The Core Group may ensure that cases involving frauds or diversion of funds with malafide intent are not covered. Equity shares acquired and held by banks under the scheme shall be exempt from the requirement of periodic mark-to-market for the 18 month period indicated at para 43 . 28.3.5 The above-mentioned time limits are maximum permitted time periods and the JLF should try to arrive at a restructuring package as soon as possible in cases of simple restructuring. 28.2 If the JLF decides restructuring of the account as CAP, it will have the option of either referring the account to CDR Cell after a decision to restructure is taken under para 27.1 as indicated above or restructure the same independent of the CDR mechanism.
In the same way, a person who is liable to pay tax under the Profession Tax Act would be required to get himself reaistered. 5.2 Any person whether or not registered, including a person whose registration is cancelled, under the Relevant Act is eligible to apply for settlement of arrears. In case of unregistered person, if there is a liability to pay tax under the Relevant Act for the past periods but the liability to pay tax is not continued then there is no necessity to obtain registration under the Relevant Act. All arrears as per statutory order are eligible for settlement, whether such arrears are disputed in appeal or not.
With a view to bring in more transparency, henceforth banks should disclose full details of write offs, including separate details about technical write offs, in their annual financial statements as per the format prescribed in the Appendix to this part of the Master Circular. 26.6 While the existing Consortium Arrangement for consortium accounts will serve as JLF with the Consortium Leader as convener, for accounts under Multiple Banking Arrangements , the lender with the highest AE will convene JLF at the earliest and facilitate exchange of credit information on the account. In case there are multiple consortium of lenders for a borrower (e.g. separate consortium for working capital and term loans), the lender with the highest AE will convene the JLF. This implies that once the higher provisions and risk weights on restructured advances revert to the normal level on account of satisfactory performance during the prescribed period, such advances should no longer be required to be disclosed by banks as restructured accounts in the “Notes on Accounts” in their Annual Balance Sheets. However, the provision for diminution in the fair value of restructured accounts on such restructured accounts should continue to be maintained by banks as per the existing instructions.
IBA would circulate the names of the CA firms against whom many complaints have been received amongst all banks who should consider this aspect before assigning any work to them. RBI would also share such information with other financial sector regulators/Ministry of Corporate Affairs /Comptroller and Auditor General . The above is only an illustrative list and the JLF may decide on a mutually agreed option. It also needs to be emphasised that while one bank may have a better https://1investing.in/ security interest when it comes to one borrower, the case may be vice versa in the case of another borrower. So, it would be beneficial if lenders appreciate the concerns of fellow lenders and arrive at a mutually agreed option with a view to preserving the economic value of assets. Once an option is agreed upon, the bank having the largest exposure may take the lead in ensuring distribution according to agreed terms once the restructuring package is implemented.
Banks can also use countercyclical / floating provisions for meeting any shortfall on sale of NPAs i.e., when the sale is at a price below the net book value . Risk category ECGC Classification Provisioning Requirement Insignificant A1 0.25 Low A2 0.25 Moderate B1 5 High B2 20 Very high C1 25 Restricted C2 100 Off-credit D 100 Banks are required to make provision for country risk in respect of a country where its net funded exposure is one per cent or more of its total assets. In addition to the provisioning requirement as per Asset Classification, the full amount of the Revaluation Gain, if any, on account of foreign exchange fluctuation should be used to make provisions against the corresponding assets.
The CPPC will enter the date of death of the pensioner in the disburser’s portion of the PPO and will retain this information on its database with suitable audit trail and in the register maintained in their software in the form as Annexure-IX. An entry for date of death of the pensioner will be made in pensioner’s half by PAHB. The pensioner’s half of PPO will then be returned to the nominee if family pension stands authorised through the same PPO; otherwise it will be returned by CPPC to CPAO along with the disburser’s half. The CPAO will up-date its record and transmit both halves of the PPO after keeping necessary note in their records to the PAO/AG who had issued the PPO for similar action and record. For payment of arrears to the nominee, he/she will be asked to apply for the same to the PAHB along with the pensioner’s half of the PPO showing the period of arrears.
