Mumbai, Feb 13 (KNN) In a move that would speed up recognition of bad loans, the RBI has come out with a revised framework on restructuring of stressed assets under which it requires lenders to classify a loan as a non-performing asset (NPA) immediately upon restructuring.

RBI said it has issued various instructions aimed at resolution of stressed assets in the economy, including introduction of certain specific schemes at different points of time. 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. 

Under the revised framework RBI said, “Lenders shall identify incipient stress in loan accounts, immediately on default, by classifying stressed assets as special mention accounts (SMA)…”

For loans that are larger than Rs 2,000 crore, the resolution plan needs to be completed within 180 days. Under the new norms, if a resolution plan is not implemented within 180 days, the account must be referred to the Insolvency and Bankruptcy Code.

The schemes that have been withdrawn include — framework for revitalising distressed assets, corporate debt restructuring scheme (CDR), flexible structuring of long-term project loans (also known as 5/25 scheme), strategic debt restructuring scheme (SDR), change in ownership outside SDR, and scheme for sustainable structuring of stressed assets (S4A). The Joint Lenders’ Forum (JLF), as an institutional mechanism for resolution of stressed accounts, also stands discontinued.

“All accounts, including such accounts where any of the schemes have been invoked but not yet implemented, shall be governed by the revised framework,” the RBI said.

For accounts where lenders have an exposure of below Rs 2,000 crore and, at or above Rs 100 crore, the RBI intends to announce, over a two-year period, reference dates for implementing the resolution professional to ensure calibrated, time-bound resolution of all such accounts in default.

The apex bank has warned that any failure on the part of banks to meet the prescribed timelines, or any actions they take to conceal the actual status of accounts or evergreen stressed accounts, will expose banks to potential monetary penalties and other actions.

It also tightened rules around resolution plans, saying any such process involving restructuring or change in ownership for large accounts with loans of Rs. 100 crore or more will need independent credit evaluation by credit rating agencies that are authorised by the RBI.

Loans of Rs. 500 crore or more will need two such independent evaluators, the RBI said. (KNN Bureau)