RBI’s Statement on Developmental and Regulatory Policies

This Statement sets out various developmental and regulatory policy measures for strengthening regulation and supervision; broadening and deepening financial markets; improving currency management; promoting financial inclusion and literacy; and, facilitating data management.

I. Regulation and Supervision

1. Mandatory Loan Component in Working Capital Finance

With a view to promoting greater credit discipline among working capital borrowers, it is proposed to stipulate a minimum level of ‘loan component’ in fund based working capital finance for larger borrowers.

2. Countercyclical Capital Buffer

The framework on counter cyclical capital buffer (CCCB) was put in place by the Reserve Bank in terms of guidelines issued on February 5, 2015 wherein it was advised that the CCCB would be activated as and when the circumstances warranted, and that the decision would normally be pre-announced with a lead time of four quarters. The framework envisages the credit-to-GDP gap as the main indicator, which may be used in conjunction with other supplementary indicators, viz., the Credit-Deposit (C-D) ratio for a moving period of three years (given its correlation with the credit-to-GDP gap and GNPA growth), industrial outlook (IO) assessment index (with due note of its correlation with GNPA growth), and interest coverage ratio (noting its correlation with the credit-to-GDP gap). Based on the review and empirical testing of CCCB indicators, it has been decided that it is not necessary to activate CCCB at this point in time.

3. Deferment of Indian Accounting Standards (Ind AS) implementation

Scheduled Commercial Banks (SCBs), excluding Regional Rural Banks (RRBs), were required to implement Indian Accounting Standards (Ind AS) from April 1, 2018. However, necessary legislative amendments – to make the format of financial statements, prescribed in the Third Schedule to Banking Regulation Act 1949, compatible with accounts under Ind AS – are under consideration of the Government. In view of this, as also the level of preparedness of many banks, it has been decided to defer implementation of Ind AS by one year by when the necessary legislative changes are expected.

4. Storage of Payment System Data

In recent times, the payment ecosystem in India has expanded considerably with the emergence of new payment systems, players and platforms. Ensuring the safety and security of payment systems data by adoption of the best global standards and their continuous monitoring and surveillance is essential to reduce the risks from data breaches while maintaining a healthy pace of growth in digital payments.

It is observed that at present only certain payment system operators and their outsourcing partners store the payment system data either partly or completely in the country. In order to have unfettered access to all payment data for supervisory purposes, it has been decided that all payment system operators will ensure that data related to payment systems operated by them are stored only inside the country within a period of 6 months.

II. Financial Markets

5. Access for Non-residents into the IRS Market

Rupee Interest Rate Swap (IRS) market, while it is the most liquid among interest rate derivative markets, still lacks depth to enable large banks to manage risks. Thin participation and consequent absence of divergence of views result in pricing inefficiencies, which further discourages participation. At the same time, it is understood that there is an active market for Rupee interest rate swaps offshore. Also, Indian market has witnessed increasing participation from non-resident players like FPIs in debt. With a view to develop a deep IRS market that accommodates divergent participants, it is proposed to permit non-residents access to the Rupee IRS market in India.

6. Introduction of Rupee Swaptions

In December 2016, RBI introduced Rupee Interest Rate Options (IRO), following the recommendations of the P.G. Apte Working Group. Only plain vanilla Interest Rate Options were allowed initially. Subsequently, market participants including corporates have expressed the need for swaptions to effectively manage interest rate risk. Fixed Income Money Market and Derivative Association of India (FIMMDA) has conveyed a similar request on behalf of its members. It is, therefore, proposed to permit interest rate swaptions in Rupees so as to enable better timing flexibility for those seeking to hedge interest rate risk.

7. Review of Separate Trading of Registered Interest and Principal Securities (STRIPS) directions

The Reserve Bank introduced the Separate Trading of Registered Interest and Principal Securities (STRIPS) in Government Securities in April, 2010. After some initial interest, the product did not find much favour with the market. With a view to encouraging trading in STRIPS by making it more aligned with market requirements and to meet the diverse needs of the investors, it is proposed to review these guidelines. The revised directions will be issued by end of April 2018.

8. Legal Entity Identifier (LEI) for Non-individual Market Participants

The Legal Entity Identifier (LEI) code has been conceived as a key measure to improve the quality and accuracy of financial data systems for better risk management post the Global Financial Crisis. The LEI is a 20-character unique identity code assigned to entities who are parties to a financial transaction. RBI has already implemented the LEI code for all market participants in Over-the-Counter (OTC) derivative products in interest rate, currency and credit markets. It was also made applicable for large corporate borrowers. Continuing with this endeavour to improve transparency in financial markets, it is proposed to implement the LEI mechanism for all financial market transactions undertaken by non-individuals, in interest rate, currency or credit markets.

