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CHAPTER- 9

NON PERFORMING ASSETS

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

PRUDENTIAL NORMS ON INCOME RECOGNITION, ASSETS CLASSIFICATION &


PROVISIONS PERTAINING TO ADVANCES (NPA)
BACKGROUND: In the wake of the financial reforms undertaken by the Government of India
based on the Narasimham Committee Report I and II, Prudential Norms for the advances portfolio
of the banks and financial Institution were introduced by Reserve Bank of India in Phased manner
w.e.f. 1/4/92 to address the credit monitoring process being adopted and pursued by the banks and
financial institutions. The norms for NPA classification the delinquency period was of 4 quarters
(non-recovery of interest/instalment up to 4 quarters) and the same was reduced to 3 quarters in
1994, 2 quarters in 1995 and 90 days w.e.f. 31.03.2004.
To strengthen further the recovery of dues by banks and financial institutions, Government of
India promulgated The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002.
INCOME RECOGNITION:
The policy of income recognition should be objective and based on record of recovery
rather than on any subjective considerations.
Interest on advances against term deposits, NSCs, IVPs, KVPs and Life policies may be
taken to income account on the due date, provided adequate margin is available in the
account.
Income from non performing assets is not recognised on accrual basis but is booked
as income only when it is actually realized.
Fees/Commission and any similar income earned by banks on NPA a/c should not be
recognized until it is actually realized.
Charges/Expenses/Insurance etc on NPA Borrowal account should not be debited to the
account unless recovered. The same needs to be recorded in the memoranda account after
charging to Banks revenue.
On an account turning NPA, the interest already charged and not collected is to be
reversed by debiting Profit and Loss account at the end of quarter/half year/year, and

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further application of interest is to be stopped. However, accrued interest is to be recorded


in a Memoranda account.
Fees, Commission and Similar income that have accrued should cease to accrue in current
period and should be reversed with respect to past period, if uncollected.
Interest on advance guaranteed by Central Government irrespective of its assets
classification status is not to be taken to income account unless the interest has been
actually realized.
Fees and commission earned by Bank as a result of renegotiations or re-scheduling of
outstanding debts should be recognized on an accrual basis over the period of time
covered by the re-negotiated or rescheduled extensions of credit.
For the sake of uniformity across banks, now the unrealized interest in the accounts classified as
NPA will be credited in the account itself by debiting Profit & Loss Account with the particulars:
Unrecovered Interest reversed and recorded in Memoranda A/c. Existing DI/SI of each
NPA/PA a/c has been credited back to the concerned NPA/PA account and simultaneously
accounted for as Recorded Interest in the memoranda account.
ASSET CLASSIFICATION: FINANCIAL PARAMETERS: (IRAC Norms vide RD Cir.
36/2014 DATED 13.10.2014):
An asset, including a leased asset, becomes non performing when it ceases to generate income for
the bank. A non performing asset (NPA) is a loan or an advance where:
Sr.
No.
1

Category of account

Cash
Credits
Overdrafts

Term Loan

Criteria for classification of account as NPA


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

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3
4

5
6

7
8

10

availability of financial statements and other data from the


borrower branch should show that renewal/ review of the
facility already on. In any case delay beyond 6 months is not
considered desirable as a general discipline. An account where
the regular/ad hoc credit limits have not been reviewed
/renewed within 180 days from the due date/date of regular/ad
hoc sanction will be treated as NPA.
and If the bill remains overdue for a period of more than 90 days.

Bills Purchased
Discounted
Direct
Agricultural The installment of principal or interest thereon remains
Advances
overdue for two Crop seasons for short duration crops or one
crop season for long duration crop.
The crop season for each crop, which means the period up to
harvesting of the crops raised, would be as determined by the
State Level Bankers Committee in each State.
Securitization transaction Amount of liquidity facility remains outstanding for more
than 90 days
Derivative transactions
The overdue receivables representing positive mark-tomarket value of a derivative contract, if these remain unpaid
for a period of 90 days from the specified due date for
payment.
Other Accounts
If any amount to be received in respect of that facility
remains overdue for a period of more than 90 days.
Payment of Interest
In case of default in payment of interest only an account
should be classified as NPA if the interest charged during
any quarter is not serviced fully within 90 days from the end
of the quarter.
Accounts
where
a If the accounts of the borrowers have been regularised before
solitary or a few credits the balance sheet date by repayment of overdue amounts
are recorded before the through genuine sources (and not by sanction of additional
balance sheet date.
facilities or transfer of funds between accounts)
the
accounts need not be treated as NPA

Overdue

Where the account indicates inherent weakness on the basis


of the data available, the account should be deemed as a
NPA. In other genuine cases, the banks must furnish
satisfactory evidence to the Statutory Auditors/Inspecting
Officers about the manner of regularization of the account to
eliminate doubts on their performing status.
Amount due to the bank under any credit facility is overdue,
if it is not paid on the due date fixed by the bank.

General Guidelines:

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1. Branches should, classify an account as NPA only if the interest charged during
any quarter is not serviced fully within 90 days from the end of the quarter.
2. All the facilities granted to a borrower /investments in securities issued by the
borrower will have to be treated as NPA and not a particular facility/
investment or part thereof which has become NPA. If the amount in default of
any borrower is outstanding in default account i.e. LC-default account/ LG-default
account / DPG default account/ Co-accepted bills default account, the balance
outstanding in that account also should be treated as a part of the borrowers
principal operating account for the purpose of application of prudential norms on
income recognition, asset classification and provisioning i.e. all the facilities
granted to a borrower / investment made have to be classified as NPA/NPI if one
of them becomes NPA. There are a few exceptions for this as under:
a. Commonality of a Collateral Security has no role in determining the Asset
Classification.
b. The bill discounted under LC favoring a borrower may not be classified as
a Non Performing Advances (NPA), when any other facility granted to the
borrower is classified as NPA. However, in case documents under LC are
not accepted on presentation or the payment under the LC is not made on
the due date by the LC Issuing Bank for any reason and the borrower does
not immediately make good the amount disbursed as a result of discounting
of concerned bills, the outstanding bills discounted will immediately be
classified as NPA with effect from the date when the other facilities had
been classified as NPA.
c. In respect of agricultural advances, as well as advances for other purposes
granted by banks to ceded PACS / FSS under the on lending system, only
that particular credit facility granted to a Primary Agricultural Credit
Society (PACS) / Farmers Service Societies (FSS) which is in default for a
period of two crop seasons in case of short duration crop & one crop season
in case of long duration crop, as the case may be, after it has become
overdue, will be classified as NPA and not all the credit facilities
sanctioned to a PACS/FSS. However, other direct loans and advances, if
any, granted by the bank to the member borrower of a PACS/FSS outside
the on-lending arrangement will become NPA even if one of the credit
facilities granted to the same borrower becomes NPA.
d. In case of bank finance given for industrial projects or for agricultural
plantations, etc. where moratorium is available for payment of interest,
payment of interest, becomes due' only after the moratorium or
gestation period is over. They become overdue after due date for payment
of interest, if uncollected.
3 Availability of security or net worth of borrower/guarantor should not be taken
into account for the purpose of treating an advance as NPA, as asset classification
and income recognition is based on record of recovery and compliance of other
non-financial indicators.
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4 The classification of an asset as NPA should be based on the record of recovery.


An account need not classify as NPA merely due to the existence of some
deficiencies which are temporary in nature such as non availability of adequate
drawing power based on the latest available stock statement, balance outstanding
exceeding the limit temporarily non-submission of stock statements and non
renewal of the limits on the due date etc.
5 Advances against Term Deposits, NSCs eligible for surrender, Indira Vikas
Patras, Kisan Vikas Patras and Life Insurance Policies, need not be treated as
NPAs although interest thereon has not been paid for 90days provided adequate
margin is available in the accounts. However, advances against gold ornaments,
Govt. securities and all other securities are not covered by this exemption.
Accounts covered under above exemption are exempted from application of
principle of percolation (i.e. principle of classifying all accounts of the Borrower
are to be classified as NPA if one account becomes NPA).
6 In respect of housing loans/Car loans or similar advances granted to staff
members where interest is payable after recovery of principal, interest need not
be considered as overdue from the first quarter onwards. Such loans/advances
should be classified as NPA only when there is default in payment of interest on
due date of payment.
7

In respect of consortium advances, each bank may classify the borrowal accounts
according to its own record of recovery and other aspects having a bearing on the
recoverability of the advances, as in the case of multiple banking arrangements.

8 Agriculture Advance: A loan granted for short duration crops will be treated as
NPA if the instalment of principal or interest thereon remains overdue for two
crop seasons. A loan granted for long duration crops will be treated as NPA if the
instalment of principal or interest thereon remains overdue for one crop season.
Long duration crops where crop season longer than one year and the crops which
are not long duration crops will be treated as short duration crops. The crop
season for each crop which means the period up to harvesting of the crops raised,
would be as determined by the state level bankers committee in each state.
9 Direct Agriculture Finance :
(a) Loans to individual farmers including self help groups (SHGs) or Joint liability
Groups (JLGs) i.e. groups of individual farmers provided banks maintain
disaggregated data on such loans engaged in Agriculture only.
(b) Loans to corporate including farmers producer companies of individual
farmers, partnership firms and co-operatives of farmers directly engaged in
Agriculture activities up to an aggregate limit of 2 crore per borrower for the
following purpose:
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(i) Short term loans for raising crops which includes traditional / non traditional
Plantations and horticulture.
(ii) Medium and long term loans for agriculture (e.g. purchase of agricultural
implements and machinery, loans for irrigation and other developmental
activities undertaken in the farm).
(iii)Loans for pre-harvest and post harvest activities viz, spraying, weeding,
harvesting, grading and sorting.
(iv) Export credit for exporting their own farm produce.
10 KCC would be deemed NPA if it remains out of order for a period of two
crop/one crop season (as the case may be). A KCC account will be treated as out
of order if :
a) There are no credits in the account continuously for two crop seasons/one
crop season (as the case may be) as on the date of balance sheet
b) The outstanding remains continuously in excess of the limit for two crop
seasons /one crop season (as the case may be) as on the date of balance sheet
c) The credits in the account are not sufficient even to cover the interest debited
in respect of the account for two crop seasons/one crop season (as the case may
be).
11 In respect of agricultural loans other than those specified above and term loans
given to non-agriculturists identification of NPAs would be done on the same
basis as non-agricultural advances which at present are the 90 days delinquency
norms.
12 Where natural calamities impair the repaying capacity of agricultural borrowers, relief
measures are decided by bank/ branches like - conversion of the short-term production
loan into term loan or reschedulement of the repayment period and sanctioning of fresh
short-term loan subject to guidelines issued by PS&LB HO. In such cases of conversion or
re-schedulement, the term loan as well as fresh short-term loan may be treated as current dues
and need not be classified as NPA. The asset classification of these loans would thereafter
be governed by the revised terms & conditions.
13 Rural Housing Advances: While fixing the repayment schedule in case of Rural housing
advances granted to agriculturists under Indira Awas Yozana and Golden Jublee Rural
Housing Finance scheme it is to ensure that interest / installment payable on such advances
are linked to crop cycle.
14 The credit facility backed by the Central Government Guarantee, though overdue may be
treated as NPA only when the Government repudiates its guarantee when invoked. This
exemption from classification of Government guaranteed advances as NPA is not for the
purpose of recognition of income.
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15 A state Government guaranteed advance, where interest and/or instalment of principal/or


any other amount due to the bank remains overdue for a period more than 90 days, shall
become a non performing advance
16 Take-out Finance: Take out finance is the product emerging in the context of the funding
of long term infrastructure projects. Under this arrangement the institution / the bank
financing infrastructure projects will have an arrangement with any financial institution for
transferring to the latter the outstanding in respect of such financing in their books on a predetermined basis. The norms of asset classification will have to be followed by the concerned
bank/ financial institution in whose books the account stands as balance sheet item as on the
relevant date. The taking over institution on taking over such assets should make provisions
treating the account as NPA from the actual date of it becoming NPA even though the account
was not in its books as on that date.
17 Post shipment suppliers credit: In respect of post-shipment credit extended by the banks
covering export of goods to countries for which the ECGCs cover is available. EXIM Bank
has introduced a guarantee-cum-refinance programme whereby, in the event of default, EXIM
Bank will pay the guaranteed amount to the bank within a period of 30 days from the day the
bank invokes the guarantee after the exporter has filed claim with ECGC. To the extent
payment has been received from the EXIM Bank, the advance may not be treated as a nonperforming asset for asset classification and provisioning purposes.
18 In case of bank finance given for industrial projects or for agricultural plantations, etc.
where moratorium is available for payment of interest, payment of interest becomes
due' only after the moratorium or gestation period is over.
19 In case of EXPORT PROJECT FINANCE, Where the lending bank is able to establish
through documentary evidence that the importer has cleared the dues in full by depositing the
amount in the bank abroad before it turned into NPA in the books of the bank, but the
importers country is not allowing the funds to be remitted due to political or other reasons,
the asset classification may be made after a period of one year from the date the amount was
deposited by the importer in the bank abroad.
20 The net lease rentals (finance charge) on the leased asset accrued and credited to income
account before the asset became non-performing, and remaining unrealized, should be
reversed or provided for in the current accounting period. The term Rs.net lease rentals' would
mean the amount of finance charge taken to the credit of P&L account and would be worked
out as gross lease rentals adjusted by amount of statutory depreciation and lease equalization
a/c.
21 Advances to Staff members, under staff welfare Scheme In respect of Housing/Car
loans or similar advances granted to staff members where interest is payable after recovery of
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principal, interest need not be considered as `overdue' from the first quarter onwards. Such
loans/advances should be classified as NPA only when there is default in repayment of
installment of principal or payment of interest on due date of payment.
RECOGNITION OF INCOME & APPROPRIATION OF RECOVERY IN NPA A/C
1)

2)

3)
4)

Income from non-performing assets is not recognised on accrual basis but is booked
as income only when it is actually realized. Branches should not charge and take to
income account interest on any NPA. This will apply to Govt. guaranteed accounts
also. For this purpose simultaneous transfer of account to General Ledger Head: NPA is a
pre-requisite. Interest realized on NPAs may be taken to income provided the credits in the
account are not out of fresh/additional credit facilities sanctioned to the borrower
concerned.
Branches should not take to income any fees/ commission and any similar income on nonperforming assets until it is actually realized. Charges/expenses/insurance etc. on such a
Borrowal account should not be debited to the Borrowers account unless recovered,
the same need to be recorded in the Memoranda Account after charging to Banks
Revenue.
Interest on advances against term deposits, NSCs, IVPs, KVPs and Life Policies should be
taken to income account on the due date, provided adequate margin is available in the
accounts.
When a credit facility is classified for the first time as NPA the interest accrued &
credited to the income account in the past periods, which has not been realized should be
ascertained and same should be reversed and should be credited back in the respective
account itself at the close of the year/half year/Quarter at the branch level by debiting
Profit & Loss Account with following particulars:
Unrecovered Interest reversed and recorded in Memoranda A/c
This will apply to Govt. guaranteed accounts also.

5)

6)
7)

For operational convenience and future records, it is necessary that Branches should first
charge interest (including Penal Interest, if any) up to the date of classification of account
as NPA and then simultaneously ascertain the quantum of interest not realized (DI) which
is required to be reversed as above. This amount will be recorded separately in
Memorandum Account.
In respect of NPAs, fees, commission and similar income that have accrued should cease
to accrue in the current period and should be reversed with respect of past periods, if
uncollected.
Interest on advance guaranteed by Central Government, irrespective of its assets
classification status is not to be taken to income account unless the interest has been
actually realized.

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FUTURE INTEREST APPLICATION


1)

On an account becoming NPA, further application of interest has to be stopped. However


Accrued Interest (including Penal Interest, if any) will continue to be recorded in
Memorandum accounts.

2)

Fees and commission earned by Bank as a result of renegotiations or rescheduling of


outstanding debts should be recognized on an accrual basis over the period of time
covered by the re-negotiated or rescheduled extensions of credit.

APPROPRIATION OF RECOVERIES (Recovery Division Cir. No. 26/13 and 36/14)


The appropriation of Recoveries in NPA Accounts (irrespective of the mode/status/stage of
recovery actions) shall be regulated in the following order of priority:
Firstly towards-(i) Expenditure/Out of Pocket Expenses incurred for Recovery (earlier
recorded in Memorandum Dues);
Secondly towards-(ii) Principal irregularities i.e. NPA outstanding in the account gets
updated / adjusted, whichever is earlier;
Thirdly towards-(iii) The interest irregularities /accrued interest.
TREATMENT IN CASH CREDIT- NPA ACCOUNTS WITH TAGGING FACILITY:
Debits in Cash Credit - NPA account with tagging facility can be allowed dependent upon extent
of tagging permitted by appropriate authority. The proceeds received through tagging
arrangement would also be utilized in the following order of priority:
(i) Expenditure/Out of pocket Expenses incurred for recovery.
(ii) Principal outstanding balance in Working Capital Facility till it is brought within the
DP/Limit (Whichever is lower)
(iii) Installments in arrear in Term Loan Account.
(iv) Recognition of Recorded Interest.
CLASSIFICATION OF NPA ACCOUNT & PROVISION.
SR. No.
1

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

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

year period from first payment of attract additional provision


interest.
of 10% i.e. total of 25% on
O/S balance.

If a/c is Sub Standard for 12 months


such an asset will have well defined
credit weaknesses with the added
characteristic that the weaknesses
make collection or liquidation in full,
on the basis of currently known facts,
conditions
and
values,
highly
questionable and improbable.
Straightway classification
When realizable value of security is
less than 50% of value assessed by the
bank or accepted by RBI at the time
of last inspection, such a/c may be
straightaway classified under doubtful
3
Loss asset
A loss asset is one where loss has
been identified by the bank or internal
or external auditors or the RBI
Inspectors but the amount has not
been written off, wholly.
Realisable value of security as
assessed by banks approved valuer /
RBI is less than 10% of outstanding in
the a/c then a/c straightaway classified
as loss asset
Provision on Standard Account on Global Loan Portfolio basis
2

Doubtful

ON GLOBAL LOAN
STANDARD
PORTFOLIO BASIS
ACCCOUNT
(Other
than
Restructured
Advances)

1) Direct Agriculture & SME - 0.25%


2) Commercial Real Estate (CRE) 1%
3) Commercial Real Estate Residential
Housing (CRE-RH)* 0.75%
4) Housing loans granted at Teaser
Rates** 2%
5) All other loans not included above
0.40%
*

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Infrastructure
loan
accounts
which
are
classified as Sub Standard
will attract a provisioning
of 20% (escrow a/c)
(i) Unsecured Portion:
Provision @ 100% of
unsecured portion,
(ii) Secured Portion: On
tangible security Up to one year
doubtful25 %
One to three year
doubtful-40%
More than 3 year
doubtful- 100%
Provision is to be made on
outstanding net of DI.
100%
of
the
Outstanding.

CRE-RH would consist of loans to




builders/developers
for
residential
housing projects (except for captive
consumption) under CRE
** The provisioning on these assets
would revert to 0.40% after 1 year
from the date on which the rates are
reset at higher rates if the accounts
remain standard
2.

Standard
Restructured
Advances

2a. From 01.06.13 new


standard account upon
Restructuring
I. In the first Two years
from
the
date
of
restructuring.
II. In case of moratorium
on
payment
of
interest/principal
after
restructuring
period
covering moratorium and
two years thereafter.
III. The Restructured a/cs
classified as NPA but
later upgraded to Standard
category in first year from
date of Up-gradation
2b) Restructured Standard
accounts existing as on
31.05.2013

5%

These accounts will attract provision of


5% in phased manner as :w.e.f 31.03.2015
4.25%
w.e.f 31.03.2016
5%
The impact of higher provisions as above
will be spread over the four quarters of
each financial year i.e.2013-14, 2014-15
and 2015-16 respectively
The provision on Standard Accounts is not reckoned for arriving at net NPAs and is not
netted from gross advances but is shown separately as Contingent Provisions against standard
assets under other liabilities and Provisions-others in Schedule-5 of the balance sheet.
Advances under rehabilitation package approved by BIFR/ Term Lending Institutions:
Banks are not permitted to upgrade the classification of any advance in respect of which the terms
have been negotiated unless the package of renegotiated terms has worked satisfactorily for a period
of one year. While the existing credit facilities sanctioned to a unit under rehabilitation packages
approved by BIFR/Term Lending Institutions will continue to be classified as Sub standard or
doubtful as the case may be, in respect of additional facilities sanctioned under the rehabilitation
packages, the Income Recognition, Asset Classification norms will become applicable after a
period of one year from the date of disbursement. So provision on additional facilities
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sanctioned need not be made for a period of one year from date of
disbursement.
Accounts with outstanding balance of Rs. 5 crore and above
With a view to bring down divergence arising out of difference in assessment of the value of
security in cases of high value NPAs (A/Cs with outstanding balance of Rs.5 crore & above and also
to enhance the reliability on stock valuations, stock audit at annual intervals by external agencies
appointed as per banks extant guideline, be got done mandatorily.
Valuation of Securities for Provisioning Purposes
(i) Wherever the Incumbent feels that realisable value of IPs is significantly lower than the one on
banks record in accounts with aggregate limits/ outstanding of Rs.10 lakhs & above but less than
Rs.1 crore and value of immovable property mortgaged/charged to the bank is Rs.20 lakhs & above,
he may get the property re-valued from the banks approved valuer provided the valuation is more
than one year old.
(ii) As regards borrower accounts having aggregate limit of Rs.1 crore & above, valuation of
immovable properties charged/mortgaged to the Bank be got done from approved valuer once in
three years. However, valuation in such accounts shall be got done from Banks approved valuer
and fees payable to the valuer be recovered from borrower.
(iii) However, where the value of immovable property to be mortgaged/charged is Rs. 5 crore &
above, branches shall get valuation of such IPs done from minimum two valuers on the Banks
approved panel. In case the difference in valuation is less than 15% the average value may be taken.
(iv) The branches while getting the valuation of IPs charged / mortgaged to the bank, from approved
valuer must take the Market and Realisable Value of the property separately.
(v) In case of Plant & Machinery only Realisable Value should be mentioned in the report and
considered for calculation of provision in the account. Valuation report should mention the brand
names of the Plant & Machinery, Year of Installation, Original cost etc.
(vi) While getting the value of securities assessed by approved valuers, valuation report should
clearly specify the assumptions/ circumstances for having arrived at the given realisable value.
(vii) In case there is substantial variation in the realizable value of charged security(ies) now being
reported and as reported at the last time/ last sanction or renewal, reasons for the same should be
clearly spelt out, preferably the earlier valuations may also be co-related/commented in the latest
valuation report.
GUIDELINES IN RESPECT OF PROJECTS UNDER IMPLEMENTATION INVOLVING
TIME OVERRUN.
Project Loan here means any term loan which has been extended for the purpose of setting up of
an economic activity. The date of completion of the project and date of commencement of
Commercial Operations (DCCO) should be clearly spelt out at the time of financial closure of the
project and formally documented. Legal and other extraneous reasons which are beyond the control
of the promoters, may lead to delay in project implementation and involve restructuring
/reschedulement of loans by banks.
Infrastructure sector is a sector as defined by RBI in its circular on Definition of Infrastructure
Lending
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All project loan have been divided into two category:


(a) Project Loans for infrastructure sector
(b) Project Loans for non-infrastructure sector
Project Loans for Infrastructure Sector
1. Classified as NPA during any time before
commencement of commercial operations as per
record of recovery (90 days overdue) unless it is
restructured
and
becomes
eligible
for
classification as standard asset
2. if it fails to commence commercial operations
within two years from the original DCCO, even
if it is regular as per record of recovery, unless it is
restructured and becomes eligible for
classification as standard asset.

Projects Loans for Non-Infrastructure


Sector
1. Classified as NPA during any time
before commencement of commercial
operations as per record of recovery
(90 days overdue) unless it is
restructured and becomes eligible for
classification as standard asset.
2. if it fails to commence commercial
operations within one year from the
original DCCO, even if it is regular as
per record of recovery, unless it is
restructured and becomes eligible for
classification as standard asset.

