PERMAMENT – MASTER Indian Overseas Bank Central Office 763, Anna Salai Chennai-600002 Ref No : MASTER / 12 /2011

-12 Date : 26.07.2011 Issuing Dept: Assets Reconstruction Department

To All Branches / Regional Offices/ Other Offices. NPA MANAGEMENT – NEW RECOVERY POLICY 2011-12 – MASTER CIRCULAR 1 1.1 PREAMBLE : Our Bank’s Recovery Policy, which formed a part of the "Loan Policy Document”, is being issued separately from the financial year 2004-05, in view of the paramount importance for NPA Recovery. The Recovery policy was renewed every year and the policy was renewed last year vide circular Permanent MASTER / 55/ 2010-11 dated 21.07.2010 with instruction that it shall remain in force until further notification. OPERATIONAL INSTRUCTIONS : Our Board, has approved the New Recovery Policy for recovery of Non Performing Assets. The full text of the policy is furnished in the Annexure. The Policy is implemented with immediate effect and will be in force upto 30.06.2012. The changes made in the new Policy are given separately also for easy reference. The Notional Dues are to be calculated at the Bank’s Base Rate (Presently 10.25%) prevailing on the date of submitting the proposal / contractual rate / decreed rate of interest whichever is less and the Net Present Value of the Securities should be calculated @ 12% as per the new Recovery Policy till further notification. CONCLUSION:

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Branches are advised to follow the Recovery Policy scrupulously and maximise the recovery. The New Recovery Policy is also made available in Bank’s Intranet “IOB ONLINE”. Our Recovery Policy may be furnished to RBI Inspectors & Statutory auditors whenever required. (A.P.SINGH) GENERAL MANAGER Index under: Recovery Policy Hindi Version follows

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INDEX
S.No I II III IV V Particulars Introduction Objective Measures to achieve the objective Methods of Recovery Debt Recovery Agents Compromise Settlements Valuation of Securities Release of Securities where OTS / OCS already sanctioned Partial Release of Security / Guarantor not under OTS/OCS Conditions to be incorporated in sanction proposal Types of accounts Relaxation from Norms Staff Lapses Willful Defaulter General Managers’ Committee / External SAC Non-Discretionary and Non-Discriminatory Treatment Payment Terms Extension of Time Settlement Formula / Calculation of Sacrifice Minimum Acceptable Amount - NPV ECGC Refund Calculations VI VII VIII IX X XI XII XIII Accounting Procedure Waiver of Legal Actions Write Off & Recovery in Written Off accounts Issue of No Due Certificate / Delisting from Defaulter / Willful defaulter list Extension of Further loans to OTS/OCS settled borrowers Guidelines for follow up of NPA accounts. Modifications to the Policy Lexicon of Abbreviations used in the Recovery Policy Page No 3 3 3 4 5 7 9 10 10 11 12 13 13 13 14 14 14 15 16 17 21 22 23 23 25 25 26 26 27

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II.. INTRODUCTION: The synopsis of our Bank’s Recovery Policy, which is forming part of the “Loan policy document”, is brought out separately also in detail from the financial year 2004-05. We have brought out a detailed Recovery Policy last year also. In order to have a broad guideline over the entire area of NPA Management, certain required improvements are made, as applicable to the present situation, and the new Revised Comprehensive Recovery Policy has been brought out which will be in force upto 30.06.2012. II. OBJECTIVES OF THE LOAN RECOVERY POLICY: To ensure arresting slippages by initiating timely remedial action whenever the advance becomes irregular. To ensure Considerable reduction in Non Performing Assets by way of Upgradation and Recovery. III. MEASURES TO ACHIEVE THE OBJECTIVE OF THE POLICY: 1. The remedial action starts, even before the account is classified as NPA, by initiating necessary curative steps when irregularity in the account is identified. 2. To coordinate and assist Credit Monitoring Department, whenever required, in formulation of various strategies to prevent Borrowal accounts from slipping to NPA. 3. Any account should be classified as NPA ONLY after routing through ERI, Watch Category, and Special Watch Category statements. The steps initiated to classify the account, as NPA should be recorded. 4. The documents should be reviewed and the enforceability of all documents to be perfected before classifying the account as NPA. 5. The slippages should be contained well within the industry average and if any Region is showing more than the industry accepted level the specific reasons for such increase should be studied and remedial steps should be taken immediately. 6. Regions should ensure that the slippage cap fixed to them is not exceeded. If exceeded, it should be compensated by equal cash recovery towards NPA reduction / Upgradation. 7. The slippages are to be monitored on continuous basis and try for Upgradation by recovering the “overdue amount” or by restructuring / rescheduling as per the prescribed norms of RBI. 8. There should be overall reduction of 20% of opening NPA level. Accordingly required targets to be assigned to the Regions, taking into account the recoverability of the accounts involved, during that year. 9. To initiate timely actions, without loss of much time to ensure recovery towards reduction of NPA, through legal and other ethical measures. 10. Introduce schematic recovery campaigns for specific focused areas. 11. Implementation / Adherence to guidelines prescribed by the Bank / RBI / Government from time to time (in respect of Management of NPAs / OTS / OCS schemes) 12. Minimize provision by improving recovery / security coverage or by deferring movement to next status as per the RBI norms. 3

13. To augment recovery by opening Specialized Branches for NPA Recovery. 14. Elimination of Non-recoverable loans. 15. Maintaining a database of profile of NPA borrowers for dissemination among the branches of the Bank. 16. Review of delegation of powers to various functionaries in the Bank with regard to filing of suit / waiver of legal action / Sacrifice .. etc., IV. METHODS OF RECOVERY: Adjusting the permitted Credits: Eligible subsidy / margin money / liquid securities must be credited immediately on classification of NPA. Persuasion / Personal contacts with the Borrower / guarantor: Regional Offices to ensure that branches are contacting the borrowers / guarantors at frequent intervals and persuade them to upgrade / close the NPA account. The latest contact address / details and other particulars of the borrowers / guarantors / securities / condition of the units / business activities must be recorded so that the bank is not put to loss for want of details. Recovering overdue amount to upgrade: The following feasible steps should be adopted for Upgradation of NPA accounts: • Recovering the overdue amounts. • Re-structuring / Re-phasing / Rehabilitating the NPA accounts wherever possible as per extant guidelines. • Implementation of rehabilitation / restructuring package permitted by BIFR / CDR and ensuring recovery as permitted. • Whenever an account is upgraded one layer above the sanctioning authority should review the upgradation. Within 3 months of the account becoming NPA, the Credit Department concerned shall examine whether the account is viable for re-structuring or recovery action. Once a decision is taken for recovery, with due approval, the file may be transferred to Central Office / Regional Office Law Department as the case may be, for recovery action. Use of ethical measures such as publication of photographs / classifying as willful defaulters etc.,: • • Publishing the photograph of the eligible defaulters as per the laid down norms. Identifying and classifying the willful defaulters for submission to RBI / Credit Information Bureau (India) Ltd (CIBIL) and / or any other credit information company which has obtained certificate of registration from RBI in terms of Section 5 of the Credit Information Companies (Regulation) Act, 2005 and of which our Bank is a member. The help of the Govt. bodies / officials should be utilized for recovery of all Govt. Sponsored Loans.

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Whenever the proposal for sale of NPA accounts to ARCs and others is taken up. our Bank has been selling NPAs to such companies on individual account / portfolio basis. The offer can be cash / Security Receipts / both and the total of such offer shall not be less than the NPV of the securities. RO shall endeavour that they submit the required details and carry out the Nodal centre jobs required for due diligence. 5 . the sanction shall be as per the extant delegated powers and in respect of portfolio of accounts. Regional offices are advised to engage the services of Recovery Agents as per the policy to maximize Recovery. Further in terms of RBI guidelines dt. Debt Recovery Agents Our Bank has framed a Policy for Engagement of Recovery Agents. Regions to ensure that 100% SARFAESI actions are initiated on all eligible accounts before completion of next quarter from the date of classification of NPA. sanction shall be by the Management Committee of the Board. 5. The terms of Recovery Policy is applicable to sale of NPAs as well and the sale shall be as per RBI guidelines issued from time to time on the subject. Follow-up with Official liquidators to ensure interim / full recovery of claim amount at the earliest.4. Following with Official liquidator / ECGC / CGFTSI: • • Submitting the timely notice to Guarantee Corporations as required and ensuring receipt of claim amount at the earliest. The decision for sale shall be taken by Central Office and in respect of individual accounts.Timely action under SARFAESI ACT 2002: • In the event of failure to upgrade the account the actions under SARFAESI Act 2002 should be initiated immediately for all eligible accounts and subsequent actions should be followed on due dates without fail till the recovery is made.2011 it shall be ensured that accounts originated fraudulently or have been classified as on the date of sale as involving fraud are not sold. Sale of NPAs to ARCs / Banks / FIs / NBFCs: RBI has framed separate guidelines for sale of NPAs by banks to ARCs / FIs / banks / NBFCs. To reduce the NPA level.

o Invoking provisions under section 138 of NI Act wherever applicable. o Execute Decree / RC immediately. 6 . o Referring to Lok Adalats for settlement through conciliation. encashing liquid securities / disposal of charged securities / exercise right of setoff etc. The forum of Lok Adalats should be used frequently as it is cost and time effective to take it to decreed stage. Before initiating legal action. After examining the pros and cons of filing suit the following measures to be initiated: o Serving legal notices o Filing suit in civil court / DRT as per the case after obtaining permission from appropriate layer of authority. o Unnecessary adjournments should be objected or cost should be insisted for every unreasonable adjournment. o Time Frame Norms for initiating Legal Action for Recovery of NPAs vide our Permanent circular Misc /125/ 2003-04 dt. o Vigorous follow-up of suit filed cases should be made before due dates by contacting the lawyers and providing whatever materials / details required by them to avoid delay from our part. o Filing Insolvency petitions wherever desirable. without waiting upto the Limitation period provided as per Law.11. attach and sell the assets of the judgment debtors. seek Garnishee orders. o Purchase and sale of non-banking assets acquired in loan recovery proceedings. steps to be taken to ensure recovery by probabilities for compromise settlements. legal action thro’ Court / DRT should be the last resort adopted for recovery of dues. seeking interim orders wherever applicable.. o Invoking Revenue Recovery Acts wherever applicable. o Filing ABJ and obtaining injunction order. to bring the securities for sale. o File appeal / review / revision petition wherever necessary within limitation period.2003 issued by law dept Central Office must be strictly adhered to. o Initiating criminal proceedings wherever necessary. seek arrest of JD in the event of non payment of decreed amount. In the event of failure to honour the Lok Adalat commitments EP proceedings should be initiated immediately. o Liaison Officers to monitor the proceedings in DRT cases by ensuring attendance of lawyers / branch managers on hearing dates. Obtaining decree / RC expeditiously.. carrying out orders etc.Legal Actions and filing of suits at appropriate forums: Normally.03.

