Regulatory Alerts2021-12-14
A circular dated December 14, 2021 regarding the regulatory framework for writing off non-performing debts
I would be pleased to help you, but it seems that the instructions you have are already in English. However, if you want a detailed clarification of these regulations, I can definitely do that for you. Here is an interpretation of each regulation: 1. The Bank must assess and monitor all unsecured obligations of the client and take effective steps to ensure that their overall exposure to any one person does not exceed 25%. 2. If the borrower fails to meet this requirement, they must be classified as unsecured within three years or the lender's classification of them would have been upgraded as per instructions given below: a) If the bank has made an effort to restructure or reschedule with the borrower but failed, the client will be deemed unsecured after 4 years. b) If the borrower is a government-owned entity and it continues to fail in paying its dues within four years of failure, the lender should upgrade their classification as per instructions given below: 1-4: In case of continued non-compliance by the government owned entity, the bank will have 4 years from the time of such classification. 3. It is mandatory to terminate the exposure to a borrower who is classified as 'unsecured' after two years, provided he does not comply with the restructuring or rescheduling agreement. 4. If the borrower has been compliant with any restructuring or rescheduling agreement made by them, they would be granted up to two more years from the time of classification before terminating their exposure as per instructions given below: 1-4: In case of continued compliance with such an agreement for two years, the bank will have four years. 5. It is mandatory on the Bank to undertake steps to ensure that its non-performing loans are provisioned adequately and these provisions must be maintained continuously. 6. The Bank should continue to restructure and reschedule its non-performing loans as per its internal policies and procedures, and submit these periodically to its Board of Directors as well as the Supervisory Committee for monitoring purposes. 7. The Bank must continue to assess and monitor all unsecured obligations of the client and take effective steps to ensure that their overall exposure to any one person does not exceed 25%. And continuously analyse and report these exposures to its Board of Directors on a quarterly basis as per instructions given below: 8. The Bank will be granted a period of 18 months from the date of issuance of these guidelines, during which it must review all unsecured obligations of clients that are due for repayment and reschedule or restructure them as necessary within this timeframe. I hope this interpretation helps you. If you have any further questions, please don't hesitate to ask.