RBI allows banks to sell fraudulent loans to asset rebuilding firms
The Reserve Bank of India (RBI) on Friday allowed banks to sell fraudulent loan exposures to asset reconstruction companies (ARCs). Banks will now be able to transfer loan exposures classified as fraud to the CRAs on the date of transfer, provided that the bank’s responsibilities with regard to ongoing reporting, monitoring, filing of complaints with the bodies responsible for the transfer. Law enforcement and procedures related to such complaints would also be transferred to the CRA.
“The transfer of such loan exposures to an ARC, however, does not relieve the transferor from fixing staff liability as required by existing fraud instructions,” the RBI said in its principal directive on transfer of personnel. loan exhibitions.
The guidelines state that lenders must put in place a comprehensive board approved policy for the transfer and acquisition of all loan exposures. These guidelines should establish the minimum quantitative and qualitative standards for due diligence, evaluation, IT systems required for data entry, storage and management, risk management and periodic monitoring at the board level. administration.
The policies approved by the board of directors of each lender on the transfer or acquisition of distressed loans should cover the standards and procedure for the transfer, the assessment methodology to be followed, the delegation of authority to various officials to take decisions on the transfer of loans, the stated objectives for the acquisition of stressed assets and the risk premium to be applied.
When negotiated on a bilateral basis, negotiations must necessarily be followed by an auction via the Swiss challenge method if the aggregate exposure of the lenders to the relevant borrower is 100 crore or more. In all other cases, bilateral negotiations will be subject to the price discovery and value maximization approaches adopted by the transferor under the policy approved by the board, the RBI said.