving reasons thereof. (SA shall make further negotiations if desired within say 30 days)

• However, proposals falling under the powers of HOCAC Level III and above may be rejected at the level of HOCAC Level III itself.

Reopening of failed OTS cases

Failure of OTS • In case of obligants’ failure to pay the OTS amount as per schedule of

payment the failure should be notified to the party after prior approval from CH maximum within one month after giving due notice.

• After declaring the OTS failed legal recourse be taken immediately for recovery of bank’s dues.

• Re-opening of failed OTS- (with or without further sacrifice). Such proposals shall be considered as Fresh / De novo proposals by the next higher authority.

Other conditions

Compromise agreement to contain a specific clause that the settlement is subject to continuation of criminal proceedings against the borrowers/obligants. Cases backed by Govt. Guarantee may be considered by Board. Cases of PSUs may be considered by MC. Staff/staff connected accounts shall be considered by CH and above. Cases involving ex-staff to be considered by CH and above, if the facilities were sanctioned prior to his retirement/resignation. OTS offer should be accepted by borrower within 15 days. If borrower proposes to pay an amount below the sanction, the case shall not be considered as reduction in OTS amount. It shall be considered by competent sanctioning authority again. Discharge of liability of one or more obligants/release of Charge on Mortgaged Property may be considered by competent authority (as per delegated powers to approve sacrifice involved/book outstanding in the account), but not below


the rank of Circle Head. Sacrifice in such cases would be the Difference of Min. Recoverable Dues and Offer Amount Proposal for assignment of Debt as part of OTS shall be considered at the level of Management Committee of the Board, if OTS is less than Book Outstanding, by ED/CMD if > Book Outstanding

SPECIAL GUIDELINES FOR CONSIDERING OTS IN WRITTEN OFF ACCOUNTS

Coverage Borrowal NPA accounts, which were written off earlier duly approved by the competent authority, whether by leaving a balance of Rs. 100/ - or not.

Relevant / Material date

The date on which the account was written off in the books of the branch, i.e. the date on which the amount of revenue loss reimbursed by HO/CO was credited to the account

Base amount Net Outstanding prior to Write off i.e. the book outstanding (exclusive of Suspended Interest/ De-recognized Interest) as on the relevant/ material date shall be the base amount. The base amount is to be duly adjusted for recoveries, if any, subsequent to the relevant/ material date.

Recoverable dues

The base amount (duly adjusted for recoveries if any, subsequent to write off), as above, may be treated as Recoverable dues without applying any future interest.

Minimum indicative amount

A comprehensive view on the capacity of the borrower(s)/ Guarantor(s) shall have to be taken. Since these cases were already written off by competent authority in the past in terms of Bank’s laid down policy on ‘write off’, whatever maximum can be recovered under given circumstances shall be the amount to be recovered. Sacrifice/ waiver in such cases may be calculated as the ‘Difference between Base Amount and the Compromise Offer’

Payment term Preferably be paid in lump sum. Where the borrower is unable to pay the entire amount in lump sum, 15-25% be recovered upfront and the balance amount within a period of 3 months. In exceptional circumstances, longer repayment period (not exceeding 12 months), together with interest at the existing Benchmark Prime Lending Rate (*) from the date of settlement up to the date of final payment, can be considered by the next higher authority. Cases where the compromise offer is 50% or more of the base amount: Rs. lac

Manager Scale I

Manager Scale II

Sr. Manager

Chief Manager

Asstt. General Manager/DGM

Approval of sacrifice/ waiver, not exceeding:

1.00

2.00

3.00

5.00

10.00

Sanctioning Powers

Cases where the compromise offer is less that 50% of the base amount : Next higher authority.


Write Off : In case of write off proposal involving ledger o/s of Rs. 20 lac and above, it should be backed by report of detective agency/investigating agency with reference to traceability of obligants/ascertaining the attachable assets of borrowers/guarantors. Powers to write off at different levels is kept in abeyance; except final write off of accounts with residual balance of Rs. 100/-; which may be written off after 1 year if o/s balance at the time of write off was up to Rs. 25000/- and after 3 years in other cases. Non-borrowal fraud cases / Cases of Theft and Dacoity These cases will be considered for write off by FPIS, HO by the appropriate authority. For all cases of loss of cash in theft/dacoity/robbery etc. and non-borrowal Fraud and non-borrowal other Impaired Assets, Delegation of Powers.

• Level of Authority HOCAC (Amt. in lac) • Level- I HOCAC---------- 50.00 • Level –II HOCAC--------- 75.00 • Level –III HOCAC--------- 100.00 • MC---------------------------- FULL • ( Powers to be exercised per case basis) .

The above powers to approve sacrifice in Non Borrowal Impaired Assets shall be exercised by the respective authorities, if duly recommended by the Committee constituted.

ASSIGNMENT OF DEBT AS PART OF OTS:

• There may be certain cases where borrowers/guarantors want to settle the dues with Bank through OTS but have no liquidity for making payment. In such a situation, they arrange funds from their friends/relatives/third party and/or Asset Reconstruction Companies who are ready to lend the money for making payment to the Bank. In lieu of this the said lender wants to secure himself and request the Bank to transfer all its rights to recover the dues from the borrowers (right of subrogation) to him to which the borrowers have also agreed. This arrangement is known as OTS through Assignment of Debt. In such cases, Memorandum of Assignment of Debt be got approved from Law Division, HO. However, a Standard Format is already prescribed in our Policy of Sale of NPAs to ARCs/NBFCs/other Banks. Assignment of Debt proposals shall be approved at a level not lower than HOCAC Level II subject to the delegated powers irrespective of Book o/s an OTS amount” .


OTS THROUGH DEBT-ASSET SWAP & ACQUISITION THROUGH SELF BIDDING:

If the bank deems it fit to go in for the offer looking to utility of the Concerned property for bank’s use Or otherwise, then a combined proposal can be considered for Settlement of account through OTS or otherwise on one hand and for Purchase of such property at market competitive rates on the other hand. Monitoring and Review of NPA Accounts (RD Cir no. 17/2012 dated 31.05.2012) Category of NPA Authority before

Whom the status report will be placed

Periodicity

Top 100 borrowal a/cs of <5.00cr in each cat Sub STD DF and Loss

MC(As per RBI Calendar of Review)

Once in a Year

NPAs With O/s > 5 Cr ED Once in a Year Fresh Slippage during the Quarter >= 5 Cr CMD As and when Fresh Slippage during the Quarter < 5 Cr but >= 1 cr

ED As and when

Fresh Slippage during the Quarter < 1 Cr but >= 50 lac

GM (Recovery) As and when

Fresh Slippage during the Quarter < 50 lac but >= 10 lac

DGM (Recovery) As and when

NPA with o/s balance of < 10 lac but above 1 lac including Fresh slippage

CH Quarterly/As and When

NPA below 1 lac including Fresh Slippage BM Quarterly/As and When OBTAINING CONSENT DECREE/ OTS AGREEMENT / MEMORANDA OF SETTLEMENT (RD 32/2014 dated 26.07.2014) (A) Non-Suit filed cases 1) Non-Sarfaesi Cases Where payment of OTS/Compromise is spread over a period of time and payments are proposed in installments, Borrower should accept terms & conditions of the compromise. In such cases a Compromise Agreement can be entered into if payment of settled amount is to be paid over a period of time. A Memoranda of settlement shall be got executed from the borrowers, as per Annexure-I. 2) Sarfaesi Cases In cases where action under SARFAESI has been taken, the action can be kept in abeyance till recovery of the entire OTS amount and in case of failure of OTS further action has to be taken. Draft Agreements are enclosed as Annexure-IA & Annexure- IB. (B) Suit Filed Accounts In suit filed cases no agreement needs to be entered into, rather terms of compromise be filed in the DRT/Court and Consent Decree be obtained as stated below: 1) Payment of OTS spread over a period of time