who is the competent authority presently to consider the compromise settlement of the same account has to be sanctioned only by the next higher layer of authority. Written-Off Accounts. Early recovery of Hard core NPAs. 3. A loan account sanctioned earlier by the official.. All NPA accounts – both Suit filed and Non-Suit filed.V. 4. 2. The compromise Settlement policy aims at: 1. Accounts under Public Interest litigation (PIL) / External Agency’s Investigation / willful defaulters / cases of malfeasance / Fraud etc. 2. which are covered by specific recovery campaign. launched. NPA Accounts sold / assigned to ARCs / Banks / FIs / NBFCs. Any other accounts. 5. C. Compromise settlement is one of the most effective and cost & time saving process in recovery of NPAs. D. The account should have been classified as NPA and the recovery of the dues to the Bank in the normal course is found difficult or would take unduly longer period depriving the Bank the immediate benefit of recycling of funds. 3. Negotiation Process: I) Grounds to entertain Compromise settlements: 1. Considering the Worth of the borrower / guarantor and realizable time and value of securities. However the permission of SAC at Central Office must be obtained for considering such accounts for compromise settlements by the appropriate layer of authority and after sanction it should be vetted by Management Committee of the Board as per RBI guidelines. by considering the issues involved in such accounts. 2. Deciding the mutually agreeable amount based on the present paying capacity of the borrower / guarantor. 5. 2. Eligible Accounts: 1. B. 7 . COMPROMISE SETTLEMENTS: A. Efforts for Upgradation either by restructuring or rehabilitation have failed and / or may not yield desired results. Considering the Net Present Value of the realizable worth of the securities at a future date compared to the Compromise amount and payment terms agreeable. Ineligible accounts: 1. 4. Simplify the procedure in calculations and provide clarity to the field level functionaries. Accounts under BIFR / AAIFR / CDR. as per the terms of such campaign.

9. 7. 3. 4.. Time value of money and probable future recoveries compared with the offer amount – the NPV concept and procedure for arriving NPV explained in some other para below. problems in title deeds etc. IV) 1. 4. 5. 2. The proportionate amount repayable to ECGC / CGFTSI on settlement. 5. income / worth of the borrower / guarantor are not sufficient to ensure full & early recovery of the dues. The following factors would also be considered while negotiating: 1. II) 1. Any other reason in which continuation of relationship with the borrower is considered not in the interest of the bank. 8 . 5. Stage of recovery action where it stands and probable time to recover. Impact of accepting the compromise proposal on P&L a/c (by way of write back of provisions and recovery of Undebited interest) 10.. 7. The difficulties in sale of the security. Cost of maintaining the suit. Any LC / LG outstanding – Any other account in the similar capacity 6. In the process of negotiation. 4. Total Undebited interest due. 3. III) Compromises may be negotiated with: Principal Borrower/s Guarantor either for partial payment or for full payment Parent Company Other interested parties like drawees of bills. maintaining and safeguarding the security. Statutory Dues if any. legal heirs etc. 6. 4. The securities. efforts should be made to recover the entire dues. Realisable value of security evaluated on a distress sale basis. 3. Means of the borrowers / guarantors other than the security charged in the account or attached in the execution proceedings and their current income if they are engaged in gainful activities.3. The recovery through legal measures will take longer time to result in recovery. Any other loans for which the borrower has extended Guarantee 11. sacrifice of various components of the dues as below in the order of desirability would be considered: Penal Interest Incidental expenses including inspection / insurance charges ECGC / Any other Guarantee corporation guarantee fees Legal expenses incurred and to be incurred Undebited Interest Write off should be avoided as far as possible and should be considered only when it is unavoidable. 2. 8. In cases where a person has obtained loan from the bank by making fraudulent representation or otherwise committing any fraud as far as possible. 2.

5 Crores or above. If there is wide variation (especially for land / buildings etc. If the valuation by the approved panel valuer is more than one year. 8. 9 . value of securities should be given as of original sanction date. The highest value of the following should be computed as realizable value of the securities: Government guideline value to be certified by approved panel valuer. highest would be taken as value of the property. Realisable value given by the approved panel valuer based on the specific location and other relevant factors. the higher value of the two should only be accepted. 5. The valuer should send the valuation report to the Branch Head in a closed cover. Age and stage of suit proceedings The possibility of deterioration and alienation of assets leading to threat to security / recovery Capacity for negotiation by the Bank and the borrower Position of group accounts and present status of activity of borrowers Source of payment to honour the commitment made by the negotiator. The borrower should be advised of the contractual dues and the actual benefit to the borrower should be explained to him VALUATION OF THE SECURITIES FOR COMPROMISE SETTLEMENT / RELEASE OF SECURITY: As per the valuation policy of our bank (Circular Misc/482 /2010-11 Dt: 9. The negotiation should endeavour to maximize recoveries / compromise amounts taking into various facts as below: Age of NPA Strength and weakness of bank in respect of documentation. valuation of the securities should not be more than ONE year old as on the date of submission of compromise proposals. Valuation Report should be obtained from one valuer for all properties valued up to Rs.4. If the variation is more than 10%. the valuation of property should be valued by approved panel valuer every 3 years. the valuation report should not be more than six months old.. In the proposal. 4. 6.2010) for all NPA accounts. 7. realization of security etc. it should be ensured that whenever any OTS/OCS proposal is submitted.) in value.. last review date and present position. If the variation in the two valuations is not more than 10%. 3. 5 Crores. The valuation of the property should be kept confidential. 2. irrespective of outstanding and limit. The Branch should obtain minimum two independent valuation reports from Approved Valuers for all properties valued at Rs. the reason for such variation should be justified with proper reasons. In the case of partial release of security not under OTS/OCS. a third valuer will be engaged at the cost of borrower and of the three valuations.V) 1. However. fresh valuation should be obtained from approved panel valuer for this purpose.

While arriving at the value of the remaining securities. It should be ensured that all the securities are insured for their full value even after filing suit and insurance is in force till the account is fully settled. both in full quit or partial release may be considered by the respective layer of authority as per the discretionary powers based on sacrifice for compromise settlements under OTS / OCS for NPA account. Central Office for the format of Desk Top valuation. o The sale proceeds of the securities proposed to be released are fully credited to the account. o o PARTIAL RELEASE OF SECURITY / GUARANTOR NOT UNDER OTS/OCS: It should be made clear in the proposal whether it is a compromise settlement in full quit or only partial release of security / guarantor. ensure that the cream of the securities are not released first. the value as ascertained by the Branch Manager should also be taken on record. as mentioned below: The sanctioning authority of the compromise settlement may authorize the release of security.2007 issued by Banking Operations Department. is to be considered on payment of OTS/OCS amount as per agreed terms. Branches may refer Permanent Circular Ref. o The residual securities left with the Bank are good and marketable. then the available security for the balance amount should be substantiated. However for the purpose of calculations under compromise proposals ONLY THE FORCED SALE VALUE should be considered. The valuation reports should not be more than six months old. after ensuring that there are no other direct or indirect liabilities connected to that account. Part release of securities can be considered by the sanctioning authority of the compromise settlement taking into account the following points: Latest valuation of the securities released and those to be released. Such proposals. The desk top value viz. 10 .11. Forced Sale Value of such securities shall be taken. Value of the balance securities held by the Bank thereafter is sufficient to cover the remaining compromise amount. o While releasing the securities. The desk top valuation should be enclosed to the Branch OTS / OCS proposal. RELEASE OF SECURITIES WHERE OTS/OCS ALREADY SANCTIONED: The release of securities charged to the Bank. Misc/ 174/ 2007-08 dated 17. Partial release can be permitted if the offer for payment is not less than the Fair Market value of the property proposed to be released or the Forced Sale Value of the residual securities are sufficient to cover the balance outstanding. No. If it is partial release.The valuation of securities should be in line with market realities.

Endeavour may be made to obtain post dated cheques for the OTS / OCS amount / instalments. the same is explained by way of example.Though the offer is not under OTS / OCS and only for partial release of security / guarantor. (The same principle will be applied for release of personal guarantee as well).00 Rs. Incase of compromise settlement reached. shall be a precondition before / while settling the dues of the bank under Compromise. In the case of compromise settlement in the suit filed accounts. Unconditional withdrawal of suits / counter claims etc. the net worth of guarantor shall be considered. documents should be kept alive by obtaining periodical renewal letters till full payment of settlement amount is received.00 Rs. before / while settling the dues. the powers may be exercised as per the delegation of powers by the respective layer of authority for sacrifice.00 Rs.. the Notional sacrifice is to be treated as Nil. To arrive at the notional balance in case of partial release. if higher than FMV Forced Sale value of the remaining securities Notional Balance Rs. the Regional Head is empowered to release the securities on payment of the Fair Market Value/offer amount. consent decree is to be obtained. In respect of Non-suit filed accounts. the dues / sacrifice shall be calculated notionally as in the case of OTS / OCS. made by the borrowers / guarantors against the Bank. as per RBI guidelines.00 Rs. CONDITIONS TO BE INCORPORATED IN THE SANCTION OF PROPOSALS: Automatic cancellation of OTS/OCS sanctioned in the event of non-fulfillment of stipulated terms of sanctions. Example: Notional Dues Fair Market Value of the property to be released / offer amount. the settlement should contain a specific clause that such settlement will not have any bearing what so ever on the ongoing criminal cases proceedings pending in the court against the persons connected with the account. the Bank is entitled to recover the entire dues as per the original terms of contract. 20. 11 . with default clause that in the event of default to make payment as per the agreed terms. If such sum is less than the notional dues. 80. In such cases. For release of personal guarantee without release of property.00 In Cases where total amount offered for the securities to be released and Forced Sale value of the remaining securities is more than the Notional Dues.20.100.60.

CONSORTIUM: Incase of consortium advances. However. TYPES OF ACCOUNTS: STAFF LOANS AND STAFF RELATED ACCOUNTS: The occasions to consider compromise settlement in staff / staff related accounts will be very rare and should be judiciously decided based on the following guidelines: A.. if the borrower offers to settle one or few accounts leaving other NPA accounts without any offer. where staff member is a guarantor. prior administrative clearance should be obtained from CGM (ARD) to consider the proposal by the respective authority. B. decision regarding entering into compromise etc. 12 . C. settlement should be considered in all the group accounts of the borrower simultaneously. our bank will go ahead independently with our decision in such matters.While recording the terms and conditions of the settlement in a consent order to be obtained from Court or DRT. Any other cases involving compromises in accounts of present staff members shall be considered only at Central office by Executive Director. shall be taken by the bank at an appropriate level of authority and other banks should be persuaded to adopt our line of action in the spirit of consortium. a specific clause should be incorporated stating that the settlement agreed between the parties shall not in any way affect or be construed as settlement of on going criminal cases / proceeding pending in the Court against borrowers. shall be approved by the respective layer of authority as per the discretionary powers ONLY after obtaining clearance from Vigilance and industrial Relations Dept Central office. GROUP ACCOUNTS: Normally. after obtaining clearance from Vigilance and industrial Relations Dept Central office. In respect of loans in the name of Ex-staff members who have deceased / retired or no more in the service of the Bank compromise proposals may be considered on merits by the respective layer of authorities as per the discretionary powers. where our Bank is the leader. However. if some member banks differ with our views. in very exceptional cases. Compromise in accounts of third parties or close relatives of staff members. The same principle will be followed where some other Bank is the consortium leader. The total sacrifice in all the group accounts should be computed to find out the authority to which the relevant proposal has to be referred.

