On a review and based on feedback received from stakeholders, the Reserve Bank of India has partly modified and also clarified, some aspects of its Prudential Guidelines for Revitalising Stressed Assets in the Economy. The revised guidelines will be applicable prospectively.

The salient features of the Review are as follows:

a. SDR:

1. Reduction in the minimum percentage of shareholding to be initially divested by the lenders;

2. Lenders to build up adequate provisions for possible loss in value of the equity acquired in lieu of debt and residual loan exposures;

b. Framework to Revitalise the Distressed Assets in the Economy

1. Reduction in the percentage of lenders, by number, required to approve the Corrective Action Plan;

2. Revised composition of the JLF-EG for enhancing the quality of decision making;

3. A scheme of incentives for adherence to timelines for decision-making by JLF members to facilitate timely implementation of the Corrective Action Plan;

c. Restructuring of Advances

1. Permitting restructuring and benefits of asset classification in cases of borrower accounts, which were involved in fraud,  where the promoters have been subsequently replaced by new promoters and the borrower is totally delinked from the erstwhile promoters;

2. Clarifying that Flexible Structuring of Project Loans is also permitted for ECBs;

It may be recalled that the Reserve Bank had issued various guidelines aimed at revitalising the stressed assets in the economy. These include: Strategic Debt Restructuring (SDR) Mechanism, Framework to Revitalise the Distressed Assets in the Economy, Revisions to the Guidelines on Restructuring of Advances by Banks, Flexible structuring of Long Term Project Loans and amendments to guidelines on Sale of Financial Assets to Securitisation Companies (SC)/Reconstruction Companies (RC).

Alpana Killawala
Principal Adviser

Press Release : 2015-2016/2016