9. Introduction of Single Master Form for Reporting of Foreign Direct Investment in India

Foreign Direct Investment in India, on a repatriable basis, is made by non-residents through eligible instruments such as Equity Shares, Compulsory Convertible Preference shares, Compulsorily Convertible Debentures, Share Warrants etc., issued by the investee company or by contributing to the capital of a Limited Liability Partnership (LLP). At present, the reporting of the above transactions resulting in foreign investment are in a disintegrated manner across various platforms/modes. The Reserve Bank plans to introduce an online reporting by June 30, 2018 via a Single Master Form which would subsume all reporting requirements, irrespective of the instrument through which the foreign investment is made.

10. Reporting by Authorised Dealers

Currently, transactions under Liberalised Remittance Scheme (LRS) are being permitted by Authorised Dealer (AD) banks based on the declaration made by the remitter. As such, it is difficult for the AD banks to monitor/ensure that a remitter has not breached the prescribed limit by approaching multiple AD banks. With the objective of improved monitoring and ensuring compliance with the LRS ceilings, it has been decided to put in place a system for daily reporting of individual transactions by banks. This will, inter alia, enable the AD Banks to view the remittances already sent by an individual before allowing further remittance thus obviating the possibility of a remitter breaching the LRS limit by approaching multiple AD banks.

III. Currency Management

11. Norms for Cash-in-Transit (CIT) Industry and Promotion of Self-Regulatory Organisation by CIT Industry

In the Statement on Developmental and Regulatory Policies of February 7, 2018, the Reserve Bank had announced a time frame to implement the recommendations of the two high level inter-agency committees constituted by it to suggest measures for improvement of currency management, including security of movement of treasure. The Committees, inter alia, had recommended stipulation of minimum standards for cash logistics industry and promotion of a Self-Regulatory Organisation (SRO) for the industry.

i) Under the ‘Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services’ issued by the Reserve Bank in November 2006, cash management and logistics at the bank level has largely been outsourced to Cash-in-Transit (CIT) companies and Cash Replenishment Agencies (CRAs). There is, however, no regulation or supervision for this industry at present. With a view to promote healthy growth of the sector and mitigate risks associated with movement of currency through these agencies, Reserve Bank will require the banks to ensure that the CIT companies/CRAs engaged by them meet minimum prescribed standards.

ii) In order to ensure compliance with minimum standards for the CIT industry and other applicable laws, the Bank will encourage the cash management industry to promote a Self-Regulatory Organisation (SRO) for undertaking development work along with self-regulation of the industry, till such time that an appropriate legislative structure is put in place.

12. Central Bank Digital Currency

Rapid changes in the landscape of the payments industry along with factors such as emergence of private digital tokens and the rising costs of managing fiat paper/metallic money have led central banks around the world to explore the option of introducing fiat digital currencies. While many central banks are still engaged in the debate, an inter-departmental group has been constituted by the Reserve Bank to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency.

13. Ring-fencing regulated entities from virtual currencies

Technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system. However, Virtual Currencies (VCs), also variously referred to as crypto currencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering, among others.

Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs. Regulated entities which already provide such services shall exit the relationship within a specified time.

IV. Financial Inclusion and Literacy

14. Tailored Financial Literacy Content

A ‘one size fits all’ approach for imparting financial education to various target groups is sub-optimal. Financial education contents sought to be delivered to diverse target groups need to be customized to meet their typical target groups. The Reserve Bank is in the process of developing tailored financial literacy contents for five specified target groups’ viz. Farmers, Small entrepreneurs, School children, Self Help Groups and Senior Citizens, that can be used by the trainers.

15. Revamping of the Lead Bank Scheme

The Lead Bank Scheme was started to ensure economic development of the districts/states by establishing coordination between the banks and government agencies. The Scheme was last reviewed by a “High Level Committee” under Smt Usha Thorat, erstwhile Deputy Governor of Reserve Bank of India, as the Chairperson in 2009. In view of several changes that have taken place in the financial sector over the years, Reserve Bank of India had constituted a “Committee of Executive Directors” of the Bank to study the efficacy of the Scheme and suggest measures for its improvement. The Committee has since submitted its recommendations and it has been decided to realign the Lead Bank Scheme based on the recommendations to make it more relevant.

V. Data Management

16. Creation of RBI Data Sciences Lab

It is critical for a full-service Central Bank, such as the RBI, with diverse responsibilities –inflation management, currency management, debt management, reserves management, banking regulation and supervision, financial inclusion, financial market intelligence and analysis, and overall financial stability – to employ relevant data and apply the right filters for improving its forecasting, now casting, surveillance and early-warning detection abilities that all aid policy formulation. In the backdrop of ongoing explosion in information gathering, computing capability and analytical tool kits, policy making benefits not only from data collected through regulatory returns and surveys but also from large volumes of structured and unstructured real-time information sourced from consumer interactions in the digital world. Accordingly, it has been decided to gainfully harness the power of Big Data analytics by setting up a Data Sciences Lab within the RBI that will comprise experts and budding analysts, internal as well as lateral, who are trained inter alia in Computer Science, Data Analytics, Statistics, Economics, Econometrics and/or Finance. It is envisaged that the unit will become operational by December 2018.