In case of suit filed cases where OTS Proposals are approved and payment of OTS amount is spread over a period of time or where the OTS amount is proposed to be received in installments, the parties shall consent for a decree as prayed for, in the plaint/DRT application with provision to pay as per OTS terms, subject to a default clause that in the event of borrower’s failure to pay OTS amount as per the terms approved, all concessions/relief shall be treated as withdrawn. The Consent Decree shall be obtained for the full amount of the claim subject to the condition that in case of payment of the amount as per OTS terms, the decree will stand satisfied. Under no circumstances the Consent Decree for OTS amount only shall be obtained. In such cases memo of compromise (Annexure-II) has to be filed by all the parties i.e Bank as well as Borrowers/Guarantors/Other Liable Parties before the Court /DRT and a Decree/Order, in terms of the compromise memo, has to be obtained/got passed from Court/DRT. 2) Payment of OTS in lump sum In case payment of OTS amount is proposed in lump sum, bank may give a communication of “No Objection” to the borrower to make payments as per Annexure-III. Further, on receipt of full and final payment as per the terms & conditions of the OTS/Compromise, a receipt in full and final settlement, as per Annexure-IV, of bank’s claim can be issued/suit be withdrawn /satisfaction of decree may be recorded without entering into any OTS agreement and/or consent decree etc. (C) Decreed Accounts In case of decreed accounts, on receipt of the entire OTS amount, a memo of satisfaction of decree shall be filed in the respective Court. In Decreed cases no agreement needs to be entered into. The position is explained hereunder: (a) If execution petition is not filed, a “No Objection Letter” can be issued as per Annexure-III. (b) If execution petition is filed, appropriate statement may be made before the Court/RO about the matter being under compromise recovery made and for keeping in abeyance of EP/RC for the required time. If lump sum payment is received/full payment as per compromise terms is received, then satisfaction can be got recorded. (D) Thus importance of obtaining Consent Decree/Memoranda of settlement needs to be understood in true spirit but at the same time it needs to be ensured that recovery of OTS amount should not be delayed for obtaining the Consent Decree/OTS Agreement and the securities charged to the bank are to be released only after receipt of OTS amount in terms of sanction. (E) All the Annxures/Agreements/No Objection Letters may be suitably modified as per terms and conditions of sanction of each proposal and if need be, assistance of the Law officer/Manager/Sr. Manager (Law)/ dealing Advocate be obtained before execution of agreement/issuance of receipt/filing of memo/application in the Court/DRT.

PRAYAAS-STAFF INCENTIVE SCHEME (RD 37/2014 dt. 28.10.2014) Prayaas Staff Incentive Scheme for NPA recovery

The scheme is in operation upto 31.03.2015 and thereafter till it is modified/revised.

Eligible Accounts

NPAs (Doubtful/Loss) with balance outstanding below Rs. 10 lac and all written off accounts.


Exceptions: 1) Accounts allocated to Recovery Agents/Resolution Agents/ Business facilitators as on 31.03.2014 2) OTS approved before 01.04.2014 and under implementation.

Recovery eligible for Incentive

For Branches other than ARMBs/SARCs- Recovery eligible for incentive Category Eligible Amount Rate of

incentive Doubtful Assets Amount recovered in excess of

floor level of 10% (for the full year) of total outstanding of eligible a/cs of the concerned branch as on the close of 31.3.2014.

4%

Loss Assets Amount recovered in excess of floor level of 10% (for the full year) of total outstanding of eligible a/cs of the concerned branch as on the close of 31.3.2014.

6%

Written off Accounts 5% of Total kitty of written off accounts, irrespective below or above Rs. 10 lac

8%. (*Maximum Rs. 60000/- per a/c).

For ARMBs/SARCs – Recovery eligible for incentive Doubtful Assets Amount recovered in

excess of floor level of 20% (for the full year) of total O/S of eligible a/cs of concerned branch as on 31.03.2014

4%

Loss Assets Amount recovered in excess of floor level of 20% (for the full year) of eligible a/cs of total O/S of concerned branch as on 31.03.2014

6%

Written off accounts- ARMBs/SARCs- Floor level (Minimum Amt to be recovered for eligibility)

10% of total kitty of written off accounts i.e. total sum of the amount under the segments whether below or above Rs.10 lacs

8%. (*Maximum in WO A/cs Rs. 60000/- per account).


OTHER IMPORTANT GUIDELINES L&A cir 38/2013 dated 28.032013 Valuation of Securities in NPA Accounts:- Proper distinction has to be made between market value and realizable value of the securities. In terms of extant guidelines, Valuation Reports should indicate the ‘Realisable Value’ in addition to the ‘Market Value’. Wide variation in value of property (ies) at the time of considering the OTS/ Write off compared to its valuation at the time of original/last sanction or at the time of making provisions should be critically examined. Preferably, the earlier valuation may also be correlated / commented in the latest valuation report. Wide variation in the valuation of securities negates our bargaining power/pressure on the borrower. Therefore, there is an urgent need to understand that the valuation reports are analyzed and self assessment is critically made about the genuineness of the Market/Realizable value of the securities given by the valuer keeping in mind the real estate market and other attendant factors prevailing in the area. In the valuation reports submitted by the approved valuers and verified by the bank’s official(s), various aspects affecting the Market Value of assets as enumerated in the Policy should be clearly mentioned / examined viz.

• Whether the property i.e. land and building, is self occupied or tenant occupied. If tenant occupied, since how many years the same is occupied by the present tenant;

• Whether land, is on lease from the Government, its agencies/ authorities, since such leased property carry clause of sharing unearned increase/ profit resulting in diminutive realisable value of property;

• Whether the property is commercial or residential; • Demand for the underlying security in the event of its sale/ disposal and availability of

ready buyers; • Undivided share in property particularly agricultural land. • Assets having no independent access. • Large or big units/ estates. • Assets created for special purpose.

In terms of extant guidelines, i) In respect of the accounts involving book outstanding of up to Rs 2 crore, the valuation report should not be more than 1 year old. ii) In respect of accounts where book outstanding is more than Rs 2 crore, latest valuation of property (ies) and other details should not be more than 3 months old to assess the valuation with more justice. iii) Where properties are valued at Rs50 crore or above, minimum 2 independent latest valuation reports from Bank’s approved valuers should be obtained.(FOR OTS purposes where properties are valued at Rs 5 crore or above, minimum 2 independent latest valuation reports from Bank’s Board approved valuers shall be obtained. RD cir no 16 dt 31-5-2012)


The valuation assessed by the approved valuer shall be got verified and vetted from the branch officials as under: O/S balance above Rs 5 Cr. Valuation to be verified by 2 officials of the bank

independently.(One of the officials not below the rank of Chief Manager). Further Additional vetting by 2 CO officials independently , one of them not below the rank of CM.

Accounts with outstanding balance of above Rs50 lac and up to Rs5 Cr.

Valuation to be verified by 2 officials of the Bank independently, one of the officials must not be below the rank of Chief Manager.

Accounts with outstanding balance up to Rs 50 lac

Valuation to be verified by an official of the bank independently not below the rank of Scale II.

It is, therefore, reiterated that a) Assessment be made about the genuineness of the Market Value of the securities given by the valuer keeping in mind the real estate market and other attendant factors like demand and salability of the property. b) While vetting the valuation reports, the concerned officials must give their comments on all the attendant issues and, as far as possible, translate the same in monetary terms, so as to arrive at a realistic Value of Securities. c) Value of properties genuinely assessed as above be incorporated in the Ladder system to facilitate calculation of correct provisions. d) There should be uniformity in reporting the ‘value of securities’, while preparing / submitting Status Notes / Review Notes and / or while fixing the Reserve Price under SARFAESI and/or at the time of considering the proposal. RECOVERY CAMPS/RIN MUKTI SHIVIR (RD cir – 9/2013 dt 22.03.2013) Circle Heads must ensure to: (i) To launch well planned and sustainable Recovery Campaigns. The RMSs and MRMSs should not be conducted merely as a ritual/formality without doing an effective spade work. Proactive action in this regard will ensure good turnout in the Shivirs with resolution of NPAs up to the expected level. (ii) Such Shivirs maty be organized preferably with cluster of 9-10 branches on a Non-Public Working Day (NPWD). (iii) Circle Heads need to set targets for themselves and motivate their Branch Incumbents to make all possible efforts to adhere to the benchmarks for number of borrowers attending the camp, cash recoveries and OTS proposals.


