Recovery Important questions and anserws

Term-III, BMSB

1. Importance of recovery management

Ans: -Bankers are dealing in public money

- Bankers have to comply with the statutory requirements i.e. CRR

4.00% and SLR at 22.5%

-Improving the bottom-line is a must for Bankers

- Stiff competition among Bankers, has affected the profitability

-Poor quality of assets affects the image of the Bank

-Recycling of funds if not ensured, affects the management of Assets and

Liabilities (ALM)

-Maintaining Capital Adequacy Ratio becomes difficult

-Recovery Management does not mean management of NPAs only

-NPAs create adverse impact on the economy

2. Measures for mitigation of NPA

*Follow up and recover the over dues

* Rehabilitation
* Sale of securities
* Filing claims with ECGC/CGTMSE
* Entering into Compromise settlement
* Sale of the portion of Syndicate finance if any.
* Filing suit as a last resort
3. Monitoring of accounts, indicators of poor conduct in a/c

Various debits in the a/c-corresponding or more credits are not observed

Continuous reduction in stocks
Long outstanding book debts
Frequent return of cheques issued by the customer
Rejection of materials supplied
Kite flying by depositing the cheques of sister concerns
Transfer of funds to unrelated accounts
Failure to submit periodical returns like stock statements etc.
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Frequent return of bills sent for collection

Inordinate delay in collection
Same item is being repeated in the stock statement
Nonpayment of statutory dues like taxes, PF dues electricity bills etc.

4. What is a special mention a/c?

SMAs are those accounts which are overdue for more than 30 days but not slipped to
NPA status.
SMAs give early warning signals may slip to NPA status.
Causes are to be analyzed and appropriate steps are to be initiated
If the causes are beyond the control of the borrower, Bank has to think of additional
finance if necessary
If the slippage is because of misuse of funds appropriate recovery action has to be
initiated immediately.
SMA0 -1 to 30 days

SMA1 31 to 60 days

SMA@- 61 to 90 days

5. Consequences( result) of a account slipping into NPA status.

TWO WAY EFFECT OF ADVANCES ACCOUNTS SLIPPING TO NPA status: the slippage of
assets and consequent provisioning requirement has two way effect on the profit of the
Banks AS UNDER

1. Banks cannot charge interest on NPAs and take it to interest income.

2. Banks have to make provisions against NPAs from the profit earned through
Performing Assets (Interest Income).

That will affect banks profit adversely.

6. Provisions made for standard assets.

Ans: A)Direct advances to Agriculture, Small and Micro Enterprises: 0.25%

B) Advances to Commercial Real Estate sector: 1%
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C) Home Loans extended at teaser rates2%. The provisioning on these assets would
revert to 0.40 per cent after 1 year from the date on which the rates are reset at higher
rates if the accounts remain standard.
Restructured advances: 3.50% as on 31-03-2014, 4.25% a on 2015 and 5% w.e.f. 31-03-
2016. For new restructured accounts, provision has to be made at 5% w .e. f. 01-04-
2013-
D) All other loans and advances not detailed above: 0.40%
(Revert to= to return)

7. Quick mortality case

If any advance account has slipped to NPA status within 12 months from the date of
sanction or last release whichever is later, such account will be treated as QUICK
MORTALITY case. Staff accountability has to be looked into in such cases.

8. Sub standard assets

SUB STD ASSET: A sub standard asset is one which has remained as NPA for a period of
less than or up to twelve months. Sub Standard Assets are further classified as Secured
Exposure and Unsecured exposure. All clean loans and loans with security of not more
than 10% are to be categorised as unsecured exposure.

DOUBTFUL ASSETS (DA): Doubtful Assets are those assets which remained in NPA status
for a period of 12 months or more. Doubtful assets are further classified as DB1, DB2,
DB3 based on the period during which the account remained as doubtful.
FURTHER, DOUBTFUL ASSET S IS FURTHER BIFURCATED IN TO SECURED PORTION AND
UNSECURED PORTION FOR PROVISIONING PURPOSE.
PROVISION AGAINST SUB STANDARD, DOUBTFUL AND LOSS ASSETS
Category of advance % of

provision

1 SUB STANDARD ASSETS 15%

a) Secured Exposure 25%

b) Unsecured exposure

Unsecured Exposure: means where the realizable value of security is not

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more than 10 percent for the purpose of determining the rate of provision.