RBI Guidelines: Norms Applicable to Restructuring

Restructuring is an act in which a lender, for economic or legal reasons relating to the borrower’s financial difficulty, grants concessions to the borrower. Restructuring would normally involve modification of terms of the advances / securities, which would generally include, among others, alteration of repayment period / repayable amount / the amount of instalments / rate of interest / roll over of credit facilities / sanction of additional credit facility / enhancement of existing credit limits / compromise settlements where time for payment of settlement amount exceeds three months.

Prudential Norms

1. Asset Classification

In case of restructuring, the accounts classified as ‘standard’ shall be immediately downgraded as non-performing assets (NPAs), i.e., ‘sub-standard’ to begin with. The non-performing assets, upon restructuring, would continue to have the same asset classification as prior to restructuring. In both cases, the asset classification shall continue to be governed by the ageing criteria as per extant asset classification norms.

2. Conditions for Upgrade

Standard accounts classified as NPA and NPA accounts retained in the same category on restructuring by the lenders may be upgraded only when all the outstanding loan / facilities in the account demonstrate ‘satisfactory performance’ (i.e., the payments in respect of borrower entity are not in default at any point of time) during the ‘specified period’ (as defined in paragraph 10 of the covering circular).

For the large accounts (i.e., accounts where the aggregate exposure of lenders is ₹ 1 billion and above) to qualify for an upgrade, in addition to demonstration of satisfactory performance, the credit facilities of the borrower shall also be rated as investment grade (BBB- or better) as at the end of the ‘specified period’ by CRAs accredited by the Reserve Bank for the purpose of bank loan ratings. While accounts with aggregate exposure of ₹ 5 billion and above shall require two ratings, those below ₹ 5 billion shall require one rating. If the ratings are obtained from more than the required number of CRAs, all such ratings shall be investment grade to qualify for an upgrade.

In case satisfactory performance during the specified period is not demonstrated, the account shall, immediately on such default, be reclassified as per the repayment schedule that existed before the restructuring. Any future upgrade for such accounts shall be contingent on implementation of a fresh resolution plan (RP) and demonstration of satisfactory performance thereafter.

3. Provisioning Norms

Accounts restructured under the revised framework shall attract provisioning as per the asset classification category as laid out in the Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances dated July 1, 2015, as amended from time to time. However, the provisions made in respect of accounts restructured before the date of the circular under any of the earlier schemes shall continue to be held as per the requirements specified therein.

4. Additional Finance

Any additional finance approved under the RP (including any resolution plan approved by the Adjudicating Authority under IBC) may be treated as ‘standard asset’ during the specified period under the approved RP, provided the account performs satisfactorily (as defined in paragraphs 3-5 above) during the specified period. If the restructured asset fails to perform satisfactorily during the specified period or does not qualify for upgradation at the end of the specified period, the additional finance shall be placed in the same asset classification category as the restructured debt.

5. Income recognition norms

Interest income in respect of restructured accounts classified as ‘standard assets’ may be recognized on accrual basis and that in respect of the restructured accounts classified as ‘non-performing assets’ shall be recognised on cash basis.

In the case of additional finance in accounts where the pre-restructuring facilities were classified as NPA, the interest income shall be recognised only on cash basis except when the restructuring is accompanied by a change in ownership.

6. Conversion of Principal into Debt / Equity and Unpaid Interest into ‘Funded Interest Term Loan’ (FITL), Debt or Equity Instruments

The FITL / debt / equity instruments created by conversion of part of principal / unpaid interest, as the case may be, will be placed in the same asset classification category in which the restructured advance has been classified.

These instruments shall be valued as per usual valuation norms and marked to market. Equity instruments, whether classified as standard or NPA, shall be valued at market value, if quoted, or else at break-up value (without considering the revaluation reserve, if any) as ascertained from the company’s balance sheet as on March 31st of the immediate preceding financial year. In case balance sheet as on March 31st of the immediate preceding financial year is not available, the entire portfolio of equity shares of the company held by the bank shall be valued at Re.1. Depreciation on these instruments shall not be offset against the appreciation in any other securities held under the AFS category.

The unrealised income represented by FITL / Debt or equity instrument can only be recognised in the profit and loss account as under:

  • FITL/debt instruments: only on sale or redemption, as the case may be;
  • Unquoted equity/ quoted equity (where classified as NPA): only on sale;
  • Quoted equity (where classified as standard): market value of the equity as on the date of upgradation, not exceeding the amount of unrealised income converted to such equity. Subsequent changes to value of the equity will be dealt as per the extant prudential norms on investment portfolio of banks.