(iv) Effectiveness of the RMSs/MRMSs should be reflected through numbers of NPA accounts resolved and amount recovered, instead by number of shivirs organized. During Special Recovery Campaigns launched by the Head Office, Circle Offices are advised to organize Mega Rin Mukti Shivirs (MRMSs) for which following parameters have been laid down: S.No. Benchmarks Per MRMS Number / Amount1 Minimum borrowers 200 2 Overall Cash Recoveries including in the written off A/Cs

and OTS approved cases Rs. 50 lacs

3 Cash Recovery in written-off accounts (out of 2 above) Rs. 2 lacs 4 OTS Proposals (Amount O/s in the NPA A/Cs) Rs.150 lacs

Important Note (i) All such Shivirs where the above mentioned criteria remain unfulfilled, do not qualify for the Mega Rin Mukti Shivirs. (ii) During the Rin Mukti Shivirs and Mega Rin Mukti Shivirs progress made in respect of NPA accounts with balance outstanding of upto Rs. 10 lacs only, will be accounted, for performance assessment. Although Circle Heads may resolve high value NPA accounts during such Shivirs but recoveries, up-gradation, OTS approved will not form part of reporting. Conducting Recovery Suits – Interim Reliefs INTERLOCULATORY APPLICATIONS. (RD cir - 12/2011 dt 28.06.2011) To ensure recovery of dues to the Bank and to safeguard the securities / assets available with the defendants during the pendency of the suits various interim reliefs to be prayed have been included in the Model Draft of the Plaint circulated vide Law Division Circular No.16/law/2013 dated 07.08.2013. Therefore it has been repeatedly stressed that we should move applications before the courts / DRTs to obtain injunction / restraint order, attachment before judgment, appointment of receiver etc. wherever such measures are necessary. It is observed that such interim reliefs are generally not sought while filing the suit and even thereafter applications for obtaining interim reliefs are generally not filed and/or if filed/included in the plaint are not properly agitated/contested/pursued. The detailed relevant provisions of hypothecation / pledge / book debts agreement etc. are given in the RD Cir. 12/2011 dated 28/06/2011, for taking up with the concerned counsels for filing applications for interim reliefs quoting the relevant clauses of the agreements to facilitate decision by courts / DRTs in favour of the Bank. POLICY FOR CLASSIFICATION AS WILFUL DEFAULTERS IN NPA A/cs (RD Cir. No. 30/2014 dt. 11.07.2014).


Guidelines on Wilful Defaulters and action their against Definition A "wilful default" would be deemed to have occurred if any of the following

events is noted :- (a) Capacity to pay -The unit has defaulted in meeting its payment / repayment obligations to the lender even when it has the capacity to honour the said obligations. (b) Diversion of Funds -The unit has defaulted in meeting its payment / repayment obligations to the lender and has not utilised the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes. ( c) Siphoning of funds- The unit has defaulted in meeting its payment / repayment obligations to the lender and has siphoned off the funds so that the funds have not been utilised for the specific purpose for which finance was availed of, nor are the funds available with the unit in the form of other assets. (d) Unauthorized Disposal of Charged Assets - The unit has defaulted in meeting its payment / repayment obligations to the lender and has also disposed off or removed the movable fixed assets or immovable property given by him or it for the purpose of securing a term loan without the knowledge of the bank/lender.

Willful defaulters – workflow chart

Detailed workflow chart for declaring a borrower as willful defaulter may be followed (RD 30/2014 dated 11.07.2014)

Diversion and siphoning of funds

‘Diversion of funds’ would be construed to include any one of the undernoted occurrences: (a) Utilisation of short-term working capital funds for long-term purposes not in conformity with the terms of sanction; (b) Deploying borrowed funds for purposes / activities or creation of assets other than those for which the loan was sanctioned; © Transferring funds to the subsidiaries / Group companies or other corporates by whatever modalities; (d) Routing of funds through any bank other than the lender bank or members of consortium without prior permission of the lender; (e) Investment in other companies by way of acquiring equities / debt instruments without approval of lenders; (f) Shortfall in deployment of funds vis-à-vis the amounts disbursed / drawn and the difference not being accounted for.

Siphoning of Funds

Siphoning of funds, should be construed to occur if any funds borrowed from Banks / FIs are utilised for purposes un-related to the operations of the borrower, to the detriment of the financial health of the entity or of the lender. The decision as to whether a particular instance amounts to siphoning of funds would have to be a judgment of the lenders based on objective facts and circumstances of the case.

Cut-off limits Guidelines relating to ‘Willful Defaulters’ would be applicable to all non-


performing borrowal accounts with outstanding (funded facilities and such non-funded facilities which are converted into funded facilities) aggregating Rs.25 lakhs and above, where ‘willful default’ is identified by the Bank. The accounts where outstanding comes below the cut off limit of Rs.25 lac and in cases where Bank has agreed for compromise settlement and the borrower has fully paid the compromise amount need not be included in the ‘Wilful Defaulters’ lists. In identified/reported cases of willful defaulters where outstanding amount has come down below Rs. 25 lac on account of write off and not due to settlement/recovery from the borrower, the branches should still report the name of the borrower in the list of wilful defaulters as per the extant system.

Identification of person

a)Bank is advancing loans/making finance to different entities such as Individuals, HUF, Firms and Legal entities such as Corporate Bodies, Companies, Societies, and Trusts etc. Keeping in view, the constitution of borrowers and the persons responsible for looking after the affairs of the enterprise/ business of the borrower, need is to identify as to whether there is any involvement of the person proposed to be a willful defaulter in the events of Willful Default. Such persons may be: (i) Borrowers (ii) Entrepreneurs (iii) Karta of HUF (iv) Promoters of Company (v) Directors of Company, (when the account became NPA). (vi) Present Directors (vii) Nominee Directors (viii) Independent Directors (ix) Partners/ Sole Proprietor/ Trustees etc. in individual capacity. (The role of Directors/Promoters of the Company who leave or resign the Company without the permission of the Bank in contravention to the covenants/ terms of sanction of Loan, be looked into while identifying willful defaulters) (The above list is only indicative and not exhaustive) b) While dealing with ‘willful default’ of a single borrowing company in a Group, the Bank should consider the track record of the individual company, with reference to its repayment performance to its lenders. c) Individual Guarantors - In case of individual Guarantors, the events of willful default on their part need to be identified on account of which the Guarantor is to be reckoned as willful defaulters. It be identified as to:- (i) Whether the guarantors having capacity/means to repay the dues of the bank but not paying dues of the Bank despite recall of the Loan and demand for payment has been made upon the guarantors. (ii) Whether the guarantors have been transferring their assets so that Bank may not be able to recover its dues? (iii) Whether guarantors are beneficiary of ‘siphoning / diversion of funds’, or are party to the fraudulent transactions?


Process for declaring willful defaulter

a) Preliminary Notice to Rectify Default Immediately on classification of an account as NPA and subsequent identification of the specific events/ transactions perceived to have constituted as “Willful Default”, as a measure of natural justice, Branches are advised to call upon the borrower including the persons as identified above as per draft letter Annexure-I by registered post with AD as well as E-mail, if available, giving them 10 days time to rectify the default, indicating that the Bank intends to classify them as willful defaulter Notice be sent to all identified persons, specifying the events of default on their part and it should not be just an endorsement for information. For eg: They havethe capacity to pay, but not paying, Directors etc. responsible for carrying of affairs/ business of the Borrower Company for which event of Willful default has happened. b) Reply to the Preliminary Notice After service of above notice replies received, if any, be examined and responded by the Branch, maximum within 7 days time and a final view to identify the borrower as a Willful Defaulter be taken after factoring in the attendant circumstances leading to default in the account. c) Proposal to Recovery Division, HO If default is not rectified, immediately on expiry of the Notice period, the Branch to submit the prescribed proposal (as per Annexure-II) within 5-6 days to Circle Office along with recommendations supported by requisite evidence/ documents.Such proposals after due examination by Circle Head through FGMO be forwarded to HO along with recommendation for placing it before Committee onWillful Defaulters headed by ED. The correspondence exchanged will form an integral part of the Annexure II.

