RBI’s New Framework for Resolving NPAs - II | Current Affairs (2024)

FAQs

What are the new NPA norms of RBI? ›

As per the 5:25 flexible structuring scheme, the lenders are allowed to fix longer amortization period for loans to projects in the infrastructure and core industries sector, for say 25 years, based on the economic life or concession period of the project, with periodic refinancing, say every 5 years.

Banks are required to maintain a minimum provision of 0.40% to 0.25% depending on the type of loan. Substandard Assets: These are assets where there is a defined weakness or default in repayment. Banks are required to maintain a higher provision ranging from 15% to 25% based on the duration of default.

All accounts can be restructured on down-gradation of asset class. An NPA account is already downgraded and can therefore be restructured, even above Rs. 25 Crore. 3) How to arrive at eligibility for borrowers who are not required to obtain Audited Balance sheet as per statute?

For non-home branches, cash transactions up to Rs 25,000 is free of charge. The charge for transactions above Rs 25,000 is Rs 5 per Rs 1000, while the minimum charge being Rs 150. Rs 20 will be charged for every additional cheque book of 20 leaves. The first 25 cheque leaves in a year are free.

The gross NPA ratio of banks could improve to 2.90-3.05 per cent by FY24 end.

Borrowers with a working capital limit of Rs 150 crore and above will need avail of the first 40 percent of their limit in the form of a "working capital demand loan". This provision comes into effect from April 1, 2019. From July 1, the loan component will go up to 60 percent.

In summary, the bank is entitled to claim interest on a loan even after it is declared as NPA.

NPA Finance is a loan given by any financial institution licensed by RBI (Reserve Bank of India) to take over borrower NPA account liability from a previous bank/NBFC and give repayment in the shape of EMIs for the next four to five years.

Any NPA can be regularised anytime by payments of entire dues but before the sale of the underlying asset becomes absolute.

How to recover NPA? ›

There are various avenues for recovery of Non Performing Asset (NPA), they are Insolvency and Bankruptcy Code, the SARFAESI Act, Asset Reconstruction, Debt Recovery Tribunals, Lok Adalats. You can read about the Non Performing Assets (NPA) – What is the meaning of NPA? [UPSC Economics Notes] in the given link.

A standard asset is a type of non-performing asset that does not disclose any problem or risk other than normal business risk. In respect of standard assets, no payment of interest is considered. Also, there is no default in the repayment of the principal.

Why in News? The gross non-performing asset (GNPA) ratio for Scheduled commercial banks (SCBs) witnessed a significant decline, falling from 3.9% at the end of March 2023 to 3.2% by the end of September, 2023, as per the recent report of Reserve Bank of India (RBI).

Legal Actions. Following are the Notice issued by the Bank to the Borrower to recover their loans. Loan Recall Notice: This is a total loan recall notice issued by the bank after the declaration of the account as an NPA account. This notice says to deposit the entire amount of the loan in a particular given time.

Non-performing Assets

Banks are required to classify an account as NPA wherein the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter.

In order to regulate the investment portfolio of cooperative banks in non-SLR securities, RBI has mandated that the total Non-SLR investments of cooperative banks shall not exceed 10% of the total deposits of a bank as on March 31 of the preceding financial year.