RBI allows banks to sell fraud loans to asset reconstruction companies

The guidelines said that lenders indispensable enactment successful spot a broad board-approved argumentation for transportation and acquisition of each indebtedness exposures.

The Reserve Bank of India (RBI) connected Friday allowed banks to merchantability fraud indebtedness exposures to plus reconstruction companies (ARCs). Banks volition present beryllium capable to transportation to ARCs indebtedness exposures classified arsenic fraud arsenic connected the day of transfer, provided that the responsibilities of the slope with respect to continuous reporting, monitoring, filing of complaints with instrumentality enforcement agencies and proceedings related to specified complaints shall besides beryllium transferred to the ARC.

“The transportation of specified indebtedness exposures to an ARC, however, does not absolve the transferor from fixing the unit accountability arsenic required nether the extant instructions connected frauds,” the RBI said successful its maestro absorption connected transportation of indebtedness exposures.

The guidelines said that lenders indispensable enactment successful spot a broad board-approved argumentation for transportation and acquisition of each indebtedness exposures. These guidelines indispensable laic down the minimum quantitative and qualitative standards relating to owed diligence, valuation, requisite IT systems for capture, retention and absorption of data, hazard absorption and periodic board-level oversight.

The board-approved policies of each lender connected transportation oregon acquisition of stressed loans shall screen the norms and process for transfer, the valuation methodology to beryllium followed, delegation of powers to assorted functionaries for taking decisions connected the transportation of loans, stated objectives for acquiring stressed assets and the hazard premium to beryllium applied.

When negotiated connected a bilateral basis, the negotiations indispensable needfully beryllium followed by an auction done the Swiss situation method if the aggregate vulnerability of lenders to the applicable borrower is `100 crore oregon more. In each different cases, the bilateral negotiations shall beryllium taxable to the terms find and worth maximisation approaches adopted by the transferor arsenic portion of the board-approved policy, the RBI said.