AGRICULTURAL ADVANCES: The policy is applicable for all Agricultural Advances except for those specific accounts which are covered under RBI / Bank’s norms and guidelines. RELAXATION FROM NORMS: Within the delegated powers.2011 to enable the “High Level Committee and Grievances Redressal Committee to complete their process for reporting to RBI / CIBIL and / or any other credit information company which has obtained certificate of registration from RBI in terms of Section 5 of the Credit Information Companies (Regulation Act.EST/63/2010-11 dt. may be considered at the rates of interest as stipulated by the BIFR as part of Rehabilitation package. STAFF LAPSES: All OTS proposals should have the status report on staff lapses as on the date of submission of proposal as per the Bank’s Staff Accountability Policy for Non Performing Credits vide circular No.2010.SUIT FILED / DECREED ACCOUNTS: Compromise / Negotiated settlement can be considered under the policy in respect of all NPA accounts irrespective of Asset Classification and whether suit filed or non-suit filed or decreed or recovery certificate obtained.4. Therefore. 13 . which might not conform to norms. 25. RO should note to incorporate the status report while recommending for OTS / OCS. 2005 and of which our Bank is a member. BIFR ACCOUNTS: OTS / OCS in respect of Industrial units under the purview of BIFR. Where BIFR does not prescribe such interest / amount the guidelines under this policy is applicable. The staff accountability has to be fixed for all the NPA accounts as per our Bank’s Staff Accountability Policy for Non-Performing Credit. the sanctioning authorities at the level of Regional heads and above can consider relaxation from norms in compromise settlement cases (except those covered under RBI Policy). with proper justification and to the satisfaction of the sanctioning authorities.10. WILFUL DEFAULTER: The identification and classification of “Willful Defaulter” should be done meticulously as per our Master circular / 11/2011-12 dt.07.

without discrimination and a monthly report on the progress and details of settlements should be submitted by the concerned authority to the next higher authority. the upfront payment need not be insisted upon. Similarly if the OTS/OCS is to be paid only by sale of securities charged to the Bank. GENERAL MANAGERS’ COMMITTEE / EXTERNAL SETTLEMENT ADVISORY COMMITTEE: All compromise proposals beyond the powers of the Corporate General managers and where the approval of sacrifice falls within the delegated authority of Executive Director / Chairman & Managing Director / Management Committee of Board are to be routed with the recommendations of the “General Managers’ Committee for One Time Settlement” and “External Settlement Advisory Committee” at Central Office. Review of compromise proposals sanctioned: Sanctioned By Branch Manager – in respect of Special Recovery Campaigns wherever Branch Managers are empowered to settle OTS / OCS Compromise Settlements sanctioned by the officials of the Regional Office Regional Head CGMs ED / CMD PAYMENT TERMS: Upfront payment: The borrower has to make an upfront payment of 10% of the offer under “No Lien” account when the proposal is submitted.Accounts under Public Interest litigation (PIL) / External Agency’s Investigation / willful defaulters / cases of malfeasance / Fraud etc can be considered for One Time settlement and the permission of SAC at Central Office must be obtained for considering such accounts for compromise settlements by the appropriate layer of authority and after sanction it should be vetted by Management Committee of the Board as per RBI guidelines. the upfront payment need not be insisted upon to consider the proposal. Reviewed By Periodicity Regional Head Regional Head CGM ED MCB Monthly Monthly Monthly Monthly Monthly 14 . NON-DISCRETIONARY AND NON-DISCRIMINATORY TREATMENT: The branches should follow the above guidelines for compromise settlement of all NPAs covered under the revised scheme. However. if the intention to make payment immediately on sanction is justified.

Whenever the extension of time for honoring the OTS / OCS sanctioned by RM / DGM or GM(Law) at Central Office is sought and if the request is genuine. any request for revival of such proposals may be treated as fresh proposals only. in respect of an OTS/OCS sanctioned on deferred payment. b. For the purpose of clarification. The sources from where the borrower / guarantor intend to raise funds must be obtained from the borrower and in case of settlement in installments. if sanctioned. However. simple interest will be charged at Bank’s base rate upto 9 months and for the period beyond 9 months. the period after the time originally stipulated for payment. proper installments should be fixed depending upon other available sources. Incase of proceeds by way of disposal of assets are not sufficient to meet the OTS/OCS amount. normally.e. within 3 months from the date of conveying the sanction without charging interest. EXTENSION OF TIME: a.Time limit for payment of OTS/OCS: The sanctioned OTS/OCS should be recovered. 25% of the OTS/OCS sanctioned amount is to be paid within 3 months of conveying the sanction and the balance 75% may be paid in monthly / quarterly installments not exceeding further 9 months together with interest at the prevailing Bank’s base rate on simple basis for the period beyond 3 months of conveying sanction. interest will be charged at 12% simple for the period delayed beyond 3 months. is sought and if the request is genuine. c. GM(Law) at Central Office may extend the time with payment of simple interest @ 12% for the delayed period i. if the payment is to be made in installments and has to extend beyond 3 months. Whenever the extension of time for honoring the OTS/OCS sanctioned by ED / CMD / MCB. the funds available from the source to meet the installment amount should be verified and recorded. the sanctioning authority themselves may extend the time with payment of simple interest @ 12% for the delayed period i. In respect of the balance 75% amount payable in 9 months. Wherever the proposals which have lapsed due to non-payment / part payment and or withdrawn and a period of 12 months have elapsed from the due date. 15 . the period after the time originally stipulated for payment.e. for payment of the 25% amount payable within 3 months. at 12%. if there is any delay. in such cases. Source of Funds: Sanctioning authority should satisfy themselves as to the source of payment of the OTS/OCS.

(a) above Sub Total = c.. Outstanding as on the date upto which interest was last debited b. ADD : Legal and Other Expenses incurred subsequent to date mentioned in col. ADD: Debits such as Bills returned unpaid. Interest y Sub-total NOTIONAL AMOUNT DUE FROM THE PARTY = x+y Waiver = Undebited interest (interest not charged to the account as per the notional dues calculation) Write-Off = Reversal off book outstanding portion after full receipt of compromise amount. k. h. ADD : Simple interest to be added from the date of last debit till date of expected payment of compromise amount at the Bank’s base rate prevailing on the date of submitting the proposal / contract rate / decreed rate of interest which ever is less. (Sacrifice is the basis for deciding the sanctioning authority) 16 .V. Notional Dues Calculation: The notional dues should be calculated as below: (Rs) a.SETTLEMENT FORMULA FOR COMPROMISE / CALCULATION OF SACRIFICE: The authority for approval of compromise settlement proposals (OTS/OCS) shall be determined based on the “SACRIFICE” involved in the proposal.(a) above Add: Interest on the (c ) above at the rate mentioned in col. C.V. charges paid to Security agencies/ Personnel etc. f. e.(b) ADD: Other Expenses viz. * SACRIFICE under OTS/OCS is always the difference between NOTIONAL DUES and OTS/OCS OFFER. j. d. Interest Total i. ECGC/DICGC premium. Insurance premium paid. (a) and Countervailing Interest. subsequent to the date of NPA. Date Amount C. g. 1. LESS: Recoveries made after the date mentioned in col. Notional Dues (minus) OTS/OCS Offer = SACRIFICE. DPGs invocation of Guarantees after the date mentioned in col. Godown rent. x LESS: CV Interest on ECGC / CGFTSI claim received amount.

20 Rs. the amount already remitted subsequent to NPA date and taken to interest account may be notionally treated as recovery towards principal and the sacrifice may be arrived at. the minimum acceptable amount should be arrived by using Net Present Value Method which will be the Minimum Acceptable Amount.20 already paid(i.e.100 Rs.30 lacs falls beyond his powers). The formula for arriving the present value (discounted value) of an amount receivable at a future date ……… present value in reciprocal of compound interest factor i. NET PRESENT VALUE MEANS .e.Rs. 20 Rs. The present value of the recovery made today should be greater than the present value (discounted value) of the recovery that may be made at a later date.As per the existing accounting policy of our Bank.THE PRESENT VALUE OF THE PRESENT MONEY compared to the PRESENT VALUE (Discounted Value) OF FUTURE MONEY. 90 Rs. However. he can consider sanction and pass orders for writing off (though the write off amount of Rs. when the OTS / OCS proposal is considered. there would not have been reduction / there would have been nominal reduction in the book outstanding. all recoveries other than the case of suit filed accounts and OTS / OCS shall be appropriated first towards interest / uncharged interest.. MINIMUM ACCEPTABLE AMOUNT / BENCH MARK AMOUNT: For Secured Advances: In all cases where the advance is secured by tangible assets. To arrive at the future recoverable value.110 Rs.20) Sacrifice: Write off: Rs. the value of the securities (Forced Sale Value) and other enforceable assets (net of expenses) should be taken into account along with the approximate time for realizing those securities. 1xP -------{1+ (R/100)} n Where R N P = = = Rate of interest (¼ of Annual rate of interest) Number of Quarters Principal (Amount recoverable on a future date) 17 . 30 As this sacrifice is falling under CRM’s powers. In the process. any payment made before the OTS / OCS proposal was submitted would have been taken to interest account in which event. Example: Book outstanding on date of NPA: Subsequent payments taken towards interest: Notional dues: Offer amount including Rs.70+Rs.

