The Reserve Bank of India has revamped the Joint Lenders' Forum
(JLF) norms to ensure mandatory presence of representatives of two
systematically important banks - SBI and ICICI Bank - in JLF Empowered Groups
formed by bankers to tackle the rising non-performing assets (NPAs).
"The JLF-EG should have a representative each of SBI and ICICI
Bank as standing members," the RBI said in a notification. Besides, a
representative each of the top three lenders to the borrower should also
present, it said. If SBI or ICICI Bank is among the top three lenders to the
borrower, then a representative of the fourth largest or a representative each
of the fourth and the fifth largest lenders should be present, it said.
JLF-EG should have a
representative each of the two largest banks in terms of advances which do not
have any exposure to the borrower and the participation in the JLF-EG should
not be less than the rank of an executive director in a public sector bank or
equivalent, the RBI said. Bankers had complained that boards of the banks find
it difficult to approve the decisions taken by JLF as the JLFs do not have
senior level representations from the participating lenders. "Although RBI
has not explicitly prescribed the level of representation in its guidelines,
banks are expected to depute sufficiently empowered senior level officials for
deliberations and decisions in the meetings of JLF," the RBI said.
JLF will finalize the
Corrective Action Plan (CAP) and the same will be placed before an empowered
group (EG) of lenders, which will be tasked to approve the restructuring
packages, it said. The JLF convening bank will convene the JLF-EG and provide
the secretarial support to it, it said.
With regard to restructuring of loans, it said generally no account
classified as doubtful should be considered by the JLF for restructuring. But
in cases where a small portion of debt is doubtful, that is the account is
standard/sub-standard in the books of at least 90 per cent of creditors (by
value), the account may then be considered under JLF for restructuring. In
partial modification, it has been decided that a JLF may decide on
restructuring of an account classified as 'doubtful' in the books of one or
more lenders similar to sub-standard assets, if the account has been assessed
as viable, it added.
On the exit option, the RBI said irrespective of whether they are
within or outside the minimum 75 per cent and 60 per cent, can exercise the
option for providing additional finance only by way of arranging their share of
additional finance to be provided by a new or existing creditor.
Dissenting lenders who do not want to participate in the
rectification or restructuring of the account as CAP, which may or may not
involve additional financing, will have an option to exit their exposure
completely by selling their exposure to a new or existing lender. The exit
should be within the prescribed timeline for implementation of the agreed CAP,
the RBI said.
The exiting lender will not have the option to continue with their
existing exposure and simultaneously not agreeing for rectification or
restructuring as CAP. "Sometimes disagreement arises among lenders on
deciding the CAP on rectification or restructuring, resulting in delay in
initiating timely corrective action," it said.
'Banks get more leeway to change firms' ownership'
Mumbai: Making it easier for
banks to bring in a new owner for a stressed company, the RBI on Thursday said
lenders could upgrade such firms to a 'standard' account even if the change in
the ownership was outside of the purview of a strategic debt restructuring
(SDR) scheme. Classifying a loan as standard helps lenders save capital as they
need to set aside smaller provisions for these.
The central bank said the change would enhance banks' ability to
bring in a change in the ownership of borrowers that were under stress
primarily due to operational or managerial inefficiencies despite substantial
sacrifices made by the lending banks.
The ownership of a company can change either if
lenders sell shares they have acquired invoking a pledge or by converting debt
into equity outside of the SDR.
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