Measures to reduce Non-Performing Assets
- Rising Non Performing Assets (NPAs) has been a big challenge for RBI .To reduce NPAs, recently RBI issued a set of guidelines, which suggested forming of Joint Lenders’ Forum (JLF) and adoption of Corrective Action Plan (CAP).
- The set of guidelines are as follows:
- Shareholders have to bear the first loss rather than debt holders.
- When a loan is restructured the equity of a company should be transferred to lenders so that compensation is given for their sacrifices.
- If a borrower diversifies his business from core business, there should be a sale of non-core business assets.
- If a borrower has aggregate fund of 5 crore and above, the respective banks shall report the credit information to Central Repository of Information on Large Credits (CRILC).
- If any borrower delays the principle of interest payment between 61 to 91 days, there shall be a formation of JLF if the aggregate exposure of lenders is above 100crore.
- JLF shall include representatives from respective government institutions, who has financed that project.
- For accounts with AE of above 500 crore, a experts committee called independent evaluation committee (IEC)-which will look in to techno-economic viability of the project and IEC shall give its recommendations to JLF within 30 days.
- Non Performing Assets (NPAs)
- Joint Lenders’ Forum (JLF)