87 2.81 2.47 1.g.60 lacs = 48.For the purpose of easy calculation the discounting factor for finding out the present value of future amount is given below.90 2.43 = 13.42 2.90 3. This is acceptable.17 1.85 = 2000000 / 1.20 2.11 1.92 2.28 2. which is much less than Rs.19 2.60 lacs --------- 18 .64 1.58 2.13 = 8.14 2.80 lacs.67 1. The Discounting factor at 12% to be applied.66 2.72 1.01 3.60 (factor for 4 years @ 12%) = Rs.51 4.69 11% 1.50.34 1.00 lacs.60 lacs immediately.45 2.27 1.54 1.03 = 1.13 1.80 Example for arriving factor for One year @ 12%: First step R = ¼ of 12% = 3 Second step – R/100 = 3/100=0.03 Fourth step finding number of quarters – for one year 4 quarters.76 4.80 lacs.{1+ (R/100)} n = 1.80 3.18 3. The borrower has offered OTS of Rs.03 x 1.48 1.99 2.03 Third step – {1+ (R/100)} = 1+0.03 = 1.81 2.03 2.43 1.73 1.51 1.76 3rd year 4th year = 2000000 / 1.37 1.10 1.00 lacs.78 3.96 15% 1.00 1st year nd year 2 = 1000000 / 1.29 2.99 --------NPV of Rs. Suppose this Rs.14 1. It will take 4 years to realize the security and the realizable amount is Rs.60 lacs is payable in 4 annual installments Then the NPV of Rs.50.13 = 88.49 Example: An NPA account with an outstanding of Rs.60 lacs is: = 1000000 = 10.34 1.38 2. The present value of Rs.22 1.62 3.10 4. Fifth step (finding the factor) .32 1. 100/1.00 3.03 x 1.50.45 3.15 1.43 2.27 = 15. The discounting factor at 12% to be applied for the purpose of NPV calculation: Period 1 Year 2 years 3 years 4 years 5 years 6 years 7 years 8 years 9 years 10 years RATE OF INTEREST COMPOUNDED QUARTERLY 10% 1.09 2.100 lacs is secured with security worth Rs.96 12% 1.60 1.56 1.59 14% 1.24 1.80 lacs realizable after 4 years is Rs.60 1.36 16% 1.60 lacs offered today.13 To get the present value divide the future money by relative factor e.80 2.38 1.00 2.26 13% 1. The NPV is: 8000000/1.25 3.03 x 1.16 1.00 lacs The Minimum Acceptable amount is Rs.15 2.56 3.29 1.

60 lacs = 50. The NPV of the refixed installments is more than the NPV of the realisable security and it may be accepted subject to confirmation of source of funds available as per the refixed installments.00 2000000= 20.50. The nature of stocks – perishable / non-perishable Quality of stocks Age of stocks held Saleability and Realisable value Condition of stock i. Raw Material. Semi finished or finished MACHINERY: (Value as per Approved Engineer's report of not more than one year old) Type Age Utility Value – Outdated or not Market Value Marketability 19 .00 lacs ). If we have to recover only by installments we may have to re-fix the installments in such a way that the NPV of the OTS offer is more than the NPV of the realizable value of security.13 = 17.75 (Or) 2000000= 15.99 4th year ----------------NPV of Rs.00 lacs.70 3d year = 2000000 / 1.50. This proposal is not acceptable.70 2000000= 17.75 = 1000000 1.e.60 lacs payable in 4 annual installments is lower (48.00 2nd year = 2000000 / 1.45 ----------------The NPV of security realizable after 4 years is Rs.43 = 6.44 53.Should be considered after discounting 50% of the Value ascertained.60 lacs) than the present value of security realizable after 4 years (50. In the same example given above we may re-fix the installments as below: 1st year = 1000000 = 10. While calculating the NPV of the security the following points should be taken into consideration: The realisable value of security should be taken at Forced Sale value net of expenses.The NPV of security realizable after 4 years is Rs.27 = 15. While valuing the securities the following points should be considered: The time taken for realisation of securities should generally be arrived not exceeding the time limit given below: SARFAESI cases Maximum of 4 years DRT cases Maximum of 6 years CIVIL Suits Maximum of 10 years Hypothecated Stocks:.00 lacs The net present value of Rs.

After discounting the hypothecated stocks & book debts as above and obtaining the value of the machinery from the valuer. repayments made by the party after classifying the account as NPA shall also be taken into account while arriving at the NPV. movable and Immovable properties and added together to arrive the total NPV of the securities available as the years for discounting the realisation will vary from account to account based on nature of account and security. The minimum acceptable amount shall be the NPV of the securities available as on the date of NPA. the NPV shall be arrived as per formula already explained.30 Rs. Therefore. Example: (1)Amount paid for release of security after date of NPA: (2)Amount realized by sale of security by Bank through SARFAESI/DRT after date of NPA (3)NPV of the remaining securities at the time of offer: (4)Repayments made after classifying account as NPA: (5)Minimum amount acceptable will be (Rs. The NPV of Plant & Machinery and other property such as vacant land. factory land etc. Separate NPV should be calculated for each category / type of security i.Should be considered after discounting 60% of the Value of the Book debts of not older than 6 months. The Book debts are not static and their realisable value should be calculated based on average of book debts considering the age and drawer. However.BOOK DEBTS: . 40 Rs.100 minus Rs. 20 .e. should be separately given in the OTS / OCS proposal. Valuation of Book debts should be obtained taking these factors into consideration The value of Jewellery and Shares declared are to be considered as NIL The worth of the Borrower / Guarantor should be ascertained by taking all the assets and investments into account after deducting other liabilities. 100 Rs. 60 (The recovery under (1) & (2) shall not be reckoned while arriving at the minimum acceptable amount). the amount remitted by sale or release of securities shall not be reckoned while arriving at the minimum acceptable amount and NPV should be arrived for the remaining securities.25 Rs. The time and realisation of security value is always directly proportionate to the number of securities available. Stocks.40) : Rs.

12 lacs Rs. Central Office vide Comlet No. the offer should be placed to the Management Committee of the Board.20 lacs = Rs.120 lacs Amount refundable to ECGC = Rs. though the endeavor shall be to recover the Book outstanding as on the date of proposal to avoid write off. 2. ILLUSTRATION: Compromise Amount Amount settled by ECGC Total dues on the relevant date = = = Rs. Note: Unsecured loans include credit card dues. end of the month in which 1st recall notice is issued OR default is reported to ECGC OR claim is settled by ECGC whichever is earlier.70 lacs Rs.70 lacs x Rs. incurred after the *relevant date) Total Dues under all the facilities on the relevant date *Relevant date means.Though the minimum acceptable amount shall not be less than the NPV of the securities.20 lacs Rs. Amount Settled by ECGC charges for security.. the acceptance of the borrower’s offer should be restricted to the contractual dues only and in the case of offer to pay notional dues. ECGC REFUND CALCULATIONS: CALCULATION OF AMOUNT REFUNDABLE TO ECGC: The amount refundable to ECGC is calculated as follows: Compromise Amount (Net of expenses such as insurance.09. it is possible that there may be cases where the NPV is more than the notional dues / contractual dues. Guidelines for recovery of Credit Card NPAs through OTS/OCS have been issued by Credit Card Division. Under unavoidable circumstances write off may be permitted after recording proper justification for the same. decision may be taken on the basis of the tangible net worth of the borrower / guarantor.120 lacs 21 .8/2010-11 dated 07.2010. FOR UNSECURED LOANS. for approval on a case to case basis. legal expenses X etc. If the OTS / OCS offer is to pay the Notional dues / contractual dues .

100 lacs into Compromise LESS: Actual Compromise Amount Rs.12 lacs VI.22 lacs *Net Compromise Amount = Actual Compromise Amount Minus Amount refundable to ECGC i.22 lacs **Surplus available in GL Head = Amount settled by ECGC Minus Amount refundable to ECGC i.100 lacs Rs. will be taken to income.8 lacs WRITE OFF AMOUNT Rs.12 lacs II.20 lacs from ECGC LESS: Amount settled by ECGC Present Book outstanding at the time of entering into compromise LESS: Net Compromise Amount* WRITE OFF AMOUNT Rs.70 lacs minus Rs.CALCULATION OF WRITE OFF WHEN REFUND TO ECGC IS INVOLVED: Based on the amount refundable to ECGC.e. the amount settled by ECGC would have been credited to the borrowal account whereas in some borrowal accounts.20 lacs Rs. Calculation of write off amount in the above two circumstances are illustrated below: Compromise Amount = Amount settled by ECGC = Book outstanding before receipt of Rs.80 lacs Rs. the write off amount will vary.100 lacs I.WHEN AMOUNT SETTLED BY ECGC HAD BEEN KEPT IN SEPARATE GL HEAD: Present Book outstanding at the time of entering Rs. the same would have been kept under separate GL Head.20 lacs from = ECGC Rs.70 lacs Rs. if any. will be credited to the book Outstanding. • • 22 . In some borrowal accounts.Rs.20 lacs minus Rs.e.WHEN AMOUNT SETTLED BY ECGC HAD BEEN CREDITED TO BORROWAL ACCOUNT: Book outstanding before receipt of Rs.70 lacs LESS: Surplus available in GL Head** Rs.20 lacs Rs. In the case of recovery through compromise settlement recovery should first be appropriated to Book outstanding and after adjusting the Balance only.58 lacs Rs. Rs. ACCOUNTING PROCEDURES: The appropriation of recovery should be done as per the Significant accounting policies of our Bank: In the case of recovery in the Non-Suit filed accounts the recovery should first be appropriated towards income and the balance left.

However. in such exceptional cases. sufficient care shall be taken by the branches before recommending waiver of legal action. any recovery of delayed period interest should be adjusted towards Book outstanding only and the balance alone should be claimed for write off from Accounts dept. the power of waiver of legal action can be exercised by all the functionaries upto the limit of write off powers delegated to them. WRITE OFF AND RECOVERY IN WRITTEN OFF ACCOUNTS: Continuation of NPA accounts where the chances of Recovery is bleak either by legal process / persuasion may only affect the performance results of the Bank. By waiving legal action. Bank loses only its right of recovery through legal process. where securities are not available to realize our dues or borrowers are not having any assets or means to repay the dues or chances of recovery in the normal course / by compromise are remote and initiating legal action for recovery is not prudent. it does not vitiate its right of appropriation of the amount received in the ordinary course of business or other recovery measures.• • • In the case of suit filed accounts. VII. VIII. However. Hence after exhausting all avenues of recovery. As the waiver of legal action would be a step towards writing off the dues. The write off exercise shall be used only as a last resort when: • The account is classified as doubtful or loss asset • Full provision is made in these accounts • There are no securities available or there is NIL / Nominal salvage value of securities • Net worth of the Borrower / Guarantor is Nil or Nominal • The Borrower / Guarantor are not traceable after reasonable enquiries • The Borrower / Guarantor has no source of income 23 . Recovery from Written Off Accounts (written off at branch level) should be credited to P&L code no: 8805 "Recovery from written-off loans. Branches shall submit the proposal for waiver of legal action to the appropriate authorities sufficiently in advance before the date of limitation sets in. WAIVER OF LEGAL ACTIONS: Every endeavor shall be made to recover the dues in the ordinary course. will be taken to income. In the event of accounts involving write off after full recovery of OTS/OCS amount. Hence. Bank may consider writing off such accounts after proper sanction from the appropriate authorities. recovery under both normal and compromise settlement recovery should first be appropriated towards Book outstanding and after adjusting the Balance only. recovery steps in the normal course should be continued even after waiver of legal action. Further the cost and valuable manpower in maintaining these accounts can be better utilized for the improvement of the Bank. Bank may consider waiver of legal action as a last resort.

