Skip to main content

RBI issues norms to hasten stressed asset resolutions via joint lender forums

By

The Reserve Bank of India (RBI) has issued new guidelines to quicken stressed asset resolutions through the joint lender forums (JLFs) comprising creditors to borrowers who are in default.
RBI said it was exercising new powers conferred on it by the Banking Regulation Ordinance that was passed on Friday.
The central bank slashed the minimum votes required in a JLF to reach a decision. It said decisions agreed to by 60% of creditors by value and 50% by number would be the basis for deciding a corrective action plan. Earlier, JLF decisions required the assent of 60% by number of creditors and 75% by value to achieve resolution.
The JLF framework was introduced in 2014 to resolve stressed assets quickly. The large composition of the committees acted as an impediment because lenders found it difficult to arrive at a consensus.
There have also been instances of a few banks striking private deals with borrowers even as they participated in a JLF.
Despite disincentives such as accelerated provisioning against bad loans, there have been delays in finalizing corrective action plans, the central bank said.
It also clarified that such plans could include flexible structuring of project loans and change in ownership under strategic debt restructuring.
The central bank said that banks should vote on JLF proposals unconditionally.
Any bank which does not support the majority decision has the option of exiting its exposure. If it fails to do so within a stipulated timeline, it will have go along with the majority decision.
“The bank shall implement the JLF decision without any additional conditionalities,” the regulator said.
It also asked bank boards to empower their executives to implement a JLF decision without requiring any further approval from the board.
RBI said it will impose monetary penalties if banks fail to stick to these timelines.
“Empowering executives to implement the JLF decision will ensure that banks will take decisions expeditiously. It will also force banks to take a final decision at the JLF without having to go back to the board for further approval,” said Sunil Srivastava, deputy managing director, State Bank of India.

Mint New Delhi, 06th May 2017

Comments

Post a Comment

Popular posts from this blog

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the...
Post a Comment
Read more

SFBs should be vigilant, proactive to mitigate risks: RBI deputy guv

By
  The Reserve Bank of India’s Deputy Governor Swaminathan J on Friday instructed the directors of small finance banks (SFBs) to be vigilant and proactive in identifying emerging risks in the sector.Speaking at a conference for directors on the boards of SFBs, Swaminathan highlighted the role of governance in guiding SFBs towards sustainable growth with stability. He also emphasised the importance of sustainable business models.Additionally, he highlighted the need for strengthening cybersecurity to protect the entities against digital threats and urged for a stronger focus on financial inclusion, customer service, and grievance redressal to ensure a broader reach of banking services.Executive Directors S C Murmu, Rohit Jain, and R L K Rao, along with other senior officials representing the Supervision, Regulation, and Enforcement Departments of the RBI, also participated in the conference.   -  Business Standard  30 th  September, 2024
Post a Comment
Read more

Brigade Hotel Ventures files draft papers with Sebi for Rs 900 crore IPO

By
  Brigade Hotel Ventures Ltd, owner and developer of hotels in South India, has filed draft papers with capital markets regulator Sebi to raise Rs 900 crore through an initial public offering (IPO).The proposed IPO is entirely a fresh issue of equity shares with no Offer-for-Sale (OFS) component, according to the draft red herring prospectus (DRHP).Proceeds from the issue to the tune of Rs 481 crore will go towards payment of debt, Rs 412 crore will be allocated to the company and Rs 69 crore to its material subsidiary, SRP Prosperita Hotel Ventures Ltd.Additionally, Rs 107.52 crore will be used to purchase an undivided share of land from the Promoter, BEL, and the remaining funds will support acquisitions, other strategic initiatives, and general corporate purposes.The company may raise up to Rs 180 crore through a Pre-IPO Placement.   If the placement is undertaken, the issue size will be reduced.Brigade Hotel Ventures Ltd is a wholly-owned subsidiary of Brigade Enterprises ...
Post a Comment
Read more