Ans: It is clarified that ‘time of transfer’ would mean when the associated risks and rewards, to the extent of economic interest transferred and as documented in the loan participation, assignment or novation contract, becomes binding on the transferor and transferee.

Ans: The provisions of Clause 34, that require the transfer to be only on cash basis at the time of transfer of loans, shall be without derogation of the provisions of clause 15, which pertains to retained economic interest. However, it is reiterated that any retention of economic interest under clause 15 by the transferor must not result in credit enhancement.

Ans: It is clarified that treatment advised in the relevant clause (revised clause 77A) for investment by a transferor in SRs backed by stressed loans transferred by it are applicable to all SR investments outstanding as on the date of issuance of the MD. However, lenders other than specified at clause 3(a) & (e) shall be guided by the proviso added to the clause 77A.

Ans: There is no restriction on transfer of loan accounts classified as fraud by lenders, which was the position even before the issue of MD-TLE, except for ARCs. Lenders can transfer such exposures to permitted transferees as per their board approved policies in compliance with Clause 73.

Ans: Ideally, the gap between time of transfer and due-diligence cut-off date should be minimal and the board approved policy should strive to ensure that. However, to account for such scenario and to ensure strict compliance with the stipulation that no loans in default is transferred under provisions of chapter III, lenders are advised to formulate a board approved policy covering all pertinent aspects.

Ans: The treatment in clause 36 is only to facilitate transfer of loans where due to operational or other constraints, the transferee does not conduct a loan level due diligence. This is without prejudice to the requirement under Clause 46 to apply prudential norms at the individual loan level.

Ans: In terms of MD-TLE dated September 24, 2021, Primary (Urban) Co-operative Banks (PUCBs), State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs) have been recognised as eligible transferors of stressed loans. The relevant provisions of circular “Guidelines on Sale of Financial Assets to Securitisation Company/Reconstruction Company (SC/RC) by Multi State Urban Cooperative Banks’ dated March 28, 2014, in terms of which only multistate cooperative banks could sell stressed assets to ARCs have been repealed. Accordingly, all cooperative banks are permitted to transfer stressed assets to ARCs in compliance with the provisions of the MD-TLE and other extant regulatory instructions.