Penal Measures

In order to prevent the access to the capital markets by the willful defaulters, a copy of the list of willful defaulters (non-suit filed accounts) and list of willful defaulters (suit filed accounts) are forwarded to SEBI by RBI and Credit Information Bureau (India) Ltd. (CIBIL) respectively.

No additional facilities should be granted by any Branch to the listed ‘willful defaulters’.

These are debarred from Institutional finance from SCBs/FIs/ NBFCs for floating new ventures for a period of 5 years.

Branch may initiate criminal proceedings against such borrower/guarantor.

RBI will publicize the names of such persons/units. The consent should be obtained.

As per our Standardized Loan Agreement, a borrowing company would not induct a person as a promoter or director on the Board of a company which has been identified as a willful defaulter and that in case, such a person is found to be on the Board of the borrower company, expeditious and effective steps for removal of the said willful defaulters from its Board be taken.


Reporting to RBI / Credit Information Companies

Branches to compile the list of willful defaulter of Rs.25 lac and above as at end of March, June, September and December every year and submit the information to their Circle office within 7 days from the close of the quarter.

Circle Office, after consolidating the information shall submit the consolidated information within 12 days from the close of the quarter to Recovery Division, HO for onward submission to RBI (in case of Non suit Filed Cases), CIBIL and other three companies namely M/s Experian Credit Information Company of India Pvt. Ltd., M/s Equifax Credit Information (P) Ltd. & M/s High Mark Credit Information Service (P) Ltd.( in case of Suit Filed Cases) of which the our bank is member.

Procedure for Identification of Willful Defaulters

With a view to imparting more objectivity in identifying cases of willful default, decisions to classify the borrower as willful defaulter has been entrusted to a Committee on Willful Defaulters (headed by Executive Director) consisting of:

(i) Executive Director (Incharge of Recovery) (ii) General Manager, Credit Monitoring Division, HO (iii) General Manager, IRMD, HO (iv) Dy. General Manager, Recovery Division, HO (Convenor) Recovery Division, Head Office will place the matter before Committee on Willful Defaulters and communicate decision of the Committee on Willful Defaulters to the Circle/ Branch. The decision taken on classification of willful defaulters should be well documented, supported by requisite evidence and should clearly spell out the reasons for which the borrower has been declared as wilful defaulter vis-à-vis RBI guidelines

The borrower should thereafter be suitably advised about the proposal to classify him as willful defaulter along with the reasons thereof. The borrower concerned should be provided reasonable time (say 15 days) for making representation against such decision, if he so desires, to a Grievance Redressal Committee headed by the Chairman and Managing Director and consisting of two other senior officials.

On receipt of any representation within the stipulated period of 15 days, the same may be sent to HO for consideration of the Grievance Redressal Committee. The cases where no such representation is received may also be informed to Recovery Division, HO so as to enable the authorities at HO level to take a view on final declaration of the said borrower as willful defaulter.

Grievance Redressal Committee should also give a hearing to the borrower if he represents that he has been wrongly classified as willful defaulter.

A final declaration as ‘willful defaulter’ should be made after a view is taken by the Committee on the representation and the borrower


should be suitably advised. The branch concerned is advised to inform the borrower of bank’s intention to identify him as willful defaulter on a draft letter under Registered AD and provide him 30 days time to rectify the default.

A final declaration of the borrower as willful defaulter would be made after a view is taken by the Grievance Redressal Committee on the representation and the borrower would be suitably advised in the matter.

Grievance Redressal Committee

As per RBI guidelines Grievance Redressal Committee headed by the Chairman and Managing Director should also give hearing to the borrower if he represents that he has wrongly been declared as Willful defaulter. Accordingly, Bank has constituted Grievance Redressal Committee, consisting of:

(i) Chairman & Managing Director (ii) Executive Director (other than the one who is the member of Committee on Willful Defaulters) (iii) Executive Director (other than the one who is the member of Committee on Willful Defaulters) (iv) GM, Recovery Division (v) GM, Credit Division (vi) DGM, Recovery Division (Convener) (In the absence of ED(s), GM (IBD), and/or GM (MASD) may be co-opted.)

On receipt of any representation by the Branch within the stipulated period of 15 days, the same be sent through Circle Head and FGMO to HO for consideration

Grievance Redressal Committee shall give a hearing to the borrower if he represents that he has been wrongly classified as willful defaulter. The Notice to the borrower/person who has made the representation be given as Per Annexure-IV for personal hearing by the Grievance Redressal Committee of the Bank.

Miscellaneous

The identification of the ‘willful default’ should be made keeping in view the track record of the borrowers and should not be decided on the basis of isolated transactions/incidents. The default to be categorised as ‘willful’ must be intentional, deliberate and calculated.

In cases where a letter of comfort and / or the guarantees furnished by the companies within the Group on behalf of the willfully defaulting units are not honoured when invoked by the Bank, such Group companies should also be reckoned as willful defaulters.

Stock Audit of Large Borrowal Accounts in NPA Category ( RD Cir 03/2013 dated 09.01.2013)

Detailed guidelines in respect of Stock Audit of Large Borrowal Accounts have been Conveyed vide LA Circular No. 102 dated 08.09.2010 viz.


(i). Annual stock audit should be got compulsorily done in respect of all borrowers whether standard or NPAs, enjoying fund based and working capital limits of Rs. 5 crore and above from our bank. (ii). In case of borrowers enjoying fund based working capital limits less than Rs. 5 Crore, Stock Audit may also be got done in emergent cases and/or where bank’s interests demand. However, for modalities of stock audit, prior concurrence of the concerned Circle Head be obtained. (iii). In cases where the borrower is enjoying working capital limits (fund based) of less than Rs. 5 crore from our Bank and Rs. 20 crore and above in aggregate from the banking system, the matter should be taken up with lead bank/major share-holder banks in multiple banking arrangement for getting the stock audit conducted. (iv). Annual Stock Audit should be compulsorily conducted in all ‘B’ to ‘D’ risk rated accounts enjoying fund based working capital limits of Rs. 1 crore and above. (v). In respect of consortium advances, where we are the leader, the stock audit may be got conducted with the consent of the member banks and in cases where we are not the leader, we may take up the matter with the Lead Bank for getting the stock audited of the borrowal account. The final decision regarding getting the stock audited of the borrowal account under consortium advances should, however, be based on consensus. It has been observed that despite above guidelines, Circle Offices are neither getting the Stock Audit done in NPA accounts nor the position of Primary Security in the shape of hypothecation of Stocks/Book Debts is getting monitored/controlled in the Post NPA stage of the account; which interalia facilitates the borrower to dispose off the hypothecated securities without routing/depositing their sale proceeds in the account, resultantly adversely affecting the recovery/up-gradation efforts due to dilution of the securities at the time of enforcement either through SARFAESI / Court / otherwise. It is further clarified that calculation of Drawing Power as ‘Nil’ in terms of sanction does not necessarily mean that value of the Hypothecated Security too can be treated as ‘Nil’. Field is advised to take a careful note of incorporating the correct/reliable value of security of Hypothecated Stocks/Book Debts while submitting Status Notes/Progress Reports of NPA accounts as also incorporate the same properly and correctly in LADDER, so that system generated calculation of Provisions in NPA accounts has complete reliability. PUBLICATION OF NAMES & PHOTOGRAPHS OF DEFAULTING BORROWERS – EDUCATION LOAN (RD 04/2014 dated 14.02.2014)