7. Change in Ownership

In case of change in ownership of the borrowing entities, credit facilities of the concerned borrowing entities may be continued/upgraded as ‘standard’ after the change in ownership is implemented, either under the IBC or under this framework. If the change in ownership is implemented under this framework, then the classification as ‘standard, shall be subject to the following conditions:

  • Banks shall conduct necessary due diligence in this regard and clearly establish that the acquirer is not a person disqualified in terms of Section 29A of the Insolvency and Bankruptcy Code, 2016.
  • The new promoter shall have acquired at least 26 per cent of the paid up equity capital of the borrower entity and shall be the single largest shareholder of the borrower entity.
  • The new promoter shall be in ‘control’ of the borrower entity as per the definition of ‘control’ in the Companies Act 2013 / regulations issued by the Securities and Exchange Board of India/any other applicable regulations / accounting standards as the case may be.
  • The conditions for implementation of RP as per Section I-C of the covering circular are complied with.

For such accounts to continue to be classified as standard, all the outstanding loans/credit facilities of the borrowing entity need to demonstrate satisfactory performance (as defined in paragraph 3 above) during the specified period. If the account fails to perform satisfactorily at any point of time during the specified period, the credit facilities shall be immediately downgraded as non-performing assets (NPAs) i.e., ‘sub-standard’. Any future upgrade for such accounts shall be contingent on implementation of a fresh RP (either under IBC, wherever mandatory filings are applicable or initiated voluntarily by the lenders, or outside IBC) and demonstration of satisfactory performance thereafter.

Further, the quantum of provisions held by the bank against the said account as on the date of change in ownership of the borrowing entities can be reversed only after satisfactory performance during the specified period.

Principles on classification of sale and lease back transactions as restructuring

A sale and leaseback transaction of the assets of a borrower or other transactions of similar nature will be treated as an event of restructuring for the purpose of asset classification and provisioning in the books of banks with regard to the residual debt of the seller as well as the debt of the buyer if all the following conditions are met:

  • The seller of the assets is in financial difficulty;
  • Significant portion, i.e. more than 50 per cent, of the revenues of the buyer from the specific asset is dependent upon the cash flows from the seller;
  • 25 per cent or more of the loans availed by the buyer for the purchase of the specific asset is funded by the lenders who already have a credit exposure to the seller.

Prudential Norms relating to Refinancing of Exposures to Borrowers in different currency

If foreign currency borrowings/export advances for the purpose of repayment/refinancing of rupee loans are obtained from:

  • lenders who are part of Indian banking system (where permitted); or
  • with support (where permitted) from the Indian banking system in the form of Guarantees/Standby Letters of Credit/Letters of Comfort, etc., such events shall be treated as ‘restructuring’ if the borrower concerned is under financial difficulty.

Similarly, rupee loans for repayment/refinancing of foreign currency borrowings/export advances will also be treated as ‘restructuring’ if such rupee loans are extended to a borrower who is under financial difficulty.

Regulatory Exemptions

1. Exemptions from RBI Regulations

Acquisition of non-SLR securities by way of conversion of debt is exempted from the restrictions and the prudential limit on investment in unlisted non-SLR securities prescribed by the RBI.

Acquisition of shares due to conversion of debt to equity during a restructuring process will be exempted from regulatory ceilings/restrictions on Capital Market Exposures, investment in Para-Banking activities and intra-group exposure. However, these will require reporting to RBI (reporting to DBS, CO every month along with the regular DSB Return on Asset Quality) and disclosure by banks in the Notes to Accounts in Annual Financial Statements. Nonetheless, banks will have to comply with the provisions of Section 19(2) of the Banking Regulation Act, 1949.

2. Exemptions from Regulations of Securities and Exchange Board of India (SEBI)

SEBI has provided exemptions, under certain conditions, from the requirements of Securities and Exchange Board of India (SEBI) (Issue of Capital and Disclosure Requirements) (ICDR) Regulations, 2009 as well as SEBI (Substantial Acquisition of Shares and Takeovers) (SAST) Regulations, 2011 for restructurings carried out as per the regulations issued by the Reserve Bank.

With reference to the requirements contained in sub-regulations 70 (5) (a) and 70 (6) (a) of ICDR Regulations, 2009, the issue price of the equity shall be the lower of (i) or (ii) below:

  • The average of the weekly high and low of the volume weighted average price of the related equity shares quoted on the recognised stock exchange during the twenty six weeks preceding the ‘reference date’ or the average of the weekly high and low of the volume weighted average prices of the related equity shares quoted on a recognised stock exchange during the two weeks preceding the ‘reference date’, whichever is lower; and
  • Book value: Book value per share to be calculated from the audited balance sheet as on March 31st of the immediate preceding financial year (without considering ‘revaluation reserves’, if any) adjusted for cash flows and financials post the earlier restructuring, if any. The balance sheet shall not be more than a year old. In case the audited balance sheet as on March 31st of the immediate preceding financial year is not available the total book value of the borrower company shall be reckoned at Re. 1.