Write Off is an internal mechanism of the Bank to clear the Non Performing Assets from the Balance Sheet. and such accounts shall be maintained at Central office to ensure that such accounts are taken to logical conclusion. The authority vested with the powers for write off can exercise such powers in respect of all NPAs requiring write-off after satisfying the above norms. irrespective of whether full provision is available or not. branches should continue their efforts to recover their dues either by persuasion or initiating legal action wherever legal remedies are in force. no fresh finance is being granted to the borrowers whose liabilities are written off. The Executive Director / Chairman & Managing Director can consider write off in all cases. Bank may carry out the Write-Off exercise at Central office level in consultation with Accounts dept Central office. Writing-Off at Central Office Level: The RBI guidelines provide Writing-Off of NPA accounts at Central Office level even though the relative advances are still outstanding in the branch books provided necessary provision is made as per the classification accorded to the respective accounts. The powers for write-off at Central Office can be for full or partial write off and irrespective of availability of any guarantee corporation cover. as and when required. In this connection the Register of Written-Off accounts should be made use of and updated with details of contacts and recoveries made. if they come to know that the party has got resources now to repay. it is necessary to maintain a Register of Written-Off accounts at every branch as per the extant guidelines. In tune with the above guidelines and to avail the tax benefits. Notwithstanding writing off of the dues (other than the accounts settled and recovered under OTS/OCS). As a matter of general policy.• • In case of suit filed accounts no use of continuing the suit except adding to the cost and even if decreed. Any recovery in the written off accounts will directly add to the profit of the Bank. Hence to prevent such defaulted borrowers from seeking / availing fresh finance. 24 . the decreed amount cannot be recovered All avenues of recovery have been exhausted. Sanctioning authorities at the time of permitting write off shall stipulate a condition in the sanction letters that recovery efforts should be pursued in the written-off accounts on an ongoing basis as writing off such accounts does not vitiate the legal rights of the Bank for recovery of its dues from the borrowers.

Bank shall. 2005 and of which our Bank is a member. and classified as “Willful Defaulter”.1 crore and above.IX.25 lacs and above. Whenever the entire dues as per the compromise settlement sanctioned is paid. in such case also bank. However. X. For accounts with balance of Rs. ‘No Due certificate’ should not be issued unless the dues are paid / settled subsequently. Extension of Further Loans to Borrowers already settled accounts under Compromise settlements: In this regard the provisions of the Loan policy will prevail. ISSUE OF “NO DUE CERTIFICATE”/ DELISTING FROM DEFAULTER / WILLFUL DEFAULTER LIST IN RESPECT OF ACCOUNTS SETTLED UNDER OTS/OCS: Wherever the borrower repays the entire contractual dues. For accounts with balance of Rs. In respect of written off account. such certificate should contain a clause indicating that the borrower has settled the dues under One Time Settlement Scheme of RBI / Bank as the case may be. Regional Offices should inform respective credit departments at central Office for non-suit filed accounts and Law Dept Central Office for suit filed accounts for putting up to the High level Committee and Grievances Redressal committee for delisting those borrowers from the Willful defaulters list submitted to RBI / CIBIL and / or any other credit information company which has obtained certificate of registration from RBI in terms of Section 5 of the Credit Information Companies (Regulation) Act. 25 . at the request of the borrower may issue ‘No Due Certificate’. whenever the entire dues as per the compromise settlement sanctioned is paid. at the request of the borrower issue ‘No due certificate’ Wherever the borrower settles dues with the bank as per “OTS/OCS scheme of RBI” or “Compromise settlement policy of the Bank” by availing concessions. 2005 and of which our Bank is a member. Regional Offices should inform ARD Central Office for non-suit filed accounts and Law Dept Central Office for suit filed accounts for delisting those borrowers from the defaulters list submitted to RBI / CIBIL and / or any other credit information company which has obtained certificate of registration from RBI in terms of Section 5 of the Credit Information Companies (Regulation) Act.

would have already been known to the branch / RO as the accounts are passed / classified through Watch / Special Watch category. Satisfaction memo to be filed seeking permission of the court to withdraw the suit / EP filed. It should be ensured that all accounts slipped into NPA are passed / classified through Watch / Special Watch category and reported to RO / CO. Branch should examine the account in detail. shall be superscribed “WITHOUT PREJUDICE TO THE ………. shall also review the following monthly : Compromise proposals pending sanction / follow up done Recovery made on sanctioned proposals Branches to diarize the due dates / date of post dated cheques obtained and ensure recovery as per terms of sanction of OTS/OCS. relating to the compliance of guidelines issued by regulatory authorities. If rehabilitation / upgradation is found to be not possible steps to be taken for recovery immediately. Guidelines to be followed after sanction of OTS/OCS: RO.” Consent decree to be obtained at the earliest whenever compromise settlement is sanctioned by filing a joint memo in suit filed accounts as per RBI guidelines. 26 . Time frame for initiating legal action for recovery of NPA as enumerated in Law Dept Misc. Any communication to the borrowers / guarantors / mortgagors in respect of suit filed accounts. after compromise amount recovered in full. the reasons for accounts becoming NPA and assess the possibility of upgradation / rehabilitation. MODIFICATIONS TO THE POLICY: Chairman & Managing Director / Executive Director / General Manager (Law & Recovery) are permitted to modify the policy.XI. This will supersede all our earlier NPA Recovery Policy and Compromise settlement policy. As soon as an account slips to Sub-standard category. from time to time. GUIDELINES FOR FOLLOW UP OF NPA ACCOUNTS Guidelines for follow up of NPA accounts. Circular 125/2003-04 to be followed. Conclusion: It should be kept in mind to recover the maximum amount with minimum sacrifice through effective negotiation. In fact the strength of the accounts before slippage to substandard category. XII. RO shall review all NPA accounts every month and identify potential accounts to bring under compromise settlement.

XIII. 2002 27 . LEXICON OF ABBREVIATIONS USED IN THE RECOVERY POLICY AAIFR Appellate Authority for Industrial & Financial Reconstruction ABJ Attachment Before Judgment ARC Asset Reconstruction Company ARD Assets Reconstruction Department BIFR Board for Industrial & Financial Reconstruction BR Base Rate CDR Corporate Debt Restructuring CGFTSI Credit Guarantee Fund Trust For Micro And Small Enterprises CGM Corporate General Manager CIBIL Credit Information Bureau Of India Ltd DRA Debt Recovery Agent DRT Debt Recovery Tribunal ECGC Export Credit Guarantee Corporation EP Execution Petition FI Financial Institutions FSV Forced Sale Value NBFC Non Banking Finance Companies NI ACT Negotiable Instruments Act NPA Non Performing Asset NPV Net Present Value OCS Out Of Court Settlement OTS One Time Settlement RBI Reserve Bank Of India RC Recovery Certificate RM Regional Manager RO Regional Office SA SARFAESI Agent SAC Settlement Advisory Committee The Securitisation & Reconstruction Of Financial Assets And SARFAESI Enforcement Of Security Interest Act.

2. RO should record in their note that the proposed compromise settlement is in conformity with RBI guidelines / our Bank’s Recovery Policy after ensuring the same). Date: General Manager Chief / Senior Regional Manager Indian Overseas Bank Regional Office (In case of proposals sanctioned by RO.FROM INDIAN OVERSEAS BANK REGIONAL OFFICE. CERTIFICATE OF REGIONAL OFFICE 1. The General Manager / Chief / Senior Regional Manager certifies that the present value of the prime and collateral security (as valued by the valuer) furnished in the OTS / OCS proposal is correct and justifiable. The proposed compromise settlement is in conformity with RBI guidelines / our Bank’s Recovery Policy. 28 . ______________ Date: Name of account : Branch : TO INDIAN OVERSEAS BANK ---------------.Department Central Office Chennai Regional Offices to ensure submission of the followings along with the proposal submitted by them to Central Office.

findings and decision taken.. If matter already taken up with central office. Whether the borrower has been a. RO should specifically mention “There are no staff lapses” and forward report in RBI format. be given. Listed as willful defaulter by RBI c. RO Comments on Staff Lapses : (RO should examine this aspect and state clearly whether lapse was observed. It should not be reported as "nil" or "----") III. etc. please give reference. Justification / Recommendation for OTS/OCS: RO recommend for acceptance and sanction of this OTS / OCS for the following reasons: General Manager . If there are no staff lapses.REGIONAL OFFICE RECOMMENDATIONS: I. Chief / Senior Regional Manager 29 . Whether any proceedings pending with CBI / Enforcement Directorate against the borrower / guarantor II. Identified / Recommended by RO as a willful defaulter b.

3.FROM INDIAN OVERSEAS BANK BRANCH Date: TO INDIAN OVERSEAS BANK REGIONAL OFFICE ………………………………. in lacs) Date of DPN Rate of Interest The details of all credit limits initially sanctioned and subsequent enhancement / reductions / adhoc sanctions with date of sanction upto the latest renewal / sanction should be given.No. S. OTS / OCS PROPOSAL 1. lacs Rs. & their respective worth Worth at the time Present Name of sanction Worth Rs. (a) (b) (c) 5. 2.. Name of account Constitution Names of proprietor / partner / Director etc.lacs Nature of activity Category of advance MLI / SME / SSI / TCD / OPS / INDL / PCD / OTHERS Whether the unit is functioning or Functioning / Closed closed Names of guarantors and their respective worth: Worth at the time Present Name of Guarantor of sanction worth Rs. S. The date of DPN and rate of interest should be given only for the limits against which amount is outstanding in the books of the branch. Sanctioned by Facilities Granted Date Nature of facility Limit (Rs.No. 30 . lacs 6. lacs Rs. 1 2 3 4.

lacs Present Fair Market Value & Forced Sale value By Approved Valuer Amount Rs. Asset Classification NPA – SS D1 D2 D3 LOSS Date Amount (O/s) Rs.for agricultural lands / house / farms for land / house / factory building etc. Prime / Collateral Security . Prime Security Whether disposed off or available * If disposed amount and without date on consent. if the account any.lacs FMV: FSV: FMV: FSV: Desk Top valuation by Branch Manager: Rs. Nature of security Value at the time Present of Value sanction B. DTV should be enclosed along with the Branch proposal 8.7. Date 31 . Situated at Town/ City (Mention full address of the property) Land Market Value at Valuation by extent the time of a. Approved Building sanction valuer construc b.No. initiated S. which the state the proceeds particulars were of criminal credited to action. Branch ted area Manager Amount (DTV) Date Rs. Detailed description of Securities and their value: A.

