Month: September 2021

The guidelines said that lenders must put in place a comprehensive board-approved policy for transfer and acquisition of all loan exposures.

The Reserve Bank of India (RBI) on Friday allowed banks to sell fraud loan exposures to asset reconstruction companies (ARCs). Banks will now be able to transfer to ARCs loan exposures classified as fraud as on the date of transfer, provided that the responsibilities of the bank with respect to continuous reporting, monitoring, filing of complaints with law enforcement agencies and proceedings related to such complaints shall also be transferred to the ARC.

“The transfer of such loan exposures to an ARC, however, does not absolve the transferor from fixing the staff accountability as required under the extant instructions on frauds,” the RBI said in its master direction on transfer of loan exposures.

The guidelines said that lenders must put in place a comprehensive board-approved policy for transfer and acquisition of all loan exposures. These guidelines must lay down the minimum quantitative and qualitative standards relating to due diligence, valuation, requisite IT systems for capture, storage and management of data, risk management and periodic board-level oversight.

The board-approved policies of every lender on transfer or acquisition of stressed loans shall cover the norms and procedure for transfer, the valuation methodology to be followed, delegation of powers to various functionaries for taking decisions on the transfer of loans, stated objectives for acquiring stressed assets and the risk premium to be applied.

When negotiated on a bilateral basis, the negotiations must necessarily be followed by an auction through the Swiss challenge method if the aggregate exposure of lenders to the relevant borrower is `100 crore or more. In all other cases, the bilateral negotiations shall be subject to the price discovery and value maximisation approaches adopted by the transferor as part of the board-approved policy, the RBI said.

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹79 lakh on Apna Sahakari Bank, Mumbai, for non-compliance with its directions on non-performing asset (NPA) classification, interest rate on deposits, and maintenance of deposit accounts.

The central bank, in a statement, said this penalty has been imposed in exercise of powers vested in the RBI by the Banking Regulation Act, 1949, taking into account failure of the bank to adhere to the aforesaid directions.

This action is based on deficiency in regulatory compliance, and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers, it added.

Referring to the statutory inspection of Apna Sahakari Bank, conducted by the RBI with reference to the bank’s financial position as on March 31, 2019, the statement said the Inspection Report pertaining thereto, and examination of all related correspondence revealed, inter alia, that the bank had not complied with the directions issued by the RBI on NPA classification.

Further, the bank had not complied with the RBI directions on payment of interest on deposits lying in current accounts of deceased individual depositors or sole proprietorship concerns while settling the claims and levying of penal charges in savings bank accounts for non-maintenance of minimum balances, the statement added.

In furtherance to the same, a notice was issued to the bank, advising it to show cause as to why penalty should not be imposed for contravention of aforesaid directions, the RBI said.

“After considering the bank’s reply to the notice, additional submissions and oral submissions made during the personal hearing, the RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions were substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with the aforesaid directions,” the central bank said.