In the case of conversion of debt into equities, the ‘reference date’ shall be the date on which the bank approves the restructuring scheme. In the case of conversion of convertible securities into equities, the ‘reference date’ shall be the date on which the bank approves the conversion of the convertible securities into equities. In case of issuance of fresh shares to the new promoter, the ‘reference date’ shall be the date of signing of the binding agreement between the bank and the new promoter.

With reference to the requirements contained in sub-regulations 10 (1) (ia) (a) of the SAST Regulations, 2001, at the time of selling the equity instruments acquired by banks (as part of a restructuring exercise) in favour of a new promoter, the selling price may be a negotiated price. However, the selling price shall not be lower than the ‘fair value’, which shall be the higher of (i) and (ii) below:

  • The average of the weekly high and low of the volume weighted average price of the related equity shares quoted on the recognised stock exchange during the twenty six weeks preceding the ‘reference date’ or the average of the weekly high and low of the volume weighted average prices of the related equity shares quoted on a recognised stock exchange during the two weeks preceding the ‘reference date’, whichever is higher; and
  • Book value: Book value per share to be calculated from the company’s latest audited balance sheet (without considering ‘revaluation reserves’, if any) adjusted for cash flows and financials post the earlier restructuring, if any.

In case of sale of equity held by banks as a result of conversion/invocation of pledge, the ‘reference date’ shall be the date on which the share purchase agreement between the bank and the new promoter is executed.

Non-applicability of these Guidelines

The revival and rehabilitation of MSMEs as defined under ‘The Micro, Small and Medium Enterprises Development Act, 2006’ shall continue to be guided by the instructions contained in RBI Circular No. FIDD.MSME & NFS.BC.No.21/ 06.02.31/ 2015-16 dated March 17, 2016, as amended from time to time.

Restructuring of loans in the event of a natural calamity shall continue to be as per the directions contained in the Master Directions FIDD.CO.FSD.BC No.8/05.10.001/2017-18, as amended from time to time.

Cases of frauds/ willful defaulters

28. Borrowers who have committed frauds/ malfeasance/ willful default will remain ineligible for restructuring. However, in cases where the existing promoters are replaced by new promoters, and the borrower company is totally delinked from such erstwhile promoters/management, lenders may take a view on restructuring such accounts based on their viability, without prejudice to the continuance of criminal action against the erstwhile promoters/management.

RBI Guidelines on Resolution of Stressed Assets – Revised Framework

The Reserve Bank of India has issued various instructions aimed at resolution of stressed assets in the economy, including introduction of certain specific schemes at different points of time. In view of the enactment of the Insolvency and Bankruptcy Code, 2016 (IBC), it has been decided to substitute the existing guidelines with a harmonised and simplified generic framework for resolution of stressed assets. These guidelines are applicable to all Scheduled Commercial banks (excluding RRBs) and All India Financial Institutions.

Early identification and reporting of stress

Lenders shall identify incipient stress in loan accounts, immediately on default, by classifying stressed assets as special mention accounts (SMA) as per the following categories:

SMA Sub-categories Basis for classification – Principal or interest payment or any other amount wholly or partly overdue between
SMA-0 1-30 days
SMA-1 31-60 days
SMA-2 61-90 days

Lenders shall report credit information, including classification of an account as SMA to Central Repository of Information on Large Credits (CRILC) on all borrower entities having aggregate exposure of ₹ 50 million and above with them. The CRILC-Main Report will now be required to be submitted on a monthly basis effective April 1, 2018. In addition, the lenders shall report to CRILC, all borrower entities in default (with aggregate exposure of ₹ 50 million and above), on a weekly basis, at the close of business on every Friday, or the preceding working day if Friday happens to be a holiday. The first such weekly report shall be submitted for the week ending February 23, 2018.

Implementation of Resolution Plan

All lenders must put in place Board-approved policies for resolution of stressed assets under this framework, including the timelines for resolution. As soon as there is a default in the borrower entity’s account with any lender, all lenders − singly or jointly − shall initiate steps to cure the default. The resolution plan (RP) may involve any actions / plans / reorganization including, but not limited to, regularisation of the account by payment of all over dues by the borrower entity, sale of the exposures to other entities / investors, change in ownership, or restructuring. The RP shall be clearly documented by all the lenders (even if there is no change in any terms and conditions).

Implementation Conditions for Resolution Plan

A RP in respect of borrower entities to whom the lenders continue to have credit exposure, shall be deemed to be ‘implemented’ only if the following conditions are met:

  1. the borrower entity is no longer in default with any of the lenders;
  2. if the resolution involves restructuring; then
  • all related documentation, including execution of necessary agreements between lenders and borrower / creation of security charge / perfection of securities are completed by all lenders; and
  • the new capital structure and/or changes in the terms of conditions of the existing loans get duly reflected in the books of all the lenders and the borrower.