Educational loans , where there is delay in repayment, While banks are free to take non-coercive methods for recovery of their dues, practices such as displaying names and photographs of defaulting students be stopped forthwith.” GETTING INFORMATION OF ATTACHABLE ASSETS OF LOAN DEFAULTERS BY OBTAINING WEALTH TAX RETURNS FROM WEALTH TAX AUTHORITIES (RD 27/2014 DATED 09.06.2014) Bank has been filing Original Applications (OA) in Debt Recovery Tribunals (DRTs) wherever its dues are Rs.10 lac and above and Civil suits in the Civil Courts where the dues are less than Rs.10 lacs. A number of decrees remain unexecuted due to inability of the bank to provide attachable assets of the Judgment Debtors. As per Wealth Tax Act, every individual, Hindu Undivided Family and Company whose net wealth exceeds the maximum amount (presently Rs.30 lacs), is liable to file Wealth Tax Return. Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) after examining the position has clarified that information on the assets of loan defaulters to enable recovery of loans by Public Sector Bank (PSB ) from such defaulters is in public interest and if application is made in the prescribed format, to the Chief Commissioner or Commission, information asked for can be provided. Procedure of obtaining Wealth Tax Return (i) Necessary application as per the prescribed format Form-I (Annexure-II) as prescribed under Sub rule (I) of Rule-9 of Section 42 B of the Wealth Tax Act, 1957 is to be moved to the concerned Chief Commissioner/or Commissioner of Wealth Tax.(It is to clarify that the Income Tax Authorities work as Wealth Tax Authorities). (ii) The information is to be sought in respect of the borrower/Mortgagor/Guarantor of the Loan only. (iii) The application as aforesaid be signed by an Officer not below the rank of Manager of the Branch concerned. (iv) An undertaking may be sought by the Chief Commission/Commissioner containing confidentiality clause specifying that such information will be used only for the purpose of recovery of loan and will not be shared. (v) In order to ensure that tax dues of the Department against the defaulter(if any) are safeguarded, the concerned bank officials will also submit an undertaking to the Commissioner wealth Tax, stating that: “Before appropriation of the surplus amount recovered from sale of immovable/movable assets of the defaulter, after adjustment of the loan dues, whose information was shared by the Wealth Tax Authorities with the bank, a No Objection Certificate (NOC) will be obtained from the jurisdictional CIT (Commissioner of Income Tax), of the loan Defaulter.” Therefore utmost care be taken that on sale of such properties, after appropriation of the sale proceeds towards recovery of loan amount of the bank, the surplus proceeds or balance, if any remains, the same is not to be remitted to any person including borrower/obligant unless & until No objection Certificate is obtained from the jurisdictional CIT (Commissioner of Income Tax) of the loan defaulter.


APPROPRIATION OF CGTMSE CLAIM RECEIVED-CHANGE IN PROCEDURE (RD 39/2014 dated 10.11.2014) 1) Neither the permission of CGFT is required for appropriation of claim amount nor it is mandatory to Write off/Scale down the dues. Accordingly, claim amount so received from CGFT should therefore be: (i) Credited straightway to the NPA Account. (ii) Recoveries thereafter if any have to be remitted (after netting of the cost incurred, if any) to CGFT, of course after routing through the concerned NPA Account, so as to maintain an appropriate record. 2) Ensure that respective NPA account does not get upgraded by credit of CGTMSE claim amount and no debit operations are allowed in the account except for remittance of recoveries to CGFT. “While crediting the amount of claims received from CGFT under CGTMSE Guarantee Cover in respective NPA accounts, a clear narration “CGTMSE CLAIM RECEIVED ON________” be invariably given in the Ledger A/c of the party. 3) Corrective procedure for credit of claim As per the revised procedure, as soon as the borrower wise CGTMSE Claim amount is received at the Circle Office, they will (i.e. Circle Office) credit the proportionate amount received in the respective borrowal accounts directly. Thus, instead of branch appropriating the amount in their borrowal accounts by debiting the Branch Inter- Sol a/c, Circle Office will directly credit the amount in the respective loan accounts debiting the impersonal Current a/c and send a list to the concerned branch for their information and record only. MISD (Ladder Cell) will devise a system based process to distinguish such credits received on account of CGTMSE Claim, from the normal cashrecoveries and ensure correct classification of accounts, based on their true and correct record of recoveries in the centralized LADDER system.

MONITORING OF QUICK MORTALITY CASES – (RD 06/2015 dated 24.02.2015) Levels/Competent Authority for monitoring of Quick Mortality Cases S.No. Aggregate Sanctioned Limit Competent authority 1 Upto Rs.10 lacs Circle Head 2 Above Rs.10 lacs up to 50 lacs FGM 3 Above 50 lacs to 1 crore GM (Recovery) 4 Above 1 crore to 5 crore ED* 5 Above 5 crore Managing Director/CEO *For QMCs under NPA category will be monitored by the ED looking after the Recovery Division and for Non-NPA QMCs, if any, ED looking after the particular FGMO will monitor. Note Large Corporate Branches (LCBs) will send the information irrespective of the aggregate


sanctioned limit of Quick Mortality Cases to the respective FGMOs. System, Periodicity of Monitoring There is no change in the guidelines stipulated by the nodal Division i.e. Inspection & Audit Division, thus the process of identification of Quick Mortality Cases etc. will be continue to be done by the field officials as being done in the past, however, additional information will be submitted by the Circles/FGMOs to the Head Office Recovery Division on prescribed format. Controlling/Monitoring Measures Monitoring of Quick Mortality Cases may involve, following steps/actions:

Meeting with the Borrower(s)/Obligant(s) and effecting recoveries through conciliatory methods like OTS, Compromise, Tagging arrangements etc.

Deliberations with special focus on Quick Mortality Cases, during every Task Force Meetings held at the Circle/FGMO level.

Initiating one action after the other, prescribed under SARFAESI Act, in the eligible cases till taken to its logical end.

Declaration of Willful Defaulters, as per the extant guidelines Filing of FIR and suit, in the eligible cases.

Latest issued other circulars:- RD 06/2015_Monitoring of Quick Mortality Cases RD 05/2015_ Workflow for sale of accounts to SCs/RCs. RD 03/2015_Approved list of ARCs working as Resolution agents RD 42/2014_Strategies for Successful sale process under SARFAESI Act RD 41/2014_Strategies for speeding up SARFAESI action RD 30/2014_Willful Defaulters and Action there against RD 25/2014_All India circle wise list of approved Recovery Agencies, Resolution agents, supporting Agencies & Detective Agencies RD 15/2014 –Stay Against Sarfaesi Action RD 13/2014 _ Correct accounting Procedures :Recovery in Written Off and other NPA A/Cs RD 11/2014_ Land mark Orders by DRT- SA/IA Under Sarfaesi RD10/2014_ Empanelment of valuers- consolidated guidelines. RD 8/2014 _ Online Portal- DRT – Monitoring of DRT cases RD 4/2014 _ Publication of photographs of defaulting borrowers –Education Loan RD 3/2014 _ Online Portal-SARFAESI Action monitoring system Annexure 1 NPA MODULE IN CBS


ACTIVITY AFTER CLASSIFICATION AN ACCOUNT AS NPA Some accounts during the life time of loans and advances becomes irregular because of various reasons and are required to be monitored closely. Based on the guidelines of Reserve Bank of India and SAMD HO New Delhi these accounts are identified as NPA. Focused and continuous attention is required for the remaining period of the account till its closure. The NPA accounts can be closed in one of the following ways : UPGRADATION TO NORMAL CATEGORY

INITIATION OF LEGAL ACTION WAIVER OF LEGAL ACTION

1) Through Recovery 2) Through

Restructuring

1)Sarfaesi 2)Suit filed /Decree / Execution of Decree 3)Compromise 4)Write Off

1)Compromise / OTS 2)Write Off

NPA are to be categorized in separate GL/SGL heads to have instant data related to fresh addition / reduction and NPA Level as on any date. Description GL Sub Head Description GL_SUB

Head Code

Balance Sheet code

Non Performing Advances ( Weekly code-55299, Office Account Code-<Sol_id5529901)

NPA Demand Loan 76100 62120

NPA Cash Credit 76110 NPA OverDraft 76115 NPA Term Loan 76120 NPA Inland Bills Purchased 76125 NPA Inland Bills Discounted 76130 NPA Pre-shipment Advances 76135 NPA Foreign Bills Purchased 76140 NPA Foreign Bills Discounted 76145 NPA Advances to Commercial banks in

India 76150

NPA Advances to Co-operative Banks in India

76155

NPA Advances to banks outside India 76160 NPA – Others 76165 NPA – suit filed 76170 NPA Decreed 76175 NPA Borrowal Fraud 76180 Non Borrowal Impaired Loss of Cash Internal Fraud 86100 63120


Assets (Weekly code 57117, Office a/c <Sol_id5711701) Non Borrowal Impaired Assets (Weekly code 57117, Office a/c <Sol_id5711702)

Loss of Cash Theft / Dacoity /Burglary 86100 63120

Non Borrowal Impaired Assets (Weekly code 57117, Office a/c <Sol_id5711703)

Other than Loss of Cash Internal Fraud 86100 63120


Other than Loss of Cash External Fraud 86100 63120


Non-borrowal impaired _ others 86100 63120

1. ‘NPAGLXFR’ - for transferring the NPA accounts to appropriate NPA GL Codes. 2. ‘MEAC’ - for change of asset classification code. 3. ‘UPGNPA’ - on up-gradation, account has to be shifted from NPA GL Head to

Corresponding operative GL Head as well as the Classification of account has to be changed to Standard through Menu option MEAC. For the convenience of the user, a menu option ‘UPGNPA’ has been customized for combined (Shifting of GL Head and change of classification) activity.