2 Doubtful Asset % of
provisioning
a) On Secured liability (portion)

Doubtful assets up to 1 year (DB1) 25%

Doubtful assets-1 year to 3 years (DB2) 40%

Doubtful assets- more than 3 years (DB3) 100%

b) On clean/unsecured liability covered by DICGC claim received or Nil

ECGC/CGMSE claim received/Lodged/cover available)

c) On clean / unsecured liability not covered by DICGC claim received or 100%

ECGC/CGMSE claim received/Lodged/ cover available)

3 Loss Assets ( on the balance outstanding minus DICGC claim received or 100%
ECGC/CGMSE claim received/lodged/cover available)

9. CDR mechanism and importance

CORPORATE DEBT RESTRUCTURING (CDR):

Objectives: is to ensure timely and transparent mechanism for restructuring corporate debts of
viable entities facing problems, outside the purview of BIFR, DRT and other legal proceedings,
for the benefit of all concerned. It is a voluntary organization.

IN PARTICULAR, THE FRAMEWORK WILL AIM AT PRESERVING VIABLE CORPORATES THAT ARE AFFECTED BY CERTAIN
INTERNAL AND EXTERNAL FACTORS AND MINIMIZE THE LOSSES TO THE CREDITORS AND OTHER STAKEHOLDERS
THROUGH AN ORDERLY AND COORDINATED RESTRUCTURING PROGRAMME.

There are three tires in CDR mechanism:

(A). CDR Standing Forum & Core Group (B) CDR Empowered Group & (C) CDR Cell

(A). CDR Standing Forum & Core Group

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CDR Standing Forum:

The CDR Standing Forum, the top tier of the CDR Mechanism in India,
It is a self-empowered body, which will lay down policies and guidelines,

It provides an official platform for both creditors and borrowers (by consultation),

The Forum meets at least once every six months.

Core Group

The CDR Core Group is carved out of the CDR Standing Forum to assist the Forum in
convening the meetings and taking decisions relating to policy, on behalf of the Forum.

The Core Group consists of Chief Executives of IDBI, SBI, ICICI Bank, BOB, BOI, PNB,
Indian Banks Association (IBA) and Deputy Chairman of IBA representing foreign banks
in India.

The Core Group lays down the policies and guidelines to be followed by the CDR
Empowered Group and CDR Cell for debt restructuring.

(B) CDR Empowered Group

It is the second tier of the structure of CDR Mechanism in India,

Members,

The EG is mandated to look into each case of debt restructuring, examine the viability
and rehabilitation potential of the company and approve the restructuring package
within a specified time frame of 90 days, or at best within 180 days of reference to the
EG.

(C) CDR Cell

The CDR Cell, the third tier of the CDR Mechanism in India, is mandated to assist the
CDR Standing Forum and the CDR Empowered Group (EG) in all their functions.

It makes initial scrutiny of the proposals received from the lenders/borrowers.

Eligibility Criteria:

Only for Multiple banking/consortium/Loan syndication accounts of corporate

borrowers,
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The category-1 only to standard&sub-standardaccounts,

While corporate indulging in frauds and malfeasance even in a single bank are ineligible,

Accounts where recovery suits are filed by the creditors against the company(75% by
value & 60% by number),

BIFR cases are not eligible. (only when net worth is eroded)

10. Identification of willful defaulters

Willful default would be deemed to have occurred if any of the following events is noted:

a) The Unit has defaulted in meeting its payment/repayment obligations to the lender
even when it has the capacity to honor the said obligations.

b) The Unit has defaulted in meeting its payment/repayment obligations to the lender
and has not utilized the finance from the lender for the specific purposes for which
finance was availed of but has diverted the funds for other purposes.

c) The Unit has defaulted in meeting its payments / repayment obligations to the lender
and has siphoned off the funds so that the funds have not been utilized for the specific
purpose for which finance was availed of, nor are the funds available with the unit in the
form of other assets.

D) The Unit has been defaulted in meeting its payment/repayment obligations to the
lender and has also disposed off or removed the movable assets or immovable property
given by him or it for the purpose of securing the facility lies without the knowledge of
the Bank/lender.

11. Penal measures taken RBI for willful defaulters

In order to prevent the access to the capital markets and additional loan facility from any bank
by the willful defaulters, a copy of the list of willful defaulters (non-suit filed accounts) and list
of willful defaulters (suit filed accounts) are forwarded to SEBI by RBI and Credit Information
Bureau (India) Ltd. (CIBIL) respectively.

