Page 41 - BANKING FINANCE JUNE 2016
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ARTICLE

ner of filling vacancies, and the procedure to be followed  Options Under Corrective Action Plan
in the discharge of the Committee's functions. The matters
of the Committee are to be decided based on simple matu-    The various options available with the Committee for imple-
rity, the Chairperson has however been allowed to use a     mentation as a part of the CAP have been discussed below
casting vote, in case of a tie.                             along with their salient features -

Corrective Action Plan                                      Rectification

Application for corrective action plan                       Involves obtaining a commitment from the borrowers
                                                                 with respect to regularisation of the account so that
The responsibility to devise a CAP is bestowed upon the          the same does not slip to become an NPA.
aforesaid Committee for cases involving a loan of Rs. 10
lakhs or more and for the ones below the said limit, the     The commitment should be backed by identifiable cash
branch itself under the supervision of the branch manager        flows within a specified period without causing any loss
has the power to devise CAP.                                     or sacrifice on the part of the lenders.

The manner in which an application is processed has been     The process should be borrower driven.
explained diagrammatically in the following figure.
                                                             Additional finance for working capital needs may be
                                                                 considered for the purpose of rectification.

                                                             In all cases of additional finance for working capital,
                                                                 any diversion of funds will render the account as NPA.

                                                             Additional finance should be repaid or regularised within
                                                                 a period of 6 months.

                                                             Additional finance for any other purpose shall be
                                                                 treated as restructuring.

                                                             Further, repeated rectification with funding, within the
                                                                 space of one year, will be treated as a restructuring.

                                                             No additional finance should be sanctioned under CAP,
                                                                 in cases where the account has been reported as fraud
                                                                 by any lender.

                                                            Restructuring

                                                             Restructuring can be explored as an option where the
                                                                 asset is classified as Standard, Special Mention Account
                                                                 or Sub-Standard by one or more lenders of the Com-
                                                                 mittee.

BANKING FINANCE |                                           JUNE | 2016 | 41

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