The principles and prudential norms laid down in this paragraph are applicable to all advances including the borrowers, who are eligible for special regulatory treatment for asset classification as specified in para 20. C. The purchasing bank shall furnish all relevant reports to RBI, credit information company which has obtained Certificate of Registration from RBI and of which the bank is a member etc. in respect of the non performing financial assets purchased by it. The reference to ‘bank’ in the guidelines on purchase/sale of non performing financial assets would include financial institutions and NBFCs. In cases where there is moratorium for payment of interest, banks should not book income on accrual basis beyond two years and one year from the original DCCO for infrastructure and non-infrastructure projects respectively, considering the high risk involved in such restructured accounts. There are occasions when the completion of projects is delayed for legal and other extraneous reasons like delays in Government approvals etc.
21.3 Acquisition of equity shares / convertible bonds / convertible debentures in companies by way of conversion of debt / overdue interest can be done without seeking prior approval from RBI, even if by such acquisition the prudential capital market exposure limit prescribed by the RBI is breached. However, this will be subject to reporting of such holdings to RBI, Department of Banking Supervision , every month along with the regular DSB Return on Asset Quality. Nonetheless, banks will have to comply with the provisions of Section 19 of the Banking Regulation Act, 1949. In the case of restructured accounts classified as non-performing assets, the income, if any, generated by these instruments may be recognised only on cash basis. The banks‘ IT and MIS system should be robust and able to generate reliable and quality information with regard to their asset quality for effective decision making.
Under no circumstances can a transfer to the SC/ RC be made at a contingent price whereby in the event of shortfall in the realization by the SC/RC, the banks/ FIs would have to bear a part of the shortfall. The bank re-assesses the viability of the project before approving the enhancement of scope and fixing a fresh DCCO. This Master Circular consolidates instructions on the above matters issued up to June 30, 2015.
Further, any conversion of debt into equity should be done only in the case of listed companies. V) Promoter’s contribution need not necessarily be brought in cash and can be brought in the form of de-rating of equity, conversion of unsecured loan brought by the promoter into equity and interest free loans. Banks will hold provision against the restructured advances as per the extant provisioning norms. 15.4 The CDR Mechanism (Annex – 4) will also be available to the corporates engaged in non-industrial activities, if they are otherwise eligible for restructuring as per the criteria laid down for this purpose. Further, banks are also encouraged to strengthen the co-ordination among themselves in the matter of restructuring of consortium / multiple banking accounts, which are not covered under the CDR Mechanism. Such loans should be substantially taken over (more than 50% of the outstanding loan by value) from the existing financing banks/Financial institutions.
When a bank / FI sells its financial assets to SC/ RC, on transfer the same will be removed from its books. Banks/ FIs may receive cash or bonds or debentures as sale consideration for the financial assets sold to SC/RC. Banks/ FIs should ensure that subsequent to sale of the financial assets to SC/RC, they do not assume any operational, legal or any other type of risks relating to the financial assets sold. Delegation of powers of various functionaries for taking decision on the sale of the financial assets; etc. In credit card accounts, the amount spent is billed to the card users through a monthly statement with a definite due date for repayment. Banks give an option to the card users to pay either the full amount or a fraction of it, i.e., minimum amount due, on the due date and roll-over the balance amount to the subsequent months’ billing cycle.
Further, a ‘stand still’7 clause could be stipulated in the DCA to enable a smooth process of restructuring. The ‘stand-still’ clause does not mean that the borrower is precluded from making payments to the lenders. The ICA may also stipulate that both secured and unsecured creditors need to agree to the final resolution. Subject to provisions of paragraphs 17.2.5, 18.2 and 19.2, interest income in respect of restructured accounts classified as ’standard assets‘ will be recognized on accrual basis and that in respect of the accounts classified as ’non-performing assets‘ will be recognized on cash basis.