Additionally, RPs involving restructuring / change in ownership in respect of ‘large’ accounts (i.e., accounts where the aggregate exposure of lenders is ₹ 1 billion and above), shall require independent credit evaluation (ICE) of the residual debt by credit rating agencies (CRAs) specifically authorised by the Reserve Bank for this purpose. While accounts with aggregate exposure of ₹ 5 billion and above shall require two such ICEs, others shall require one ICE. Only such RPs which receive a credit opinion of RP4 or better for the residual debt from one or two CRAs, as the case may be, shall be considered for implementation. Further, ICEs shall be subject to the following:

  • The CRAs shall be directly engaged by the lenders and the payment of fee for such assignments shall be made by the lenders.
  • If lenders obtain ICE from more than the required number of CRAs, all such ICE opinions shall be RP4 or better for the RP to be considered for implementation.

The above requirement of ICE shall be applicable to restructuring of all large accounts implemented from the date of this circular, even if the restructuring is carried out before the ‘reference date’ stipulated in paragraph 8 below.

Timelines for Large Accounts to be Referred under IBC

In respect of accounts with aggregate exposure of the lenders at ₹ 20 billion and above, on or after March 1, 2018 (‘reference date’), including accounts where resolution may have been initiated under any of the existing schemes as well as accounts classified as restructured standard assets which are currently in respective specified periods (as per the previous guidelines), RP shall be implemented as per the following timelines:

  • If in default as on the reference date, then 180 days from the reference date.
  • If in default after the reference date, then 180 days from the date of first such default.

If a RP in respect of such large accounts is not implemented as per the timelines specified in paragraph 8, lenders shall file insolvency application, singly or jointly, under the Insolvency and Bankruptcy Code 2016 (IBC) within 15 days from the expiry of the said timeline.

In respect of such large accounts, where a RP involving restructuring/change in ownership is implemented within the 180-day period, the account should not be in default at any point of time during the ‘specified period’, failing which the lenders shall file an insolvency application, singly or jointly, under the IBC within 15 days from the date of such default.

‘Specified period’ means the period from the date of implementation of RP up to the date by which at least 20 percent of the outstanding principal debt as per the RP and interest capitalisation sanctioned as part of the restructuring, if any, is repaid.

Provided that the specified period cannot end before one year from the commencement of the first payment of interest or principal (whichever is later) on the credit facility with longest period of moratorium under the terms of RP.

Any default in payment after the expiry of the specified period shall be reckoned as a fresh default for the purpose of this framework.

For other accounts with aggregate exposure of the lenders below ₹ 20 billion and, at or above ₹ 1 billion, the Reserve Bank intends to announce, over a two-year period, reference dates for implementing the RP to ensure calibrated, time-bound resolution of all such accounts in default.

It is, however, clarified that the said transition arrangement shall not be available for borrower entities in respect of which specific instructions have already been issued by the Reserve Bank to the banks for reference under IBC. Lenders shall continue to pursue such cases as per the earlier instructions.

Prudential Norms

The revised prudential norms applicable to any restructuring, whether under the IBC framework or outside the IBC, are contained in Annex-1. The provisioning in respect of exposure to borrower entities against whom insolvency applications are filed under the IBC shall be as per their asset classification in terms of the Master Circular on Prudential norms on Income Recognition, Asset Classification and Provisioning, as amended from time to time.

Supervisory Review

Any failure on the part of lenders in meeting the prescribed timelines or any actions by lenders with an intent to conceal the actual status of accounts or evergreen the stressed accounts, will be subjected to stringent supervisory / enforcement actions as deemed appropriate by the Reserve Bank, including, but not limited to, higher provisioning on such accounts and monetary penalties.

Bank Promotion Exams – A golden opportunity for growth

Banks in the public sector as well as regional rural banks keep conducting Promotion Tests to various scales internally. This is a huge opportunity for any banker to grow in scale and position along with the rich experience that comes with it. From time to time every banker is required to upscale, opening up a big window of opportunity starting from the entry level clerical position, moving up to senior level scale IV position by clearing these internal promotion exams announced by their respective Banks.

As with any growth path, along with the incentive of a higher pay scale and position also comes greater responsibility and accountability. These exams are put in place to prepare the Banker to handle responsible positions by learning about banking basics and enhancing their banking knowledge with the years through investment in study and actual experience in the branch. This is an opportunity not just for all bankers to grow in their career paths but also for the respective banks and the Indian banking sector at large.

Thus the scope of study which starts from basic banking knowledge gets wider with each scale promotion exam to cover guidelines and latest updates issued by the Reserve Bank of India and financial and economic reports, budget and policy changes by the governement in the banking and financial sector, advanced banking concepts like Risk Management, Foreign Exchange, Banking Technology and Treasury Management, and other information on financial awareness.