date and amount of claim lodged. If claim amount received date and amount received.No Present Book Outstanding Facilities Rs. Position of DICGC / ECGC Claim (in Rupees) Date of Claim Date of claim made Amount received Credited to the a/c or kept in separate GL Head (Specify whether cover available. balance available for adjustment to account. present position. amount to be refunded. already refunded. reasons there for : : : 12. Whether claim lodged. Enclose statement of account for each facility from the date when interest was last debited to till date) 10. S. If rejected reason thereof. Outstanding ADD Amount Refundable to ECGC TOTAL (Furnish exact book o/s for each facility. Whether credited to account or held in separate account.9.) 11. etc. (a) (b) (c) Whether notice under SARFAESI Act issued or not If issued developments thereon If not issued. (a) Date when Recovery application filed at DRT : (b) Recovery Application number and its Claim amount: (c) Present position of the Application before DRT : (d) Date of DRT Order for Recovery Certificate : (e) Date and Amount of Recovery Certificate : (f) Name of the Lawyer : (i) Amount of fees paid so far : (ii) Amount of fees to be paid : 32 . if not reason thereof. In case of recovery of compromise amount.

purpose. efforts taken to recover.. rehabilitation steps if any taken. if any: 16. steps taken in enforcing the securities during pendency of Recovery Application / Recovery Certificate. reason for filing Recovery Application at DRT. be furnished. Enclose additional sheet. development that took place in the running of the unit/ business. CALCULATION OF NOTIONAL DUES: 33 (in Rupees) . reason for irregularities. if necessary) 15. exp.13. TASK FORCE MEETING AND OTS / OCS OFFER OF THE PARTY Date Name of person who attended the Task Force Meeting Name of Bank Executive who presided over the Task Force Meeting OTS / OCS Offer and terms of payment 17. etc. from application date @ simple rest as claimed in the application till the end of the current month + cost & misc. If RC issued. amount due as per Recovery Certificate) 14. a) Dues when interest compounded at : Contractual rate (Balance on NPA date + compound interest @ DPN rate + cost) b) Dues as on date calculated as per : Recovery Certificate (Application amount + int. date of availment of facilities. details of dishonoured accepted bills incase of Bills outstanding.BRIEF HISTORY OF THE ACCOUNT: (Comprehensive history of the account such as date of starting of the unit. Details of previous OTS / OCS sanctioned but not honoured by the party. present position of legal proceedings.

j. x LESS: CV Interest on ECGC / CGFTSI claim received amount. Godown rent. d. Reasons for the expected delay in realization of the securities: 34 . f. subsequent to the date of NPA. ADD: Debits such as Bills returned unpaid. In lacs) Net present Security Realizable value Realizable S.(b) ADD: Other Expenses viz. Outstanding as on the date upto which interest was last debited Date of Interest Last debited: ADD : Simple interest to be added from the date of last debit till date of expected payment of compromise amount at the Bank’s base rate prevailing on the date of submitting the proposal / contract rate / decreed rate of interest which ever is less.(a) above Add: Interest on the (c ) above at the rate mentioned in col. c. C. charges paid to Security agencies/ Personnel etc.V. ADD : Legal and Other Expenses incurred subsequent to date mentioned in col. (a) above Sub Total = LESS: Recoveries made after the date mentioned in col. g. k. Interest Total i. ECGC/DICGC premium. (a) and Countervailing Interest. Date Amount C. factory land etc: should be separately given in the OTS / OCS proposal. b. DPGs invocation of Guarantees after the date mentioned in col.. Interest y Sub-total = x+y NOTIONAL AMOUNT DUE FROM THE PARTY 18. e.No NPV Factor Details net of expenses period Value TOTAL NPV The NPV of the Plant & Machinery and other property such as vacant land. Insurance premium paid.CALCULATION NET PRESENT VALUE (MINIMUM ACCEPTABLE AMOUNT): (Rs.V. h.a.

OTS / OCS OFFER AMOUNT: BOOK OUTSTANDING OTS / OCS OFFER NOTIONAL DUES SACRIFCE (if any) WRITE OFF WAIVER OF UNDEBITED INTEREST TOTAL PROVISION HELD (in Rupees) 20. Branch should specifically mention. 21. be given. If matter already taken up with central office.19. findings and decision taken. BRANCH RECOMMENDATIONS BRANCH MANAGER INDIAN OVERSEAS BANK ……………………………. please give reference. If there are no staff lapses. 22. BRANCH 35 . etc. It should not be reported as "nil" or "----"). SOURCE OF PAYMENT & TERMS OF PAYMENT: (Any upfront payment made should also be mentioned. “There are no staff lapses” and forward Report in RBI format.. REPORT ON STAFF LAPSES: (Branch should examine this aspect and state clearly whether lapse was observed. If not the reasons for relaxing the same should be recorded).

Statement of Account for each facility from the date when account became stagnant. STAFF LAPSES REPORT IN RBI FORMAT We confirm having complied with the following conditions stipulated by RBI. Subsidy etc credited to the account after date of NPA have to be deducted for arriving notional dues.Adv/146/93-94 dated 15.11. interest on ECGC / DICGC claims received should alone be deducted from the amount due to arrive at notional dues if the ECGC amount was kept separately in Sundry Creditors / GL Head. Minutes of Task Force Meeting. Cash Margin. (say 1 year prior to date of last debit of interest]. Please forward the following with the proposal: a. 3. 3. 4. The amounts received from parties. The amount refundable to DICGC/ECGC should be added to the present outstanding. OTS / OCS offer letter from the subjects. Latest Valuer’s report d.A/C:………………………………………. 2. e. C. There was no act of Commission or Omission on the part of the staff leading to the debt proving irrecoverable. vide Central Office Circular No. 4. AGM/CHIEF/SENIOR MANAGER RBI/2007-2008/152 36 . However.V. ARDRS. Please take care to fill up all columns with relevant particulars 2. There was no laxity in the conduct and post disbursement supervision of the advances. c. if decreed.93: 1. Copies of plaint or decree. All possible steps to recover the dues have been taken and there are no further prospects of recovering the debt and that writing off is in the larger interest of the Bank. if already credited to the account. Date Branch: NOTE: 1. The sanctioning authority in the case of Advances had exercised his powers judiciously and adhered to the guidelines issued by the Bank in the matter of grant of advances and that normal terms and conditions were stipulated. b.

The sale price should generally not be lower than the net present value arrived at in the manner described above. Yours faithfully.DBOD. 4. However.BP. Banks should.DBOD.BC.04. In terms of the above banks' Boards are required to lay down policies and guidelines covering among other things. valuation procedure to be followed to ensure that the economic value of financial assets is reasonably estimated based on the assessed cash flows arising out of repayments and recovery prospects. Guidelines on purchase/sale of Non Performing Assets Please refer to our Circular No. 3.048/2005-06 dated 13 July 2005 on the captioned subject. while selling NPAs. it has come to notice that in some cases NPAs have been sold for much less than the value of available securities and no justification has been given. Same principle should be used in compromise settlements.BC.16/21.34 /21.No. the net present value of the settlement amount should be calculated and this amount should generally not be less than the net present value of the realisable value of securities. 2007 All Commercial Banks (excluding RRBs) All India Term Lending and Refinancing Institutions All Non Banking Financial Companies (including RNBCs) Dear Sir.04. (Prashant Saran) Chief General Manager-in-Charge Annexure to Recovery Policy 2011-12 The comparative table between Recovery policy for the year 2010-11 37 . 2. As the payment of the compromise amount may be in installments.BP. work out the net present value of the estimated cash flows associated with the realisable value of the available securities net of the cost of realisation.048 /2007-08 October 4.

Recovery Policy 2010-11 III MEASURES TO ACHIEVE THE OBJECTIVE OF THE POLICY: 7.and the modifications for the year 2011-12 are given below. Implementation of rehabilitation / restructuring package permitted by BIFR / CDR and ensuring recovery as permitted. The slippages are to be monitored on continuous basis and try for Upgradation by recovering the “overdue amount” or by restructuring / rescheduling as per the prescribed norms of RBI. Whenever an account is upgraded one layer above the sanctioning authority should review the upgradation. The slippages are to be monitored on continuous basis and try for Upgradation by recovering the “critical amount” or by restructuring / rescheduling as per the prescribed norms of RBI. Whenever an account is upgraded one layer above the sanctioning authority should review the upgradation. Within 3 months of the account becoming NPA. IV METHODS OF RECOVERY: Recovering overdue amount to upgrade: The following feasible steps should be adopted for Upgradation of NPA accounts: • • • • Recovering the critical / overdue amounts. Re-structuring / Re-phasing / Rehabilitating the NPA accounts wherever possible as per extant guidelines. Implementation of rehabilitation / restructuring package permitted by BIFR / CDR and ensuring recovery as permitted. • • Recovering the overdue amounts. Re-structuring / Re-phasing / Rehabilitating the NPA accounts wherever possible as per extant guidelines. the Credit Department concerned shall 38 . IV METHODS OF RECOVERY: Recovering critical / overdue amount to upgrade: The following feasible steps should be adopted for Upgradation of NPA accounts: • • Modification in Recovery Policy 2011-12 III MEASURES TO ACHIEVE THE OBJECTIVE OF THE POLICY: 7.

7. • Identifying and classifying the willful defaulters for submission to RBI / CIBIL as per the RBI guidelines. the file may be transferred to Central Office / Regional Office Law Department as the case may be. 21.7. Once a decision is taken for recovery.examine whether the account is viable for re-structuring or recovery action. 06. with due approval. • Identifying and classifying the willful defaulters for submission to RBI / Credit Information Bureau(India) Ltd(CIBIL) and / or any other credit information company which has obtained certificate of registration from RBI in terms of Section 5 of the Credit Information Companies (Regulation Act. for recovery action.2009 to enable the “High Level Committee and Grievances Redressal Committee to complete their process for reporting to RBI / CIBIL. WILFUL DEFAULTER: The identification and classification of “Willful Defaulter” should be done meticulously as per our Master circular / 36 / 2009 – 2010 dt. Modification in Recovery Policy 2011-12 Use of ethical measures such as publication of photographs / classifying as willful defaulters etc. 2005 and of which our Bank is a member. WILFUL DEFAULTER: The identification and classification of “Willful Defaulter” should be done meticulously as per our Master circular / 54 / 2010 – 2011 dt.2010 to enable the “High Level Committee and Grievances Redressal Committee to complete their process for reporting to RBI / CIBIL and / or any other credit information company which has obtained certificate of registration from RBI in terms of Section 5 of the Credit Information Companies 39 . Recovery Policy 2010-11 Use of ethical measures such as publication of photographs / classifying as willful defaulters etc.

