RBI asks for weekly default disclosures in revised framework; withdraws SDR, S4A and JLF

The Reserve Bank of India has revised the new stressed assets framework, asking banks to immediately identify defaults and make disclosures every Friday to the RBI credit registry from February 23.

The RBI has also withdrawn the existing resolution frameworks and the Joint Lenders’ Forum (JLF) also stands discontinued with immediate effect.

“The extant instructions on resolution of stressed assets such as Framework for Revitalising Distressed Assets, Corporate Debt Restructuring Scheme, Flexible Structuring of Existing Long Term Project Loans, Strategic Debt Restructuring Scheme (SDR), Change in Ownership outside SDR, and Scheme for Sustainable Structuring of Stressed Assets (S4A) stand withdrawn with immediate effect,” the central bank said.

In view of the enactment of the Insolvency and Bankruptcy Code, 2016 (IBC), it has been decided to substitute the existing guidelines with a harmonised and simplified generic framework for resolution of stressed assets, RBI said releasing a circular late evening on revised framework for resolution of stressed assets.

Recognition of stress

According to the circular, “lenders shall identify incipient stress in loan accounts, immediately on default, by classifying stressed assets as special mention accounts (SMA).

SMA sub-categories are classified as principal or interest payment or any other amount wholly or partly overdue between 1-30 days as SMA-0, between 31-60 days as SMA-1 and between 61-90 days as SMA-2.

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.”

The CRILC-Main Report will now be required to be submitted on a monthly basis, effective April 1, 2018.

In addition, the lenders shall report to CRILC, all borrower entities in default (with aggregate exposure of Rs 5 crore and above), on a weekly basis, at the close of business on every Friday, or the preceding working day if Friday happens to be a holiday.

The first such weekly report shall be submitted for the week ending February 23, the banking regulator said.

Timelines for large accounts

In respect of accounts with aggregate exposure of the lenders at Rs 2,000 crore and above, on or after March 1, including accounts where resolution may have been initiated under any of the existing schemes as well as accounts classified as restructured standard assets which are currently in respective specified periods, the resolution professional (RP) shall implement as per following timelines.

  1. i) If in default as on the reference date, then 180 days from the reference date.
  2. ii) If in default after the reference date, then 180 days from the date of first such default.

Immediate Resolution Plan

The central bank has asked all lenders to put in place Board-approved policies for resolution of stressed assets under this framework, including the timelines for resolution.

“As soon as there is a default in the borrower entity’s account with any lender, all lenders − singly or jointly − shall initiate steps to cure the default.

“The resolution plan (RP) may involve any actions / plans / reorganization including, but not limited to, regularisation of the account by payment of all over dues by the borrower entity, sale of the exposures to other entities / investors, change in ownership, or restructuring,” RBI said.