Working on resolution of large NPA accounts, says RBI

The Reserve Bank of India (RBI) today said it has devised a strategy to deal with large stressed accounts and expects to see some action soon.

"Overall, the RBI has a strategy to deal with the resolution of large assets and we are working in a calibrated manner and we hope to see some actions coming soon," RBI Deputy Governor N S Vishwanathan told reporters here.

Last month, the government cleared an Ordinance to amend the Banking Regulation Act, giving wide-ranging legislative powers to the RBI to issue directions to lenders to initiate insolvency proceedings for the recovery of bad loans.

Vishwanathan said the RBI has decided to focus on a few large stressed accounts under the framework and accordingly a set of accounts has been identified.

"The decision on specific accounts out of these to be referred for Insolvency and Bankruptcy Code (IBC) or to be restructured will be taken under the guidance of the internal advisory committee," he said.

The deputy governor also said the first meeting of internal advisory committee will be convened very shortly.

Post the clearance of the much-awaited NPA Ordinance, RBI also issued a directive bringing some changes to the existing regulations on dealing with stressed assets.

The directives said that a corrective action plan could include flexible restructuring, strategic debt restructuring (SDR) and scheme for sustainable structuring of stressed assets (S4A).

To facilitate faster decision making in the joint lender forum (JLF), the RBI changed the consent required for approval of a proposal to 60% by value instead of 75% earlier.

It was also decided to reconstitute the oversight committee under the aegis of the RBI and to enlarge it to include more members so that the committee can constitute requisite benches to deal with the volume of cases referred to it.

Vishwanathan further said the proposal to bring in the oversight committee under the aegis of the RBI and with an expanded remit has also been approved in-principle so that it will come out soon.

He said the RBI has held a series of meetings with the stakeholders like banks, rating agencies, asset reconstruction companies (ARCs), private equity (PE) firms and investors.

"The required modifications to the restructuring guidelines are under the works and the feedback received from these stakeholders are being built into the final outcome," Vishwanathan said.

In a meeting held between the RBI and bankers last week, lenders had sought a few relaxation from the central bank in the current S4A mechanism including waiver of promoters personal guarantee, for quick resolution of stressed assets.

Bankers also requested to grant fresh moratorium or extension of repayment schedule or reduction of rate of interest to help companies come out of the stress.