Projects involving Time Overrun Asset Classification


If Project Loan classified as standard asset is
restructured any time during the period up to two
years from the original DCCO, in accordance with
the provisions of restructuring guidelines, it can be
retained as a standard asset if the fresh DCCO is
fixed within the following limits, and further
provided the account continues to be serviced as per
the restructured terms.
Upto another 2 years (beyond the existing
extended period of 2 years i.e. total extension
of 4 years) in case the reason for extension is
arbitration proceedings or a court case.
Upto another 1 year (beyond the existing
extended period of 2years i.e. total extension of
3 years) in other than court cases.
Application for restructuring should be received
before the expiry of period of 2 years from the
original DCCO and when the account is still
standard as per record of recovery.

In case of non-infrastructure projects, if


the delay in commencement of
commercial operations extends beyond
the period of one year from the date of
completion as determined at the time of
financial closure, banks can prescribe a
fresh DCCO, and retain the "standard"
classification by undertaking restructuring
of accounts in accordance with the
Restructuring Guidelines, provided the
fresh DCCO does not extend beyond a
period of two years from the original
DCCO
Application for restructuring should be
received before the expiry of period of
one Year from the original DCCO and
when the account is still standard as per
record of recovery.

Income Recognition
Where there is moratorium for payment of interest, Where there is moratorium for payment
Non-Performing Assets: Page 13 of 98


income should not be booked on accrual basis


beyond two years from the original DCCO,
considering the high risk involved in such
restructured accounts.
Provision:
DCCO revised upto 2 years from the original
DCCO prescribed at the time of financial closure:
0.40%.

of interest, income should not be booked


on accrual basis beyond one year from
the original DCCO, considering the high
risk involved in such restructured
accounts.
DCCO revised upto 1 year from the
original DCCO prescribed at the time of
financial closure : 0.40%.

DCCO extended from the original DCCO


prescribed at the time of financial closure:
(Beyond 2 years and up to 4 years or 3 years , as
the case may be, depending upon the reasons for
such delay ):-

DCCO extended from the original


DCCO prescribed at the time of
financial closure (beyond one year
and upto two years)

Project loans restructured with effect from


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

Project loans restructured with effect


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

Other common guidelines for Asset Classification


1)
Dispensation is subject to adherence to the provisions regarding restructuring of accounts,
which would inter alia require that the application for restructuring should be received before the
expiry of period of two years (Infrastructure Sector) or 1 year (Non-Infrastructure Sector) from the
original DCCO and when the account is still standard as per record of recovery.
Non-Performing Assets: Page 14 of 98


2)
For the purpose of these guidelines, mere extension of DCCO would not be considered as
restructuring, if the revised DCCO falls within the period of two years (Infrastructure Sector) or 1
year (Non-Infrastructure Sector) from the original DCCO. In such cases the consequential shift in
repayment period by equal or shorter duration (including the start date and end date of revised
repayment schedule) than the extension of DCCO would also not be considered as restructuring
provided all other terms and conditions of the loan remain unchanged. As such project loans will be
treated as standard assets in all respects; they will attract standard asset provision of 0.40 per cent.
3)
Any change in the repayment schedule of a project loan caused due to an increase in the
project outlay on account of increase in scope and size of the project, would not be treated as
restructuring if :
a) The increase in scope and size of the project takes place before commencement of
Commercial operations of the existing project.
b) The rise in cost excluding any cost-overrun in respect of the original project is 25%
or more of the original outlay.
c) The viability of the project is reassessed before approving the enhancement of scope
and fixing a fresh DCCO.
d) On re-rating, (if already rated) the new rating is not below the previous rating by
more than one notch.
4) Funded Interest: Income recognition in respect of the NPAs, regardless of whether these are or
are not subjected to restructuring/ rescheduling/ renegotiation of terms of the loan agreement, should
be done strictly on cash basis, only on realisation and not if the amount of interest overdue has been
funded. If, however, the amount of funded interest is recognised as income, a provision for an equal
amount should also be made simultaneously. In other words, any funding of interest in respect of
NPAs, if recognised as income, should be fully provided for.
5) Conversion into equity, debentures or any other instrument: The amount outstanding converted
into other instruments would normally comprise principal and the interest components. If the
amount of interest dues is converted into equity or any other instrument, and income is recognised
in consequence, full provision should be made for the amount of income so recognised to offset the
effect of such income recognition. Such provision would be in addition to the amount of provision
that may be necessary for the depreciation in the value of the equity or other instruments, as per the
investment valuation norms. However, if the conversion of interest is into equity which is quoted,
interest income can be recognised at market value of equity, as on the date of conversion, not
exceeding the amount of interest converted to equity. Such equity must hereafter be classified in the
available for sale category and valued at lower of cost or market value. In case of conversion of
principal and /or interest in respect of NPAs into debentures, such debentures should be treated as
NPA, ab initio, in the same asset classification as was applicable to loan just before conversion and
provision made as per norms. This norm would also apply to zero coupon bonds or other
instruments which seek to defer the liability of the issuer. On such debentures, income should be
recognized only on realization basis. The income in respect of unrealized interest which is converted
into debentures or any other fixed maturity instrument should be recognised only on redemption of
Non-Performing Assets: Page 15 of 98


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

GOVT GUARANTEED ACCOUNTS


State Govt guaranteed advances:-. A state Government guaranteed advance, where interest
and/or instalment of principal/or any other amount due to the bank remains overdue for a period
more than 90 days shall become a non performing advance.
Central Govt guaranteed advances: The credit facility backed by the Central Government
Guarantee though overdue may be treated as NPA only when the Government repudiates its
guarantee when invoked. This exemption from classification of Government guaranteed
advances as NPA is not for the purpose of recognition of income. Accordingly Central Govt.
guaranteed advance, if become overdue, be classified as Standard asset (Govt Guaranteed)
(unless Govt. repudiate its guarantee when invoked) though interest on such advance is not to be
taken to income account if it is not realized.
TAKE OUT FINANCE
Take out finance is the product emerging in the context of the funding of long-term
infrastructure projects. Under this arrangement, the institution/ the bank financing infrastructure
projects will have an arrangement with any financial institution for transferring to the latter the
outstanding in respect of such financing in their books on a pre-determined basis .If an asset has
become NPA before taking over by another institution, the lending institution in whose books at
present the asset is outstanding should treat it NPA for all purposes irrespective of the fact that it
ultimately is to be taken over by another institution. When the asset is actually taken over, the
lending institution should reverse the provisions earlier made in its books. Whereas the taking
over institution, should make provision from the actual date the asset became NPA and not from
the date of taking over of the asset.
Reserve for Exchange Rate Fluctuations Account (RERFA)
When exchange rate movements of Indian rupee turn adverse, the outstanding amount of foreign
currency denominated loan (where actual disbursement was made in Indian Rupee) which
becomes overdue goes up correspondingly, with its attendant implications of provisioning
requirements. Such assets should not normally be revalued. In case such assets need to be revalued
as per requirement of accounting practices or for any other requirement, the following procedure
may be adopted:
The loss on revaluation of assets has to be booked in the bank's Profit & Loss Account.
Besides the provisioning requirement as per Asset Classification, banks should treat the full
amount of the Revaluation Gain relating to the corresponding assets, if any, on account of
Foreign Exchange Fluctuation as provision against the particular assets.
PROVISIONING FOR COUNTRY RISK
With effect from 31 March 2003, banks are to make provisions on the net funded country
Non-Performing Assets: Page 16 of 98


exposures as per the following schedule:


Risk category
ECGC Classification
Provisioning Requirement (per cent)
Insignificant
A1
0.25
Low
A2
0.25
Moderate
B1
5
High
B2
20
Very high
C1
25
Restricted
C2
100
Offcredit
D
100
Banks are required to make provision for country risk in respect of a country where its net
funded exposure is one per cent or more of its total assets.
The provision for country risk shall be in addition to the provisions required to be held
according to the asset classification status of the asset.
In the case of loss assets and doubtful assets, provision held, including provision held for
country risk, may not exceed 100% of the outstanding.
Banks may not make any provision for home country exposures i.e. exposure to India.
The exposures of foreign branches of Indian banks to the host country should be included.
Foreign banks shall compute the country exposures of their Indian branches and shall hold
appropriate provisions in their Indian books. However, their exposures to India will be
excluded.
Banks may make a lower level of provisioning (say 25% of the requirement) in respect of
short-term exposures (i.e. exposures with contractual maturity of less than 180 days).
OPERATING INSTRUCTIONS AND ACCOUNTING
1) For treating an irregular account as NPA some branches wrongly mention the date as at the
end of financial year i.e. 31st March. For example, in case an account becomes out of order or
irregular from 26.01.2013, it shall be treated as NPA as on 26.04.2013, in case default persists.
The date of NPA in this account will be 26.04.2013 (and not 30.06.2013).
2) Surplus security available in one facility of an account should be considered in another facility
of the same borrower where there is shortfall.
3) Net means of borrowers and guarantors are not to be included as security.
4) In all accounts identified as NPAs including Govt. guaranteed accounts under standard assets,
the unrealized interest (earlier termed as Derecognized Interest) and future interest is to be
recorded only. Recorded Interest should be calculated, checked and recorded under
authentication of the concerned official. Further, in NPA accounts (except where operations
are allowed under tagging arrangement & accounts covered under Credit Guarantee scheme)
expenses like Insurance Premium, Stamp Duty, Legal Expenses, Emoluments paid to the
Godown Keeper or such other expenses incurred for safeguarding the interest of the bank
should not be debited to the concerned NPA account. Instead, such expenses should be
charged to revenue and recorded in the NPA Memoranda Account. The same may be claimed by
the branch from the borrower at the time of filing the suit or entering into Negotiated Settlement.
If recovered, the same may be taken to revenue at the time of actual recovery. In NPA Accounts
Non-Performing Assets: Page 17 of 98


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

Updation and maintenance of GL Head NPA The Due Date Defaults in


advances attract 90 days NPA norms as per the extant guidelines. The NPAs in
Due Date Defaults will be transferred to NPA
Heads as under:
64100 LC-Defaults
64110 DPG-Defaults
64120 LG-Defaults
64130 CO-Accepted Bills-Default

: NPA-DL 76100
: NPA-TL 76120
: NPA-DL 76100
: NPA-TL 76120

Prudential Guidelines on Restructuring of Advances by banks. (RD cir 36/2014 dated


13.10.2014)
Restructuring is the situation where the Bank, for economic or legal reasons relating to
1
the borrowers financial difficulty, grants to the borrower concessions that the Bank
would not otherwise consider. Restructuring would normally involve modification of
terms of the advances/securities, which would generally include, among others, alteration
of repayment period / repayable amount / the amount of installments / rate of interest (due
to reasons other than competitive reasons).
Accounts classified under Standard, Sub-standard and
2
Eligibility criteria
Doubtful are eligible. Rescheduling / Restructuring /
renegotiation cannot be with retrospective effect.
Frauds and malfeasance will continue to remain ineligible
Willful default cases may be taken up with Boards
approval, while for such accounts the restructuring under
the CDR Mechanism may be carried out with the approval
of the Core Group only
Restructuring in BIFR cases cannot be implemented
without express approval of BIFR.
No account will be taken up for restructuring unless the
financial viability is established and there is a reasonable
certainty of repayment from the borrower, as per the terms of
restructuring package. Any restructuring done
without looking into cash flows of the borrower and assessing
the viability of the projects / activity financed by bank would
tantamount to an attempt at ever greening a weak credit facility
and would invite supervisory concerns / action.
3
Broad bench mark for Return on capital employed should be at least equivalent
Non-Performing Assets: Page 18 of 98


to 5 year Government security yield plus 2 per cent.


The debt service coverage ratio should be greater than
1.25 within the 5 years period in which the unit should
become viable and on year to year basis the ratio should
be above 1. The normal debt service coverage ratio for 10
years repayment period should be around 1.33.
The benchmark gap between internal rate of return and
cost of capital should be at least 1per cent.
Operating and cash break even points should be worked
out and they should be comparable with the industry
norms.
Trends of the company based on historical data and future
projections should be comparable with the industry. Thus
behavior of past and future EBIDTA should be studied
and compared with industry average.
Loan life ratio (LLR), as defined below should be 1.4,
which would give a cushion of 40% to the amount of loan
to be serviced.
LLR= (Present value of total available cash flow (ACF)
during the loan life period (including interest and
principal) / (Maximum amount of loan).
While a restructuring proposal is under consideration, the
Process
usual asset classification norms would continue to apply.
Normally, restructuring cannot take place unless alteration /
changes in the original loan agreement are made with the
formal consent / application of the debtor. However, the
process of restructuring can be initiated by the bank in
deserving cases subject to customer agreeing to the terms
and conditions.
Asset
Classification Restructuring of advances can take place in the following
stages:
Norms General
a) before commencement of commercial production /
operation;
b) after commencement of commercial production / operation
but
before the asset has been classified as 'sub-standard';
c) after commencement of commercial production / operation
and the
asset has been classified as 'sub-standard' or 'doubtful'.
1) The accounts classified as 'standard assets' should be
immediately
re- classified as 'sub-standard assets' upon restructuring
2) The non-performing assets, upon restructuring, would
continue to
have the same asset classification as prior to restructuring
Viability Parameters

Non-Performing Assets: Page 19 of 98




and slip
into further lower asset classification categories as per
extant asset
classification norms with reference to the pre-restructuring
repayment schedule except as allowed as per para G9.2.2.
3) Standard accounts classified as NPA and NPA accounts
retained in the same category on restructuring by the bank
should be upgraded only when all the outstanding
loan/facilities in the account perform satisfactorily during the
specified period i.e. principal and interest on all facilities in
the account are serviced as per terms of payment during that
period. (Specified Period means a period of one year from the
commencement of the first payment of interest or principal,
whichever is later, on the credit facility with longest period of
moratorium under the terms of restructuring package)
Satisfactory Performance means:
a) Non-Agricultural Cash Credit Accounts
In the case of non-agricultural cash credit accounts, the account
should not be out of order any time during the specified period,
for a duration of more than 90 days. In addition, there should
not be any overdues at the end of the specified period.
b) Non-Agricultural Term Loan Accounts
In the case of non-agricultural term loan accounts, no payment
should
remain overdue for a period of more than 90 days. In addition
there should not be any overdues at the end of the specified
period.
c) Housing & other personal Loan accounts:
It is observed that in a rising interest rate scenario, the
repayment period is normally extended by keeping the EMI
constant. However, in a few cases this results in extending the
repayment period much beyond the retirement age or the
revenue generating capacity of the borrower. Therefore, it is
advised that
(i) While extending repayment period in respect of housing
loans to keep the EMI unchanged, branches should satisfy
themselves about the
revenue generation / repaying capacity of the borrower during
the entire repayment period including the extended repayment
period.
(ii) Branches should not extend the repayment period of such
borrowers where they have concerns regarding the repaying
capacity over the extended period, even if the borrowers want
to extend the tenor to keep the EMI unchanged.
(iii) Branches should provide the option of higher EMI to such
Non-Performing Assets: Page 20 of 98


borrowers who want to repay the housing loan as per the


original repayment period.
d) All Agriculture Accounts
In case of agriculture accounts, at the end of the specified
period the
account should be regular.
At the outset, it is to be noted that the special concessions (mentioned ahead) are not to be
extended to the following categories of advances:
Consumer and personal advances
Advances classified as Capital market exposures
Advances classified as commercial real estate exposures;
The special regulatory treatment has the following two components:
A. Incentive for quick implementation of the restructuring package.
B. Retention of the asset classification of the restructured account in the pre - restructuring
asset classification category.
A. Incentive for quick implementation of the restructuring package Restoration of Asset
Classification Status
As an incentive for quick implementation of the package, if the approved package is implemented
by the bank as per the following time schedule, the asset classification status may be restored to
the position which existed when the reference was made to the CDR Cell in respect of cases
covered under the CDR Mechanism or when the restructuring application was received by the
bank in non-CDR cases:
i. Within 120 days from the date of approval under the CDR Mechanism.
ii. Within 90 days from the date of receipt of application by the bank in cases other than those
restructured under the CDR Mechanism.
B. Asset classification benefits
An existing 'standard asset' will not be downgraded to the sub-standard category upon restructuring
and, during the specified period, the asset classification of the sub-standard/doubtful accounts will
not deteriorate upon restructuring, if satisfactory performance is demonstrated during the specified
period.
Further, these benefits will be available subject to compliance with the following conditions:
A) The dues to the bank are fully secured However, The condition of being fully secured by
tangible security will not be applicable in the following cases:
MSE borrowers, where the outstanding is up to Rs. 25 lac.
Infrastructure projects, provided the cash flows generated from these projects are adequate for
repayment of the advance, the financing bank(s) have in place an appropriate mechanism to
escrow the cash flows, and also have a clear and legal first claim on these cash flows.
B) The unit becomes viable in 8 years, if it is engaged in infrastructure activities, and in 5 years
in the case of other units.
C) The repayment period of the restructured advance including the moratorium, if any, does not
exceed 15 years in the case of infrastructure advances and 10 years in the case of other advances.
The ceiling of 10 years, over the repayment period of the restructured advances, would not be
applicable for restructured housing loans (for being eligible for special regulatory treatment). Our
Non-Performing Assets: Page 21 of 98


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

Non-Performing Assets: Page 22 of 98




Interest income in respect of restructured accounts classified as 'standard assets' will be


recognized on accrual basis and that in respect of the accounts classified as 'non-performing
assets' will be recognized on cash basis.
In the case of restructured accounts classified as standard, the income, if any, generated by
debt / equity instruments created on conversion of dues may be recognized on accrual basis.
In the case of restructured accounts classified as non-performing assets, the income, if any,
generated by these instruments may be recognized only on cash basis.
PROVISIONING NORMS FOR RESTRUCTURED ACCOUNTS
Normal provisions
Branches will hold provision against the restructured advances as per the existing provisioning
norms . Similarly if so decided, HO Recovery Division too may hold account specific additional
provision even on Restructured Advances like other accounts.
Restructured accounts classified as non-performing advances, when upgraded to standard
category will also attract a higher provision (as prescribed from time to time) in the first year
from the date of upgradation.
The above-mentioned higher provision on restructured standard advances has been enhanced
from previous 2.75% to 5% in respect of new restructured standard accounts (flow) with
effect from June 1, 2013 and increase in a phased manner for the stock of restructured
standard accounts as on May 31, 2013 as under :
i)3.50% - with effect from March 31, 2014 (spread over the four quarters of 2013-14)
ii)4.25% - with effect from March 31, 2015 (spread over the four quarters of 2014-15)
iii)5.00%- with effect from March 31, 2016 (spread over the four quarters of 2015-16)

Provision for diminution in the fair value of restructured advances


Reduction in the rate of interest and /or reschedulement of the repayment of principal amount, as
part of the restructuring, will result in diminution in the fair value of the advance. Such diminution
in value is an economic loss for the bank and will have impact on the banks market value of
equity. It is, therefore, necessary for banks to measure such diminution in the fair value of the
advance and make provisions for it by debit to Profit & Loss Account. Such provision should be
held in addition to the provisions as per existing Provisioning norms, and in an account distinct
from that for normal provisions. For this purpose, the erosion in the fair value of the advance
should be computed as the difference between the fair value of the loan before and after
restructuring Fair value of the loan before restructuring will be computed as the present value of
cash flows representing the interest at the existing rate charged on the advance before restructuring
and the principal, discounted at a rate equal to the banks BPLR as on the date of restructuring plus
the appropriate term premium
and credit risk premium for the borrower category on the date of restructuring. Fair value of the
loan after restructuring will be computed as the present value of cash flows representing the
interest at the rate charged on the advance on restructuring and the principal, discounted at a rate
equal to the banks BPLR as on the date of restructuring plus the appropriate term premium and
credit risk premium for the borrower category on the date of restructuring. In the case of working
capital facilities, the diminution in the fair value of the cash credit /overdraft component may be
Non-Performing Assets: Page 23 of 98


computed as above, reckoning the higher of the outstanding amount or the limit sanctioned as the
principal amount and taking the tenor of the advance as one year. The term premium in the
discount factor would be as applicable for one year. The fair value of the term loan components
(Working Capital Term Loan and Funded Interest Term Loan) would be computed as per actual
cash flows and taking the term premium in the discount factor as applicable for the maturity of the
respective term loan components.
In the event any security is taken in lieu of the diminution in the fair value of the advance, it
should be valued at Rs. 1/- till maturity of the security. This will ensure that the effect of charging
off the economic sacrifice to the Profit & Loss account is not negated.
The diminution in the fair value may be re-computed on each balance sheet date till
satisfactory completion of all repayment obligations and full repayment of the outstanding in
the account, so as to capture the changes in the fair value on account of changes in BPLR,
term premium and the credit category of the borrower. Consequently, banks may provide
for the shortfall in provision or reverse the amount of excess provision held in the distinct
account.
If due to lack of expertise/ appropriate infrastructure, a bank finds it difficult to
ensure computation of diminution in the fair value of advances extended by small/rural
branches, as an alternative to the methodology prescribed above for computing the amount
of diminution in the fair value, banks will have the option of notionally computing the
amount of diminution in the fair value and providing therefore, at five percent of the total
exposure, in respect of all restructured accounts where the total dues to bank(s) are less than
rupees one crore till the financial year ending March 2013.
Further The total provisions required against an account (normal provisions plus
provisions in lieu of diminution in the fair value of the advance) are capped at 100% of the
outstanding debt amount.
The provisions required for Restructured A/cs (including the provision for Diminution in Fair
Value will be maintained/updated/adjusted by Credit (Industrial Rehabilitation) Division at HO,
who in turn will provide an account-wise list of NPA A/cs to Recovery Division before finalization
of Balance Sheet, so as to ensure that in respect of NPA A/cs, the Total Provisions do not exceed
100% outstanding Debt amount.
OTHER GUIDELINES
Under the Debt Restructuring Mechanism for SMEs, in exceptional cases Circle Heads may
permit Restructuring of debt in accounts where the bank has initiated recovery action (under
SARFAESI / filing recovery suit).
Extension of moratorium period may be permitted by the competent authority such that the
total repayment period of the restructured debt falls within the RBI norms. However, the
change in the moratorium is to be linked to the projected/ accepted cash flows.
Restructuring within one year of enhancement may be permitted by the competent authority.
However, the powers for restructuring within one year of sanction of WC/ term loan shall
continue to be vested one level higher
DISCLOSURE
Banks are required to disclose in their published annual Balance Sheets, under "Notes on
Accounts", information relating to number and amount of advances restructured, and the amount
Non-Performing Assets: Page 24 of 98


of diminution in the fair value of the restructured advances. The information on advances
restructured under CDR Mechanism, SME Debt Restructuring Mechanism and other categories are
required to be disclosed separately.
IRAC NORMS-AGRICULTURAL ADVANCES Income Recognition, Asset Classification,
Provisioning & Related Aspects-Agricultural Advances- Kisan Credit Card Scheme
( RD 36/2014 DATED 13.10.2014)
(i) Kisan Credit Card Schemes aim at providing adequate and timely credit support from the
banking system under a single window to the farmers for their cultivation & other needs as
indicated below:
a) To meet the short term credit requirements for cultivation of crops
b) Post harvest expenses
c) Produce Marketing loan
d) Consumption requirements of farmer household
e) Working capital for maintenance of farm assets and activities allied to agriculture, like dairy
Animals, inland fishery etc.
f) Investment credit requirement for agriculture and allied activities like pumpsets, sprayers,
dairy animals etc.
(While the aggregate of components a) to e) above forms the short term credit limit portion,
the aggregate of components under f) forms the long term credit limit portion.)
(ii) Kissan Card Cash Credit limits are being sanctioned and opened in CBS under scheme code
CCAKC and all the operative guidelines for opening of these guidelines in the system have to
be meticulously followed.
(iii)RBI has prescribed that the repayment period may be fixed by banks as per the anticipated
harvesting and marketing period for the crops for which a loan has been granted and the extant
prudential norms for income recognition, asset-classification and provisioning will continue to
apply for loans granted under revised KCC Scheme.
(iv) Income Recognition & Asset Classification (IRAC) Norms as prescribed by RBI are being
circulated by HO Recovery Division interalia explaining applicability of IRAC norms to the
Agriculture Advances as follow:
A loan granted for short duration crops will be treated as NPA, if the installment of principal or
interest thereon remains overdue for two crop seasons. A loan granted for long duration crops will
be treated as NPA, if the installment of principal or interest thereon remains overdue for one crop
season. For the purpose of these guidelines, long duration crops would be crops with crop season
longer than one year and crops, which are not long duration crops, would be treated as short
duration crops. The crop season for each crop, which means the period up to harvesting of the
crops raised, would be as determined by the State Level Bankers Committee in each State.
Depending upon the duration of crops raised by an agriculturist, the above NPA norms would also
be made applicable to agricultural term loans availed of by him. The above norms should be made
Non-Performing Assets: Page 25 of 98


applicable to all direct agricultural advances as listed below:


(v) Thus, the KCC facility being essentially in the nature of Cash Credit accommodation for
agricultural purposes, the prudential norms as applicable to Cash Credit facilities would apply
to the KCC accounts in other words, the Kisan Credit Card Account would be deemed to be a
Non-Performing Asset (NPA) if it remains out of order for a period of two crop seasons/one
crop season (as the case may be). Therefore a KCC account can be treated as out of order in the
following circumstances:
a) There are no credits in the account continuously for two crop seasons/one crop season (as
the
case may be) as on the date of balance sheet.
b) The outstanding remains continuously in excess of the limit for two crop seasons/one crop
season (as the case may be) as on the date of balance sheet.
c) The credits in the account are not sufficient even to cover the interest debited in respect of
the account for two crop seasons/one crop season (as the case may be).
(vi) The following relaxations in assets classification norms in credit facilities granted to
borrowers
affected by Cyclones or other natural calamities in District & Block Notified by State
Government are available:
(Where natural calamities impair the repaying capacity of agricultural borrowers, relief measures
are decided by bank/ branches like - conversion of the short-term production loan into term loan
or re-schedulement of the repayment period; and the sanctioning of fresh short-term loan subject
to guidelines issued by PS & LB HO. Such cases of conversion or re-schedulement, the term loan
as well as fresh short-term loan may be treated as current dues and need not be classified as NPA.
The asset classification of these loans would thereafter be governed by the revised terms &
conditions and would be treated as NPA if interest and/or instalment of principal remains overdue
for two crop seasons for short duration crops and for one crop season for long duration crops. For
the purpose of these guidelines, long duration crops would be crops with crop season longer
than one year and crops which are not long duration would be treated as short duration crops.)
(vii) The norms prescribed under para iv above are also applicable to all direct agricultural
advances as listed in below :
DIRECT FINANCE
1.1 Finance to individual farmers (including self help group (SHGs) or Joint Liability Group
(JLGs), i.e. groups of individual farmers provided banks maintain disaggregated data on
such finance) for agriculture.
1.1.1 Short term loans for raising crops, i.e. for crop loans. This will include
traditional / non-traditional plantations and horticulture
1.1.2 Advances upto Rs.50 lac against pledge / hypothecation of agricultural produce
(including warehouse receipts) for a period not exceeding 12 months, irrespective
of whether the farmers were given crop loan for raising the produce or not.
Non-Performing Assets: Page 26 of 98


1.1.3

Working capital and term loans for financing production and investment
requirements for agriculture.
1.1.4 Loans to small and marginal farmers for purchase of land for agriculture purpose.
1.1.5 Loans to distressed farmers indebted to non-institutional lenders against
appropriate collateral or group security.
1.1.6 Loans granted for pre-harvest and post-harvest activities such as spraying,
weeding harvesting, grading, sorting, processing and transporting undertaken by
individuals, SHGs and cooperatives in rural areas.
1.1.7 Loans granted for agricultural activities, irrespective of whether the borrowing
entity is engaged in export or otherwise.
1.2
Finance to others (such as corporate, partnership firms and institutions) for
agriculture
1.2.1 Loans granted for pre-harvest and post harvest activities such as spraying,
weeding, harvesting, grading, sorting and transporting.
1.2.2 Finance upto an aggregate amount of Rs. One crore per borrower for the purposes
listed at 1.1.1, 1.1.2, 1.1.3 and 1.2.1 above
1.2.3 One third of loans in excess of Rs. One crore in aggregate per borrower for
agriculture.
In respect of agricultural loans, other than those specified in the said Annexure and term loans
given to non-agriculturists, identification of NPAs would be done on the same basis as nonagricultural advances which, at present, is the 90 days delinquency norm.
APPROPRIATION OF RECOVERY IN NPA ACCOUNTS: [Ref: RD Cir. 26/2013 dtd.
04.06.2013]
W. e. f .01.01.2013 Recoveries in NPA Accounts (irrespective of the mode / status / stage of
recovery actions), henceforth shall be appropriated in the following order of priority:
i) Expenditure/Out of Pocket Expenses incurred for Recovery
ii) Principal irregularities i.e. NPA outstanding in the account gets updated / adjusted, whichever
is earlier?
iii) There after towards the interest irregularities/accrued interest.
A menu option NPACHRG has been customized in the CBS system to capture/recover/waive
the charges incurred for recovery of dues in the NPA account. System will check the credits made
in the NPA accounts from the last recovery date and create transaction, for the outstanding charge
amount or recovery made in the account whichever is lower, debit the loan account and credit
the expenditure head whichever has been debited earlier Report PNBRPT-28/7 has also been
customized, which will show all the NPA accounts wherever recoveries have been received but
appropriation of the same for the charges made in the expenditure account has not been done.
Ref: R.D. Cir No. -13/2014 dated 06.03.2014 Recoveries in WO/Non WO NPA A/cs
Correct Accounting Procedures:To facilitate the Branches to maintain and see at a glance the true and correct position of the
account, to produce the same as an evidence to courts etc. under Bankers Book of Evidence Act,
and to plug the instances of wrong reporting of Cash Recoveries either in Written Off A/cs or in
Non Written Off Accounts and to facilitate the branches to follow correct accounting procedure, It
Non-Performing Assets: Page 27 of 98


has been reiterated that all transactions in the NPA A/cs have to be necessarily routed
through the Borrowal Loan A/cs in the CBS System. Any other Accounting procedure
adopted by the Branches does not carry procedural sanction and may be viewed as a serious
infringement of Bank Guidelines
Recovery in Written Off A/cs is required to be credited to P&L A/c. Income under its sub Code
Income: Bad Debts Written Off Realized (Code 21199). Similarly Recovery of Delayed
Period Interest on OTS approved cases is also required to be credited to Income: Bad Debts
Written Off Realized instead of Income: Interest on Advances.
COMPUTATION OF NPA LEVELS
Keeping in view the need for uniformity across banks in reporting of Advances and NPAs, so as
to avoid any scope for different interpretations by the auditors/public, as also to improve the
comparability of Advances position of banks, RBI has recently advised Banks to compute their
Gross Advances, Net Advances, Gross NPAs and Net NPAs, as per the format given below:
PART A
1.
2.
3.
4.
5.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
6.
7.
8.

(Rs. in crores up to two decimals)


Particulars
Amount
Standard Advances
Gross NPAs *
Gross Advances ** ( 1+2 )
Gross NPAs as a percentage of Gross Advances ( 2/3 ) (in %)
Deductions
Provisions held in the case of NPA Accounts as per asset classification
(Including additional Provisions for NPAs at higher than prescribed
rates).
DICGC/ECGC claims received and held pending adjustment
Part payment received and kept in Suspense Account or any other
similar account
Balance in Sundries Account (Interest Capitalization Restructured
Accounts), in respect of NPA Accounts
Floating Provisions***
Provisions in lieu of diminution in the fair value of restructured accounts
classified as NPAs
Provisions in lieu of diminution in the fair value of restructured accounts
classified as standard assets
Net Advances( 3-5 )
Net NPAs {2 - 5( i + ii + iii + iv + v +vi)}
Net NPAs as percentage of Net Advances ( 7/6 ) (in %)

* Principal dues of NPAs plus Funded Interest Term Loan (FITL) where the corresponding contra
credit is parked in Sundries Account (Interest Capitalization Restructured Accounts), in respect
of NPA Accounts.

Non-Performing Assets: Page 28 of 98




** For the purpose of this Statement, Gross Advances mean all outstanding loans and advances
including advances for which refinance has been received but excluding rediscounted bills, and
advances written off at Head Office level (Technical write off).
*** Floating Provisions would be deducted while calculating Net NPAs, to the extent, banks
have exercised this option, over utilizing it towards Tier II capital.
For the purpose of computing Gross Advances, interest recorded in the Memorandum account
should not be taken into account.
Supplementary Details
(Rs. in crores up to two decimals)
Particulars
Amount
1.
Provisions on Standard Assets excluding 5(vi) in Part A above
2.
Interest recorded as Memorandum Item
3.
Amount of cumulative Technical Write Off in respect of NPA
accounts reported in Part A above
Provisioning Coverage Ratio for Advances [PCR]
Provisioning Coverage Ratio (PCR) is essentially the ratio of provisioning to gross nonperforming assets and indicates the extent of funds a bank has kept aside to cover loan losses.
At present, the provisioning requirements for NPAs range between 15 per cent and 100 per cent
of the outstanding amount, depending on the age of the NPAs and the security available. Banks
can also make additional specific provisions subject to a consistent policy based on riskiness of
their credit portfolios, because the rates of provisioning stipulated for NPAs are the regulatory
minimum.
To enhance the soundness of individual banks and the stability of the financial sector, RBI has has
asked the banks to augment their provisioning cushions (consisting of specific provisions against
NPAs as well as floating provisions) and ensure that their total provisioning coverage ratio,
including floating provisions, is not less than 70 per cent by 30.09.2010. Also, the PCR is to be
disclosed in the Notes to Accounts to the Balance Sheet.
Particular
Amount in Rs. Crore
1
Gross NPAs plus technical / prudential write-off.
2.
Specific Provisions held including provisions for
diminution in fair value of the restructured
accounts classified as NPAs plus technical /
prudential write-off.
3.
Floating Provisions for Advances (only to the
extent they are not used as Tier II Capital).
4.
DICGC / ECGC claims received and held pending
adjustment.
5.
Part payment received and kept in Suspense
account or any other similar account
6.
Total (2 to 5)
7.
Provision Coverage Ratio [( Row 6/ Row 1) *
100%)]

Non-Performing Assets: Page 29 of 98




Technical or prudential write-off is the amount of non-performing loans which are


outstanding in the books of the branches, but have been written-off (fully or partially) at
Head Office level.
SECURITIZATION & RECONSTRUCTION OF FINANCIAL
ENFORCEMENT OF SECURITY INTEREST (SARFAESI)

ASSETS

AND

BACKGROUND: In order to help banks and FIs to resolve the NPAs , the Govt. of India
promulgated Securitization and Reconstruction of Financial Assets and Enforcement of Security
Interest (SARFAESI) Ordinance, 2002 on 21.06.2002 , which was later replaced by Act 54 of
2002.
It has 42 sections divided into VI chapters. The act is applicable to whole of India including J&K.
Supreme Court vide its judgment dated 8.04.2004, in the case of M/s. Mardia Chemicals Ltd. &
others Vs Union of India & Others, upheld the validity of the Act except sub section 2 of the
Section 17 of the Act (deposit of 75% of the amount claimed with DRT along with the
application), which was declared ultra virus of Article 14 of the Constitution of India and directed
the Govt. of India to make certain amendments/modifications in the Act. As a result, the
Enforcement of Security Interest and Recovery of Debts (ESI & RD) Laws (Amendment) Act
2004 came into force w.e.f. 11.11.04
Salient provisions of the act are as Under:ENFORCEMENT OF SECURITY INTEREST:
1) Powers to the secured creditor: Any secured creditor having security interest by way of
Mortgage, Charge, Hypothecation and assignment (not by lien/pledge) may exercise powers
under the Law to take possession of secured assets (U/s 13-4), appoint a person to manage the
secured assets, require any person who has acquired secured assets, to pay to the secured creditor
and if a secured creditor is a Securitization Company, it can exercise power of takeover of
management of business of borrower
2) Conditions for exercising powers under the act: Such power can be exercised provided:
The Asset is classified as NPA as per RBI norms
Value of Financial Assets is more than Rs. One lac;
Security Interest is not created on agriculture land, an aircraft or a shipping
vessel;
Amount due is 20% or more, of principal and interest thereon;
Debt is not time barred;
Loan is not secured by way of pledge, lien & by security of bank deposits;
Asset is not on conditional sale or hire purchase or lease;
Property is not liable to attachment or sale under code of Civil Procedure.
The assets though exempted U/s 60 CPC (One residential house etc), if it
is charged to secure the debts, can be enforced under SARFAESI act.
Non-Performing Assets: Page 30 of 98


3) Possession Notice: U/s 13(2) of the act, a secured creditor has to give a notice in writing to the
borrower to discharge the debt/liability in full within sixty days from the date of notice. It is not
legally necessary to make a recall of the facility and invocation of guarantee separately.
These can be included in the notice Under Section 13(2) itself.
(LAW Division Cir - 04.2011) -- Under Section 31(i) of the SARFAESI Act, it has been provided
that the provisions of the Act shall not apply to any security interest created in agricultural land.
However, instances have come to our notice where IPs charged to the Bank by way of mortgage
are shown as agricultural land in the revenue records but the same are not being used for the
purposes of agriculture and are being used for purposes other than agriculture.
In this regard, attention is invited to the decision the of the Honble High Court of Andhra
Pradesh in the case of Gajula Exim (P) Ltd. Vs. Authorized Officer, Andhra Bank, Main Branch
and two Others (AIR 2008 AP 184), wherein it has been held that The present characteristics and not the potentialities of a land are the proper criterion (to
decide whether the land is agricultural or not). If a land is ordinarily used for purposes of
agriculture or for purposes subservient to or allied to agriculture it would be agricultural
land. If it is not so used, it would not be agricultural land. The question, how a land is
ordinarily used, would be one of fact depending on the evidence in each case.
The Honble Court, after going through the entire material in the case took the view that the land
on which the factory is situated cannot be treated as an agricultural land. Therefore, it is not
exempted under the Act.
It may also be added that the aforesaid view of the Honble Court was challenged before the
Honble Supreme Court by way of SLP (Civil) No.17714/2008 but the same was dismissed by the
Supreme Court vide its order dated 04.08.2008 with the observations that We do not find any
ground to interfere with the impugned order.
In view of the above legal position, it is advised that whenever the Banks action under the
SARFAESI Act is challenged in a similar situation, the aforesaid legal position can be of
assistance to the Bank to contest the same.
In other cases, where the mortgaged IP is being used for agriculture purpose, recovery
proceedings be initiated by filing suit in DRT/Court, as the case may be, and the property in
question be got attached and sold through the DRT/Court.
4) Representation by the borrower: (U/S 13(3A) if, on receipt of the notice under sub-section
(2) the borrower makes any representation or raises any objection, the secured creditor considers
such representation or objection as not acceptable or tenable, he shall communicate to the
borrower within one week of receipt of such representation or objection along with the reasons
for non acceptance of the representation or objection. This has been recently increased to 15
days.
Non-Performing Assets: Page 31 of 98


In consortium accounts consent of 60% of the secured creditors (in BIFR reference consent of
3/4th of secured creditors ) need to be taken before taking possession/other measures u/s 13(4) of
SARFAESI Act.
SALE OF ASSET:
1) Minimum Notice Period: A minimum 30 days notice be given to the owner after taking
possession by the authorized officer and the eventual sale of both movable and immovable
properties. In a recently concluded case, Supreme Court held that it is left at the discretion of the
Authorized Officer to take or not to take the possession of the immovable property before
effecting the sale as per Rule 9 framed under the act.
2) Designated official: The authorized officer has to be an officer in the Rank of the Chief
Manager of a Public Sector Bank or such other person authorized as such by the board of
Directors of the Bank.
3) Mode of sale: After taking possession, lender can sell the asset through public auction/inviting
tenders or by private treaty. If it is by public auction/tender, it should be backed by public notice
in two newspapers out of which in vernacular language having sufficient circulation.
4) Reserve Price: Reserve price would be arrived at after making proper valuation. For movable
assets authorized officer will take estimated value & for immovable assets, authorized officer will
obtain valuation from board approved valuer. Sale below the reserve price can be done only if
both borrower and lender agree except when there is a natural decay or cost of possession
may exceed the sale price.
5) Confirmation of Sale: Sale will be confirmed after deposit of 25% by the highest bidder,
balance will be paid within 15 days of confirmation of sale.
STRATEGIES FOR SUCCESSFUL SALE PROCESS UNDER SARFAESI ACT
(RD 42/2014 dated 18.12.2014)
SARFAESI Act prescribes various chain of actions to be taken by the Bank against the
defaulting borrower/guarantor/mortgagor, till it is taken to its logical end.
After serving the Notice under Section 13(2) of the Act, in case there is no positive
response from the borrower/guarantor/mortgagor, the Authorized Officer (i.e
Officer not less than a Chief Manager) after taking Symbolic and/or Physical
Possession may further initiate action for sale of the secured assets.
Under the SARFAESI Act, sale may be made by any of the following modes:
(a) By obtaining quotations from parties dealing in secured assets or otherwise
interested in buying the secured assets
(b) By inviting tenders from public
(c) By holding public auction or
(d) By private treaty
The aim is to secure maximum price for the assets to be sold.
The most transparent and effective methods of sale of the secured assets are:
1) Public Auction and
2) Inviting Tenders
For free, fair and transparent auctions, Ministry of Finance directed the Banks
Non-Performing Assets: Page 32 of 98


to adopt the Electronic medium for conducting auctions also known by the name
E-Auctions.
Steps for making E-Auctions successful
High failure rate of E-Auctions, clearly and categorically indicate that still there is
lot of scope in initiating the desired steps for making an E-Auction a successful
endeavor. A list of such desired steps is given below as a ready reckoner/checklist to
facilitate the field officials to ensure to adopt the same and accelerate the process of
recoveries through sale of secured assets:
1) Valuation of secured assets
Valuation of securities is an important and sensitive issue in the process of
enforcement of security interest, as it forms the base for fixation of Reserve Price,
before proceeding for sale. Valuation Report relied upon should normally be not
more than a year old. Branch Incumbent, besides relying upon the Valuation Report
submitted by the Valuer(s), as per extant guidelines, should involve him/herself in
the process and make discreet enquiries from the Property Dealers/Real Estate
Agents/Residents of that area etc. so that a fair assessment may be made, before
fixing the Reserve Price.
2) Fixation of Reserve Price
A realistic Reserve Price will always improve the chances of successful sale
process. Reserve Price needs to be fixed by taking into cognizance, various factors
e.g. location of the property, multiple tenancy, IPs not demarcated, various
Government obligations/litigations/attachments etc. Thus a pragmatic and rational
approach is the key to success.
3) Publicity
Publicity can be bifurcated mainly into two parts:
(1) As per statutory/regulatory guidelines and
(2) General practices for fetching better quotes/price
(a) Statutory/Regulatory Requirements
(i) For statutory compliance, Sale Advertisement is to be compulsorily
published in two leading Newspapers, one of which should be in
vernacular language. Further, in addition to giving 30 days Notice to the
borrower/mortgagor/guarantor, Sale Notice is also required to be affixed
on the conspicuous part of the property.
(ii)The Sale Notice is to be loaded at the following two websites, compulsorily:
www.pnbindia.in and www.tenders.gov.in
(b) Other Important Steps for Publicity
In addition to the above mentioned modes of publicity which are more or less
statutory/regulatory in nature, in order to brighten the prospects of successful
Auctions and fetch better price, following Publicity measures may also taken:
(i) Sale Notice can be displayed on Notice Boards of all the branches of the
Circle/ATM Cabins etc.
(ii) Other than the statutory requirement of publishing the Sale Notices in two
Newspapers, it can be published in some additional Newspapers, having good
circulation in that particular area.
(iii) To give wider publicity, a Strip can be displayed on the Local Cable TV/Other
Non-Performing Assets: Page 33 of 98


TV Channels for some period say a week/fortnight/month.


(iv) Hand Bills/Pamphlets can be circulated through Newspaper Vendors, which a
low cost publicity medium with wider reach.
(v) For sale of properties with high Reserve Price (1 crore & above),
pamphlets/brochures containing description and photos of the property
(wherever possible) can also be considered for circulation.
(vi) While giving the advertisement in the Newspapers/Hand Bills/Pamphlets etc.
positive features of the property be highlighted e.g posh locality, near to
Market/Schools etc., having modern kitchen. Such features enhance the
chances of receiving better quotes. Thus proper description of the security is
very important.
4) Preparation of list of potential buyers and Mobilisation of bids
A database of the prospective Valuable Customers/Real Estate Agents/Property
Dealers etc. may be prepared and kept hand for future sale transactions also. In case
of any fresh sale process, E-Mails/Invitation letters may be sent to such prospective
buyers to make the event successful.
5) Spot Inspection of the property and Enquiries by the Prospective Buyers
No bidder would be inclined to bid until and unless the property placed for sale, is
personally inspected by the bidder. Therefore such request of the bidders needs to be
complied with and spot inspection may be arranged as per their convenience. Further,
at the time of Due Diligence by the prospective buyers, it is quite obvious and natural
that certain queries are raised by them, for which it is essential that they are properly,
correctly and honestly responded to so that no complications arise at a later stage,
which may have an adverse effect on the entire sale process.
6) Facelift of the Properties
Generally after taking possession, the condition of the property deteriorates due to
closure or lack cleanliness, whitewash etc. and sometimes it is difficult to have access
through the property due to growing of weeds, grass etc. in the open area of the
premises. Thus, before opening the property to spot inspection, wherever possible,
efforts must be made for giving them a face lift by spending a nominal amount and
taking help of the labor for whitewash, removal of weeds/grass, cleaning the premises
etc.
7) Actual /Physical/Symbolic Possession
In case Bank has actual/physical possession of the property, the chances of success of
the auction/sale increase. However, where there is only Symbolic Possession, Bidders
will be interested to know when will he/they will get the possession, in case the sale is
finalized. Thus all possible efforts must be made to obtain the DM/CMM orders so
that Bank may give delivery of the property after the sale.
8) Utilization of services of Supporting Agencies
Bank permits utilization of services of Supporting Agencies for procuring bidders.
Through their professional approach and local contacts such Agencies can play an
effective role for getting the bidders. For utilization of services of Supporting
Agencies, Circle Heads may take a final call in this regard and wherever required,
services of such Agencies may be utilized.