The structure and approach of NBTI study kits for Internal Promotion Exams in Public Sector Banks (PSBs) and Regional Rural Banks (RRBs) is unique and very well-thought out and methodical. These study kits have helped many bankers get that dream promotion they were hoping for and looking forward to in anticipation for a long time. The gap in proper knowledge and guidance somehow could not get them across in time to move up their career ladder quickly. But this has all changed with NBTI Distance Learning Material as you no longer need to take leave and miss office or home to attend a class to prepare for your promotion exams. You can do it now from the comfort of your home, at your own pace with the best-in-class Promotion study material from Narang’s Bankers Training Institute.

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Highlights of Budget 2018

Government of India claims that it is firmly on course to achieve high growth of 8% plus as manufacturing, services and exports are back on good growth path. While GDP growth at 6.3% in the second quarter of 2017-18 signalled turnaround of the economy, growth in the second half is likely to remain between 7.2% to 7.5%. The Union Minister for Finance and Corporate Affairs while presenting the General Budget 2018-19 in Parliament today said that Indian society, polity and economy had shown remarkable resilience in adjusting with the structural reforms. IMF, in its latest Update, has forecast that India will grow at 7.4% next year in the backdrop of services resuming high growth rates of 8% plus, exports expected to grow at 15% in 2017-18 and manufacturing back on good growth path.

Reiterating the pledge given to the people of India four years ago to give this nation an honest, clean and transparent Government and to build a strong, confident and a New India, FM said, the Government led by Prime Minister, Shri Narendra Modi, has successfully implemented a series of fundamental structural reforms to propel India among the fastest growing economies of the world.

The Finance Minister said that Government has taken up programs to direct the benefits of structural changes and good growth to reach farmers, poor and other vulnerable sections of our society and to uplift the under-developed regions. He said, this year’s Budget will consolidate these gains and particularly focus on strengthening agriculture and rural economy, provision of good health care to economically less privileged, taking care of senior citizens, infrastructure creation and working with the States to provide more resources for improving the quality of education in the country. He said, the Government has ensured that benefits reach eligible beneficiaries and are delivered to them directly and said that Direct Benefit Transfer mechanism of India is the biggest such exercise in the world and is a global success story.

Find a detailed sector-wise analysis and impact of Budget 2018 followed by multiple choice questions that are likely to come in the upcoming JAIIB, CAIIB, and Promotion exams at Narang’s Bankers Training Institute.

Highlights of Economic Survey 2018

The Indian economy is so complex, it constantly throws up opportunities for investigation and calls for rigorous research.

The Economic Survey Report 2018 was tabled in Parliament on Monday, 29th January 2018. The survey was prepared by the finance ministry’s Chief Economic Advisor Arvind Subramanian, who estimated that gross domestic product would grow to 6.75 per cent in the current fiscal year 2017-18, ending in March.

Here are the highlights from the Economic Survey:

  • GDP to grow 7-7.5% in FY19; India to regain fastest growing major economy tag.
  • GDP growth to be 6.75% in FY2017-18.
  • Policy vigilance required next fiscal if high oil prices persist or stock prices correct sharply.
  • Policy agenda for next year – support agriculture, privatize Air India, finish bank recapitalisation.
  • GST data shows 50% rise in number of indirect taxpayers.
  • Tax collection by states, local governments significantly lower than those in other federal countries.
  • Demonetisation has encouraged financial savings.
  • Insolvency Code being actively used to resolve NPA woes.
  • Retail inflation averaged 3.3% in 2017-18, lowest in last 6 fiscals.
  • India needs to address pendency, delays and backlogs in the appellate and judicial arenas.
  • Urban migration leading to feminisation of farm sector.
  • Rs 20,339 cr approved for interest subvention for farmers in current fiscal.
  • FDI in services sector rises 15% in 2017-18 on reforms.
  • Fiscal federalism, accountability to help avoid low equilibrium trap.
  • India’s external sector to remain strong on likely improvement in global trade.
  • Technology should be used for better enforcement of labour laws.
  • Swachh Bharat initiative improved sanitation coverage in rural areas from 39% in 2014 to 76% in January 2018.
  • Priority to social infrastructure like education, health to promote inclusive growth.
  • Centre, states should enhance cooperation to deal with severe air pollution
  • Suvey 2017-18 in pink colour to highlight gender issues.
  • Indian parents often continue to have children till they have the desired number of sons.