Under general category, there can be situations where bank is put unexpectedly to loss due to events such as civil unrest or collapse of currency in a country. Natural calamities and pandemics may also be included in the general category. active arrears meaning Market category would include events such as a general melt down in the markets, which affects the entire financial system. Among the credit category, only exceptional credit losses would be considered as an extra-ordinary circumstance.
The bank should hold floating provisions for ‘advances’ and ‘investments’ separately and the guidelines prescribed will be applicable to floating provisions held for both ‘advances’ & ‘investment’ portfolios. While the provisions on individual portfolios are required to be calculated at the rates applicable to them, the excess or shortfall in the provisioning, vis-a-vis the position as on any previous date, should be determined on an aggregate basis. If the provisions required to be held on an aggregate basis are less than the provisions held as on November 15, 2008, the provisions rendered surplus should not be reversed to Profit and Loss account; but should continue to be maintained at the level existed as on November 15, 2008. In case of shortfall determined on aggregate basis, the balance should be provided for by debit to Profit and Loss account. A) For determining the amount of unsecured advances for reflecting in schedule 9 of the published balance sheet, the rights, licenses, authorisations, etc., charged to the banks as collateral in respect of projects financed by them, should not be reckoned as tangible security. Banks should not recognise income on accrual basis in respect of the projects under implementation which are classified as a ‘substandard’ asset.
7.7 It must be borne in mind that there is no waiver in respect of the un-disputed tax except when the requisite amount is paid under lump sum option as per section 8 of the Settlement Act. 7.5 Anaexure-A and Annexure-B appended to the Act provide the extent of undisputed tax, disputed tax, interest, penalty and late fee to be paid and waiver thereof under the Relevant Acts. 5.3 However; where the liability to pay tax is continued, such unregistered person would be required to obtain the registration under the Relevant Act.
These instruments should be held under AFS and valued as per usual valuation norms. Equity classified as standard asset should be valued either at market value, if quoted, or at break-up value, if not quoted which is to be ascertained from the company’s latest balance sheet. In case the latest balance sheet is not available, the shares are to be valued at Re. Equity instrument classified as NPA should be valued at market value, if quoted, and in case where equity is not quoted, it should be valued at Re. Depreciation on these instruments should not be offset against the appreciation in any other securities held under the AFS category. The restructuring of such cases may be done with Board’s approval, while for such accounts the restructuring under the CDR Mechanism may be carried out with the approval of the Core Group only.
28.4.2 As the preliminary viability of account has already been decided by the JLF, CDR Cell should directly prepare the Techno-Economic Viability study and restructuring plan in consultation with JLF within 30 days from the date of reference to it by the JLF. Once the first two options at and above are seen as not feasible, due recovery process may be resorted to. The JLF may decide the best recovery process to be followed, among the various legal and other recovery options available, with a view to optimising the efforts and results. Operating and cash break even points should be worked out and they should be comparable with the industry norms. After commencement of commercial production / operation and the asset has been classified as ’sub-standard‘ or ‚doubtful‘.
Based on what is outlined here, your taxes are adjusted under the assumption that arrears were received in the year in which they were due. As per the rules laid down by the Income Tax Department, any income, such as a salary, is taxed when it is received and not altogether at the end of the financial year. But, there are certain situations in which salary benefits are not provided in the same financial year, but the following year instead, forcing you to adjust your salary arrears in the subsequent years. Calls in Arrears means the amount due for calls which are not received by business yet. When the amounts due to a bank are fully covered by the value of security, duly charged in its favour in respect of those dues, the bank’s dues are considered to be fully secured.
All CDR approved packages must incorporate creditors‘ right to accelerate repayment and borrowers‘ right to pre-pay. All restructuring packages must incorporate ‘Right to recompense’ clause and it should be based on certain performance criteria of the borrower. In any case, minimum 75 per cent of the recompense amount should be recovered by the lenders and in cases where some facility under restructuring has been extended below base rate, 100 per cent of the recompense amount should be recovered. 5.5.1 As stated in para 5.4.1 a creditor who for any internal reason does not wish to commit additional finance will have an option.