Non-Performing Assets: Page 34 of 98




CONFIRMATION OF SALE AND ISSUE OF SALE CERTIFICATE (RD 38/2014


05.11.2014)
Confirmation of Sale : On payment of initial deposit, the sale shall be confirmed. Confirmation
of sale be recorded and conveyed to the highest bidder. The steps needs to be taken immediately
but within 15 days from the date of Auction for getting the sale confirmed from the secured
creditor i.e. Committee of Officers and confirmation be conveyed to the highest bidder.
1) IMMOVABLE ASSETS
Confirmation by the Authorised Officer and confirmation by the secured creditor are
necessary only in respect of sale of immovable assets. Sale of immovable property is to be got
confirmed (Form SI-22 of SARFAESI Manual) by the Authorized Officer from the Secured
Creditor. In terms of SARFAESI Rules, 2002 {Rule 9(6)}:
On confirmation of sale by the secured creditor (Committee of Officers) and if the terms of
payment have been complied with, the Authorized Officer exercising the power of sale shall
issue a Certificate of Sale of the immovable property in favor of the purchaser. (Form SI-17
of the SARFAESI Manual)
2) MOVABLE ASSETS
Confirmation of sale by the Authorized Officer/ Secured Creditor (i.e Committee of officers)
may be dispensed with/may not be followed, as in case of movable assets, sale confirmation
is not required. In case of sale of movable assets, on payment of full sale price, Authorized
Officer shall issue Certificate of Sale (Form SI-15 of the SARFAESI Manual). Certificate of
Sale may attract stamp duty. If the purchaser does not insist for a Certificate of Sale, he can be
given a receipt (Refer Appendix B- Form SI 16 of the SARFAESI Manual) for the sale price
received.
3) NON CONFIRMATION OF SALE
If it is found by the Committee of Officers that sale is not to be confirmed, the reasons for not
confirming the sale be recorded in the minutes of the meeting and should be immediately
conveyed to the purchaser and initial deposit be returned.
4) COMMITTEE OF OFFICERS FOR CONFIRMATION OF SALE
S.No. Particulars
Committee
to
sale Members of committee
confirmation
1
For branches other COCESI ( Circle office 1.Circle Head (Chairperson)
than LCBs
committee
for 2.Second in command at CO
enforcement of security 3.Chief/Sr. Manager of Recovery
interest
4.Sr.Manager/Manager Law
2
For LCBs
Committee of LCB for 1.Head of the LCB
Non-Performing Assets: Page 35 of 98


enforcement of security 2.Second in command


interest
3.Relationship manager
The above Committees will confirm the sale of secured assets (compulsorily for immovable
property), in the capacity of secured creditor.
In this regard, provisions of Rule 9(2) of The Security Interest (Enforcement) Rules, 2002,
provide as under:
The sale shall be confirmed in favor of the purchaser who has offered the highest sale
price in his bid or tender or quotation or offer to the authoried officer and shall be subject
to confirmation by the secured creditor.
5) EXTENSION OF TIME LIMIT FOR PAYMENT OF BALANCE AMOUNT
Rule 9(3) of The Security Interest (Enforcement) Rules, 2002 states that:
On every sale of immovable property, the purchaser shall immediately pay a deposit of 25% of
the amount of the sale price, to the Authorized Officer
Further Rule 9(4) provides that:
The balance amount of 75% of the purchase price payable shall be paid by the purchaser to the
Authorized Officer on or before the fifteenth day from date of confirmation of sale of the
immovable property or such extended period as may be agreed upon in writing between the
parties.
Supreme Court in its Judgment in the case of J.Rajiv Subramaniyan & Anr. Vs. Pandiyas and Ors.
Decided on 14.3.2014, held that sale by any other method in terms of Rule 8(8) of SARFAESI
Rules other than public auction or tender shall be on such terms as may be settled between the
parties in writing. According to the Court, the parties mean the borrower (mortgagor),
purchaser and the bank. Thus
Extension in the time period (i.e beyond 15 days, as specified in Rule 9(4) of the
SARFAESI Act), for depositing of the balance amount be permitted only when:
(i) It is mutually agreed upon by the Borrower(mortgagor), Bank and purchaser OR
(ii) Consent is given by the borrower/mortgagor for doing so.
CONSENT OF MORTGAGOR REQUIRED FOR SALE BY PRIVATE TREATY
AND ON FAILURE/CANCELLATION OF SALE- ENTIRE PROCESS BE
FOLLOWED AFRESH (RD 17/2014 DATED 22.04.2014)
-----------------------------------------------------------------------------------------------------------After failure/cancellation of sale process, which may be through any of the four modes
prescribed under the SARFAESI Act i.e Auctions/Tenders/Quotations/Private Treaty,
before making another attempt the whole procedure is to be started afresh e.g issue of 30
days notice to the borrower, publication in the two newspapers etc. as if the sale
process has been started for the first time.
APPEAL PROVISIONS:
Non-Performing Assets: Page 36 of 98


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

Non-Performing Assets: Page 37 of 98




REVISED GUIDELINES-DELEGATION OF POWERS (RD Cir 20/2012)


Incumbents Incharge of the branches including LCBs, irrespective of the Scale shall have
full powers irrespective of amount of loan outstanding, to permit for initiation of SARFAESI
Action and issue of Recall Notices through SI-1 and SI-1A.
On taking an administrative decision to initiate action under SARFAESI, the matter shall be
referred maximum within 3 working days to the competent/designated Authorized Officer by
submitting the approved copy (by Incumbent) of SI-2 along-with the Draft Notice under Section
13(2) of the Act, who then shall issue the Notice under Section 13(2), maximum within 3
working days of receipt of such requisition from the Branch Incumbent. In the branches
including LCBs, headed by the Scale IV and above officers, the Incumbent Incharge in his
capacity as designated Authorized Officer, shall himself take action under the SARFAESI on
the basis of the proposal prepared as per SI-2. However, they shall keep the respective Circle
Head/FGM informed. All actions under SARFAESI however shall continue to be taken by
such designated Authorized Officer.
SARFAESI ACT 2002 - UPLOADING OF AUCTION NOTICES AT WEBSITES GUIDELINES (RD 02/2015 dated 09.01.2015)
All Auction Notices are to be placed compulsorily on the following websites as per the
procedure explained in the subsequent paragraphs, in addition to publication in the
newspapers, as per the provisions of the SARFAESI Act 2002 :
(i) www.pnbindia.in (Regulatory Disclosure) -> Banks website
(ii) www.tenders.gov.in -> The Indian Govt. Website
Besides above mentioned two websites, for further exploring the market of prospective
buyers, FGM/Circle Head may decide to upload the Auction Notice on the following
private website, approved by the Executive Committee in its meeting held on
20.11.2010 (Recovery Divisions Note dated 22.09.2010), where value of IP is Rs. 5.00
crore and above:
www.foreclosure.com
For placing the information on the above mentioned optional website, matter may be taken
up directly, with M/s Foreclosure India by e-mail. The contact details of the Company are
given below:
Fax No. : 040-23836405
Email : info@foreclosureindia.com
Website : www.foreclosureindia.com
For listing of Auction Notices on their website, the Company may be paid Rs. 800/- per
account/borrower, inclusive of service Tax. In addition to this, Company shall also
upload the same Auction Notice in vernacular language without any extra cost. In case
of
Auctions, new dates of auction shall be intimated to M/s Foreclosure India. However,
no
further charges shall be payable. Further, on sale of listed properties, no commission
Non-Performing Assets: Page 38 of 98


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

Division
HO:MASD
HO: RECOVERY DIVISION

Email address
website@pnb.co.in
prerona.misra@pnb.co.in
mksethy@pnb.co.in
sc.aggarwal@pnb.co.in

Procedure for uploading Auction Notices at www.tenders.gov.in


Circles would be responsible for uploading the Auctions on Government Website
www.tenders.gov.in.
For uploading the Auction Notices at www.tenders.gov.in, the required information is given in
the Annexure-II-Summarized Information. Circle Offices may seek the required information
from the concerned branch for uploading the Notice.
Circles will also upload the Auction Notices for the Large Corporate Branches and Large
Corporate Branches (LCBs) will get their Auction Notices uploaded through the respective
Circle Offices.
Executive Incharge, Recovery Section at the Circle Offices will be responsible for
uploading of the Auction Notices at the Government website www.tenders.gov.in of the
Branches of the Circle and of the Large Corporate Branch also located in their area.
For uploading of such Auction Notices at the Govt. website, step by step work
flow is stipulated in the Annexure-I-Work Flow & Annexure-IV-User Mannual {RD Cir
02/2015 dated 09.01.2015}
Important Terms and Conditions
Non-Performing Assets: Page 39 of 98


1. Auction Notice should be invariably placed on the Banks and Govt. of India
websites for at- least 30 days in advance.
2. Branches will send details of the Auction Notice(s) to its Circle Office (soft as
well as hard copy) and Circle Offices for placing the Auction Notices on the
Government website www.tenders.gov.in after verifying the facts and
completeness of requisite information.
3. Circle Office will maintain a record of such Auction Notices and allot/mark
serial number starting from 1 (year-wise) e.g for 2014 the first Auction Notice
sent to Recovery Division shall bear serial number 1. Similarly in 2015 it will
again start from 1 and so on.
4. All other guidelines for enforcing the Security Interest under SARFAESI Act
have to be complied with, meticulously.
5. Regarding creation of User IDs information on the prescribed format (RAD
02/2015) be submitted to recovery division HO New Delhi.
ADOPTION OF E-AUCTIONS-AMENDMENTS IN GUIDELINES (RD 04/2015 DATED
09.02.2015)
BACKGROUND :
As per extant guidelines following two Service Providers are conducting E-Auctions under
SARFAESI Act and at DRTs, on behalf of the bank are being paid Rs. 5000/- per
Event/ auction:
(i) M/s C-1 India
(ii) M/s Nextenders
Till 31.03.2015 the e-auctions will continue to be conducted by existing two vendors.
Amendments in the existing guidelines:
All E-Auctions (i.e under SARFAESI Act & at DRTs) will be conducted at the Circles from
01.04.2015 onwards. Large Corporate Branches (LCBs) will also get their E- Auctions
conducted through the respective Circle Offices, however their Authorized Officer will be
invariably present in the Circle Office, carrying the mandate from the Incumbent of the LCB, to
take any decisions related to the E-Auctions. In such cases Circle Office will provide only
infrastructural facility to conduct E-Auction and rest of the activities and all other
responsibilities associated with the conduct of E-Auction will be taken care by LCB.
Charges Payable to the Service Providers
The concerned Branch having the NPA account, for which E-Auction is being
conducted, will make payment to the Service Provider by debiting Expenditure: General
Law Charges (P & L Code No. 1081001) at the following rates: Per successful E-Auction
/Event @ Rs. 4000/- (Previously Rs. 5000/-) inclusive of Service Tax as applicable, with
maximum of 10 items (movable items viz. Plant, Machinery etc. and/or immovable
Non-Performing Assets: Page 40 of 98


properties) per borrower per auction, being conducted on the same day. For every
additional 5 items additional charges @ Rs. 2000/- shall be paid to the Service Provider.
For failed per E-Auction/Event only Rs. 1000/- will be paid.
The above prices will be all-inclusive and TDS or any other statutory levies will be
deducted by Bank as per Income Tax rules from time to time and are applicable, both for,
E-Auctions to be conducted at DRTs and under SARFAESI Act and are applicable with
immediate effect i.e E-Auctions conducted on or after 09.02.2015.
For payment of above expenses, the Incumbent Incharge of the branch has full powers and no
further reference needs to be made to the Circle Office.
Clarification
If there are multiple properties in an NPA account and for which separate reserve Price
has been fixed and timings of the Auctions are different (even if on the same day), each
Auction will be considered as separate Event and payment is to be made to the Service
Providers separately for each Event, despite the fact that properties belong to a single
borrower.
However, in case of multiple properties in an account (subject to the upper limit of 10
items), if a single reserve price has been fixed and timing of the Auction is only one,
then only it will qualify for a single Auction.
CENTRAL REGISTRY:- Central Govt. has set up a Central Registry. After its set up,
particulars of every transaction of creation of security interest be filed within 30 days of creation.
Any modification be also filed. The Company is a Government Company with a shareholding of
51% by the Central Government .Select Public Sector Banks , National Housing Bank are also
shareholders of the Company.
Help Desk.
* CERSAI has set up help desk at New Delhi for trouble shooting both in technical and functional
areas through telephone (Nos. 011 26176847, 011-26176855, 011-26176856) and email (email ID
helpdesk@cersai.org.in).
* web based Helpdesk system w.e.f. 01.12.2011 and the same can be accessed at
http://www.helpdesk.cesai.org.in through internet .
Company under liquidation, notice U/s 13(2) of SARFAESI act is to be served on to the
official liquidator and if no response is received, bank to obtain leave of the Company Court
under section 537 of Companies Act to take measure under section 13(4) of the SARFAESI act.
DEBT RECOVERY TRIBUNALS (DRT)
DRTs were established in 1993 under Recovery of debts due to Banks and Financial institution
act 1993, on recommendations of Narsimham Committee. The act came into effect on 25th June
1993 and extends to whole of India except J & K. It contains 37 sections spread over 6 chapters.

Non-Performing Assets: Page 41 of 98




Composition: DRT is headed by Presiding Officer called President (appointed by Central


Govt). The Presiding Officer will hold office for a period of 5 years or until he attains the age of
62 years, whichever is earlier. It does not go with CPC, but act on the principal of natural justice.
Recovery Officer: Once the claim is upheld, DRT issues a certificate to the Recovery Officer
who has various powers in execution such as attachment, arrest and may also require debtor to
declare on affidavit his assets and liabilities. Appeal against order of recovery officer to DRT can
be made within 30 days from the date of order.
Amount: It deals with cases of Rs.10 lac & above (Central Govt. can reduce the amount to Rs.1
lac). All the accounts of a borrower can be combined and one application can be made.
Nature of Debts covered: All lawful debts (not time barred by limitation), which have arisen
during ordinary course of business of Banks/FIs, are eligible to be filed. Cases relating to
misappropriation of any amount of a bank by an employee are not covered.
Civil Imprisonment: The tribunal can issue orders of attachment and can also order for detention
of the defendant for a term not exceeding 3 months.
Time Frame: of 6 months from the date of application has been stipulated for decision in a case..
Appellate Tribunal (DRAT):- The appellate tribunal consists of the Chairperson, appointed by
the Central Govt. He will hold office for a period of 5 years or until he attains the age of 65 years,
whichever is earlier.
Appeal: (i) Appeal against DRT is to be filed to Appellate Tribunal within 45 days of receipt of
order. (ii) The Appellate Tribunal should dispose of the appeal within a period of 6 months from
the date of appeal. (iii) Appeal to be made after depositing 75 % of amount due as determined by
the Tribunal (DRT). DRAT may wave/relax this condition on merits.
Disposal of Cases by DRTs Non production of original documents in the cases, which are
being investigated by outside Agencies
Law Division vide its Circular No. 07/Law/2013 dated 23.01.2013 has issued the guidelines to the
effect that in respect of seizure / production of document during investigation of case in terms of
Section 91 of the Criminal Procedure Code, 1973, when any Officer Incharge of a Police Station
considers that the production of any document is necessary for the purpose of any investigation,
enquiry of a case, such officer can issue a written order to the person in whose possession such
document is, to produce the same. Such an order of Police Officer be complied with after
obtaining seizure memo and keeping a record the attested copies of the documents.
(RD 02/2014 dated 15.01.2014)
Guidelines for filing & follow-up of Recovery cases before Civil Courts/ DRTs Ref LAW DIV
CIR 16/2013 dated 06.08.2013,
Monitoring of DRT/DRAT matters- DRT Portal on CBS Screen- Ref : Rec Div Cir 46/2013 dt
09.10.2013.

Non-Performing Assets: Page 42 of 98




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

This policy is applicable to transfer / sale of financial assets by the


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

Non-Performing Assets: Page 43 of 98




Objective

Banks/FIs/NBFCs (excluding RRBs).


A financial asset may be transferred to Securitization Company /
Reconstruction Company on outright sale basis under Sections
5(1)(a) and 5(1)(b), or Agency basis under Section 10(1) of the
SARFAESI Act.
Resolution of NPAs by transfer / sale and also Non Performing
Investments (NPIs) in case of sale to other Banks/FIs/NBFCs.
Swiftly realizing as much of total dues as possible depending upon
valuation of underlying security interest.
Reduces expenditure on NPA maintenance (legal expenditure,
follow-up requirements etc.) and releases resources for core
operations.
Sends signals that the Bank is serious in resolution of NPAs, even
by off-loading them.
helps in creating an active and vibrant market for NPA/
Restructured debt papers and To develop a healthy secondary
market for NPAs/NPIs

Factors in favour of a) Realization of assets is expected over a longer period.


sale of FA
b) Multiple litigations are involved.
c) Outstanding towards workmens dues and/or government taxes
etc are either large or cannot be estimated reasonably / accurately.
d) Other contingent liabilities are existing.
e) Sale is in the larger interest of the bank
Eligibility of SCs/ SCs/RCs who has / have obtained the Certificate of Registration
RCs for purchase of
from RBI under Section 3 of the SARFAESI Act before providing
financial asset of
information in respect of a financial asset to them.
bank
Whenever Banks financial assets are placed for sale to the
SCs/RCs/NBFCs/FIs/Banks etc. (whether Bank approaches them
or they approach the Bank), it must be ensured that invitation is
sent to minimum 5 SCs/RCs/Banks/NBFCs etc. in order to get
better offers. Condition of giving invitation to minimum 5 buyers,
will not be applicable in those cases, where a prospective buyer
offers 100% Memoranda Dues. In that case Bank may consider
the offer on bilateral basis, after taking permission of the
HOCAC-III.
Offers on bilateral basis will not be considered from those ARCs,
where PNB is a sponsor Bank (Presently PNB is sponsor Bank in
ARCIL, ACRE, PRIDHVI & ISARC)
Eligibility criteria for Before considering transfer / sale of a financial asset, pros and cons
accounts to be placed
of going for enforcement of the related security interest by the bank
for sale / transfer
itself under SARFAESI Act vis--vis transfer / sale of the financial
asset to a Securitization Company/ Reconstruction Company/Other
Banks/FIs/NBFCs be analyzed.
latest guidelines issued by the Recovery Division for valuation of
Non-Performing Assets: Page 44 of 98


securities in NPA accounts be complied with along-with the other


practical aspects e.g. the assets should be pooled on geographical
basis for assessing the Stamp Duty implications and/or all assets
with common underlying security/financial assets belonging to
same group to be auctioned as part of same pool.
List of Financial Assets which can be sold to
SCs/RCs
Banks/FIs/NBFCs
A financial asset, including
1) A NPA, including a nonassets
under
multiple/
Performing bond/debenture.
consortium
banking
2) Standard Asset, where:
would be
(a) The asset is under consortium arrangements,
eligible
for
sale
to
/multiple banking arrangements,
(b) At least 75% by value of the Banks/FIs/NBFCs etc. if it is
asset is classified as non- non-performing asset / nonperforming assets in the books of performing investment in the
other Banks/FIs and
books of the Bank.
(c) At least 75% by value of the Banks will be permitted to sell
banks/FIs
who
are
under their NPAs to other Banks /FIs
consortium/multiple
banking /NBFCs (excluding SC/RC)
arrangements agree to sale of the without any initial holding
period. However, the nonasset to SC/RC.
3) An asset reported as SMA-2 performing financial asset
(Special Mention Account- where should be held by the
principal or interest payment is purchasing bank for a period
overdue between 61-90 days) by of 12 months before it is sold
the Bank/FI to Central Repository to other Banks/FIs/NBFCs
for information on Large Credit (excluding SC/RC).
(CRILC)
in
terms
of
DBOD.BP.BC.No.98 /21.04.132
/2013-14 dated 26.02.2014.
Additional Sub-Category of accounts permitted for sale
Category of Accounts
Remarks
Willful
defaulters/Criminal Proposal for approval shall be
by
the
Action (only non-fraudulent considered
cases) cases. As per RBI Management Committee on
guidelines, fraud cases cannot be merits of the case.
considered for sale.
Accounts backed by Govt. Such cases may also be
considered for sale, subject to
Guarantees
approval by the Board.
A written off NPA may also be considered for transfer / sale.
A financial asset in respect of which any case is pending before a
Court/DRT/BIFR etc. may also be considered for sale
All the financial assets due from a single debtor shall be
considered for transfer / sale. Similarly, financial assets having
Non-Performing Assets: Page 45 of 98


Exempted category of
advances for sale

Authority
/
Delegation of power
for identification &
initiating sale process

Approving authority

Withdrawl

of

linkages to the same collateral/common security shall be


considered for transfer / sale simultaneously.
Both fund and non-fund based financial assets may be included
in the list of assets for transfer / sale.
Retail NPAs of homogeneous nature may also be sold on portfolio
basis to SCs/RCs/Other Banks/FIs/NBFCs etc.
Exceptions:
Pool of assets being sold does not contain any loan originated
fraudulently or has been classified as fraud as on the date of sale.
Any loan originated fraudulently or has been classified as fraud as on
the date of sale. This is equally applicable to standalone/bilateral sale
of accounts.
NPAs in respect of which OTS is already concluded and is under
implementation.
NPAs where restructuring is already approved and is under
implementation.
NPAs where DICGC/ECGC claim has already been received,
should normally be avoided for Sale.
Identification of accounts to be placed for sale to
SCs/RCs/FIs/NBFCs
etc.
may
be
done
at
the
Branch/Circle/FGMO/HO Level. Workflow be referred for
sending the cases to HO.
In case a Branch/Circle identifies account(s) and/or any buyer
approaches Circle/Branch for purchase of account(s), in both the
situations concurrence of the FGM be invariably be taken before
proceeding further in the matter.
The powers for permitting for initiation of sale of identified
financial assets to SCs/RCs/Other banks/FIs/NBFCs etc. will be
vested with HOCAC-III.
In case of non-NPA accounts e.g Standard Accounts or Accounts
under SMA-2 category, to start the sale process in such accounts,
necessary permission from the HOCAC-III to start the process
will be obtained by the concerned Head Office Division, dealing
with such accounts and after obtaining the permission, rest of the
modalities will be taken care by the Recovery Division, in terms of
the extant Sale Policy.
Looking to sensitivity involved in cases relating to sale of financial
assets, the proposal(s) shall be considered for approval by the
Management Committee (MC) through:
Circle Office Asset Sale Committee(COASC)
Field General Manager Office Asset Sale Committee
(FGMOASC)
Head Office Asset Sale Committee(HOASC) and
Head Office Settlement Advisory Committee(HOSAC)
The powers for withdrawal of the account due to any reason, e.g

Non-Performing Assets: Page 46 of 98




accounts from the non-availability of the latest valuation report, OTS/Compromise


Sale
Process- Offer
received
from
the
borrower/co-borrower,
any
Authority & Criteria
regulatory/legal requirement/restriction etc. from sale process are
vested with ED/CMD. In case obligant(s) and co obligant(s) come
forwards, for OTS, before finalization of sale process by the
proposed buyer(s), the concerned account may be withdrawn from
the sale process considering account specific merits, provided:
a) The minimum offer of OTS shall be as under:
Where Outstanding is
Percentage
Upto Rs.10 lacs
115% of Reserved price
More than 10 lacs upto 50 lacs
110% of Reserved Price
More than 50 lacs
105% of Reserved Price
AND
b) The party deposits 50% cash as upfront money immediately and
remaining within 3 months of approval of OTS.
Sale Consideration SCs/RCs shall, by transferring funds, invest a minimum of 15% of the
for the Financial SRs of each class issued by them under each scheme on an ongoing
Assets
Sold
to basis, till redemption of all the SRs, issued under such scheme. i.e.
minimum cash component will be 15% of the sale price and rest 85%
SCs/RCs (only)
in the form of Security Receipts/Bonds etc.
Bond & Debentures The Bank may receive cash or bonds or debentures as sale
consideration for the financial assets sold to Securitization
Companies/ Reconstruction Companies. The SCs/RCs can issue
bonds or debentures or other similar security to the Bank on agreed
terms and conditions [Section 5(1)(a) of SARFAESI Act 2002].
The securities (bonds and debentures) offered by Securitization
Company/ Reconstruction Company as sale consideration should
satisfy the guidelines issued by RBI presently
(i) The securities must not have a term in excess of six years.
(ii)The securities must carry a rate of interest which is not lower
than 1.5% above the Bank Rate in force at the time of issue.
(iii)The securities must be secured by an appropriate charge on
assets transferred.
(iv)The securities must provide for part or full prepayment in the
event the SCs/RCs sells the asset securing the security before
the maturity date of the security.
(v) The commitment of the SC/RC to redeem the securities must
be unconditional and not linked to realization of the assets.
(vi) Whenever the security is transferred to any other party, notice
of transfer should be issued to the SC/RC.
Validity Period of SRs
In terms of RBI guidelines SRs are redeemable within 5 years which
can be extended upto 8 years with the approval of the Boards of
the SCs/RCs. However, there is no guarantee of return on SRs.
Yield on Security Receipts
Non-Performing Assets: Page 47 of 98


In case of sale by way of SRs, the expected yield for SRs to be in the
range of 5-10% p.a.
Sale to other Banks/FIs/NBFCs etc, will be made only on cash
basis. The entire sale consideration should be received upfront and
the asset can be taken out of the books of the selling Bank only on
receipt of the entire sale consideration. Under no circumstances
can a sale to other banks be made at a contingent price.