(Regulation Act. IX.25 lacs and above. whenever the entire dues as per the compromise settlement sanctioned is paid. and classified as “Willful Defaulter”. IX. Regional Offices should inform respective credit departments at central Office for non-suit filed accounts and Law Dept Central Office for suit filed accounts for putting up to the High level Committee and Grievances Redressal committee for delisting those borrowers from the Willful defaulters list submitted to RBI / CIBIL and / or any other credit information company which has obtained certificate of registration from RBI in terms of Section 5 of the For accounts with balance of Rs. ISSUE OF “NO DUE CERTIFICATE”/ DELISTING FROM DEFAULTER / WILLFUL DEFAULTER LIST IN RESPECT OF ACCOUNTS SETTLED UNDER OTS/OCS: For accounts with balance of Rs. and classified as “Willful Defaulter”. 40 .25 lacs and above. 2005 and of which our Bank is a member.1 crore and above. Regional Offices should inform respective credit departments at central Office for non-suit filed accounts and Law Dept Central Office for suit filed accounts for putting up to the High level Committee and Grievances Redressal committee for delisting those borrowers from the Willful defaulters list submitted to RBI / CIBIL. ISSUE OF “NO DUE CERTIFICATE”/ DELISTING FROM DEFAULTER / WILLFUL DEFAULTER LIST IN RESPECT OF ACCOUNTS SETTLED UNDER OTS/OCS: For accounts with balance of Rs. For accounts with balance of Rs. Whenever the entire dues as per the compromise settlement sanctioned is paid. whenever the entire dues as per the compromise settlement sanctioned is paid. Whenever the entire dues as per the compromise settlement sanctioned is paid.1 crore and above. Regional Offices should inform ARD Central Office for non-suit filed accounts and Law Dept Central Office for suit filed accounts for delisting those borrowers from the defaulters list submitted to RBI / CIBIL and / or any other credit information company which has obtained certificate of registration from RBI in terms of Section 5 of the Credit Information Companies (Regulation Act. Regional Offices should inform ARD Central Office for non-suit filed accounts and Law Dept Central Office for suit filed accounts for delisting those borrowers from the defaulters list submitted to RBI / CIBIL. 2005 and of which our Bank is a member.

18.10. ROs should make use of the provisions available and engage Recovery Agents and SARFAESI Agents.Credit Information Companies (Regulation Act. Modification in Recovery Policy 2011-12 Debt Recovery Agents Debt Recovery Agents Our Bank has formed a Policy for Our Bank has framed a Policy for Engagement of Recovery Agents Engagement of Recovery Agents. vide Law Dept circular No.1. Regional offices are advised to engage the services of Recovery Branches / Regional Offices to Agents as per the policy to follow the procedures and engage maximize Recovery. 2005 and of which our Bank is a member. Trans/E/11/2009-10 dt. Recovery Agents. Recovery Policy 2010-11 Recovery Policy 2010-11 41 Modification in Recovery Policy 2011-12 . Engagement of Sarfaesi Agents to assist the Recovery officer is also detailed in the circular.

RO shall endeavor that they submit the required details and carry out the Nodal centre jobs required for due diligence. Modification in Recovery Policy 2011-12 42 . sanction shall be by the Management Committee of the Board. sanction shall be by the Management Committee of the Board. The decision for sale shall be taken by Central Office and in respect of individual accounts. Whenever the proposal for sale of NPA accounts to ARCs and others is taken up. the sanction shall be as per the extant delegated powers and in respect of portfolio of accounts. applicable to sale of NPAs as well and the sale shall be as per RBI guidelines issued from time to time on the subject. The terms of Recovery Policy is The terms of Recovery Policy is applicable to sale of NPAs as well. the sanction shall be as per the extant delegated powers and in respect of portfolio of accounts. our Bank has been selling NPAs to such companies on individual account / portfolio basis. 5. Recovery Policy 2010-11 The offer can be cash / Security Receipts / both and the total of such offer shall not be less than the NPV of the securities. To reduce the NPA level. RO shall endeavor that they submit the required details and carry out the Nodal centre jobs required for due diligence. The decision for sale shall be taken by Central Office and in respect of individual accounts.4. To reduce the NPA level. Whenever Central Office decides to sell the selected NPA accounts to ARCs and others.2011 it shall be ensured that accounts originated fraudulently or have been classified as on the date of sale as involving fraud are not sold. our Bank will also endeavor for sale of NPAs to such companies on individual account / portfolio basis. The offer can be cash / Security Receipts / both and the total of such offer shall not be less than the NPVs of the securities.Sale of NPAs to ARCs / Banks / Sale of NPAs to ARCs / Banks / FIs FIs / NBFCs: / NBFCs: RBI has framed separate guidelines RBI has framed separate guidelines for sale of NPAs by banks to ARCs / for sale of NPAs by banks to ARCs / FIs / banks / NBFCs. FIs / banks / NBFCs. Further in terms of RBI guidelines dt.

VALUATION OF THE SECURITIES FOR COMPROMISE SETTLEMENT / RELEASE OF SECURITY: In the case of partial release of security not under OTS/OCS. 5 Crores or above. the lower value of the two should only be accepted. If the variation in the two valuations is not more than 10%. relevant factors. The valuer should send the valuation report to the Branch Head in a closed cover. The lowest value of the following should be computed as realizable value of the securities: Government guideline value to be certified by approved panel valuer. The highest value of the following should be computed as realizable value of the securities: Government guideline value to be certified by approved panel valuer. the higher value of the two should only be accepted. The valuation of the property should be kept confidential. 5 Crores. lowest would be taken as value of the property. Desktop valuation by branch Deleted manager assessed after inspection 43 . The Branch should obtain minimum two independent valuation reports from Approved Valuers for all properties valued at Rs. Realisable value given by the Realisable value given by the approved panel valuer based on approved panel valuer based on the specific location and other the specific location and other relevant factors. highest would be taken as value of the property. 5 Crores or above. If the variation is more than 10%. If the variation in the two valuations is not more than 10%. The Branch should obtain minimum two independent valuation reports from Approved Valuers for all properties valued at Rs. the valuation report should not be more than six months old.VALUATION OF THE SECURITIES: If the valuation by the approved panel valuer is more than one year. If the variation is more than 10%. 5 Crores. a third valuer will be engaged at the cost of borrower and of the three valuations. fresh valuation should be obtained from approved panel valuer for this purpose ( we propose addition). a third valuer will be engaged at the cost of borrower and of the three valuations. Valuation Report should be obtained from one valuer for all properties valued up to Rs. Valuation Report should be obtained from one valuer for all properties valued up to Rs.

The desk top value viz. Recovery Policy 2010-11 If it is partial release then the If it is partial release. Modification in Recovery Policy 2011-12 PARTIAL RELEASE OF SECURITY / PARTIAL RELEASE OF SECURITY / GUARANTOR NOT UNDER OTS/OCS: GUARANTOR NOT UNDER OTS/OCS: It should be made clear in the proposal whether it is a compromise settlement in full quit or only partial release of security / guarantor. value of securities should be given as of original sanction date. both in full quit or partial release may be considered partial release may be considered 44 . Partial release can be permitted only if the residual securities are sufficient to cover the balance outstanding or the offer for payment is not less than the Fair Market value of the property proposed to be released. Such proposals. amount should be substantiated. last review date and present position.) in value.. If there is vide variation (especially for land / buildings etc. The valuation of securities should be in line with market realities. the value as ascertained by the Branch Manager should also be taken on record. In the proposal. If there is wide variation (especially for land / buildings etc.and local market enquiries. then the available security for the balance available security for the balance amount should be substantiated.. value of securities should be given as of original sanction date. the reason for such variation should be justified with proper reasons. In the proposal. the reason for such variation should be justified with proper reasons and a certificate to that effect should be enclosed duly signed by the Regional Head. last review date and present position. It should be made clear in the proposal whether it is a compromise settlement in full quit or only partial release of security / guarantor. both in full quit or Such proposals. Partial release can be permitted if the offer for payment is not less than the Fair Market value of the property proposed to be released or the Forced Sale Value of the residual securities are sufficient to cover the balance outstanding. The valuation reports should not be more than six months old.) in value.

Forced Sale Value of such securities shall be taken.00 Rs. For Part release of security / personal guarantee. Though the offer is not under OTS / OCS and only for partial release of security / guarantor.by the respective layer of authority as per the discretionary powers for compromise settlements under OTS / OCS for Waiver / write-off of NPA account.60.00 Rs.00 Rs.00 Dues Example: Notional Rs. For release of personal guarantee without release of property. the networth of guarantor shall be considered.60. if higher than FMV Forced Sale value of the remaining securities Notional Balance Dues Rs.00 Fair Market Value of the property to be released / offer amount.00 Fair Market Value of the property to be released / offer amount. the minimum offer shall be Fair Market Value of the property to be released. the networth of guarantor shall be considered. the same is case of partial release. other than BIFR/CDR. To arrive at the notional balance in To arrive at the notional balance in case of partial release.20. by the respective layer of authority as per the discretionary powers based on sacrifice for compromise settlements under OTS / OCS for NPA account. Rs. the dues / sacrifice shall be calculated notionally as in the case of OTS / OCS. the In Cases where total amount offered for the securities to be released and Forced Sale value of the remaining securities is more than the Notional Dues. Forced Sale Value of such securities shall be taken. if higher than FMV Forced Sale value of the remaining securities Notional Balance 20. While arriving at the value of the remaining securities.00 Rs. 20. the same is explained by way of example.00 In Cases where the Fair Market Value of the securities to be released and Forced Sale value of the remaining securities is more than the Notional Dues.00 Rs.00 Rs. explained by way of example.100. the 45 .20. the dues / sacrifice shall be calculated notionally as in the case of OTS / OCS. 80. Example: Notional Rs. While arriving at the value of the remaining securities. Though the offer is not under OTS / OCS and only for partial release of security / guarantor.100. For release of personal guarantee without release of property. 80.

Nil.4.Notional sacrifice is to be treated as Notional sacrifice is to be treated as Nil. any valid reason. for OCS amount/instalments. the Regional Head is empowered to release the securities on payment of the Fair Market Value/offer amount. RO should note to incorporate the status report while 46 .19. Modification in Recovery Policy 2011-12 STAFF LAPSES: All OTS proposals should have the status report on staff lapses as on the date of submission of proposal as per the Bank’s Staff Accountability Policy for Non Performing Credits vide circular No. specific mention should be made in the proposal itself and the waiver shall be approved by the sanctioning authority. Therefore.EST/42/2009-10 dt.10.EST/63/2010-11 dt. If such sum is less than the notional dues. Recovery Policy 2010-11 Recovery Policy 2010-11 STAFF LAPSES: All OTS proposals should have the status report on staff lapses as on the date of submission of proposal as per the Bank’s Staff Accountability Policy for Non Performing Credits vide circular No. In such cases.6. (The same principle will be applied (The same principle will be applied for release of personal guarantee for release of personal guarantee as well.2010. the sanctioning authority can release the securities on payment of the Fair Market Value of the properties.2009.) Modification in Recovery Policy 2011-12 CONDITIONS TO BE INCORPORATED CONDITIONS TO BE INCORPORATED IN THE SANCTION OF PROPOSALS IN THE SANCTION OF PROPOSALS Post dated cheques should be Endeavour may be made to obtain obtained as per the terms of post dated cheques for the OTS / payment and if this not possible.) as well. In such cases. the powers may be exercised as per the delegation of powers by the respective layer of authority for sacrifice.

