To rule out all possible chances of NPAs taking a heavy toll on the banking industry from now on, the central bank has revised rules per se stressed assets. Some of the regulatory overhauls made are listed hereforth:
Identify defaults on an immediate basis and report them on Friday every week
In revised framework for stressed assets, the stress has been made on weekly disclosures of defaults and its reporting every Friday and thereon its resolution in 180 days time.
The authority to which such defaults have to be reported is RBI credit registry. Also the disclosures have to be made from February 23.
Stress recognition to be at the earliest stage through classification
The available mode of classification of defaulting loan accounts shall be used which categorise any stressed asset type to different classes of Special Mention Accounts or SMAs depending upon the time gap since the payments have been dues.
1. SMA 0 : If the principal and interest payments have been overdue for 1-30 days
2. SMA 1- For 31-60 days
3. SMA 2- For 61-90 days
In this regard, RBI said, "Lenders shall report credit information, including classification of an account as SMA to Central Repository of Information on Large Credits (CRILC) on all borrower entities having aggregate exposure of Rs 50 million (Rs 5 crore) and above with them." And the reporting system has to come into action from April 1, 2018.
Loans of over Rs. 2000 crore to be resolved within 180 days else be taken to IBC: After default of loan account, the process for its resolution should be in place in 180 days, If the same is not done through in the stipulated time, the account has to be referred to the courts in 15 days.
Amendments made as 100% bankers have to agree to the new resolution rules: This is against the earlier regime. Also the existing resolution framework stands cancelled and the JLF or Joint lenders Forum agreement also stand cancelled with immediate effect.
And with all this into effect, it is expected that there will be a faster recognition as well as resolution of default accounts as weekly reporting shall now be the new norm. More so, in the coming time, we may say a new banking system i.e robust and fresh.