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

Bank will not use auction process for sale of NPAs as a price
discovery mechanism for such assets, where the bids are invited
from SCs/RCs and no bid is accepted without assigning any
reason.
If a bid received is above the Reserve Price and a minimum 50%
of sale proceeds is in cash and also fulfills the other conditions
specified in Offer Document, acceptance of that bid would be
mandatory for the Bank.
Fixation of Reserve Important aspects associated with fixation of Reserve Price
Price
The Reserve Price for each account placed for the sale, in which
prospective buyers (ARCs/Banks/FIs etc.) have evinced interest,
will be declared before hand, at the time of sending invitation to
them to submit bids. For this, the HOASC will finalize the Reserve
Price based on the recommendations received from FGMOASC. In
those accounts where no interest has been shown by the buyers, the
Reserve Price will not be disclosed.
Separate Reserve Price may be fixed for offers received on
(a) 100% cash basis and
(b) Other than 100% cash basis
Since sale on cash basis is always beneficial for the bank, the
Reserve price fixed for 100% cash basis will be 10%-15% (to
be decided by HOASC) less than that on other than 100% cash
basis. Further, in case offers are received at the minimum Reserve
Price fixed in both the cases, the offer at 100% cash basis will be
preferred.
Pricing / Valuation
The objectives of the valuation are essentially to:
a) arrive at Net Present Realizable Value of the assets;
b) provide a basis for fixation of Reserve Price, evaluation and
acceptance of offer of Securitization Companies /
Reconstruction Companies/ other banks/FIs/NBFCs etc for
sale / transfer of assets
The bank shall make internal assessment to determine Net Present
Realizable Value (NPRV), which will be preferably based on the
latest valuation report obtained from the Banks approved valuer
Latest Valuation Report which should not be older than 1 year,
as on the date of submission of PAIR to the intending buyer.
Wherever it is not possible to have fresh Valuation Report i.e less
Non-Performing Assets: Page 48 of 98


Resolution cost

Evaluation of offer

Prudential norms

than 1 year old, such accounts must be immediately


recommended for withdrawl from the sale process.
In case the value of immovable property to be mortgaged/ charged
is Rs.5 crore & above, branches shall get valuation of such IPs
done from minimum two valuers on the Banks approved
panel
and
In case the difference in valuation by the two valuers is less
than 15%, the average value may be taken. Same procedure may
be adopted while assessing the latest value of the securities, before
going for sale of financial assets.
(a)Enterprise / Business Valuation using discounted cash
flow technique on the future earning projections in case of
operating units / potentially viable units.
b) Net Present Realisable Value of Assets (NPRV) Keeping in
view the difficulties faced by the field staff and subjectivity
involved in the calculation of NPRV, due to different percentage of
discounting factors, a simpler and objective procedure is to be
adopted in line with the Banks OTS Policy. The calculation of
NPRV is to be done as per the Annexure-NPRV enclosed with
the circular.
Besides discounting factors permitted under Banks
OTS/compromise Policy on the market value of assets, further
discounting factor of 30% in the form of Resolution Cost
(which may include cost related to insurance, litigation etc. & Cost
involved due to time factor for realization of securities etc.) is also
applied for arriving at the NPRV.
Further, while adopting the sale of financial assets route for
resolution of NPAs, application of Resolution Cost factor is not
compulsory for calculation of the Net Present Value and must be
use with prudence.
Intending buyers may be given 25-30 days period for doing due
diligence and also submission of their Price bid offers.
There exists a well laid down policy in the Bank for calculation of
recoverable dues (as per general guidelines of compromise) for
considering OTS/Compromise in NPAs. Same procedure shall be
adopted in calculation of recoverable dues for considering
sacrifice.
The COASC shall fix the Reserve Price as per the latest present
realizable value of available security net of cost of realization, as
per Annexure-NPRV and recommend to the FGMOASC,
which will review it and further recommend to the HOASC,
for finalization. Sale price should not be lower than NPRV.
When the bank sells its financial assets to Securitization Company/
Reconstruction Company, on transfer the same will be removed

Non-Performing Assets: Page 49 of 98





Resolution
disputes

of

Monitoring

from its books.


If the sale to SCs/RCs is at a price below the Net Book Value
(NBV) (i.e Book Value less provisions held), the shortfall
should be debited to the Profit & Loss account of that year.
If
there
is
any
dispute
between
Securitization
Company/Reconstruction Company/Other Banks/FIs/NBFCs etc.
and PNB or Qualified Institutional Buyers in respect of
securitization or reconstruction or non-payment of any amount due
including interest, it shall be settled in accordance with Section 11
of the SARFAESI Act.
The disputes between Securitisation Company/ Reconstruction
Company/Other Banks/FIs/NBFCs etc., Bank and Qualified
Institutional Buyers cannot be taken to civil court.
Recovery Division, Head Office shall monitor progress in the
matter of sale of financial assets to Securitisation Companies /
Reconstruction Companies/ /Other Banks/FIs/NBFCs etc..

STRATEGY FOR UPGRADATION OF VIABLE NPAs TAGGING ARRANGEMENT


In certain viable cases, operations may be allowed in NPA accounts with a view to upgrade the
accounts by appropriating a certain part of the credits in the accounts (i.e. tagging a part of
credit) for regularization of the over dues/irregularities and allowing the borrower to utilize the
balance amounts for operating activities.
Tagging of 15% and above may be sanctioned by Incumbents Incharge, and 10% to less
than 15% by Circle Head, for credit facilities sanctioned by any authority. If tagging is to
be fixed at less than 10%, the sanctioning authority is FGM
Policy for Engagement of Recovery Agencies
(RD Cir. 20/14 dt. 21.05.2014).
All Doubtful and Loss category accounts (whether non-suit filed, suit
Eligible
filed or decreed) with ledger outstanding not exceeding Rs.10 lac.
accounts
All written off accounts shall be covered by the scheme except accounts
where compromises have been approved (including those reached at in
Lok Adalats) and have not been treated as failed.
Circle Office should ensure that proper mix of Doubtful/Loss
accounts (difficult to resolve) is allocated to the Recovery
Agencies. Circle Head shall ensure that reasonable number of
accounts are allocated to each Recovery Agent to get optimum
results. In case one branch is unable to provide requisite number of
accounts, Recovery Agents be allocated accounts from nearby
branches.
Recovery Agencies shall be empanelled for the entire District or Cluster
Empanelof Districts.
Only agencies (companies, corporations, firms,
ment
of
NBFCs etc.) with sufficient means/ resources/ field experience will be
Recovery
Non-Performing Assets: Page 50 of 98


Agencies

Guarantee

Mode
of
Settlement

considered for empanelment. Factors such as past experience, financial


soundness, business reputation, standards of performance, market
feedback and external factors e.g. political, social, legal & economic
environment should also be kept into consideration while empanelling
the recovery agencies.
Applications would be invited at the concerned Circle Offices, from
interested parties through advertisements to be placed in two local
newspapers, out of which one should be vernacular. Committee
comprising of 2nd in command of Circle Office, Chief Manager and Sr.
Manager/ Manager (Recovery Deptt.) will interview the applicants and
recommend the empanelment.
Competent Authority to approve the empanelment of Agency will be
respective Head of the Circle Office. The decision of Head of Circle
Office would be final. There would be no review process by any higher
authority.
The panel of Recovery Agency will be reviewed by Circle Office on
annual basis. However, bank has right to terminate the contract at any
time without assigning any reason.
The up to date details of the Recovery Agency firms/companies engaged
by Circle Office shall also be posted on the banks website.
The Agency shall furnish to the Banks Circle Office, a Bank guarantee
for an amount of Rs. 1,00,000/-. Alternatively, the Agency shall make a
security deposit (by way of term deposit) for equivalent amount which
shall be returned to the Agency on termination of the arrangement.
If reputed recovery agencies having good track of effecting recoveries of
the Banks and desirous of getting empanelled with other Circle Offices
shall provide Bank Guarantee/ Security deposit of Rs. 1 lac in each
Circle Office subject to maximum of Rs. 3 lac.
Every field staff of the Recovery Agency shall be issued a temper-proof
Identity Card (with in-built photo as in Electronic Photo Identity Card
issued by Election Commission) at the cost of Recovery Agency, to be
signed by 2nd in command of Circle Office and authorized signatory of
Recovery Agency.
Recovery Agents shall not accept cash. Cash recoveries, if any, shall be
directly deposited by the borrower or his representative in the branch.
The field staff of Recovery Agency shall not receive any cheque/draft in
his name or in the name of the Agency. The cheques / drafts should be
drawn in favor of PNB A/c ___________ (title of the account for which
collection is made) and crossed A/c Payee only.
When recoveries are made in suit-filed / decreed accounts, satisfaction
to the extent of the realization made shall be got recorded by
appropriate application / statement before the Court.
RBIs Guidelines on Fair Practices Code for Lenders and IBAs Model
Code for Collection of Dues and Repossession of Security (CDRS Code)
shall be adhered to, wherever required, by the Recovery Agency.

Non-Performing Assets: Page 51 of 98




Commission

Training

Supreme Court has cautioned the Banks against use of coercive methods
for recovery of loans and in the other case on the same issue State
Consumer Forum of New Delhi has given stern warning to Banks that if
any complaint is received against any Bank alleging use of force by
recovery agents, the punishment of minimum one month imprisonment
shall be imposed under section 27 of the Consumer Protection Act 1986.
The branch should inform the borrower the details of Recovery Agency
firms/companies while forwarding default cases to the Recovery Agency.
For NPA accounts (suit filed / non suit filed)
Commission payable on amount of
Age of NPA
recovery
A/cs
with O/s A/cs with O/s above
upto Rs.1 lac
Rs.1 lac
Upto 3 years
7.5%
5%
3 years upto 5 years
10%
7.5%
Beyond 5 years
15%
10%
For decreed accounts
Age of decree
Commission payable
Upto 3 years
5% of amount recovered
Above 3 years upto 5 years
7.5% of amount recovered
Above 5 years
10% of amount recovered.
The allocated accounts may be withdrawn from Recovery Agencies after six
months from the date of allocation in case no effective result is achieved by
Recovery Agencies within this period subject to approval of Circle Head.
The number of hours of training for various categories of Recovery Agents
Sl.

Educational Qualification

hours

Below 12th Pass


12th pass and above and below
graduation
3.
Graduation and above
50 hours.
The progress shall be monitored on Monthly basis by 2nd in command of
Circle Office. Circle Head him/herself shall review the performance of
Recovery Agencies on Half-Yearly basis
The progress under the scheme shall be monitored by RD HO on
quarterly basis and review note will be placed to the GM (RD) on
quarterly basis and to Executive Director on annual basis.
An officer shall be designated as Nodal Officer at Circle Office.
Any complaint arising in the matter to be addressed by the Nodal
Officer within 7 days of receipt of complaints.
1.
2.

Monitoring /
Supervision
& Control

No.
of
Training
100 hours.
70 hours.

Non-Performing Assets: Page 52 of 98




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

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

Other Firms
A
Firm/Company
promoted by and/or
employing
professional
person
/persons like Chartered
Accountant /Company
Secretary
/
Cost
Accountant and / or
honorably
retired
Senior Executives of
the Banks (not less
than DGM/GM) with
minimum 3 years
experience in the
resolution of NPAs.
Firms/Companies not
having
3
years
experience but having
professionals
with
minimum 3 years
experience
in
resolution
of NPAs, will also be
eligible.
For all other cases, the
matter may be referred
to the Head Office,
Recovery Division to
consider on merits of
the case.
Invitation of Head office , Recovery Concerned
Field
applications
Division
shall
invite General
Managers
applications from Scs/Rcs. shall
invite
applications
from
Firms / Companies
(other than SCs/Rcs)
Non-Performing Assets: Page 53 of 98


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

HRD and/or Recovery


Division of concerned
Circle office shall
invite
applications
from the honorably
retired bank employees
(including Voluntarily

Competent
Authority for
empanelment

Eligibility of
accounts for
allotment to
Resolution
Agents

5.
Identification
& Allocation
of accounts
Delegation of
Powers.

Retired
Employees).
ED for empanelment as FGM,
after Upto
Circle Head
Resolution cum Recovery engagement
of scale-III
Agents and allocation of Resolution agents CH Scale IV FGM
NPAs under Retail Loans may
advise
the & V
on portfolio basis
dealing officials from Scale VI Executive
the office to visit the & VII
Director
site/office
of
the
(through
Firms/Companies
HRD)
This panel shall be
circulated to all the
offices
for
the
utilization of their
services
for
resolution of non
performing accounts
under the scheme
Following eligibility criteria are common for all the 3 categories of
Resolution Agents i.e. SCS/RCs, Other Firms & PNB Retired employees:
(i) NPA accounts categorized as Doubtful / Loss whether non suit filed, suit
filed or decreed accounts shall be covered under the Scheme.
(ii) A financial asset in which any case is pending before a Court / DRT / BIFR
/ Action under SARFAESI may also be considered for allocation under the
Scheme.
(iii) The financial assets where non funded facilities are yet to be crystallized
are not to be allocated.
(iv) In case of written off accounts, outstanding balance at the time of write off,
shall be taken as Notional outstanding.
Rs. 1Cr Circle
More than
Circle
Up to Rs. Clerical Circle
to 5 Cr. Head
Rs.10 lac
25 Lac
staff
head
Head
And upto Rs.
Above Rs. Scale I, Circle
Above
Field
1 Lac but II & III Head
Rs.5
General 1 crore
up to Rs.
Crore.
manager
100 Lac
Above
Field
Rs. 1 crore up General
Above Rs. Scale
Circle
to
Rs.
5 Manager 10
Lac IV & Head
crores
Scaleupto
V
Rs.250
Above
5 Executive lacs

Non-Performing Assets: Page 54 of 98




Criteria
for Ledger
of
allocation of outstanding
Rs.1 cr. & above
accounts
(Further,
all
Retail
Loans
under
Doubtful/Loss
category may be
allocated
to
them Circle-wise
on
portfolio
basis in addition
to
NPAs
(Doubtful/Loss)
of Rs. 1 cr. &
above.)
Resolution
Limit
for A
number
of Agent shall be
Accounts to be initially allocated
allocated
to 10 to 15 accounts
the Resolution for resolution and
it
may
be
Agents.
subsequently
allocated
more
accounts based on
their performance.
However, in case
of eligible Retail
Loan NPAs under
portfolio basis, the
limit
will
be
restricted to 50
accounts
per
Circle with total
ceiling
of
8
Circles. Therefore
at a time, a
maximum of 400
Non-Performing Assets: Page 55 of 98


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

Above
Scale
Circle
Rs.10 lacs VI & Head
upto
above
Rs.500
lacs

Ledger outstanding of
more than Rs. 10 lacs.

Ledger outstanding upto Rs.


crores,
subject
to
th
condition
that
retire
employees be not given such
accounts for resolution which
they handled while in servic
i.e the accounts which wer
either sanctioned by them o
their
operations
wer
handled by them during thei
stay in that particula
branch.

The Resolution Agent


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

A Resolution Officer shall be


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

NPA accounts will


be allocated under
Retail
Loan
Scheme
on
portfolio basis to a
single SC/RC, in
addition to eligible
accounts
with
balance
outstanding of Rs.
1 crore & above
Period
of Maximum period for resolution of allocated accounts shall be 12 months if
resolution
of Resolution Agent fails, accounts will be taken back. However, same can be
accounts (common extended upto 24 months by Field General Manager on merits of the
case, keeping in view the steps taken by the Agent for recovery.
for
SCs/RCs/Other
Firms/PNB
Retired
Employees.
Commission
For
SCs/RCs/Other
Firms/Companies

Commission
For
SCs/RCs/Other
Firms/Companies

Fixed Component.
SCs/RCs and Firms/Companies other than SCs/RCs may be paid
commission at the rate of 5% of the recoveries, as fixed component.
However, there are no changes in the other expenses payable e.g
Insurance charges, Security/Valuation charges after taking the possession
by Bank/Official Liquidator/DRT Receiver, legal expenses including fees
to the advocates, charges relating to auction, which shall be borne by the
Bank.
Variable Component
S.No
Distress value Rec up to Recovery
Recovery
of security
90%
of above 90% above
Principal
up
to principal
principal
Cases
with No
5% of the
1
No
distress
recovery
Incentive
Incentive
value of tangible
in excess of
security
more
principal
than
principal
amount.

Non-Performing Assets: Page 56 of 98




Cases
with No
6% of recovery in excess of
distress
90% of the principal
Incentive
value of tangible
security between
50%
to
90%
of
principal
amount.
Cases
with 7% of any recovery
3
distress
value of tangible
security less than
50%
of
principal
amount
Cases
without 10% of any recovery
4
tangible
security
Note. A consolidated commission of 10% of recovery shall be payable to the SCs/RCs for
resolution of Retail Loans under NPAs entrusted to them on portfolio basis.
2

For PNB Retired Employees.


Commis
sion
Outstanding

If the Age of NPA is If Age of NPA is more than 3


up to 3 Years
years.
Up to Rs. 1 Lac
8%
10%
Above Rs. 1 lac to 7%
9%
Rs. 50 Lac
Above Rs. 50 Lac to 1 6%
8%
crore
Above Rs.1 core upto 5%
6%
Rs.5 crore
(Max Rs.15 lacs)
(Max Rs.15 lacs)

The above mentioned rates payable to all categories of Resolution Agents are all
inclusive of taxes whatsoever may be applicable.

For resolution /recovery of accounts expenses on conveyance/travelling, salary to staff


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

Non-Performing Assets: Page 57 of 98




Commission is to be paid by the branches to the debit of Expenditure: Outsourcing of


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

Incumbent Incharge of the branch will be the competent authority to finalize the
bill/claim submitted by the Resolution Agents and its payment, based on their record
of recoveries and as per the Banks extant guidelines. In case of any dispute, Circle
Head may take the final decision, considering facts of the case and for LCBs the
concerned FGM shall be the competent authority for settlement of disputes
Miscellaneous Terms & Conditions
Following terms and conditions are applicable to all the 3 categories of Resolution Agents.

Borrowers/co-obligants shall be informed of the engagement of Resolution Agent


at the time of assigning the job for resolution to the concerned SC/RC.

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

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

In case Resolution Agents desire for Power of Attorney from Bank to act on behalf of
the Bank for the resolution of the account, they may be provided as per formatAnnexure- POA enclosed as per Circular.

Keeping in view the provisions of the RTI Act, salient features of the Policy e.g criteria
for empanelment, experience, fees/commission etc. may be placed on the Banks Website
for the convenience of the Resolution Agents.

Resolution Agent shall ensure that while acting as Resolution Agent, they do not
give rise to any pecuniary liability to bank otherwise they shall be held liable for their
action.

Bank has right to withdraw any financial asset allocated to the Resolution Agent
without assigning any reason subject to approval of Field General Manager.

Non-Performing Assets: Page 58 of 98




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

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

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


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

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

The object clause of SC/RC/Company (under category of Other Firms) is to permit to act
as Resolution Agent for bank/banks.

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

b Legal Action/Follow-up by the Resolution Agents


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

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

Involvement of Resolution Agents during negotiations with borrowers

Non-Performing Assets: Page 59 of 98




Branches/Circles should generally involve the Resolution Agents to participate during settlement
discussions with the borrowers. In fact, presence of Resolution Agents who are responsible for
follow-up with the borrowers is beneficial for settlement through negotiations and can result into
higher settlement. This facilitates to integrate the efforts of the Resolution Agents and Bank
officials and avoids any communication gap.
Circle Heads to ensure that:
Police verification Reports of the antecedents of their employees, which may include preemployment police verification, as a matter of abundant caution are available in the Circle
Office records. Further, re-verification of antecedents should be resorted to at an interval of 2
years.
It has been brought to the notice that branches, while providing the requisite
information pertaining to allotted NPA accounts to the Resolution Agents, also part with
the documents e.g the file, mortgage deeds etc., which may jeopardize the banks interest.
It must be ensured that parting of documents to Resolution Agents is not permitted under
any circumstances.
* Resolution Agents must ensure that:
(i) There is a tape recording of the contents/text of the calls made by them to the customers, and
vice versa. It may take reasonable precaution such as intimating the customer that the
conversation is being recorded, etc.
(ii) They preserve documents and/or data in accordance with the legal/regulatory obligation of the
bank
* . Monitoring & Review of the Scheme
* The list of SCs/RCs/Other Firms/PNB Retired Employees as Resolution Agents, shall be
placed on the Banks website.

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

POLICY FOR ENGAGEMENT OF SUPPORTING AGENCIES UNDER SARFAESI


ACT 2002
(RD 21/2014 DATED 22.05.2014)
Nature
of The following services/activities/sub-activities need to be performed by
services
such professional Supporting Agencies :
1)Pre-take over examination of identified units/assets including survey
which shall include:
(i) Location of the unit/asset,
(ii) Its status i.e whether the unit is running or closed, whether the
IP is vacant or occupied, if occupied by owner or by tenants
etc.
(iii) Requirement of manpower (security personnel) at the time of
taking over the actual possession,
(iv) Assessment as to whether the owner is likely to hand over the
possession voluntarily and/or peacefully or offer resistance.
Non-Performing Assets: Page 60 of 98


2) Facilitating the Bank in seizure of securities/taking possession of


movable and immovable assets.
3) To provide security for preservation and protection of assets taken
in possession.
4) To act as Custodian of secured assets.
5) Obtaining assistance of District Magistrate/Metropolitan
Magistrate for taking over possession of securities. For this
services of an advocate from Banks panel may be utilized
6) Assisting the Bank for sale of assets taken in possession through
auction or otherwise.
Authority
for Circle Head is authorized for empanelment of a Supporting Agency. In
engagement
/ case of LCBs the power for engagement of Supporting Agencies shall vest
empanelment
with the Incumbent of the LCB.
Wherever required, FGM may permit to utilize the services of a Supporting
Agency engaged by one of his Circle Offices, in the other Circle Offices
also, under his jurisdiction.
Validity of panel The panel of Supporting Agencies will remain valid till the time revised/updated list is placed on the Banks website, preferably on yearly basis.
Addition
/ Circle head is authorized
delisting
Payment of fees Annexure II and III of the circular and are all inclusive of taxes whatsoever
may be payable. The Fee Structure given in the Annexure does not cover
the charges for Seizure of vehicles including Tractors, for which there
is separate Policy approved by the Board
For obtaining assistance from DM / Chief metropolitan magistrate
for taking over possession of securities the fees shall be paid in two
stages:
50% at the beginning on moving the application
Balance 50% after obtaining possession of secured assets.
Payment
of Expenditure: Outsourcing of Financial Services-Supporting Agencies
commission
{P & L- GL Report Code 11427 (Account No. <solid> 1142703) as
revenue head
mentioned in I&AD Cir no.51/08
Recovery
Where supporting agencies have played a proactive role in recovering
through OTS
banks dues through OTS or otherwise (normal recoveries) after taking
possession under the Act but there is no sale of assets, Circle Head may
approve fee to the Agency at the rate of 50% of normal fee (i.e. fee payable
for sale of asset) with the ceiling of Rs.1,50,000/- (one lac fifty thousands)
and payable to debit Expenditure: Outsourcing of Financial ServicesSupporting Agencies {P & L- GL Report Code 11427 (Account No.
<solid> 11427103) ( I&AD Cir no.51/08)
Competent
The payment will be made by the concerned branch as per the directions of
Authority
for the Authorized Officer.
payment
and In case of any dispute, Circle Head may take the final decision,
settlement
of considering facts of the case and for LCBs the concerned FGM shall be
disputes
the competent authority for settlement of disputes.
Non-Performing Assets: Page 61 of 98


Monitoring

Quarterly review meetings shall be held with the staff of Supporting


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

POLICY ON SEIZURE AND SALE OF VEHICLES(INCLUDING TRACTORS)


DEFAULTER BORROWERS
(RD 23/2014 DATED 23.05.2014)
(1)

For recovery of Banks dues in irregular and NPA vehicle loans (including Tractor
advances), following procedure is to be followed by Branch Manager for
repossession and disposal of the security of vehicle including Tractors:

(a)

Branches shall resort to repossession of security only for the purpose of realization of its
dues in default as the last resort and not with whimsical intention of depriving the
borrower of security / vehicle.