CLASSIFICATION OF ASSETS - CODE Main Classification: 001 - Performing Asset 002 - Non- Performing Asset Sub Classification: 001 - Standard Asset 002 - Sub-standard Asset 003 - Doubtful Asset 004 - Loss Asset A menu option NPADET (six sub menu options) has been customized to capture additional data required for these reports MENU OPTION DESCRIPTION NPAD NPA A/C RELATED DETAILS


COWO COMPROMISE / WRITE OFF DETAILS SARF SARFAESI DETAILS RCYM RECOVERY DETAILS RADM RECOVERY AGENT DETAILS MISC MISC. DETAILS

User is required to feed data related to all NPA accounts marked in the CBS system using the menu option ‘NPAD’.

This data is required to generate the following: 1. Memoranda of dues (RI).

To create the memoranda records user is required to follow the steps given below: i) Generate report through menu option PNBRPT 28/3 (Report to know the list of NPA A/Cs to be entered through menu option ‘ NPAD’) ii) Feed all the relevant fields through the menu option (NPAD).

RELEVANT FIELDS FOR CREATION OF MEMORANDA ARE EXPLAINED HEREUNDER:

MENU OPTION - NPAD

FIELD DESCRIPTION FUNCTION CODE Options are available at key

F1.(Add/Modify/Inquiry/Delete/Undelete/Cancel/Verify). ENTITY TYPE user to input ‘AC’-Account in this field ENTITY ID User has to give valid account no. of sixteen digits. Customer

id will be populated on press of key F4. DI/SI REVERESED /APPROPRIATED

DI/SI reversed and credited in the account as per revised guidelines or appropriated during write off be given in this field

RI Unrecovered interest amount up to the last accrual date(last interest applied upto NPA date), This date has been made available in report(PNBRPT-28/3). RI will be calculated by the system after this date

DICGC/CGFT Claim received amount/appropriated at the time of write off be given here.

EXTENT OF GOVT.GUARANTEE

Extent of Amount of guarantee available to secure the outstanding amount in the account from Central/state govt

NET MEANS OF GUARANTOR

Amount of net means of guarantor as per latest CR.

IP OF GUARANTOR Value of IPs available as part of net means of guarantor CONSORTIUM BANKS/FIs

Name of banks/FIs if applicable


EXPOSURE IN LOANS Amount of loans at exposure in the account SHARE ON SECURITY percentage of share on security available MODE OF RESOLUTION PROPOSED

It is a text field of 70 character length. User has to propose appropriate action/strategy for resolution of the account e.g. (If RC filed user to enter “RC FILED ON 01-01-2015”) Date can be changed

EXPECTED DATE OF ACCOUNT CLOSURE

Expected date of account closure is to be given on the basis of action/strategy suggested in the previous field

REASON FOR NOT SUIT If suit has not been filed in the account the reasons for the same in short be given as text in this field

STAFF ACCOUNTABILITY

It is also a text field of 70 character length. User has to give brief information on staff side

SUIT STATUS If suit has been filed in the account. The status of the suit is to be given in brief.

RCVRY APP TO DISI In case of recovery in the account the amount appropriated against recovery of DI/SI be reported in this field

RCVRY APP TO RI In case of recovery in the account the amount appropriated against recovery of RI be reported in this field

RCVRY APP TO DICGC In case of recovery in the account the amount appropriated for remitting to DICGC be given in this field

INCOME BOOKED to be discussed with SAMD CDR flg?: Appropriate value is ‘Y’ or ‘N’ (value ‘Y’ is to be given if

account has been restructured as per extent guidelines on corporate debt restructuring issued from time to time.

TECH WRITE OFF DATE Date of technical write off be given in this field if available (list of technically writen off account is available with HO SAMD).

TECH WRITE OFF AMT Amount written off in such accounts be given in this field. NOTE: THE DETAILS ENTERED THROUGH THE MENU OPTION ARE TO BE VERIFIED BY THE OTHER USER WITH FUNCTION ‘V’ THROUGH THE SAME MENU OPTION.

Though these fields are not mandatory, but (0.00) may be entered if nothing is to be reported against these fields instead of leaving blank. Values fed in this fields will populate in the relevant fields at screen in menu option “COWO”. The details of other fields which shall be used for generation of other NPA monitoring reports(NPAMGT) are given below.

SARFAESI DETAILS

Menu Option = SARF FIELD DESCRIPTION FUNCTION CODE Options are available at key

F1.(Add/Modify/Inquiry/Delete/Undelete/Cancel/Verify). ACCOUNT NUMBER USER TO PUT ACCOUNT NUMBER ACCOUNT NAME USER TO put account name here


ELIGIBLE FOR SARFAESI

Whether account is eligible for Sarfaesi Action put Y/N

Date of eligibility Mention here date when account is eligible for Sarfaesi action DATE OF NOTICE 13(2) Give here date of notice issued under Sarfaesi act section 13(2) DATE OF NOTICE 13(4) Give here date of notice issued under Sarfaesi act section 13(4) DATE OF POCESSION OF SECURITY

GIVE date when possession of security taken

NATURE OF SESCURITY Give here nature of security DATE OF SECURITY SALE

Put here date when security was sold

SECURITY SALE AMOUNT

Sold amount of security

APPROACHED FOR COMPR

Whether customer approached for compromise?

COMPROMISE SETTLED

Whether compromise has been settled or not?

OTS Recovery amount If compromise settled give here OTS Recovery amount Other Recovery Amount If recovered other the OTS give amount here NPA Account sale date IF NPA account sold give date of sale here SC/RC/OTHER BANK/NBFC

Put here to whom NPA Account has been sold

NPA A/c SALE AMOUNT Give here Sale Amount of NPA LATEST STATUS Give here present status of the account which be modified time

to time DI REVERSED DI reversed amount put here DICGC CLAIM APPROVED

STATUS of DICGC Claim be given

ECGC CLAIM APPROVED

Status of ECGC Claim be given

NRR Balance Give here net recoverable amount PROVISION HELD Put here provision amount

KITTY AVAILABLE IN WRITTEN OFF ACCOUNTS The guidelines for creation of write off kitty are applicable to both existing written off accounts (not close in the system) and accounts which will be written off after the cut off date (31.03.2010). (KITTY = AMOUNT ACTUALLY WRITTEN OFF MINUS RECOVERIES AFFECTED IN THE ACCOUNT AFTER WRITE OFF ) Out of all the NPA accounts, entered through NPAD, data related to written off accounts are to be fed. COMPROMISE AND WRITE OFF DETAILS MENU OPTION = COWO FIELD DESCRIPTION


FUNCTION CODE Options are available at key F1. Add/Modify/Inquiry/Delete/ Undelete/ Cancel/Verify).

ACCOUNT NUMBER The sixteen digits account number be given for which details have already been fed through Menu option NPAD

ACCOUNT NAME The name will populate on press of key F4 after giving account number.

DI/SI DI/SI amount entered through NPAD will populated here automatically, otherwise it is to be entered through NPAD menu option

RI Amount of unrecovered/recorded interest as entered through NPAD will populate here automatically, otherwise it is to be entered through NPAD menu option.

DICGC/CGFT Amount of claim as entered through NPAD will populate here automatically, otherwise it is to be entered through NPAD menu option

Base amt/WO amount Ledger outstanding in the account as on the date of write off be given in this field.