Banks should not sanction any additional finance to the listed Willful defaulters.
Such institutions should be debarred from institutional finance from the Scheduled
Commercial Banks, Developmental Financial Institutions, and Investment Institutions
etc. for floating new ventures for a period of 5 years from the date the name of the
Willful Defaulter is published in the list of Willful Defaulters by RBI.
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The legal process wherever warranted against the borrowers / guarantors and
foreclosure of recovery of dues should be initiated expeditiously. The Bank may also
initiate criminal proceedings against Willful Defaulters, wherever necessary, with
permission of the Competent Authority.
A covenant in the loan agreements or an undertaking be obtained, with the companies
in which the bank has significant stake, should be incorporated by the Bank to the effect
that the borrowing Company should not induct a person who is a promoter or director
on the Board of a Company which has been identified as a willful defaulter as per
the definition given herein above and that in case, such a person is found to be on the
Board of the borrower Company, it would take expeditious and effective steps for
removal of the person from its Board.
In case where guarantees furnished by the Companies within the Group on behalf of the
willfully defaulting Units are not honored when invoked by the Banks, such Group
companies should also be reckoned as willful defaulters.
Banks have to submit from the Corporate office, the particulars of borrowers including
the PAN No., fathers/husbands name etc. in respect of :
A) the list of suit filed accounts of willful defaulters of Rs.25.00 lacs and above as at the
end of each quarter March, June, September and December every year to CIBIL and any
other Credit Information Company which has obtained / would obtain certificate of
Registration from RBI in terms of Sect.5 of the Credit Information Companies
(Regulation) Act, 2005 and of which it is a member.
B) Submit the quarterly list of Willful Defaulters where suits have not been filed only to
RBI as per the prescribed format.
Latest decision:
Adopting a name and shame policy to make borrowers pay their dues, banks have
decided to publish the photographs and details like names and address of willful loan
defaulters in news papers. Besides, banks would also publish photographs, names and
address of guarantors of such defaulters in news papers if the dues are not cleared
within 15 days of the notice containing particulars of the original borrowers. Some
banks have also decided to display the details of the willful loan defaulters in a
prominent place at branches in the locality of such borrowers.

12. Sick units as per SICA 1985

The criteria to determine sickness in an industrial company are

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(i) The accumulated losses of the company to be equal to or more than its net worth i.e.
its paid up capital plus its free reserves

(ii) The company should have completed five years after incorporation under the
Companies Act, 1956

(iii) It should have 50 or more workers on any day of the 12 months preceding the end
of the financial year with reference to which sickness is claimed

(iv) It should have a factory license. Reference has to be made by the Sick Co. under
Sect.15 of SICA.

13. What is rescheduling?

As per Domestic Recovery Policy of BOB, it is changing the Pattern of Debt service
obligation from equated monthly installment to ballooning schedule or descending
schedule without considering any enhancement in repayment period and quantum of
outstanding.

UNDER RESHEDULING

Existing repayment period will be retained

Outstanding exposure will not be exceeded

Nature and quantum of existing credit facilities will not be changed

No fresh credit facility or additional limit will be sanctioned within the existing
outstanding exposure

14. Stages in rehabilitation of sick units

Viability study or assessing the long term viability of the project.

Working out a rehabilitation package.
Getting the approval of the package.
Implementing the rehabilitation package.
Close monitoring of implementation of the package.
15. Compromise settlement (when not to entertain)

When there are adequate realizable securities covering dues and properly charged to
the Bank.
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When the accounts are covered by the guarantee cover of ECGC/CGFTMSE and
adequate securities are available to cover the Banks dues and/or present net worth of
the borrower/s and guarantor/s is adequate.
Getting vacant possession is difficult or not possible.
Security is a subject matter of litigation
Land in question may be under land acquisition proceedings of the Govt. Authorities.
Documents are not defective
For a lesser value than realizable do not agree for compromise

16. Calculation of NPV

NPV = p/ (1 + 12%) ^N

P is the present market value

N is the no of years taken to realize the present value

17. Calculation of notional dues

1. Book balance
2. Interest reversed unrealized /undebited interest from date of NPA to compromise date
3. Add 1 and 2
18. SARFAESI Act