(b)

In addition to the usual / normal recovery reminders / notices / efforts, a 15 days notice
calling upon the borrower to remedy the default shall be given (with copy to guarantor/s)
in writing in local vernacular language. The notice shall state that in the event of failure
on the part of the borrower / guarantor to do so within the prescribed time, the bank shall
be entitled to seize the vehicle and proceed for selling it to recover its dues as per terms
of the loan agreements and in consonance with the law. Draft notice is enclosed as
Annexure-I of RD 23/2014.

(c)

In case the default persists, another possession-cum-sale notice of 10 days shall be


given to borrower / guarantors in writing in local vernacular language intimating the date
of taking over possession of the vehicle / tractor and conveying banks intention of
selling it to recover its dues on a date to be specified in the notice. Draft Notice is
enclosed as Annexure-II of RD 23/2014.

(d)

The borrower shall be at liberty to repay banks dues on any day before the date fixed for
sale and get back possession of his vehicle. In such an eventuality further action of sale
shall be stopped.
Estimated price of vehicle shall be ascertained and notified to the borrower / guarantor,
and on the notified date for sale, the vehicle shall be sold by Public
Auction/Tender/Quotations and/or through a private contract at the sole discretion of the
bank in a fair and transparent manner, where borrower will also be advised to be present.

(e)

Non-Performing Assets: Page 62 of 98




The depreciated value of the vehicle/tractor may be taken as estimated value.


However, as an additional safeguard, estimated value may be got valued from a
Surveyor. Draft Notice is enclosed as Annexure-III of RD 23/2014.
(f)

Proceeds of sale, net of expenses incurred in this regard, shall be promptly credited to
borrowers loan account towards liquidation. Any surplus shall be refunded to the
borrower and for any deficit further recovery action shall be initiated as per our normal
guidelines.

(2)

For taking possession and /or for sale, the BM may require services of a suitable
Agency. Circle Heads may shortlist suitable Agencies out of the panels of approved
Recovery Agencies and Supporting Agencies keeping in view their infrastructure,
expertise, skills, storage space, past performance, area of operation etc as Seizure
& Disposal Agents for undertaking the job of seizure, storage and disposal of
tractors and of other vehicles.

(a)

While initiating action for seizure of vehicles (including tractors), intimation to the
Police Authorities is neither regulatory nor mandatory requirement. However, it is
advisable to send such communication to the Police Authorities, for information only.

(b)

Further, in case the borrower refuses to sign the paper/possession memo (document for
establishing the fact that Bank has taken possession of the vehicle) when the vehicle is
repossessed by the Bank, copy of same be sent to the borrower through Registered
Post (Acknowledgement Due). Further, on repossession of the vehicle by the Bank,
Immediate information be also provided to the local Police Authorities (AnnexureII of RAD 23/2014), intimating time and place when the vehicle was repossessed
(Rajeev Raijyada versus S Ravindra Bhat, High Court decision dated 18.01.2005).

(3)

After seizure of the vehicle, prompt and quick steps shall be taken to dispose off / sell
the vehicle but in any case not exceeding 60 days from the date of seizure, failing which
the vehicle / tractor may be restored back to the borrower.
S.No.
Service rendered
Fee payable
A
Seizure and transporting the vehicle Maximum Rs.2500/- per vehicle (Cars,
to a nearby godown
Tractors, Trucks etc.)
B
Acting as custodian of vehicle / Maximum Rs.100/- per day for a maximum
Storage Charges
period of 60 days during which either the
possession is to be restored to the borrower or
the vehicle is sold.
C
Sale of vehicle
5% of amount realized.
D
Recovery without seizure of 5% of amount recovered
vehicle/Tractor
(4)
Sale proceeds net of these expenses shall be credited to the borrowers account. If there is
surplus, the same shall be remitted to the borrower(s) and in case of deficit, further
recovery measures should be taken.
Non-Performing Assets: Page 63 of 98


Compromise / One Time Settlement ( Ref: Cir No RD 16 /2012 dated 31.05.2012


Definitions:
BASE AMOUNT is gross outstanding as on date of NPA (inclusive of SI/DI) duly adjusted for
recovery/further debits in the account (except interest), irrespective of the fact whether recovery
was appropriated towards income or reduction in outstanding. In case interest already recovered
exceeds principal, the excess amount shall be deducted from gross outstanding
NET PRESENT REALISABLE VALUE (NPRV) OF SECURITIES: is the Present Market
Value of the charged securities, net of cost of realization, discounted as under:
A
B
B-I

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

10%
20%

B-II

More than 1 year old stay against SARFAESI action/Auction under 10%
Sarfaesi failed as no bidder came.
B-III
Attachment of IP by Tax/Revenue authorities (if no priority charge)**
10%
B-V
IP not demarcated / Undivided share mortgaged / no independent access.
10%
B-VI
Mortgagor is dead
10%
Maximum discount restricted to 40%. (if more than one attendant factors).
** In case of priority charge, deduction of full dues / amount of attachment. Also, if proof exists
of IPs having statutory encumbrances like Property Tax, Lease Rent, Development charges etc.
the deduction shall be 50% of such dues, apart from the above discounts.
Net Present Value of the OTS amount:
(OTS amount + Interest at BR)
If OTS amount is to be recovered without interest or at a rate lower than BR net present
value shall be calculated by adjusting difference in BR and charged rate of interest in the
OTS sanction.
(Payment within 3 months without interest is considered immediate payment) .
GENERAL GUIDELINES ON ONE TIME SETTLEMENT OF NPAs
All Borrowal/Loan accounts identified as NPA in terms of extant RBI guidelines
outstanding as at the end of last quarter shall be eligible for considering under these
Policy guidelines for compromise/negotiated settlement/one time settlement and/or
write off..
RBI reported 1 .OTS proposal in such NPA accounts having book outstanding of Rs. 25 lac &
above shall be considered at the highest level i.e. Management Committee/ Board.
Willful
default/Fraud 2. Cases involving outstanding balance of up to Rs. 10 lac where an amount higher
than NPRV/Book Outstanding (whichever is higher) is being recovered may be
cases
considered at COCAC level within the delegated power of the sacrifice involved
provided the staff side case, if any, has been decided against the erring official(s).
3 OTS proposals in accounts having outstanding balance of up to Rs. 10 lac where

Coverage

Non-Performing Assets: Page 64 of 98




Criminal
action cases
Recoverable
Dues

Minimum
Indicative
OTS amount

OTS offer is lesser than the NPRV/Book outstanding shall be considered on case to
case basis by HOCAC Level II as per their vested powers subject to post facto
information to Management Committee on Quarterly basis.
4. Cases involving outstanding balance of Rs. 10 lac & above but below Rs. 25 lac
where an amount higher than NPRV/Book Outstanding (whichever is higher) is
being recovered shall be considered by HOCAC Level II.
5 OTS proposals in accounts having outstanding balance of Rs. 10 lac & above but
below Rs. 25 lac where OTS offer is lesser than the NPRV/Book
outstanding shall be considered on case to case basis by HOCAC Level III as per
vested powers.
6 The criminal cases filed under Section 138 of Negotiable Instrument Act
shall not be governed by these guidelines and OTS proposals in such cases shall
be dealt in normal course as per vested powers.
Cases, where criminal action initiated / FIR lodged, will be considered by
MC/Board.
Present Ledger outstanding + *interest @ Base Rate simple or contractual rate of
interest whichever is lower.
(*Interest shall be calculated on simple reducing balance basis starting from the
Balance outstanding as on the date of NPA. Recorded interest on classification as
NPA will be added in Recoverable Dues. )
For NPAs Under direct agricultural advances with balance outstanding up to
Rs.10 lac (including Kisan Credit Cards but excluding Tractor Advances)
recoverable dues shall be calculated with interest @ 6% simple, irrespective of
age of NPA.
In decreed accounts, recoverable dues shall be calculated as per the above rate
or decretal rate whichever is lower.
Minimum recoverable amount/recoverable dues shall be calculated, as at the
close of the quarter preceding the date of the proposal and shall include
recorded legal/other expenses also.
If NPRV is
Min. Indicative OTS Amount
> Recoverable dues
Recoverable dues
< Recoverable Dues but > Book NPRV
Outstanding
< Book Outstanding
NPRV
Where NPRV is Zero
Whatever maximum can be recovered
The basis for negotiation shall always be Memoranda Dues and should aim
at recovering maximum share of the same.
Under Direct Agriculture Advances upto Rs. 10 lac,
the realizable value of primary/collateral security
will exclude
the agricultural land offered as security.
However, security available other than agricultural land shall be
taken into consideration for arriving at the NPRV

Non-Performing Assets: Page 65 of 98




Minimum Indicative OTS Amount in case of Direct Agricultural


Advances up to Rs. 10 lacs will be as under where NPRV is less than Book
Outstanding
Sub-Standard NPAs : Minimum 50% of Book outstanding
Doubtful NPAs : Minimum 40% of Book outstanding
If the borrower is unable to pay the Min. indicative OTS amount, the best possible offer involving
higher sacrifice, depending upon merits and attendant circumstances of individual case, can be
considered by the next higher authority.
Upfront
Efforts should be made to get upfront payment in settlement of OTS proposal
Payment
as under :
OTS Offer up to Rs. 10 lac
: Upfront 20%
OTS offer >Rs.10 lac to Rs.50 lac : Upfront 15%
OTS offer>Rs. 50 lac
: Upfront 10%
where it is considered that upfront amount is difficult to be insisted in advance
(reasons to be recorded specifically), minimum amount to be deposited shall be
insisted upon before considering the OTS proposal as
follows:
Upfront Amount where it is
difficult to provide prescribed
Amount upfront Amount
Upto Rs. 10 lacs
20%
NIL
Rs. 10 lacs to Rs. 50 lacs
15%
Rs. 0.50 lacs
Rs. 50 lacs to Rs. 100 lacs
10%
Rs. 1.00 lacs
Rs. 100 lacs to 500 lacs
10%
Rs. 5.00 lacs
Rs. 500 lacs & Above
10%
Rs.10.00 lacs
In genuine cases, competent authority may allow lower / NIL upfront payment
and/or may allow reasonable time of 7-10 days to deposit the amount.
*Party to deposit remaining Upfront amt within 15 days. failing which OTS is
treated as cancelled/withdrawn and conveyed to the borrower in writing
Generally it should be within 3 months without any interest.
OTS amount should normally be paid within a maximum period of 12 months.
HOCAC Level II may consider proposals under their powers with payment
period up to 24 months.
Cases where payment period is proposed to be more than 24 months shall be
placed before the Management Committee for consideration irrespective of the
amount of waiver involved.
Cases where the OTS amount is to be paid beyond a period of 3 months from
the date of conveying approval, and/ or payment in installments, future
interest on the settlement amount shall be charged @ 6-10% on simple basis
on reducing balance from the date of conveying approval by the branch.
COCAC and above may consider at lower rate, in exceptional circumstances.
OTS Offer

Payment term

Non-Performing Assets: Page 66 of 98




Upfront

Cases not involving further sacrifice


. Without further sacrifice(Not exceeding 12 M ).by - COCAC level 1.
> 12 M but up to 15 M by -COCAC level II.
> 15 M but up to 18 M by HOCAC level II
>18 M but up to 24 M by HOCAC level III
MC- Full Powers.
Cases involving further sacrifice
By next higher authority keeping in view the original sacrifice and present
sacrifice.
(If OTS sanctioned by MC shall be placed to MC only).
Amendment in T & C other than OTS amt, interest be granted by sanctioning
authority. Cases of HO powers by HOCAC level II .
Any proposal submitted by the branch can be rejected by an authority one
Rejection
step higher than the authority competent to approve the proposal. ( but
should be put up in max 15 days to the SA/CO)
Accordingly, competent authority should refer the case for rejection to his
next higher authority, giving reasons thereof. (SA shall make further
negotiations if desired within say 30 days)
However, proposals falling under the powers of HOCAC Level III and
above may be rejected at the level of HOCAC Level III itself.
Reopening of
Failure of OTS
In case of obligants failure to pay the OTS amount as per schedule of
failed
OTS
payment the failure should be notified to the party after prior approval
cases
from CH maximum within one month after giving due notice.
After declaring the OTS failed legal recourse be taken immediately for
recovery of banks dues.
Re-opening of failed OTS- (with or without further sacrifice).
Such proposals shall be considered as Fresh / De novo proposals by the next
higher authority.
Other
Compromise agreement to contain a specific clause that the settlement is
conditions
subject to continuation of criminal proceedings against the
borrowers/obligants.
Cases backed by Govt. Guarantee may be considered by Board.
Cases of PSUs may be considered by MC.
Staff/staff connected accounts shall be considered by CH and above. Cases
involving ex-staff to be considered by CH and above, if the facilities were
sanctioned prior to his retirement/resignation.
OTS offer should be accepted by borrower within 15 days.
If borrower proposes to pay an amount below the sanction, the case shall not
be considered as reduction in OTS amount. It shall be considered by
competent sanctioning authority again.
Discharge of liability of one or more obligants/release of Charge on Mortgaged
Property may be considered by competent authority (as per delegated powers
to approve sacrifice involved/book outstanding in the account), but not below
Extension

Non-Performing Assets: Page 67 of 98




the rank of Circle Head. Sacrifice in such cases would be the Difference of Min.
Recoverable Dues and Offer Amount
Proposal for assignment of Debt as part of OTS shall be considered at the level
of Management Committee of the Board, if OTS is less than Book
Outstanding, by ED/CMD if > Book Outstanding
SPECIAL GUIDELINES FOR CONSIDERING OTS IN WRITTEN OFF ACCOUNTS
Borrowal NPA accounts, which were written off earlier duly approved by the
Coverage
competent authority, whether by leaving a balance of Rs. 100/ - or not.
Relevant
/ The date on which the account was written off in the books of the branch, i.e. the
Material date date on which the amount of revenue loss reimbursed by HO/CO was credited to
the account
Base amount
Net Outstanding prior to Write off i.e. the book outstanding (exclusive of
Suspended Interest/ De-recognized Interest) as on the relevant/ material date
shall be the base amount. The base amount is to be duly adjusted for
recoveries, if any, subsequent to the relevant/ material date.
Recoverable
The base amount (duly adjusted for recoveries if any, subsequent to write off), as
dues
above, may be treated as Recoverable dues without applying any future
interest.
Minimum
A comprehensive view on the capacity of the borrower(s)/ Guarantor(s) shall
indicative
have to be taken. Since these cases were already written off by competent
amount
authority in the past in terms of Banks laid down policy on write off,
whatever maximum can be recovered under given circumstances shall be the
amount to be recovered.
Sacrifice/ waiver in such cases may be calculated as the Difference between
Base Amount and the Compromise Offer
Payment term Preferably be paid in lump sum. Where the borrower is unable to pay the
entire amount in lump sum, 15-25% be recovered upfront and the balance
amount within a period of 3 months. In exceptional circumstances, longer
repayment period (not exceeding 12 months), together with interest at the
existing Benchmark Prime Lending Rate (*) from the date of settlement up to the
date of final payment, can be considered by the next higher authority.
Cases where the compromise offer is 50% or more of the base amount:
Sanctioning
Powers
Rs. lac
Approval
Manager
Manager
Sr.
Chief
Asstt.
of
Scale I
Scale II
Manager
Manager
General
sacrifice/
Manager/D
waiver,
GM
not
exceeding: 1.00
2.00
3.00
5.00
10.00
Cases where the compromise offer is less that 50% of the base amount : Next
higher authority.

Non-Performing Assets: Page 68 of 98




Write Off : In case of write off proposal involving ledger o/s of Rs. 20 lac and above, it should
be backed by report of detective agency/investigating agency with reference to traceability of
obligants/ascertaining the attachable assets of borrowers/guarantors.
Powers to write off at different levels is kept in abeyance; except final write off of accounts
with residual balance of Rs. 100/-; which may be written off after 1 year if o/s balance at the
time of write off was up to Rs. 25000/- and after 3 years in other cases.
Non-borrowal fraud cases / Cases of Theft and Dacoity
These cases will be considered for write off by FPIS, HO by the appropriate authority. For all
cases of loss of cash in theft/dacoity/robbery etc. and non-borrowal Fraud and non-borrowal other
Impaired Assets,
Delegation of Powers.
Level of Authority HOCAC (Amt. in lac)
Level- I HOCAC---------50.00
Level II HOCAC--------75.00
Level III HOCAC--------100.00
MC---------------------------FULL
( Powers to be exercised per case basis) .
The above powers to approve sacrifice in Non Borrowal Impaired Assets shall be exercised by the
respective authorities, if duly recommended by the Committee constituted.
ASSIGNMENT OF DEBT AS PART OF OTS:

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

Non-Performing Assets: Page 69 of 98




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


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

Authority
before
Whom the status
report
will
be
placed
Top 100 borrowal a/cs of <5.00cr in each MC(As per RBI
cat Sub STD DF and Loss
Calendar
of
Review)
NPAs With O/s > 5 Cr
ED
Fresh Slippage during the Quarter >= 5 Cr CMD
Fresh Slippage during the Quarter < 5 Cr ED
but >= 1 cr
Fresh Slippage during the Quarter < 1 Cr GM (Recovery)
but >= 50 lac
Fresh Slippage during the Quarter < 50 lac DGM (Recovery)
but >= 10 lac
NPA with o/s balance of < 10 lac but above CH
1 lac including Fresh slippage
NPA below 1 lac including Fresh Slippage BM

Periodicity

Once in a Year
Once in a Year
As and when
As and when
As and when
As and when
Quarterly/As and When
Quarterly/As and When

OBTAINING CONSENT DECREE/ OTS AGREEMENT / MEMORANDA OF SETTLEMENT


(RD 32/2014 dated 26.07.2014)
(A) Non-Suit filed cases
1) Non-Sarfaesi Cases
Where payment of OTS/Compromise is spread over a period of time and payments are proposed in
installments, Borrower should accept terms & conditions of the compromise. In such cases a
Compromise Agreement can be entered into if payment of settled amount is to be paid over a period of
time. A Memoranda of settlement shall be got executed from the borrowers, as per Annexure-I.
2) Sarfaesi Cases
In cases where action under SARFAESI has been taken, the action can be kept in abeyance till recovery
of the entire OTS amount and in case of failure of OTS further action has to be taken. Draft
Agreements are enclosed as Annexure-IA & Annexure- IB.
(B) Suit Filed Accounts
In suit filed cases no agreement needs to be entered into, rather terms of compromise be filed in the
DRT/Court and Consent Decree be obtained as stated below:
1) Payment of OTS spread over a period of time
Non-Performing Assets: Page 70 of 98


In case of suit filed cases where OTS Proposals are approved and payment of OTS amount is spread
over a period of time or where the OTS amount is proposed to be received in installments, the
parties shall consent for a decree as prayed for, in the plaint/DRT application with provision to pay as
per OTS terms, subject to a default clause that in the event of borrowers failure to pay OTS amount as
per the terms approved, all concessions/relief shall be treated as
withdrawn. The Consent Decree shall be obtained for the full amount of the claim subject to the
condition that in case of payment of the amount as per OTS terms, the decree will stand satisfied.
Under no circumstances the Consent Decree for OTS amount only shall be obtained. In such cases
memo of compromise (Annexure-II) has to be filed by all the parties i.e Bank as well as
Borrowers/Guarantors/Other Liable Parties before the Court /DRT and a Decree/Order, in terms of the
compromise memo, has to be obtained/got passed from Court/DRT.
2) Payment of OTS in lump sum
In case payment of OTS amount is proposed in lump sum, bank may give a communication of No
Objection to the borrower to make payments as per Annexure-III. Further, on receipt of full and
final payment as per the terms & conditions of the OTS/Compromise, a receipt in full and final
settlement, as per Annexure-IV, of banks claim can be issued/suit be withdrawn /satisfaction of
decree may be recorded without entering into any OTS agreement and/or consent decree etc.
(C) Decreed Accounts
In case of decreed accounts, on receipt of the entire OTS amount, a memo of satisfaction of decree
shall be filed in the respective Court. In Decreed cases no agreement needs to be entered into. The
position is explained hereunder:
(a) If execution petition is not filed, a No Objection Letter can be issued as per Annexure-III.
(b) If execution petition is filed, appropriate statement may be made before the Court/RO about the
matter being under compromise recovery made and for keeping in abeyance of EP/RC for the required
time. If lump sum payment is received/full payment as per compromise terms is received, then
satisfaction can be got recorded.
(D) Thus importance of obtaining Consent Decree/Memoranda of settlement needs to be understood in
true spirit but at the same time it needs to be ensured that recovery of OTS amount should not be
delayed for obtaining the Consent Decree/OTS Agreement and the securities charged to the bank
are to be released only after receipt of OTS amount in terms of sanction.
(E) All the Annxures/Agreements/No Objection Letters may be suitably modified as per terms
and conditions of sanction of each proposal and if need be, assistance of the Law
officer/Manager/Sr. Manager (Law)/ dealing Advocate be obtained before execution of
agreement/issuance of receipt/filing of memo/application in the Court/DRT.
PRAYAAS-STAFF INCENTIVE SCHEME
(RD 37/2014 dt. 28.10.2014)
Prayaas
Staff The scheme is in operation upto 31.03.2015 and thereafter till it is
Incentive
modified/revised.
Scheme
for
NPA recovery
Eligible
NPAs (Doubtful/Loss) with balance outstanding below Rs. 10 lac and all
Accounts
written off accounts.
Non-Performing Assets: Page 71 of 98


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

for

For Branches other than ARMBs/SARCs- Recovery eligible for incentive


Category
Eligible Amount
Rate
of
incentive
Amount recovered in excess of 4%
Doubtful Assets
floor level of 10% (for the full
year) of total outstanding of
eligible a/cs of the concerned
branch as on the close of
31.3.2014.
Amount recovered in excess of 6%
Loss Assets
floor level of 10% (for the full
year) of total outstanding of
eligible a/cs of the concerned
branch as on the close of
31.3.2014.
Written off Accounts
5% of Total kitty of written off 8%.
accounts, irrespective below or (*Maximum Rs.
above Rs. 10 lac
60000/- per a/c).

For ARMBs/SARCs Recovery eligible for incentive


Doubtful Assets
Amount recovered in 4%
excess of floor level of
20% (for the full year) of
total O/S of eligible a/cs of
concerned branch as on
31.03.2014
Loss Assets
Amount recovered in 6%
excess of floor level of
20% (for the full year) of
eligible a/cs of total O/S
of concerned branch as on
31.03.2014
Written off accounts- 10% of total kitty of 8%.
ARMBs/SARCs- Floor written off accounts i.e. (*Maximum in WO
level (Minimum Amt to total sum of the amount A/cs Rs. 60000/- per
be
recovered
for under
the
segments account).
eligibility)
whether below or above
Rs.10 lacs
Non-Performing Assets: Page 72 of 98


OTHER IMPORTANT GUIDELINES


L&A cir 38/2013 dated 28.032013
Valuation of Securities in NPA Accounts:Proper distinction has to be made between market value and realizable value of the securities. In
terms of extant guidelines, Valuation Reports should indicate the Realisable Value in addition to
the Market Value. Wide variation in value of property (ies) at the time of considering the OTS/
Write off compared to its valuation at the time of original/last sanction or at the time of making
provisions should be critically examined. Preferably, the earlier valuation may also be correlated /
commented in the latest valuation report. Wide variation in the valuation of securities negates our
bargaining power/pressure on the borrower. Therefore, there is an urgent need to understand that
the valuation reports are analyzed and self assessment is critically made about the genuineness of
the Market/Realizable value of the securities given by the valuer keeping in mind the real estate
market and other attendant factors prevailing in the area.
In the valuation reports submitted by the approved valuers and verified by the banks official(s),
various aspects affecting the Market Value of assets as enumerated in the Policy should be clearly
mentioned / examined viz.
Whether the property i.e. land and building, is self occupied or tenant occupied. If tenant
occupied, since how many years the same is occupied by the present tenant;
Whether land, is on lease from the Government, its agencies/ authorities, since such leased
property carry clause of sharing unearned increase/ profit resulting in diminutive realisable
value of property;
Whether the property is commercial or residential;
Demand for the underlying security in the event of its sale/ disposal and availability of
ready buyers;
Undivided share in property particularly agricultural land.
Assets having no independent access.
Large or big units/ estates.
Assets created for special purpose.
In terms of extant guidelines,
i) In respect of the accounts involving book outstanding of up to Rs 2 crore, the valuation
report should not be more than 1 year old.
ii) In respect of accounts where book outstanding is more than Rs 2 crore, latest valuation of
property (ies) and other details should not be more than 3 months old to assess the valuation
with more justice.
iii)
Where properties are valued at Rs50 crore or above, minimum 2 independent latest
valuation reports from Banks approved valuers should be obtained.(FOR OTS purposes where
properties are valued at Rs 5 crore or above, minimum 2 independent latest valuation reports from
Banks Board approved valuers shall be obtained.
RD cir no 16 dt 31-5-2012)
Non-Performing Assets: Page 73 of 98


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

Accounts with outstanding balance of


above Rs50 lac and up to Rs5 Cr.
Accounts with outstanding balance up
to Rs 50 lac

Valuation to be verified by 2 officials of the bank


independently.(One of the officials not below the
rank of Chief Manager).
Further Additional vetting by 2 CO officials
independently , one of them not below the
rank of CM.
Valuation to be verified by 2 officials of the
Bank independently, one of the officials must
not be below the rank of Chief Manager.
Valuation to be verified by an official of the
bank independently not below the
rank of
Scale II.

