Page 35 - Banking Finance September 2018

ARTICLE

Resolution of Stress Assets-new

Initiatives:
Stressed assets in the banking system have reached
unacceptably high levels and urgent measures are required
for their resolution. To minimise the stress in advances
particularly in large exposures, public credit intimation plays
vital role and transparent credit information of large credit
exposures should be readily available. Let us analyse the
various resolution measures taken by the Government and
our Regulator in the recent past to address the burning
stressed assets position in banking industry. (based on their repayment status) and furnish the details to
the RBI to be stored in a central database: CRILC.
Crilc Framework: A Tool for Banks/Fis to Participating institutions are required to submit reports on

Monitor Stressed Assets all the borrowers with an aggregate fund-based and non-
fund based exposure of INR 50 million or more under the
Conversion of a performing asset to a non-performing one
CRILC guidelines. The guidelines also require institutions to
does not happen overnight. There are some early signs of
segregate borrowers as Special Mention Accounts (SMA) of
distress which if ignored, can lead to delinquency. various levels to gauge their probability of going delinquent.
Furthermore, the cumulative non-performance across
institutions can have a snowballing effect and lead to a Crilc Data- A helping hand to Banking
credit crunch, paralyzing the economy. With strong systems
in place, warning signs can be recognized well in advance Industry
to prevent problems and also alert other players within the The RBI shares the CRILC data on stressed borrowers with
system, to curb the negative effects. all lending institutions. The CRILC reports help institutions
to look at and tackle their stressed or near NPA exposures.
Monitoring non-performing assets (NPA) is one of the biggest The RBI has asked FIs to make use of credit information
concerns of any financial institution as well as that of the provided by CRILC for opening current accounts. FIs should
regulator. In the pre-digital reporting era, this was an even use the data available in the CRILC database to verify
bigger problem. The limited and often untimely exchange whether the customer is availing/has availed of a credit
of information across stakeholders did not provide enough facility from another FI.
time for corrective measures. With the recent boost to
digital reporting, the situation has improved, but challenges The CRILC system is an innovative data sharing framework
that collects data on stressed assets from all Indian FIs and
around the efficiency of tracking and exchange of
then advises the rest of the sector about the state of
information is still a concern.
impairment. This is a mechanism that dramatically improves
To help overcome some of these challenges, the banking the stability of the banking sector in India and is an initiative
regulator of India, the RBI, introduced guidelines for credit that many other countries are following closely.
risks on large exposures of banks and financial institutions.
Subsequently, in 2014, a collaborative system called the Legal Entity Identifier (LEI):
Central Repository of Information on Large Credits (CRILC) To minimize the corporate delinquency and burden of banks,
was built to help banks and financial institutions evaluate the regulator has come out with a new concept of LEI. It
their NPAs and share information with other institutions as has been decided for banks to make it mandatory for
alerts. corporate borrowers having aggregate fund-based and non-
fund based exposure of Rs.5 crore and above from any bank
The RBI came up with the guidelines for individual financial to obtain Legal Entity Identifier (LEI) registration and
institutions to highlight the status of stressed borrowers capture the same in the Central Repository of Information

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