However, if the resolution plan entails restructuring of the loans, the standard loans will get classified as NPAs.
Under the revised framework RBI said, 'Lenders shall identify incipient stress in loan accounts, immediately on default, by classifying stressed assets as special mention accounts (SMA)... "This has been the case with most of the NCLT 2 list of borrowers, whereby the resolution plans failed for most of borrowers and were referred under IBC; this is expected to further spike up the credit provisioning requirements for banks during FY2019", ICRA said. This information will then have to be reported by lenders to the Central Repository of Information on Large Credits (CRILC) on all borrower entities having aggregate exposure of Rs 5 crore and above with them. These are the schemes that set loan restructuring programmes prevalent among banks to restructure defaulted loans and made resolution of defaults time bound. According to him, the guidelines will facilitate uniformity in asset classification across banks and act as a deterrent to efforts at ever-greening.
Also the RPs involving restructuring or change in ownership in respect of "large" accounts shall require independent credit evaluation (ICE) of the residual debt by credit rating agencies (CRAs) specifically authorised by the Reserve Bank for this goal.
For accounts where lenders have an exposure of below Rs 2,000 crore and, at or above Rs 100 crore, the RBI intends to announce, over a two-year period, reference dates for implementing the resolution professional to ensure calibrated, time-bound resolution of all such accounts in default.
If in default as on the reference date, then 180 days from the reference date.
Once a default occurs, banks will have 180 days within which to come up with a resolution plan.
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"Any failure on the part of lenders in meeting the prescribed timelines or any actions by lenders with an intent to hide 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", it said.
Some of these accounts are already classified as NPAs and may not add to the overall stock of NPAs.
The central bank has warned banks of monetary penalties and higher provisions if banks are found to have violated or found "evergreening" accounts to escape its stringent new norms on fixing defaults.
The new framework, which subsumes most existing stressed asset schemes such as the Strategic Debt Restructuring Scheme (SDR) and the Scheme for Sustainable Structuring of Stressed Assets (S4A), gives primacy to the Insolvency and Bankruptcy Code (IBC) of 2016, and has disbanded the concept of a Joint Lenders' Forum. It will remove uncertainty and impediments of various forms of restructuring earlier introduced and will be easier to implement.
The third largest private sector lender had already factored in higher bad assets recognition and the resultant provisions due to migration to the IndAS, the newer accounting system due from April 1, and therefore, it will be able to support credit growth even after setting aside more money, Sharma said.