It is, therefore, reiterated that


a) Assessment be made about the genuineness of the Market Value of the securities given by
the valuer keeping in mind the real estate market and other attendant factors like demand and
salability of the property.
b) While vetting the valuation reports, the concerned officials must give their comments on all
the attendant issues and, as far as possible, translate the same in monetary terms, so as to arrive
at a realistic Value of Securities.
c) Value of properties genuinely assessed as above be incorporated in the Ladder system to
facilitate calculation of correct provisions.
d) There should be uniformity in reporting the value of securities, while preparing /
submitting Status Notes / Review Notes and / or while fixing the Reserve Price under
SARFAESI and/or at the time of considering the proposal.
RECOVERY CAMPS/RIN MUKTI SHIVIR
(RD cir 9/2013 dt 22.03.2013) Circle Heads must ensure to:
(i) To launch well planned and sustainable Recovery Campaigns. The RMSs and MRMSs should
not be conducted merely as a ritual/formality without doing an effective spade work. Proactive
action in this regard will ensure good turnout in the Shivirs with resolution of NPAs up to the
expected level.
(ii) Such Shivirs maty be organized preferably with cluster of 9-10 branches on a Non-Public
Working Day (NPWD).
(iii) Circle Heads need to set targets for themselves and motivate their Branch Incumbents to
make all possible efforts to adhere to the benchmarks for number of borrowers attending the
camp, cash recoveries and OTS proposals.
Non-Performing Assets: Page 74 of 98


(iv) Effectiveness of the RMSs/MRMSs should be reflected through numbers of NPA accounts
resolved and amount recovered, instead by number of shivirs organized.
During Special Recovery Campaigns launched by the Head Office, Circle Offices are advised
to organize Mega Rin Mukti Shivirs (MRMSs) for which following parameters have been laid
down:
S.No.
1
2
3
4

Benchmarks Per MRMS


Minimum borrowers
Overall Cash Recoveries including in the written off A/Cs
and OTS approved cases
Cash Recovery in written-off accounts (out of 2 above)
OTS Proposals (Amount O/s in the NPA A/Cs)

Number / Amount
200
Rs. 50 lacs
Rs. 2 lacs
Rs.150 lacs

Important Note
(i) All such Shivirs where the above mentioned criteria remain unfulfilled, do not qualify for
the Mega Rin Mukti Shivirs.
(ii) During the Rin Mukti Shivirs and Mega Rin Mukti Shivirs progress made in respect of
NPA accounts with balance outstanding of upto Rs. 10 lacs only, will be accounted, for
performance assessment. Although Circle Heads may resolve high value NPA accounts during
such Shivirs but recoveries, up-gradation, OTS approved will not form part of reporting.
Conducting Recovery Suits Interim Reliefs INTERLOCULATORY APPLICATIONS.
(RD cir - 12/2011 dt 28.06.2011)
To ensure recovery of dues to the Bank and to safeguard the securities / assets available with the
defendants during the pendency of the suits various interim reliefs to be prayed have been
included in the Model Draft of the Plaint circulated vide Law Division Circular No.16/law/2013
dated 07.08.2013. Therefore it has been repeatedly stressed that we should move applications
before the courts / DRTs to obtain injunction / restraint order, attachment before judgment,
appointment of receiver etc. wherever such measures are necessary.
It is observed that such interim reliefs are generally not sought while filing the suit and even
thereafter applications for obtaining interim reliefs are generally not filed and/or if filed/included
in the plaint are not properly agitated/contested/pursued. The detailed relevant provisions of
hypothecation / pledge / book debts agreement etc. are given in the RD Cir. 12/2011 dated
28/06/2011, for taking up with the concerned counsels for filing applications for interim reliefs
quoting the relevant clauses of the agreements to facilitate decision by courts / DRTs in favour of
the Bank.
POLICY FOR CLASSIFICATION AS WILFUL DEFAULTERS IN NPA A/cs
(RD Cir. No. 30/2014 dt. 11.07.2014).
Non-Performing Assets: Page 75 of 98


Guidelines on Wilful Defaulters and action their against


A "wilful default" would be deemed to have occurred if any of the following
Definition
events is noted :(a) Capacity to pay -The unit has defaulted in meeting its payment / repayment
obligations to the lender even when it has the capacity to honour the said
obligations.
(b) Diversion of Funds -The unit has defaulted in meeting its payment /
repayment obligations to the lender and has not utilised the finance from the
lender for the specific purposes for which finance was availed of but has
diverted the funds for other purposes.
( c) Siphoning of funds- The unit has defaulted in meeting its payment /
repayment obligations to the lender and has siphoned off the funds so that
the funds have not been utilised for the specific purpose for which finance
was availed of, nor are the funds available with the unit in the form of other
assets.
(d) Unauthorized Disposal of Charged Assets - The unit has defaulted in
meeting its payment / repayment obligations to the lender and has also
disposed off or removed the movable fixed assets or immovable property
given by him or it for the purpose of securing a term loan without the
knowledge of the bank/lender.
Detailed workflow chart for declaring a borrower as willful defaulter may be
Willful
defaulters
followed (RD 30/2014 dated 11.07.2014)
workflow chart
Diversion and Diversion of funds would be construed to include any one of the undernoted
siphoning
of occurrences:
(a)
Utilisation of short-term working capital funds for long-term purposes
funds
not in conformity with the terms of sanction;
(b)
Deploying borrowed funds for purposes / activities or creation of assets
other than those for which the loan was sanctioned;

Transferring funds to the subsidiaries / Group companies or other


corporates by whatever modalities;
(d) Routing of funds through any bank other than the lender bank or members
of consortium without prior permission of the lender;
(e)
Investment in other companies by way of acquiring equities / debt
instruments without approval of lenders;
(f)
Shortfall in deployment of funds vis--vis the amounts disbursed / drawn
and the difference not being accounted for.
Siphoning of Siphoning of funds, should be construed to occur if any funds borrowed
Funds
from Banks / FIs are utilised for purposes un-related to the operations of
the borrower, to the detriment of the financial health of the entity or of the
lender. The decision as to whether a particular instance amounts to
siphoning of funds would have to be a judgment of the lenders based on
objective facts and circumstances of the case.
Guidelines relating to Willful Defaulters would be applicable to all nonCut-off limits
Non-Performing Assets: Page 76 of 98


Identification
of person

performing borrowal accounts with outstanding (funded facilities and such nonfunded facilities which are converted into funded facilities) aggregating Rs.25
lakhs and above, where willful default is identified by the Bank.
The accounts where outstanding comes below the cut off limit of Rs.25 lac
and in cases where Bank has agreed for compromise settlement and the
borrower has fully paid the compromise amount need not be included in the
Wilful Defaulters lists.
In identified/reported cases of willful defaulters where outstanding amount
has come down below Rs. 25 lac on account of write off and not due to
settlement/recovery from the borrower, the branches should still report the
name of the borrower in the list of wilful defaulters as per the extant system.
a)Bank is advancing loans/making finance to different entities such as
Individuals, HUF, Firms and Legal entities such as Corporate Bodies,
Companies, Societies, and Trusts etc. Keeping in view, the constitution of
borrowers and the persons responsible for looking after the affairs of the
enterprise/ business of the borrower, need is to identify as to whether there is any
involvement of the person proposed to be a willful defaulter in the events of
Willful Default.
Such persons may be:
(i) Borrowers
(ii) Entrepreneurs
(iii) Karta of HUF
(iv) Promoters of Company
(v) Directors of Company, (when the account became NPA).
(vi) Present Directors
(vii) Nominee Directors
(viii) Independent Directors
(ix) Partners/ Sole Proprietor/ Trustees etc. in individual capacity.
(The role of Directors/Promoters of the Company who leave or resign the
Company without the permission of the Bank in contravention to the covenants/
terms of sanction of Loan, be looked into while identifying willful defaulters)
(The above list is only indicative and not exhaustive)
b) While dealing with willful default of a single borrowing company in a
Group, the Bank should consider the track record of the individual company,
with reference to its repayment performance to its lenders.
c) Individual Guarantors - In case of individual Guarantors, the events of
willful default on their part need to be identified on account of which the
Guarantor is to be reckoned as willful defaulters. It be identified as to:(i) Whether the guarantors having capacity/means to repay the dues of the
bank but not paying dues of the Bank despite recall of the Loan and demand
for payment has been made upon the guarantors.
(ii) Whether the guarantors have been transferring their assets so that Bank
may not be able to recover its dues?
(iii) Whether guarantors are beneficiary of siphoning / diversion of funds, or
are party to the fraudulent transactions?

Non-Performing Assets: Page 77 of 98




Process
declaring
willful
defaulter

for a) Preliminary Notice to Rectify Default


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

Penal
Measures

In order to prevent the access to the capital markets by the willful


defaulters, a copy of the list of willful defaulters (non-suit filed
accounts) and list of willful defaulters (suit filed accounts) are
forwarded to SEBI by RBI and Credit Information Bureau (India)
Ltd. (CIBIL) respectively.
No additional facilities should be granted by any Branch to the listed
willful defaulters.
These are debarred from Institutional finance from SCBs/FIs/ NBFCs
for floating new ventures for a period of 5 years.
Branch may initiate criminal proceedings against such
borrower/guarantor.
RBI will publicize the names of such persons/units. The consent
should be obtained.
As per our Standardized Loan Agreement, a borrowing company would not
induct a person as a promoter or director on the Board of a company which
has been identified as a willful defaulter and that in case, such a person is
found to be on the Board of the borrower company, expeditious and effective
steps for removal of the said willful defaulters from its Board be taken.

Non-Performing Assets: Page 78 of 98




Reporting to Branches to compile the list of willful defaulter of Rs.25 lac and above
as at end of March, June, September and December every year and
RBI / Credit
submit the information to their Circle office within 7 days from the
Information
close of the quarter.
Companies
Circle Office, after consolidating the information shall submit the
consolidated information within 12 days from the close of the quarter
to Recovery Division, HO for onward submission to RBI (in case of
Non suit Filed Cases), CIBIL and other three companies namely M/s
Experian Credit Information Company of India Pvt. Ltd., M/s Equifax
Credit Information (P) Ltd. & M/s High Mark Credit Information
Service (P) Ltd.( in case of Suit Filed Cases) of which the our bank is
member.
Procedure for With a view to imparting more objectivity in identifying cases of willful
default, decisions to classify the borrower as willful defaulter has been
Identification
entrusted to a Committee on Willful Defaulters (headed by Executive
of
Willful
Director) consisting of:
Defaulters
(i) Executive Director (Incharge of Recovery)
(ii) General Manager, Credit Monitoring Division, HO
(iii) General Manager, IRMD, HO
(iv) Dy. General Manager, Recovery Division, HO (Convenor)
Recovery Division, Head Office will place the matter before Committee on
Willful Defaulters and communicate decision of the Committee on Willful
Defaulters to the Circle/ Branch. The decision taken on classification of willful
defaulters should be well documented, supported by requisite evidence and
should clearly spell out the reasons for which the borrower has been declared as
wilful defaulter vis--vis RBI guidelines
The borrower should thereafter be suitably advised about the proposal
to classify him as willful defaulter along with the reasons thereof. The
borrower concerned should be provided reasonable time (say 15 days)
for making representation against such decision, if he so desires, to a
Grievance Redressal Committee headed by the Chairman and
Managing Director and consisting of two other senior officials.
On receipt of any representation within the stipulated period of 15
days, the same may be sent to HO for consideration of the Grievance
Redressal Committee. The cases where no such representation is
received may also be informed to Recovery Division, HO so as to
enable the authorities at HO level to take a view on final declaration
of the said borrower as willful defaulter.
Grievance Redressal Committee should also give a hearing to the
borrower if he represents that he has been wrongly classified as
willful defaulter.
A final declaration as willful defaulter should be made after a view
is taken by the Committee on the representation and the borrower
Non-Performing Assets: Page 79 of 98


Grievance
Redressal
Committee

Miscellaneous

should be suitably advised.


The branch concerned is advised to inform the borrower of banks
intention to identify him as willful defaulter on a draft letter under
Registered AD and provide him 30 days time to rectify the default.
A final declaration of the borrower as willful defaulter would be made
after a view is taken by the Grievance Redressal Committee on the
representation and the borrower would be suitably advised in the
matter.
As per RBI guidelines Grievance Redressal Committee headed by the
Chairman and Managing Director should also give hearing to the borrower
if he represents that he has wrongly been declared as Willful defaulter.
Accordingly, Bank has constituted Grievance Redressal Committee,
consisting of:
(i) Chairman & Managing Director
(ii) Executive Director (other than the one who is the member of Committee on
Willful Defaulters)
(iii) Executive Director (other than the one who is the member of Committee on
Willful Defaulters)
(iv) GM, Recovery Division
(v) GM, Credit Division
(vi) DGM, Recovery Division (Convener)
(In the absence of ED(s), GM (IBD), and/or GM (MASD) may be co-opted.)
On receipt of any representation by the Branch within the stipulated period
of 15 days, the same be sent through Circle Head and FGMO to HO for
consideration
Grievance Redressal Committee shall give a hearing to the borrower if he
represents that he has been wrongly classified as willful defaulter. The
Notice to the borrower/person who has made the representation be given as
Per Annexure-IV for personal hearing by the Grievance Redressal
Committee of the Bank.
The identification of the willful default should be made keeping in
view the track record of the borrowers and should not be decided on
the basis of isolated transactions/incidents. The default to be
categorised as willful must be intentional, deliberate and calculated.
In cases where a letter of comfort and / or the guarantees furnished by
the companies within the Group on behalf of the willfully defaulting
units are not honoured when invoked by the Bank, such Group
companies should also be reckoned as willful defaulters.

Stock Audit of Large Borrowal Accounts in NPA Category ( RD Cir 03/2013 dated
09.01.2013)
Detailed guidelines in respect of Stock Audit of Large Borrowal Accounts have been
Conveyed vide LA Circular No. 102 dated 08.09.2010 viz.
Non-Performing Assets: Page 80 of 98


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

Non-Performing Assets: Page 81 of 98




Educational loans , where there is delay in repayment, While banks are free to take noncoercive methods for recovery of their dues, practices such as displaying names and
photographs of defaulting students be stopped forthwith.
GETTING INFORMATION OF ATTACHABLE ASSETS OF LOAN DEFAULTERS BY
OBTAINING WEALTH TAX RETURNS FROM WEALTH TAX AUTHORITIES
(RD 27/2014 DATED 09.06.2014)
Bank has been filing Original Applications (OA) in Debt Recovery Tribunals (DRTs) wherever its
dues are Rs.10 lac and above and Civil suits in the Civil Courts where the dues are less than Rs.10
lacs. A number of decrees remain unexecuted due to inability of the bank to provide attachable
assets of the Judgment Debtors. As per Wealth Tax Act, every individual, Hindu Undivided Family
and Company whose net wealth exceeds the maximum amount (presently Rs.30 lacs), is liable to
file Wealth Tax Return. Ministry of Finance, Department of Revenue (Central Board of Direct
Taxes) after examining the position has clarified that information on the assets of loan defaulters to
enable recovery of loans by Public Sector Bank (PSB ) from such defaulters is in public interest and
if application is made in the prescribed format, to the Chief Commissioner or Commission,
information asked for can be provided.
Procedure of obtaining Wealth Tax Return
(i)

(ii)
(iii)
(iv)
(v)

Necessary application as per the prescribed format Form-I (Annexure-II) as prescribed


under Sub rule (I) of Rule-9 of Section 42 B of the Wealth Tax Act, 1957 is to be moved
to the concerned Chief Commissioner/or Commissioner of Wealth Tax.(It is to clarify
that the Income Tax Authorities work as Wealth Tax Authorities).
The information is to be sought in respect of the borrower/Mortgagor/Guarantor of the
Loan only.
The application as aforesaid be signed by an Officer not below the rank of Manager of
the Branch concerned.
An undertaking may be sought by the Chief Commission/Commissioner containing
confidentiality clause specifying that such information will be used only for the purpose
of recovery of loan and will not be shared.
In order to ensure that tax dues of the Department against the defaulter(if any) are
safeguarded, the concerned bank officials will also submit an undertaking to the
Commissioner wealth Tax, stating that:

Before appropriation of the surplus amount recovered from sale of immovable/movable


assets of the defaulter, after adjustment of the loan dues, whose information was shared by
the Wealth Tax Authorities with the bank, a No Objection Certificate (NOC) will be obtained
from the jurisdictional CIT (Commissioner of Income Tax), of the loan Defaulter. Therefore
utmost care be taken that on sale of such properties, after appropriation of the sale proceeds
towards recovery of loan amount of the bank, the surplus proceeds or balance, if any remains,
the same is not to be remitted to any person including borrower/obligant unless & until No
objection Certificate is obtained from the jurisdictional CIT (Commissioner of Income Tax) of
the loan defaulter.
Non-Performing Assets: Page 82 of 98


APPROPRIATION OF CGTMSE CLAIM RECEIVED-CHANGE IN PROCEDURE


(RD 39/2014 dated 10.11.2014)
1) Neither the permission of CGFT is required for appropriation of claim amount nor it is
mandatory to Write off/Scale down the dues. Accordingly, claim amount so received from
CGFT should therefore be:
(i) Credited straightway to the NPA Account.
(ii) Recoveries thereafter if any have to be remitted (after netting of the cost incurred, if any)
to CGFT, of course after routing through the concerned NPA Account, so as to maintain
an appropriate record.
2) Ensure that respective NPA account does not get upgraded by credit of CGTMSE
claim amount and no debit operations are allowed in the account except for remittance
of recoveries to CGFT.
While crediting the amount of claims received from CGFT under CGTMSE Guarantee
Cover in respective NPA accounts, a clear narration CGTMSE CLAIM RECEIVED
ON________ be invariably given in the Ledger A/c of the party.
3) Corrective procedure for credit of claim
As per the revised procedure, as soon as the borrower wise CGTMSE Claim amount is
received at the Circle Office, they will (i.e. Circle Office) credit the proportionate amount
received in the respective borrowal accounts directly. Thus, instead of branch appropriating the
amount in their borrowal accounts by debiting the Branch Inter- Sol a/c, Circle Office will directly
credit the amount in the respective loan accounts debiting the impersonal Current a/c and send a list
to the concerned branch for their information and record only. MISD (Ladder Cell) will devise
a system based process to distinguish such credits received on account of CGTMSE Claim, from
the normal cashrecoveries and ensure correct classification of accounts, based on their true and
correct record of recoveries in the centralized LADDER system.
MONITORING OF QUICK MORTALITY CASES (RD 06/2015 dated 24.02.2015)
Levels/Competent Authority for monitoring of Quick Mortality Cases
S.No.
Aggregate Sanctioned Limit
Competent authority
1
Upto Rs.10 lacs
Circle Head
2
Above Rs.10 lacs up to 50 lacs
FGM
3
Above 50 lacs to 1 crore
GM (Recovery)
4
Above 1 crore to 5 crore
ED*
5
Above 5 crore
Managing Director/CEO
*For QMCs under NPA category will be monitored by the ED looking after the Recovery
Division and for Non-NPA QMCs, if any, ED looking after the particular FGMO will
monitor.
Note
Large Corporate Branches (LCBs) will send the information irrespective of the aggregate
Non-Performing Assets: Page 83 of 98


sanctioned limit of Quick Mortality Cases to the respective FGMOs.


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

Meeting with the Borrower(s)/Obligant(s) and effecting recoveries through conciliatory


methods like OTS, Compromise, Tagging arrangements etc.
Deliberations with special focus on Quick Mortality Cases, during every Task Force
Meetings held at the Circle/FGMO level.
Initiating one action after the other, prescribed under SARFAESI Act, in the eligible cases till
taken to its logical end.
Declaration of Willful Defaulters, as per the extant guidelines
Filing of FIR and suit, in the eligible cases.

