RBI revises Joint Lenders' Forum guidelines to rein in NPAs

As part of its effort to rein in bad loans, Reserve Bank today modified the Joint Lenders' Forum norms to ensure mandatory presence of representatives of two systematically important banks -- SBI and ICICI Bank -- as part of the Empowered Group (EG).
Banks should send senior-level representative for deliberations and decisions in the meetings of Joint Lenders' Forum (JLF), according to revised guidelines issued by RBI.
"It has been represented to us that sometimes boards of the banks find it difficult to approve the decisions taken by JLF as the JLFs do not have senior-level representations from the participating lenders," RBI said.

"In this regard, it is clarified that, although RBI has not explicitly prescribed the level of representation in its guidelines, banks are expected to depute sufficiently empowered senior level officials for deliberations and decisions in the meetings of JLF," it said.
It has been decided that JLF will finalise the Corrective Action Plan (CAP) and the same will be placed before an Empowered Group (EG) of lenders, which will be tasked to approve the restructuring packages, it said.
"The JLF-EG should have a representative each of SBI and ICICI Bank as standing members," it said. Besides, a representative each of the top three lenders to the borrower should also present, it added.

Recently, RBI named SBI and ICICI Bank as 'systemically important' and subjected them to higher levels of supervision to prevent disruption to financial services in event of any failure.

RBI further said that participation in the JLF-EG should not be less than the rank of an Executive Director in a public sector bank or equivalent.
The JLF convening bank will convene the JLF-EG and provide the secretarial support to it, it said.
With regard to restructuring of loans, it said generally no account classified as doubtful should be considered by the JLF for restructuring.
But in cases where a small portion of debt is doubtful that is the account is standard/sub-standard in the books of at least 90 per cent of creditors (by value), the account may then be considered under JLF for restructuring.

In partial modification, it has been decided that a JLF may decide on restructuring of an account classified as 'doubtful' in the books of one or more lenders similar to sub-standard assets, if the account has been assessed as viable, it added.