For loans that are larger than Rs 2,000 crore, the resolution plan needs to be completed within 180 days.
"Any failure on the part of lenders in meeting the prescribed timelines or any actions by lenders with an intent to hide the actual status of accounts or evergreen the stressed accounts will be subjected to stringent supervisory / enforcement actions as deemed appropriate by the Reserve Bank, including, but not limited to, higher provisioning on such accounts and monetary penalties", it said. "The government is determined to clean up things in one go and not defer it".
Market experts believe the new measures by the RBI would lead to early recognition of bad loans, leading to higher provisioning expense that could subsequently hit their profits at least in the near term. The new norms will bring vast pressure on stressed borrowers. "It is a more transparent system for resolution", he said", he said here.
India's lenders are struggling with over Rs 8 lakh crore in non-performing assets, a large part of it in the public sector banks. These banks may now to have to re-evaluate some of their accounts and consider whether they need to be treated as a bad asset.
It also said that so far the Reserve Bank has issued Rs 10 coins in 14 designs.
In the past, the RBI has allowed banks to use several restructuring mechanisms to resolve the problem of bad loans, such as the Strategic Debt Restructuring Scheme, Scheme for Sustainable Structuring of Stressed Assets and the Corporate Debt Restructuring Scheme.
Banks that do not adhere to the timelines will face action, the central bank warned in its notification. "In view of the enactment of the IBC, it has been chose to substitute the existing guidelines with a harmonised and simplified generic framework for resolution of stressed assets", RBI said in the notification.
The lenders will have to report to CRILC, all borrower entities in default 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 resolution plan (RP) may involve any actions/plans/ reorganisation 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.
The guidelines insist that the lenders need to finalise resolution plans as these accounts slip into Special Mention Accounts (SMA) categories.
All lenders are required to submit report to Central Repository of Information on Large Credits (CRILC) on a monthly basis effective April 1, 2018.