Latest issued other circulars:RD 06/2015_Monitoring of Quick Mortality Cases


RD 05/2015_ Workflow for sale of accounts to SCs/RCs.
RD 03/2015_Approved list of ARCs working as Resolution agents
RD 42/2014_Strategies for Successful sale process under SARFAESI Act
RD 41/2014_Strategies for speeding up SARFAESI action
RD 30/2014_Willful Defaulters and Action there against
RD 25/2014_All India circle wise list of approved Recovery Agencies, Resolution agents,
supporting Agencies & Detective Agencies
RD 15/2014 Stay Against Sarfaesi Action
RD 13/2014 _ Correct accounting Procedures :Recovery in Written Off and other NPA A/Cs
RD 11/2014_ Land mark Orders by DRT- SA/IA Under Sarfaesi
RD10/2014_ Empanelment of valuers- consolidated guidelines.
RD 8/2014 _ Online Portal- DRT Monitoring of DRT cases
RD 4/2014 _ Publication of photographs of defaulting borrowers Education Loan
RD 3/2014 _ Online Portal-SARFAESI Action monitoring system
Annexure 1
NPA MODULE IN CBS
Non-Performing Assets: Page 84 of 98


ACTIVITY AFTER CLASSIFICATION AN ACCOUNT AS NPA


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

INITIATION OF LEGAL ACTION

WAIVER
OF
LEGAL ACTION
1)Sarfaesi
1)Compromise
/
2)Suit filed /Decree / Execution of OTS
Decree
2)Write Off
3)Compromise
4)Write Off

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

GL Sub Head Description

GL_SUB
Head
Code
76100

Non
Performing NPA Demand Loan
Advances ( Weekly code55299, Office Account
Code-<Sol_id5529901)
NPA Cash Credit
76110
NPA OverDraft
76115
NPA Term Loan
76120
NPA Inland Bills Purchased
76125
NPA Inland Bills Discounted
76130
NPA Pre-shipment Advances
76135
NPA Foreign Bills Purchased
76140
NPA Foreign Bills Discounted
76145
NPA Advances to Commercial banks in 76150
India
NPA Advances to Co-operative Banks in 76155
India
NPA Advances to banks outside India
76160
NPA Others
76165
NPA suit filed
76170
NPA Decreed
76175
NPA Borrowal Fraud
76180
Non Borrowal Impaired Loss of Cash Internal Fraud
86100
Non-Performing Assets: Page 85 of 98


Balance
Sheet
code
62120

63120


Assets (Weekly code


57117,
Office
a/c
<Sol_id5711701)
Non Borrowal Impaired
Assets (Weekly code
57117,
Office
a/c
<Sol_id5711702)
Non Borrowal Impaired
Assets (Weekly code
57117,
Office
a/c
<Sol_id5711703)
Non Borrowal Impaired
Assets (Weekly code
57117,
Office
a/c
<Sol_id5711704)
Non Borrowal Impaired
Assets (Weekly code
57117,
Office
a/c
<Sol_id5711705)

Loss of Cash Theft / Dacoity /Burglary

86100

63120

Other than Loss of Cash Internal Fraud

86100

63120

Other than Loss of Cash External Fraud

86100

63120

Non-borrowal impaired _ others

86100

63120

1. NPAGLXFR - for transferring the NPA accounts to appropriate NPA GL Codes.


2. MEAC
- for change of asset classification code.
3. UPGNPA
- on up-gradation, account has to be shifted from NPA GL Head

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

CLASSIFICATION OF ASSETS - CODE


Main Classification:
001
- Performing Asset
002
- Non- Performing Asset
Sub Classification:
001
- Standard Asset
002
- Sub-standard Asset
003
- Doubtful Asset
004
- Loss Asset
A menu option NPADET (six sub menu options) has been customized to capture additional data
required for these reports
MENU OPTION
NPAD
Non-Performing Assets: Page 86 of 98


DESCRIPTION
NPA A/C RELATED DETAILS


COWO
SARF
RCYM
RADM
MISC

COMPROMISE / WRITE OFF DETAILS


SARFAESI DETAILS
RECOVERY DETAILS
RECOVERY AGENT DETAILS
MISC. DETAILS

User is required to feed data related to all NPA accounts marked in the CBS system using the
menu option NPAD.
This data is required to generate the following:
1. Memoranda of dues (RI).
To create the memoranda records user is required to follow the steps given below:
i) Generate report through menu option PNBRPT 28/3 (Report to know the list of
NPA A/Cs
to be entered through menu option NPAD)
ii) Feed all the relevant fields through the menu option (NPAD).
RELEVANT FIELDS FOR CREATION OF MEMORANDA ARE
HEREUNDER:

EXPLAINED

MENU OPTION - NPAD


FIELD
FUNCTION CODE

DESCRIPTION
Options
are
available
at
key
F1.(Add/Modify/Inquiry/Delete/Undelete/Cancel/Verify).
user to input AC-Account in this field
ENTITY TYPE
User has to give valid account no. of sixteen digits. Customer
ENTITY ID
id will be populated on press of key F4.
DI/SI
REVERESED DI/SI reversed and credited in the account as per revised
guidelines or appropriated during write off be given in this
/APPROPRIATED
field
Unrecovered interest amount up to the last accrual date(last
RI
interest applied upto NPA date), This date has been made
available in report(PNBRPT-28/3). RI will be calculated by
the system after this date
Claim received amount/appropriated at the time of write off be
DICGC/CGFT
given here.
EXTENT
OF Extent of Amount of guarantee available to
secure the outstanding amount in the account from
GOVT.GUARANTEE
Central/state govt
NET
MEANS
OF Amount of net means of guarantor as per latest
CR.
GUARANTOR
Value of IPs available as part of net means of guarantor
IP OF GUARANTOR
Name of banks/FIs if applicable
CONSORTIUM
BANKS/FIs

Non-Performing Assets: Page 87 of 98




Amount of loans at exposure in the account


percentage of share on security available
It is a text field of 70 character length. User has to propose
appropriate action/strategy for resolution of the account e.g.
(If RC filed user to enter RC FILED ON 01-01-2015) Date
can be changed
EXPECTED DATE OF Expected date of account closure is to be given on the basis of
action/strategy suggested in the previous field
ACCOUNT CLOSURE
REASON FOR NOT SUIT If suit has not been filed in the account the reasons for
the same in short be given as text in this field
It
is also a text field of 70 character length. User has to give
STAFF
brief information on staff side
ACCOUNTABILITY
If suit has been filed in the account. The status of the suit is to
SUIT STATUS
be given in brief.
In case of recovery in the account the amount appropriated
RCVRY APP TO DISI
against recovery of DI/SI be reported in this field
In case of recovery in the account the amount appropriated
RCVRY APP TO RI
against recovery of RI be reported in this field
In case of recovery in the account the amount
RCVRY APP TO DICGC
appropriated for remitting to DICGC be given in this field
to be discussed with SAMD
INCOME BOOKED
Appropriate value is Y or N (value Y is to be given if
CDR flg?:
account has been restructured as per extent guidelines on
corporate debt restructuring issued from time to time.
TECH WRITE OFF DATE Date of technical write off be given in this field if available
(list of technically writen off account is available with HO
SAMD).
TECH WRITE OFF AMT Amount written off in such accounts be given in this field.
EXPOSURE IN LOANS
SHARE ON SECURITY
MODE OF RESOLUTION
PROPOSED

NOTE: THE DETAILS ENTERED THROUGH THE MENU OPTION ARE TO BE


VERIFIED BY THE OTHER USER WITH FUNCTION V THROUGH THE SAME
MENU OPTION.
Though these fields are not mandatory, but (0.00) may be entered if nothing is to be reported
against these fields instead of leaving blank. Values fed in this fields will populate in the
relevant fields at screen in menu option COWO. The details of other fields which shall be
used for generation of other NPA monitoring reports(NPAMGT) are given below.
SARFAESI DETAILS
Menu Option = SARF
FIELD
FUNCTION CODE
ACCOUNT NUMBER
ACCOUNT NAME

DESCRIPTION
Options
are
available
at
key
F1.(Add/Modify/Inquiry/Delete/Undelete/Cancel/Verify).
USER TO PUT ACCOUNT NUMBER
USER TO put account name here

Non-Performing Assets: Page 88 of 98




ELIGIBLE
FOR
SARFAESI
Date of eligibility
DATE OF NOTICE 13(2)
DATE OF NOTICE 13(4)
DATE OF POCESSION
OF SECURITY
NATURE OF SESCURITY
DATE OF SECURITY
SALE
SECURITY
SALE
AMOUNT
APPROACHED
FOR
COMPR
COMPROMISE
SETTLED
OTS Recovery amount
Other Recovery Amount
NPA Account sale date
SC/RC/OTHER
BANK/NBFC
NPA A/c SALE AMOUNT
LATEST STATUS

Whether account is eligible for Sarfaesi Action put Y/N


Mention here date when account is eligible for Sarfaesi action
Give here date of notice issued under Sarfaesi act section 13(2)
Give here date of notice issued under Sarfaesi act section 13(4)
GIVE date when possession of security taken
Give here nature of security
Put here date when security was sold
Sold amount of security
Whether customer approached for compromise?
Whether compromise has been settled or not?
If compromise settled give here OTS Recovery amount
If recovered other the OTS give amount here
IF NPA account sold give date of sale here
Put here to whom NPA Account has been sold

Give here Sale Amount of NPA


Give here present status of the account which be modified time
to time
DI reversed amount put here
CLAIM STATUS of DICGC Claim be given

DI REVERSED
DICGC
APPROVED
ECGC
CLAIM Status of ECGC Claim be given
APPROVED
Give here net recoverable amount
NRR Balance
Put here provision amount
PROVISION HELD

KITTY AVAILABLE IN WRITTEN OFF ACCOUNTS


The guidelines for creation of write off kitty are applicable to both existing written off accounts
(not close in the system) and accounts which will be written off after the cut off date
(31.03.2010).
(KITTY = AMOUNT ACTUALLY WRITTEN OFF MINUS RECOVERIES AFFECTED IN
THE ACCOUNT AFTER WRITE OFF ) Out of all the NPA accounts, entered through NPAD,
data related to written off accounts are to be fed.
COMPROMISE AND WRITE OFF DETAILS
MENU OPTION = COWO
FIELD
DESCRIPTION
Non-Performing Assets: Page 89 of 98


FUNCTION CODE

Options are available at key F1. Add/Modify/Inquiry/Delete/


Undelete/ Cancel/Verify).
ACCOUNT NUMBER
The sixteen digits account number be given for which details
have already been fed through Menu option NPAD
ACCOUNT NAME
The name will populate on press of key F4 after giving account
number.
DI/SI
DI/SI amount entered through NPAD will populated here
automatically, otherwise it is to be entered through NPAD menu
option
RI
Amount of unrecovered/recorded interest as entered through
NPAD will populate here automatically, otherwise it is to be
entered through NPAD menu option.
DICGC/CGFT
Amount of claim as entered through NPAD will populate here
automatically, otherwise it is to be entered through NPAD menu
option
Base amt/WO amount
Ledger outstanding in the account as on the date of
write off be given in this field.
WLA Flg
Valid values are Y or N
WLA Date
Date of WLA(Waiver of legal action) approved be given in this
field
Written Off Flg ?:
Valid values are Y or N to be mentioned as Y when the
account is written off.
Written Off Date
Date of write off i.e. when the amount of revenue loss was
credited in the account be given in this field
Revenue Loss
Amount of revenue loss, (i.e) the amount credited in the written
off account be given in this field. (The amount should be equal to
Base amt- DICGC+DI Appropriated)
Written Off Apprv Lvl
Write off approval level be given in this field. Help is
available at key F1.
DETAILS IN OTHER FIELDS ARE NOT REQUIRED FOR CREATION OF WRITE
OFF KITTY HOWEVER IF COMPROMISE IN WRITTEN OFF ACCOUNT IS
APPROVED THE DETAILS IN OTHER FIELDS SHOULD ALSO BE ENTERED.
Apprch for Comp?
Mode of Settlement
Compr( OTS) date
Compr (OTS) Amount
Compro Appro Lvl.:
Compromise due date

Value Y be given if party has approached for compromise or


else value N be given in this field
: User has to select one of the modes of settlement available
on F1 key. LA for Lok Adalat, RA for recovery agencies,
RC for recovery camps and OTH for others.
Date of approval of compromise be given in this field
Amount of compromise be given in this field
list of Compromise approval level is available at key
F1.Appropriate value to be selected
The earliest due date of deposit of compromise Amount
/installment by the party be given in this field. The next date is to

Non-Performing Assets: Page 90 of 98




Amt Payable Due date


Fresh Dr. to Bk revenue
Waiver Int Exp (RI)
Set off DI/SI Amount
Income to be Booked
Set off of provision
Compro failed

be fed in case of compromise amount is payable in more than one


installment and the date should be fed after expiring of the earlier
date
The amount of compromise due on the date mentioned in the
previous field
As mentioned in OTS Proposal
As mentioned in OTS Proposal
As mentioned in OTS Proposal
In case compromise amount is more than the ledger
outstanding the surplus credit transferred to income amount be
given in this field
As mentioned in OTS Proposal
If compromise is failed reasons in brief be given in the next three
fields.

NOTE: THE DETAILS ENTERED THROUGH THE MENU OPTION ARE TO BE


VERIFIED BY THE OTHER USER WITH FUNCTION V THROUGH THE SAME MENU
OPTION.
RECOVERY IN NPA/WRITTEN OFF/OTS APPROVED ACCOUNTS
User is required to feed recovery upto 31.03.2010 in all NPA accounts through menu option
RCYM as the recovery details of all NPA accounts may not be available in the CBS system due
to migration of account through different legacy systems. The recovery details can be entered
through the menu option in consolidated form in single entry with date of recovery as
31.03.2010.The records of recovery after 31.03.2010 will be taken into report from the CBS
system.
RECOVERY DETAILS
MENU OPTION = RCYM
This menu option is to be used for handling recovery received in written of accounts.
The fields are explained here under :
FIELD
FUNCTION CODE
ACCOUNT NUMBER
ACCOUNT NAME
WO/Compr Recvry?
Mode of Rec

DESCRIPTION
User to select function code A (ADD)
The valid account no. of sixteen digits be given, for which
details are required to be entered
The name will populate on press of key F4 after giving account
number in the previous field.
Valid value is W for recovery in written off accounts , C for
OTS approved in written off accounts and N for all other NPA
accounts which neither written off nor compromised
Help at Key F1 is available. Valid values are LA for Lok
Adalat, RA for recovery agencies, RC for recovery camps

Non-Performing Assets: Page 91 of 98




Recovery Date
Recovery Amount

and OTH for others


In respect of existing accounts user to give date of recovery as
31.03.2010.
Consolidated recovery amount for an account up to the cut off
date i.e 31.03.2010 is to be entered

NOTE: Verification of records entered through RCYM is not required. User is required to enter
details through menu option NPAD and COWO for the accounts written off even after the
31.03.2010 but recovery details in such accounts will not be required to be entered by the user
through menu option RCYM.
RECOVERY AGENT DETAILS
MENU RADM
FIELD
FUNCTION CODE
ACCOUNT NUMBER
ACCOUNT NAME
Agent Code
Agent Name
Date of Allocation
Commission paid

DESCRIPTION
Options are available at key F1. Add/Modify/Inquiry/Delete/
Undelete/ Cancel/Verify)
The valid account no. of sixteen digits be given, for which
details are required to be entered
The name will populate on press of key F4 after giving account
number in the previous field.
Give here Recovery Agent code allocated
Give here name of Recovery Agent
Date of Allocation of the account for recovery be mention here
Commission paid for this account for recovery

MISCELLNAEOUS DETAILS
MENU MISC
FIELD
FUNCTION CODE
ACCOUNT NUMBER
ACCOUNT NAME
SECTOR
Method of lending
CONSORTIUM DETAIL
MRTP/GROUP

DESCRIPTION
Options are available at key F1. Add/Modify/ Inquiry/
Delete/Undelete / Cancel/Verify)
The valid account no. of sixteen digits be given, for which
details are required to be entered
The name will populate on press of key F4 after giving account
number in the previous field.
Give here Sector as RBI loan classification
Give here method of lending whether consortium etc.
Put here maximum 70 character name of bank etc.
Give here details of Group etc.

REPORTS - PNBRPT 28 (NPA MANAGEMENT)


1. Report on NPA a/c not transferred to NPA GL HEAD
2. Report on RI Calculation and Memoranda Dues
Non-Performing Assets: Page 92 of 98


3. Report of NPA Accounts details not entered in NPAD


4. Report on WRITE OFF KITTY POSITION
5. Report of standard a/cs under NPA GL head
6. Report on status of charges due in NPA a/c
7. Report on appropriation of charges pending in NPA a/c
8. Report on Related A/Cs of NPA Accounts for a SOL
OTHER REPORTS
1. List of a/cs where limitation has expired (PNBRPT 3/5)
2. List of a/cs where limitation is going to expire.
(PNBRPT 3/5A)
FIELDS REQUIRED FOR PROPER
ACCOUNT RELATED REPORTS
REASON
LIMITATION EXPIRY
NPA ACCOUNTS
RC FILED CASES

GENERATION OF LIMIATION EXPIRED

FIELD DESCRIPTION
Mention Debt acknowledgement date in S details of
Account through ACM-M option and verify
Use Menu NPAD and fill up details of (i) DI REVERSED
(ii) RI UPTO ACCRUAL DT (iii) PROVISION (iv)
DICGC/CGFT (v) ECGC
Update suit status field in NPAD menu giving RC FILED
ON [ DATE] field
/DECREE Update GL sub head code of the account through TACBSH

SUIT
FILED
OBTAINED
WLA
(WAIVEMENT
OF Update through menu Option COWO Enter Y in WLA
LEGAL ACTION) APPROVED
approved field and give date of WLA
WRITTEN OFF CASES
Use COWO menu and update Written Off Flag Y, Date
of write off, Revenue loss amount if any, Write off
approval level.
RESTRUCTURED ACCOUNT MAINTENANCE IN CBS
To facilitate data addition / modification /deletion / inquiry in CBS in respect of restructured
facilities the existing menu option RSAM is to be used and data may be fed in following ways:
Account Number

Repay Start Date


Restruct Reason
Deleted ?

Valid account number is one which has been rescheduled in CBS i.e.
the Schedule No. in E-details is other than 01. In CBS it is
necessary to re-phase the restructured facility first and then add it
through RSAM
This date need not be entered as the system will automatically pick
up the same from E-details of the account
Suitable codes from the list should be filled in
This field is not accessible. It only populates the status of deletion of
a particular record

Non-Performing Assets: Page 93 of 98




Multiple Records
Date of Restructure
Remarks
CDR Flag

Cut Off Date

Exit CDR

This field is not accessible.


This should be the date on which account is rephrased / rescheduled
in the system
This is a free t ext column to be filled with any relevant information
pertaining to the account
This flag should be Y for the a/cs restructured under CDR
mechanism where multiple banks are involved. For MSME
accounts, this flag would always be N. Necessary checks have been
put in the system
This is a mandatory field. For all restructured customers of Rs.1
crore & above category, the Cut Off date should be a past date i.e.
the date, balance as on which has been referred in the restructured
proposal. The Cut off date for below 1 cr category of customers
should be same as the Date of Restructure. The cut off date is
relevant for all those customers where diminishing fair value (DFV)
or provisioin on account of sacrifice is required to be calculated. As
per extant guidelines, DFV is computed for customers with exposure
Rs.1 Cr. And above.
This flag is by default shown as N and relevant for only those
accounts where CDR flag I Y. Whenever, restructured fails and the
customer is downgraded to NPA, this flag is required to be updated
to Y after obtaining due approval of the CDR forum. The value of
this flag can be Y only for NPA accounts.

NPACHRG HANDING OF CHARGES IN NPA ACCOUNTS - GUIDELINES


Expenditure/Charges like Law Charges, Postage Charges, misc charges etc. are debited to
separate account (expenditure Account) and not in Loan account itself for NPA Accounts, to
identify such charges and to recover from customer on receipt of recovery made in the NPA
account thereafter, a separate menu option NPACHRG has been customized in CBS.
This menu has following 3 features:1. C- Capturing of Charges: - Charges debited to office accounts (expenditure Account)
with respect to NPA Account can be captured.
2. W- Waiver of Charges: - In case of OTC/Write off, charges made for the NPA account
may required to be waived. The same can be done for the already captured charges (part of
or full).
3. R- Recovery of Charges: - System will check credits made in NPA Account from the last
recovery date and create transaction, for outstanding charge amount or recovery made in
the account whichever is lower, debit the Loan Account and credit the expenditure head
which ever has been debited earlier.
For monitoring following 2 reports are made available in CBS-MIS:
Non-Performing Assets: Page 94 of 98


PNBRPT- 28 /6:- Status of Charges due in NPA Account (for a set)


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

Charge Particulars
Charge Date
Non-Performing Assets: Page 95 of 98


Inputs
A- Add, M-Modify, V-Verify, D-Delete, IInquiry
16 digit Account number of the customer
Auto Populated on the basis of existing data

C- Charge details capturing ,W- Waiver of


charges, R- Recovery of charges
to be filled only if Amount of Charges/Waiver , Auto
option is C/W
Populated in case of R- Recovery
to be filled only if Office
Account
from
which
option is C-Charge charge/expenditure has been debited for the
(to be blank for
NPA Account. On recovery the same
W-Waiver or
account will be reversed.
R-Recovery)
Charge Particulars, Description
Tran Date of Charge made from office
account for the NPA Account


Confirm (Y/N)

Y/N

M Modify (Unverified record can be modified, after Verification modification not allowed)
V Verify - Verification should be done with user other than the one who has Added/Modified.
Verification is must after any of the operation (Add/Modify)
I inquiry (Input Account Number, only Status like total charges, waiver, Recovery and total
amount due is displayed in Inquiry, for details reports are also available)
D Delete ( Only unverified record can be deleted)
WAIVER DETAILS OF NPA ACCOUNT
A Add (For type W - Waiver details for a NPA Account, Waiver amount should be less than
the outstanding amount)
I inquiry (Input Account Number, after waiver)
RECOVERY DETAILS OF NPA ACCOUNT
A Add (For type R - Recovery details for a NPA Account, Recovery amount is calculated
automatically by the system on the basis of credits after the charge/last adjustment date)
V Verify - Verification should be done with user other than the one who has Added/Modified.
Verification is must after any of the operation (Add/Modify)
On verification Transaction is created debiting customer account and crediting Expenditure head
which was debited earlier for the charges (as per the details added in C-option of NPACHRG
menu)
NPA MANAGEMENT RECPORTS:
MENU OPTION - NPAMIS ( PHASE I )
Sr.No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

Module/report name
SAMD_3
SAMD_4
SAMD_5
SAMD_6
SAMD_7
SAMD_8
SAMD_9
SAMD_10
SAMD_11
SAMD_12
SAMD_13
SAMD_14
SAMD_15
SAMD_16
SAMD_18

Non-Performing Assets: Page 96 of 98




Report description
Sec. 1 portfolio analysis part A
Sec.2 Classification of risk assets part A
DSB: Off Balance sheet items.
Sec.3 Change in asset quality profile.
Quarterly Balance
Top Impaired Accounts
Industry wise exposure of NPAs
Zone wise of position of High value NPAs
Asset wise breakup of High value NPAs
Customer NPA Profile
Fresh slippage as on date
Fresh slippage and cumulative postion
NPA accounts fallen below Rs.1 Crore.
Evaluation of High value NPA accounts.
Amount wise breakup of Gross NPA

16
17
18
19
20
21
22
23
24

SAMD_20
SAMD_21
SAMD_22
SAMD_23
SAMD_33
SAMD_36
SAMD_37
SAMD_48
SAMD_49

Movement of NPA since beginning


Comparative position of NPAs
Movement of NPAs
Top 100 NPA accounts below Rs.1 Crore.
Additional disclosure in balance sheet
Monitoring Management of NPAs
Visit of Sr.Executive from HO
Resolution strategy on Individual accounts
Amount wise break up of gross NPA(Comparision
with previous Half Year.
Analysis of Balance sheet.
NPA related Budget V/s Performance

25
SAMD_50
26
SAMD_53
MENU OPTION NPAMGT (PHASE-II)
Sr.No.
Report name
Description
1
SAMD_REC1
Weekly reduction of existing NPAs
2
SAMD_REC2
Weekly reduction of existing NPAs amt wise
breakup
3
SAMD_REC3
Weekly reduction out of fresh slippage in last FY
4
SAMD_REC4
Weekly reduction out of fresh slippage in last FY
amt wise breakup
5
SAMD_REC5
Weekly reduction out of fresh slippage since last YE
6
SAMD_REC6
Weekly reduction out of fresh slippage since last YE
amt wise breakup
7
SAMD_REC7
Recovery though recovery agents
8
SAMD_SAR1
monthly
return
progress
report
on
recovery/reduction in NPAs for the period
9
SAMD_ SAR2
Monthly return SA II : Summary of enforcement
action as on month end date
10
SAMD_ SAR3
for accounts which are NPA as on statement despite
issuance of notices
11
SAMD_ SAR4
Details
of
financial
assets
sold
to
securitization/Reconstruction
companies/other
Banks/Fis/NBFCs during the Qtr.
12
RBI_M1
Details of borrowal accounts with working capital
limit of Rs.10 crore and above from the entire
banking system
13
SAMD_M2
Details of Primary/ Collateral security ANNEXURE 1
14
SAMD_TWO
Position of HO indentified accounts
15
SAMD_LOSS
Review of loss assets for the half year ended with
the outstanding of Rs. 10 lac and above
16
SAMD_RLEST
Statement of NPA under Real Estate
17
Fresh slippage 5 crore and above during the prev.
SAMD_SLP5C
Qtr.
Non-Performing Assets: Page 97 of 98


18
19
20
21
22
23

SAMD_REUP1
SAMD_OTSWO
SAMD_CSLA
SAMD_RTRC
SAMD_MZCA

24
25
26
27
28
29

SAMD_RPAD
SAMD_RWOA
SAMD_WOPQ
SAMD_HVNPA
SAMD_PDCLA
DATA_INP

SAMD_RCPA

Non-Performing Assets: Page 98 of 98




Recovery/ Up gradation of Rs. 1 Crore.


OTS approved in write off accounts for the qtr.
Compromise settlement by Lok Adalat
Recovery through recovery Camps
Month wise/zone wise compromise approved.
Reduction in NPA:Recovery in comp.prop.
approved.
Recovery position as on date.
Recovery in written off accounts
Write off proposals for qtr end.
Evaluation of high value npa accounts
Prudential classification.
List of data captured accounts.