Making the Right Choice

“The early bird catches the worm.” A famous idiom we have all heard while growing up from our teachers, parents and elders trying to teach us the value of self-discipline, punctuality, organization and a methodical approach in life. What this idiom simply means is those who start preparing early stand a better chance at success than those who do not. I’m not here trying to give any teaching lessons, but simply say this that given the hectic schedule of a banker in the present time, it is tough to study along with work. Working hours have increased, work load has gone up and in general our lifestyle today demands a lot from us in terms of time and attention. So in such a scenario would you want to struggle with lengthy, tedious, heavy worded books, with lots and lots of pages that say everything about and around banking but those specific things that you need to know to clear your exams? Or would you rather choose simple, clear, concise, already well-researched and proven study material that is easy to understand and conceptually grasp that guarantees your success in the exams? Well, the choice is yours.
But if you take my advice, I would encourage you to start your preparation early so you can go slow and steady without any pressure and be ready well in time for your exams while many others out there would still be busily trying to figure out where to get a cheaper book from and be cheated at the hands of several players out there in the market who do make big promises but deliver nothing when the time comes. By then you will have absorbed and understood all the concepts and practiced all types of questions and be ready to succeed in your JAIIB exams or CAIIB exams or Promotion tests. So I would say choose wisely, choose now to gain advantage of an early start over all those who are waiting for the final lap to enter the race and gamble their career over freebies and low quality books just because they weigh quantity more over quality.  Now it is up to you to make that choice.
Having said that, here is just a little extra push for those appearing for JAIIB May 2018 exams as a welcome gesture from Team NBTI. Read more

New Year Wishes

Here’s wishing you all a very Happy New Year 2018…filled with lots of exciting stuff, special features, amazing offers and lots more! We begin the year by welcoming all NEW entrants to banking and financial institutions and wishing you great success in your career. And to encourage you to clear JAIIB in one shot, NBTI has announced a Special Limited Period Offer for all JAIIB aspirants of May/June 2018 examinations.

  • Avail Big Discount of up to 30% on JAIIB Distance Learning Material on all orders placed till 31st January 2018.
  • Get the revised, latest study kit at a SPECIAL PRICE with FREE access to Online Mock Test Facility (will be made available 2 months prior to the exams) and much more.
  • Make the most of this SPECIAL ONE MONTH OFFER as prices are likely to go up after 31st January 2018.
  • Refer your friends and colleagues and avail SPECIAL BENEFITS.

JAIIB study kits are now updated and ready for circulation. All orders placed for revised and updated kits will be dispatched maximum within 48 hours of placing the order. For more details, please write to us at info@nbti.in or call us on +91 9312219818

Wishing you the very best in both your personal and professional spheres.

Have a Happy and Prosperous New Year!

Exam Tips

I hope the first paper for JAIIB went well for the participants. For the remaining I wish all JAIIB and CAIIB exam participants the very best for their preparation and exams.

I am sure you have already gone through the theory section thoroughly. If not, you still have a little time to at least read up the study material. Just read it through like a novel to familiarize yourself with the topics and then attempt the MCQs for practice. You have the option of attempting the questions a number of times in the online test format to improve your performance. If you go through the subject properly you can find out independently as to how the solution to a particular question is arrived at. If you are thorough with the subject you should immediately grasp the hint to reach the correct answer. Therefore, I encourage all participants who still have some time left with them to study the subjects thoroughly and re-attempt the mock tests after a few days gap. You should try to solve problems and case studies yourself and not depend on just reading as there is a saying about learning process, ‘We hear and we forget; we see and we remember; we do and we UNDERSTAND’. So try to solve numerical and case studies at least two to three times and see the miracle. Remember there is no short cut to success.

Wish you Good Luck!

NBTI Test Series

NBTI study kits, with their simple, easy-to-understand, high-quality, well-researched content, exam-oriented approach and well thought out structure have helped many bankers clear their JAIIB/ CAIIB/ Promotion exams in one shot. Based on popular demand we recently launched the ONLINE TEST Platform to provide that extra edge in exam preparation. These tests offer participants a flavour of the actual exam and allow them to evaluate their preparedness. This unique offering is bound to help all JAIIB/ CAIIB/ Internal Promotion aspirants immensely.

Here are some unique features of the Online Test functionality:

– Extensive database of multiple choice questions for self-evaluation
– Select case studies, numerical problems (especially for CAIIB) with step-by-step solutions
– All topics covered under prescribed syllabus
– Accessibility from laptop/ desktop as well as mobile phones
– IIBF recommended exam pattern for testing
– Real-time test environment to gage performance
– Several attempts for thorough practice
– Easy access online, anytime, anywhere
– Self-paced, simple workflow with quick results
– Helps you formulate strategy for the actual exam
– Variety of practice mock tests inside
– Tests designed by highly experienced faculty from banking industry

With these online tests, we aim to completely change your exam preparation experience. We are sure these tests will prove to be highly beneficial in ensuring your success.

But let me also add that testing one’s knowledge only helps when you have gone through the subject in detail. Having read and grasped the basics you now set out to test where you stand, how much you have understood and how well you can apply the theoretical  concepts practically. Without this preparation, if you start off attempting the questions you may very well find yourself clouded with fear and doubt as to whether you should even appear in the said exam for not knowing most of the answers or figuring out how the solutions were arrived at. Why take yourself through the grind? Instead, focus on going through the study kit for JAIIB or CAIIB or Promotion, whichever applicable and then get down to online mock tests. That way you will not only be well prepared but also confident and sure of yourself and the efforts you put in.

So what are you waiting for? Get started now!