WLA Flg Valid values are ‘Y’ or ‘N” WLA Date Date of WLA(Waiver of legal action) approved be given in this

field Written Off Flg ?: Valid values are ‘Y’ or ‘N’ –to be mentioned as ‘Y’ when the

account is written off. Written Off Date Date of write off i.e. when the amount of revenue loss was

credited in the account be given in this field Revenue Loss Amount of revenue loss, (i.e) the amount credited in the written

off account be given in this field. (The amount should be equal to Base amt- DICGC+DI Appropriated)

Written Off Apprv Lvl Write off approval level be given in this field. Help is available at key F1.

DETAILS IN OTHER FIELDS ARE NOT REQUIRED FOR CREATION OF WRITE OFF KITTY HOWEVER IF COMPROMISE IN WRITTEN OFF ACCOUNT IS APPROVED THE DETAILS IN OTHER FIELDS SHOULD ALSO BE ENTERED.

Apprch for Comp? Value ‘Y’ be given if party has approached for compromise or

else value ‘N’ be given in this field Mode of Settlement : User has to select one of the modes of settlement available

on F1 key. ‘LA’ for Lok Adalat, ‘RA’ for recovery agencies, ‘RC’ for recovery camps and OTH for others.

Compr( OTS) date Date of approval of compromise be given in this field Compr (OTS) Amount Amount of compromise be given in this field Compro Appro Lvl.: list of Compromise approval level is available at key

F1.Appropriate value to be selected Compromise due date The earliest due date of deposit of compromise Amount

/installment by the party be given in this field. The next date is to


be fed in case of compromise amount is payable in more than one installment and the date should be fed after expiring of the earlier date

Amt Payable Due date The amount of compromise due on the date mentioned in the previous field

Fresh Dr. to Bk revenue As mentioned in OTS Proposal Waiver Int Exp (RI) As mentioned in OTS Proposal Set off DI/SI Amount As mentioned in OTS Proposal Income to be Booked In case compromise amount is more than the ledger

outstanding the surplus credit transferred to income amount be given in this field

Set off of provision As mentioned in OTS Proposal Compro failed If compromise is failed reasons in brief be given in the next three

fields. NOTE: THE DETAILS ENTERED THROUGH THE MENU OPTION ARE TO BE VERIFIED BY THE OTHER USER WITH FUNCTION ‘V’ THROUGH THE SAME MENU OPTION. RECOVERY IN NPA/WRITTEN OFF/OTS APPROVED ACCOUNTS User is required to feed recovery upto 31.03.2010 in all NPA accounts through menu option RCYM as the recovery details of all NPA accounts may not be available in the CBS system due to migration of account through different legacy systems. The recovery details can be entered through the menu option in consolidated form in single entry with date of recovery as 31.03.2010.The records of recovery after 31.03.2010 will be taken into report from the CBS system. RECOVERY DETAILS MENU OPTION = RCYM This menu option is to be used for handling recovery received in written of accounts. The fields are explained here under : FIELD DESCRIPTION FUNCTION CODE User to select function code ‘A’ (ADD) ACCOUNT NUMBER The valid account no. of sixteen digits be given, for which

details are required to be entered ACCOUNT NAME The name will populate on press of key F4 after giving account

number in the previous field. WO/Compr Recvry? Valid value is ‘W’ for recovery in written off accounts , ‘C’ for

OTS approved in written off accounts and ‘N’ for all other NPA accounts which neither written off nor compromised

Mode of Rec Help at Key F1 is available. Valid values are ‘LA’ for Lok Adalat, ‘RA’ for recovery agencies, ‘RC’ for recovery camps


and OTH for others Recovery Date In respect of existing accounts user to give date of recovery as

31.03.2010. Recovery Amount Consolidated recovery amount for an account up to the cut off

date i.e 31.03.2010 is to be entered NOTE: Verification of records entered through RCYM is not required. User is required to enter details through menu option NPAD and COWO for the accounts written off even after the 31.03.2010 but recovery details in such accounts will not be required to be entered by the user through menu option RCYM. RECOVERY AGENT DETAILS MENU – RADM FIELD DESCRIPTION FUNCTION CODE Options are available at key F1. Add/Modify/Inquiry/Delete/

Undelete/ Cancel/Verify) ACCOUNT NUMBER The valid account no. of sixteen digits be given, for which


number in the previous field. Agent Code Give here Recovery Agent code allocated Agent Name Give here name of Recovery Agent Date of Allocation Date of Allocation of the account for recovery be mention here Commission paid Commission paid for this account for recovery

MISCELLNAEOUS DETAILS MENU – MISC FIELD DESCRIPTION FUNCTION CODE Options are available at key F1. Add/Modify/ Inquiry/

Delete/Undelete / Cancel/Verify) ACCOUNT NUMBER The valid account no. of sixteen digits be given, for which


number in the previous field. SECTOR Give here Sector as RBI loan classification Method of lending Give here method of lending whether consortium etc. CONSORTIUM DETAIL Put here maximum 70 character name of bank etc. MRTP/GROUP Give here details of Group etc.

REPORTS - PNBRPT 28 (NPA MANAGEMENT) 1. Report on NPA a/c not transferred to NPA GL HEAD 2. Report on RI Calculation and Memoranda Dues


3. Report of NPA Accounts details not entered in NPAD 4. Report on WRITE OFF KITTY POSITION 5. Report of standard a/cs under NPA GL head 6. Report on status of charges due in NPA a/c 7. Report on appropriation of charges pending in NPA a/c 8. Report on Related A/Cs of NPA Accounts for a SOL OTHER REPORTS 1. List of a/cs where limitation has expired (PNBRPT 3/5) 2. List of a/cs where limitation is going to expire. (PNBRPT 3/5A) FIELDS REQUIRED FOR PROPER GENERATION OF LIMIATION EXPIRED ACCOUNT RELATED REPORTS REASON FIELD DESCRIPTION LIMITATION EXPIRY Mention Debt acknowledgement date in S details of

Account through ACM-M option and verify NPA ACCOUNTS Use Menu NPAD and fill up details of (i) DI REVERSED

(ii) RI UPTO ACCRUAL DT (iii) PROVISION (iv) DICGC/CGFT (v) ECGC

RC FILED CASES Update suit status field in NPAD menu giving RC FILED ON [ DATE] field

SUIT FILED /DECREE OBTAINED

Update GL sub head code of the account through TACBSH

WLA (WAIVEMENT OF LEGAL ACTION) APPROVED

Update through menu Option COWO – Enter “Y” in WLA approved field and give date of WLA

WRITTEN OFF CASES Use COWO menu and update Written Off Flag “Y”, Date of write off, Revenue loss amount if any, Write off approval level.

RESTRUCTURED ACCOUNT MAINTENANCE IN CBS To facilitate data addition / modification /deletion / inquiry in CBS in respect of restructured facilities the existing menu option RSAM is to be used and data may be fed in following ways: Account Number Valid account number is one which has been rescheduled in CBS i.e.

the Schedule No. in E-details is other than 01. In CBS it is necessary to re-phase the restructured facility first and then add it through RSAM

Repay Start Date This date need not be entered as the system will automatically pick up the same from E-details of the account

Restruct Reason Suitable codes from the list should be filled in Deleted ? This field is not accessible. It only populates the status of deletion of

a particular record


Multiple Records This field is not accessible. Date of Restructure This should be the date on which account is rephrased / rescheduled

in the system Remarks This is a free t ext column to be filled with any relevant information

pertaining to the account CDR Flag This flag should be Y for the a/cs restructured under CDR

mechanism where multiple banks are involved. For MSME accounts, this flag would always be N. Necessary checks have been put in the system

Cut Off Date This is a mandatory field. For all restructured customers of Rs.1 crore & above category, the Cut Off date should be a past date i.e. the date, balance as on which has been referred in the restructured proposal. The Cut off date for below 1 cr category of customers should be same as the Date of Restructure. The cut off date is relevant for all those customers where diminishing fair value (DFV) or provisioin on account of sacrifice is required to be calculated. As per extant guidelines, DFV is computed for customers with exposure Rs.1 Cr. And above.