25% of the OTS sanctioned amount is to be paid within 3 months of conveying the sanction and the balance 75% may be paid in monthly / quarterly installments not exceeding further 9 months together with interest at PLR on the date of sanction. is sought and if the request is genuine. from the date of conveying the sanction to date of final payment made. EXTENSION OF TIME: a. However. Whenever the extension of time for honouring the OTS / OCS sanctioned by RM / DGM or GM(Law) at Central Office is sought and if the request is genuine. normally. if any and fixing Staff Accountability is to be completed within six months from the date of account becoming NPA. if the payment is to be made in installments and has to extend beyond 3 months. EXTENSION OF TIME: a. It may be noted that it is the responsibility of the Regional Office to ensure that the exercise of identification of Staff Lapses. Recovery Policy 2010-11 The staff accountability has to be fixed for all the NPA accounts as per our Bank’s Staff Accountability Policy for Non-Performing Credit.recommending for OTS / OCS. However. normally. 25% of the OTS / OCS sanctioned amount is to be paid within 3 months of conveying the sanction and the balance 75% may be paid in monthly / quarterly installments not exceeding further 9 months together with interest at the prevailing Bank’s base rate on simple basis for the period beyond 3 months of conveying sanction. if the payment is to be made in installments and has to extend beyond 3 months. within 3 months from the date of conveying the sanction without charging interest. the sanctioning authority themselves may extend the time with payment PAYMENT TERMS: Time limit for payment of OTS: The sanctioned OTS should be recovered. the concerned sanctioning authority themselves may extend the time with payment of interest @ PLR for 47 . Whenever the extension of time for honoring the OTS/OCS sanctioned by RM / CGM. within 3 months from the date of conveying the sanction without charging interest. Modification in Recovery Policy 2011-12 PAYMENT TERMS: Time limit for payment of OTS/OCS: The sanctioned OTS/OCS should be recovered.

Extension of time for an OTS/OCS Deleted sanctioned by MCB.the delayed period. Recovery Policy 2010-11 b. in respect of an OTS/OCS sanctioned on deferred payment. GM(Law) at Central Office may extend the time with payment of simple interest @ 12% for the delayed period i.e. 48 .e. is sought and if the request is genuine. Whenever the extension of time for honoring the OTS / OCS sanctioned by ED / CMD / MCB. is sought and if the request is genuine. if there is any delay. for payment of the 25% amount payable within 3 months. the period after the time originally stipulated for payment. at 12%. c. In respect of the balance 75% amount payable in 9 months. CGM (Law) or CGM (Credit Departments) may extend the time with payment of interest @ 12% for the delayed period. simple interest will be charged at Bank’s base rate upto 9 months and for the period beyond 9 months. Modification in Recovery Policy 2011-12 b. of simple interest @ 12% for the delayed period i. interest will be charged at 12% simple for the period delayed beyond 3 months. For the purpose of clarification. waiving part / full interest for the delayed period may be considered subject to a floor @ 3 year G Sec plus 2% by CMD and in his absence by ED. the period after the time originally stipulated for payment. Whenever the extension of time for honoring the OTS sanctioned by ED / CMD / MCB.

SETTLEMENT FORMULA FOR COMPROMISE / CALCULATION OF SACRIFICE: Simple interest to be added from the date of last debit till date of expected payment of compromise amount at the rate of 9. Example: Book outstanding on date of NPA: Rs. any payment made before the OTS / OCS proposal was submitted would have been taken to interest account in which event. (Sacrifice is the basis for deciding deciding the sanctioning authority) the sanctioning authority) As per the existing accounting policy of our Bank.100 49 . However.25% per annum / contract rate / decreed rate of interest which ever is less to be reviewed once in 6 months as on 31st March and 30th September Recovery Policy 2010-11 SETTLEMENT FORMULA FOR COMPROMISE / CALCULATION OF SACRIFICE: Simple interest to be added from the date of last debit till date of expected payment of compromise amount at the Bank’s base rate prevailing on the date of submitting the proposal / contract rate / decreed rate of interest which ever is less Modification in Recovery Policy 2011-12 * SACRIFICE under OTS is always the * SACRIFICE under OTS is always the difference between NOTIONAL difference between NOTIONAL DUES and OTS OFFER. Notional Dues (minus) OTS Offer = Notional Dues (minus) OTS Offer = SACRIFICE (Sacrifice is the basis for SACRIFICE = Waiver + Write-Off. DUES and OTS OFFER. In the process. the amount already remitted subsequent to NPA date and taken to interest account may be notionally treated as recovery towards principal and the sacrifice may be arrived at. when the OTS / OCS proposal is considered. all recoveries other than the case of suit filed accounts and OTS / OCS shall be appropriated first towards interest / uncharged interest. there would not have been reduction / there would have been nominal reduction in the book outstanding.

we propose obtaining the value of the machinery from the valuer. The minimum acceptable amount shall be the NPV of the securities available as on the date of NPA. 30 As this sacrifice is falling under CRM’s powers. Therefore.20) Sacrifice: Write off: Rs. repayments made by the party after classifying the account as NPA shall also be taken into account while arriving at the NPV. However.110 Rs. 20 Rs.30 Recovery Policy 2010-11 50 .Subsequent payments taken towards interest: Notional dues: Offer amount including Rs.Rs.20 already paid(i. 20 Rs. Modification in Recovery Policy 2011-12 At the end of para on valuation of After discounting the hypothecated hypothecated stocks.e. factory land etc. he can consider sanction and pass orders for writing off (though the write off amount of Rs. The NPV of Plant & Machinery and other property such as vacant land. shall be arrived as per formula already explained. Example: (1)Amount paid for release of security after date of NPA: Rs. the NPV addition.30 lacs falls beyond his powers). should be separately given in the OTS / OCS proposal. Machinery stocks & book debts as above and and Book Debts. the amount remitted by sale or release of securities shall not be reckoned while arriving at the minimum acceptable amount and NPV should be arrived for the remaining securities.70+Rs.90 Rs.

Recovery Policy 2010-11 FOR UNSECURED LOANS.40) : Rs.100 Rs. the offer should be placed to the Management Committee of the Board. under unavoidable circumstances write off may be permitted after recording proper justification for the same.(2)Amount realized by sale of security by Bank through SARFAESI/DRT after date of NPA Rs.100 minus Rs. for approval on a case to case basis.25 (3)NPV of the remaining securities at the time of offer: (4)Repayments made after classifying account as NPA: (5)Minimum amount acceptable will be (Rs. to avoid write off. If the OTS / OCS offer is to pay the Notional dues / contractual dues . the acceptance of the borrower’s offer should be restricted to the contractual dues only and in the case of offer to pay notional dues. Book outstanding as on the date of proposal may be taken as Minimum acceptable amount. Modification in Recovery Policy 2011-12 FOR UNSECURED LOANS. it is possible that there may be cases where the NPV is more than the notional dues / contractual dues. 40 Rs. though the endeavor shall be to recover the Book outstanding as on the date of proposal to avoid write off. 51 . decision may be taken on the basis of the tangible net worth of the borrower / guarantor. However. 60 (The recovery under (1) & (2) shall not be reckoned while arriving at the minimum acceptable amount) Though the minimum acceptable amount shall not be less than the NPV of the securities.

09.2010. Under unavoidable circumstances write off may be permitted after recording proper justification for the same. The proposed compromise settlement is in conformity with RBI guidelines / our Bank’s Recovery Policy. Central Office vide Comlet No. 2.07. Name of account : Branch : 1. The page on Executive Summary deleted since these details are contained in the format of OTS / OCS proposal.Compromise below the minimum acceptable Amount / Benchmark Amount should not be treated as deviation as long as it is with cogent reasons. Modification in Recovery Policy 2011-12 CERTIFICATE BY REGIONAL HEAD( in CERTIFICATE BY REGIONAL HEAD: the event of wide variation in valuation): OTS / OCS PROPOSAL (in terms of CO Circular No ADV / 55/2010-11 dated 21. (In case of proposals sanctioned by RO.8/2010-11 dated 07. Note: Unsecured loans include credit card dues. The General Manager / Chief / Senior Regional Manager certifies that the present value of the prime and collateral security (as valued by the valuer) furnished in the OTS / OCS proposal is correct and justifiable.10 Name of account : Branch : The General Manager / Chief / Senior Regional Manager certifies that the present value of the prime and collateral security (as valued by the valuer / branch manager) furnished in the OTS / OCS proposal is correct and justifiable. RO should record in their note that the proposed compromise settlement is in conformity with RBI 52 Recovery Policy 2010-11 . Guidelines for recovery of Credit Card NPAs through OTS/OCS have been issued by Credit Card Division.

Facilities Limit Balance Outstanding --------------------------------------------------------------------------------------------------------------------------A. ******************** Annexure -2 Indian Overseas Bank. VALUATION OF LANDED PROPERTY : --------------------------------------------------------------------------------------------------------------------------Location Nature Extent Owned/ Value (at Current Urban/Semi-Urban/ Leased Market Rate) Rural/Agri.guidelines / our Bank’s Recovery Policy after ensuring the same)./House Sites etc. Branch DESK TOP VALUATION REPORT 1. Rs. --------------------------------------------------------------------------------------------------------------------------- 53 . Rs. Fund Based : a) b) c) B. Name of the Borrower 2.………………. Non-Fund Based : a) b) c) --------------------------------------------------------------------------------------------------------------------------3.

Others (LIC Policy/Jewellery/UTI/NSC. Address Leased Current occupied House/Factory/ II Class Mtrs. VALUATION OF BUILDING : --------------------------------------------------------------------------------------------------------------------------Nature Condition Extent Location/ Owned/ Value(at Self Residential/ I Class/ Sq.--------------------------------------------------------------------------------------------------------------------------4. VALUATION OF OTHER ASSETS : ------------------------------------------------------------------------------------------------Brief Details Present Value Rs. Land 2. Building 3. Market or Office Building Construction Rate Rs. VALUATION OF MACHINERY : Brief Details Location Imported/ 1 2 Indigenous 3 Aged/Date of Purchase 4 Cost as per Market Value Rs. leased 5. etc) -----------------------------------------------Present Valuation Amount Rs. Machinery 4. 1. 54 . ------------------------------------------------------------------------------------------------- CONSOLIDATION Earlier Valuation Amount Rs. 6 including taxes 5 6.

one copy to be given to Auditors along with HYR Return. 2.------------------------Date : ------------------------ Branch Manager Notes : 1. One copy to be retained at the branch. It should be prepared in triplicate. 55 . one copy to be sent to Regional Computer Centre along with HYR Return. The present value indicated in this report should be incorporated in the HYR Returns at the appropriate columns.

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