Sect.13 of the Act, deals with the enforcement of various classes of security interest.
However, following classes of encumbrances are exempted from the summary
procedure prescribed in the Act:
A) A lien on any goods or security given under the Indian Contract Act of 1872 or any
other Law for the time being in force.
B) A pledge of any movables within the meaning of Sect.172 of the Indian Contract Act
of 1872.
C) Creation of any security in any aircraft as defined in clause (1) of Sect.2 of the
Aircraft Act.
D) Creation of any security in any vessel as defined in clause 55 of Sect.3 of the
Merchant Shipping Act.
E) Any conditional sale, hire purchase or lease or any other contract in which security
interest is created
F) Any rights of unpaid seller under Sect.47 of Sale of Goods Act, 1930.
G) Any properties not liable for attachment or sale under the first proviso to Sect.60 (1)
of the Civil Procedure Code, 1908.
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H) Any security interest for securing repayment of any financial asset not exceeding
Rs.1 lakh,
I) any case in which the amount due is not less than 20% of the principal amount and
the interest thereon.
Notices given under this act

Demand notice-60 days

Possession notice
Notice of sale to debtor-30 days
Sale by private treaty
Auction notice
Auction

Notice of sale to the borrower that the property will be auctioned and if he finds a
purchaser he can bring them (30 days 3notice).
Valuation by approved valuer
Notice pasted on the Property & photographed
Inviting bidders quoting minimum bid
Reserve Price & 10% of this as EMD
Giving details of DN, PN and repeating the contents
30 days period Place, date & time fixed for auction
Interse bidding allowed
Accepting the highest bidder
25% of bid amount will have to be paid immediately and reasonable period say 15 days
given for settlement
Valuation & Sale will be carried out as per law in fair & transparent manner
Excess amount of proceeds after meeting Dues/Expenses to be remitted to the
borrower
Opportunity to be given to the borrower to take back the Security by remitting all dues
any time after repossession BUT before the sale of the property
Borrower can go to D.R.T only for any grievance to stall the proceedings. But he has
deposit 50% of the amount claimed by the creditor ( 50% after the judgment in Maradia
Chemicals Vs Union of India-Amendment 2004)
19. Steps involved in filing a suit

Br. should appropriate the credit balance in any current account / SB and FRDs in the
name of the borrower/s or guarantor/s prior to filing suit.
Reasonable notice to be given to the borrower before filing suit.
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In the case of pledged goods and also for hypothecated goods, explore to take
possession of the assets and sell them after giving due notice.
In the case of LIC policies assigned to a Bank, surrender the polices and appropriate the
surrender value so received towards the loan dues.
The proceeds of securities such as NSC, Mutual Fund, shares, debentures etc. should be
appropriated against the loan account.
Ensure that documents/securities are enforceable against the borrowers / guarantors.
Ensure that draft plaint is prepared by the advocate within a reasonable time.
All details with facts and figures stated in the draft plaint /OA suit be verified and should
be sent to the Competent Authority for approval along with the list of documents.
A case involving Rs.10.00 lac and above shall be filed in DRT and below Rs.10 lac is to
filed in civil court.
20. Filing an appeal in DRT

a) Filing of the application with the Registrar of DRT. When Bank files an application in
DRT, Bank is called as Applicant and the borrowers and guarantors are called as
Defendants.

b) Admission of the application after scrutiny and allotment of number by the Registrar.

c) Issue of summons by the Presiding Officer. In case summons

cannot be served in the usual manner, it could be served by

paper publication. Prompt servicing of summons is very

important for quick disposal of the case.

Once the summons is served, the case is listed for hearing by the Presiding Officer. As per
the recent amendment, defendant has to file written statement of his defense within 30
days from the date of service of summons. However, the Presiding Officer may in
exceptional circumstances to be recorded in writing, allow not more than two extensions to
the defendant to file the written statement.