Exit CDR This flag is by default shown as N and relevant for only those accounts where CDR flag I Y. Whenever, restructured fails and the customer is downgraded to NPA, this flag is required to be updated to Y after obtaining due approval of the CDR forum. The value of this flag can be Y only for NPA accounts.

NPACHRG – HANDING OF CHARGES IN NPA ACCOUNTS - GUIDELINES Expenditure/Charges like Law Charges, Postage Charges, misc charges etc. are debited to separate account (expenditure Account) and not in Loan account itself for NPA Accounts, to identify such charges and to recover from customer on receipt of recovery made in the NPA account thereafter, a separate menu option “NPACHRG” has been customized in CBS. This menu has following 3 features:-

1. C- Capturing of Charges: - Charges debited to office accounts (expenditure Account) with respect to NPA Account can be captured.

2. W- Waiver of Charges: - In case of OTC/Write –off, charges made for the NPA account may required to be waived. The same can be done for the already captured charges (part of or full).

3. R- Recovery of Charges: - System will check credits made in NPA Account from the last recovery date and create transaction, for outstanding charge amount or recovery made in the account whichever is lower, debit the Loan Account and credit the expenditure head which ever has been debited earlier.

For monitoring following 2 reports are made available in CBS-MIS:


PNBRPT- 28 /6:- Status of Charges due in NPA Account (for a set) PNBRPT- 28 /7:- Appropriation of recovery of Charges pending in NPA Account (for a set) Users are required to capture charges incurred for recovery of NPA account debited to expenditure head directly. Capturing of charges should be made separately of each loan account vis-à-vis expenditure account. Branch users are required to run menu option for ‘C’ option for capturing of charges as and when incurred and debited to expenditure account. Branch users are required to recover the charges on recovery in the NPA account. For the convenience of the user, PNBRPT-28/7 report has been customized which will show all the NPA accounts wherever recovery has been received and appropriation of recovery for the charges made in the expenditure account has not been done. Menu option – NPACHRG There can be following 5 valid Function Codes A – Add I - Inquire M – Modify D – Delete V – Verify ENTERING CHARGE DETAILS TO BE RECOVERED Here user has to input required data for a Account, help is available on F1 key press. A – Add (For type – C - Charge details of payment made from office account for a NPA Account) Valid Data Fields are as under: Field Inputs Function Code A- Add, M-Modify, V-Verify, D-Delete, I-

Inquiry Loan Account 16 digit Account number of the customer Total Amount Due Auto Populated on the basis of existing data Total Charges Total Waiver Total Recovery Option C- Charge details capturing ,W- Waiver of

charges, R- Recovery of charges Amount to be filled only if

option is C/W Amount of Charges/Waiver , Auto Populated in case of R- Recovery

Charge Account Number Office Account from which charge/expenditure has been debited for the NPA Account. On recovery the same account will be reversed.

Charge Particulars Charge Particulars, Description Charge Date

to be filled only if option is C-Charge (to be blank for W-Waiver or R-Recovery)

Tran Date of Charge made from office account for the NPA Account


Confirm (Y/N) Y/N M – Modify (Unverified record can be modified, after Verification modification not allowed) V – Verify - Verification should be done with user other than the one who has Added/Modified. Verification is must after any of the operation (Add/Modify) I – inquiry (Input Account Number, only Status like total charges, waiver, Recovery and total amount due is displayed in Inquiry, for details reports are also available) D – Delete ( Only unverified record can be deleted) WAIVER DETAILS OF NPA ACCOUNT A – Add (For type – W - Waiver details for a NPA Account, Waiver amount should be less than the outstanding amount) I – inquiry (Input Account Number, after waiver) RECOVERY DETAILS OF NPA ACCOUNT A – Add (For type – R - Recovery details for a NPA Account, Recovery amount is calculated automatically by the system on the basis of credits after the charge/last adjustment date) V – Verify - Verification should be done with user other than the one who has Added/Modified. Verification is must after any of the operation (Add/Modify) On verification Transaction is created debiting customer account and crediting Expenditure head which was debited earlier for the charges (as per the details added in C-option of NPACHRG menu) NPA MANAGEMENT RECPORTS: MENU OPTION - NPAMIS ( PHASE –I ) Sr.No. Module/report name Report description 1 SAMD_3 Sec. 1 portfolio analysis part A 2 SAMD_4 Sec.2 Classification of risk assets part A 3 SAMD_5 DSB: Off Balance sheet items. 4 SAMD_6 Sec.3 Change in asset quality profile. 5 SAMD_7 Quarterly Balance 6 SAMD_8 Top Impaired Accounts 7 SAMD_9 Industry wise exposure of NPAs 8 SAMD_10 Zone wise of position of High value NPAs 9 SAMD_11 Asset wise breakup of High value NPAs 10 SAMD_12 Customer NPA Profile 11 SAMD_13 Fresh slippage as on date 12 SAMD_14 Fresh slippage and cumulative postion 13 SAMD_15 NPA accounts fallen below Rs.1 Crore. 14 SAMD_16 Evaluation of High value NPA accounts. 15 SAMD_18 Amount wise breakup of Gross NPA


16 SAMD_20 Movement of NPA since beginning 17 SAMD_21 Comparative position of NPAs 18 SAMD_22 Movement of NPAs 19 SAMD_23 Top 100 NPA accounts below Rs.1 Crore. 20 SAMD_33 Additional disclosure in balance sheet 21 SAMD_36 Monitoring Management of NPAs 22 SAMD_37 Visit of Sr.Executive from HO 23 SAMD_48 Resolution strategy on Individual accounts 24 SAMD_49 Amount wise break up of gross NPA(Comparision

with previous Half Year. 25 SAMD_50 Analysis of Balance sheet. 26 SAMD_53 NPA related Budget V/s Performance

MENU OPTION – NPAMGT (PHASE-II) Sr.No. Report name Description 1 SAMD_REC1 Weekly reduction of existing NPAs 2 SAMD_REC2 Weekly reduction of existing NPAs amt wise

breakup 3 SAMD_REC3 Weekly reduction out of fresh slippage in last FY 4 SAMD_REC4 Weekly reduction out of fresh slippage in last FY

amt wise breakup 5 SAMD_REC5 Weekly reduction out of fresh slippage since last YE6 SAMD_REC6 Weekly reduction out of fresh slippage since last YE

amt wise breakup 7 SAMD_REC7 Recovery though recovery agents 8 SAMD_SAR1 monthly return progress report on

recovery/reduction in NPAs for the period 9 SAMD_ SAR2 Monthly return SA II : Summary of enforcement

action as on month end date 10 SAMD_ SAR3 for accounts which are NPA as on statement despite

issuance of notices 11 SAMD_ SAR4 Details of financial assets sold to

securitization/Reconstruction companies/other Banks/Fis/NBFCs during the Qtr.

12 RBI_M1 Details of borrowal accounts with working capital limit of Rs.10 crore and above from the entire banking system

13 SAMD_M2 Details of Primary/ Collateral security - ANNEXURE 1

14 SAMD_TWO Position of HO indentified accounts 15 SAMD_LOSS Review of loss assets for the half year ended with

the outstanding of Rs. 10 lac and above 16 SAMD_RLEST Statement of NPA under Real Estate 17 SAMD_SLP5C Fresh slippage 5 crore and above during the prev.

Qtr.


18 SAMD_REUP1 Recovery/ Up gradation of Rs. 1 Crore. 19 SAMD_OTSWO OTS approved in write off accounts for the qtr. 20 SAMD_CSLA Compromise settlement by Lok Adalat 21 SAMD_RTRC Recovery through recovery Camps 22 SAMD_MZCA Month wise/zone wise compromise approved. 23 SAMD_RCPA Reduction in NPA:Recovery in comp.prop.

approved. 24 SAMD_RPAD Recovery position as on date. 25 SAMD_RWOA Recovery in written off accounts 26 SAMD_WOPQ Write off proposals for qtr end. 27 SAMD_HVNPA Evaluation of high value npa accounts 28 SAMD_PDCLA Prudential classification. 29 DATA_INP List of data captured accounts.

chapter 9 - npa.pdf

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