Page 46 - Banking Finance May 2019 N

ARTICLE

Salient Features of guidelines: (ii) In addition, all borrower entities (with AE of Rs.5.00
crore and above) which are in default are required to
(A). Early Identification and Reporting of Stress:
be reported to CRILC, by the lenders, on a weekly basis
Lenders are required to identify incipient stress in loan at the close of business hours on every Friday. If Friday
accounts, immediately on default and classify the stressed is holiday, then reporting should be done on the
assets as special mention accounts (SMA) preceding working day.
SMA Sub Categories Basis for classification
SMA-0 Overdue between 1 & 30 days(#) (B). Implementation of Resolution Plan (RP):
SMA-1 Overdue between 31 & 60 days (I) The guidelines issued by RBI stipulate that all the
lenders will put a board approved policy for resolution
SMA-02 Overdue between 61& 90 days
of stressed assets under revised framework.
(#) It may be noted here that earlier only technical defaults (ii) All lenders either singly or jointly shall initiate steps to
were covered under SMA-0 category. But now the same has cure the default
been changed to financial default. (iii) The Resolution Plan includes:
Y Regularization of the account by payment of all
Default means non-payment of debt when whole or any part overdue by the borrower Entity.
or installment of the amount of debt has become due and
Y Sale of exposures to other entities/investors
payable and is not repaid by the debtor. In other words,
accounts with revolving facilities like cash credit would be Y Change in ownership
termed to be in default if the outstanding balance in the Y Restructuring(#)
account remains in continuous excess of the sanctioned limit
or drawing power, whichever is lower for a period of more (#) Restructuring has been defined as an act in which a
than 30 days. lender grants concession to the borrower due to economic
or legal reasons relating to the borrowers financial difficulty.
In case Aggregate Exposure (AE) of a borrower entity is
Rs.5.00 crore and above, lender are required to report credit Restructuring would normally involve:
information , including classification of account as SMA to (a) Modification in repayment period, repayment
Central Repository of Information on Large Credits (CRILC). amount, amount of installment, rate of interest.
RBI has now made the following changes with respect to
the reporting of credit information to CRILC. (b) Roll over of credit facilities
(c) Sanction of additional credit facility
(i) The CRILC main report is to be submitted on a monthly (d) Enhancement of existing credit limits
basis effective from 01.04.2018. (Earlier reporting
(e) Compromise settlements where time for payment
frequency was quarterly which has now been made or settlement amount exceeds three months.
monthly.)
(C) Implementation Conditions for Resolution
Plan (RP):
A. Resolution Plan shall be deemed to be implemented only
if the following conditions are met:
1. The borrower entity is no longer in default with any
of the lenders

2. If the RP involves restructuring then lender should
complete all documentation including execution of
necessary agreements between lenders and
borrower, creation of security charge, perfection
of securities and the new capital structure and/or

46 | 2019 | MAY | BANKING FINANCE