Branches should obtain interim orders for restraining the mortgages from transferring,
alienating or disposal of mortgaged assets in any manner, attachment of uncharged
assets including debtors of the borrower and guarantors and appointment of receiver
where there is income from the charged assets or otherwise to the borrower and
guarantor. Within 30 days of receipt of summons, the defendant has to file written
statement on the points raised by the Bank.
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At the subsequent hearings, the arguments of the parties will be heard, witnesses will
be examined.
The Presiding Officer will pass the final orders asking the defendants to pay the amount
that is proved to be owing by them within the period permitted. If the amount is not
paid, Presiding Officer will issue the Recovery Certificate (RC). The Recovery Officer of
the DRT will issue a Demand Notice asking the defendants to pay the dues to the Bank.
Branch should ascertain details of assets by making enquiries from all the sources.
Branch should supply details of securities charged and others for execution of RC to the
Recovery Officer.
Under Section 28 (4A) of the DRT Act, the Recovery Officer can order any judgment
debtor to declare on affidavit his assets. Branch must move an application for such an
order to get full details of assets.
If the defendants do not pay the amount due within 15 days from the date of receipt of
RC, the Recovery Officer will attach the properties of the defendants and appoint a
Receiver to manage the properties and auction them. Recovery Officer can auction the
properties even without appointing a receiver.
Recovery Officer is having the powers to order for the arrest of the defendants in case
they refuse to pay the dues despite having the means to pay or obstruct the recovery
proceedings. Branch may file application before the Recovery Officer in such cases.
The defendants cannot approach a civil court if they have any grievance against the
orders passed by the Presiding Officer of the DRT. Any appeal is to be filed before DRAT.
Appeal has to be filed within 45 days of the order passed by DRT. Before filing an appeal,
the defendant has to deposit at DRAT, 75% of the amount ordered to be paid. The
DRAT is headed by a Chairperson appointed by the Central Govt.
Fee payable at DRT:

Rs.12000/- up to Rs.10/- lakhs and at Rs.1000/- per lakh thereafter subject to a

maximum of Rs.1.50 lakhs.

21. Lok adalats:Lok Adalat is a process of administering justice without resorting to courts
and is established under Legal Services Authority Act 1987. Under the provisions of the
Act, States have constituted Legal Services Authorities at High Court, District and at
Taluka level. Under the Authorities of such Committees respective Courts are organizing
Lok Adalats within the area of jurisdiction. They are presided over by the judges of
courts as additional responsibility

Advantages of recovery through Lok Adalats:

1) No court fee is to be paid when fresh disputes are referred.

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Term-III, BMSB

2) Lok Adalat can take cognizance of any existing suit in the court as well as look into and
adjudicate upon fresh disputes.

3) If no settlement is arrived at, the parties can continue with court proceedings.

4) Every award of Lok Adalat shall be deemed to be a decree passed by Civil Court and is
binding on the parties and execution proceeding can be filed accordingly.

5) No appeal lies against the decree passed by Lok Adalats as the matters are settled
through negotiation and mutual consent of the parties.

6) In case where matter is compromised or settled in Lok Adalat, then the Court fee will be
refunded in the manner provided under the court Fee Act/ Legislation.

1. The State/District/Taluka Level Services committees/ authorities constituted under the

Act ( Honble sitting Sr. Judge of court) have to be contacted for doing the ground work for
organising Lok Adalats.

2. Cases of amount up to Rs.20.00 lacs can be referred to Lok Adalats.

3. DRTs also are conducting Lok Adalats.

4. It is advise to approach cluster wise while referring to Lok Adalats so that maximum
branches can take the benefits of Lok Adalat.

5. Lok Adalats can entertain only cases referred to them by civil and criminal courts or
Legal Services Authority. No other person can directly approach a Lok Adalat. Parties to the
dispute have to first file a case in a civil court.

6. After hearing both the sides, if the court decides that it is a fit case for compromise, the
court may refer to the Lok Adalat for settlement.

7. On getting approval from concerned Judicial Authirities for organising Lok Adalats,
summons are sent through court representative and as far as possible the borrowers are
approached personally. Branch officials have to ensure that borrowers and guarantors
attend the Lok Adalat proceedings.

8. Only those officials, who have been delegated with the powers of compromise sacrifice
an other requisite authority, attend the Lok Adalat so that instant and clear cut decisions
can be taken as to the extent of which Bank is willing to compromise.
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9 When the compromise is entered, it should ensued that in the consent terms default
clause is incorporated against the borrower and the guarantor stating that in the event of
default either in full or part or no adherence to the terms of the award, entire contractual
amount as claimed

22. Guiding factor for Compromise settlement?

a) Total Contractual dues

b) Margin Money and receivables held separately

c) Security Detail

d) Realizable Value of Security

22. What are the causes responsible for advance slip in to NPA?

Some of the reasons for any unit becoming sick and turning in to NPA are:

1. Mismanagement including lack of proper organizational set up, dissention among the
key managerial personnel, poor industrial relations, lack of coordination and control,
and dishonesty.

2. Lack of proper marketing including inability to deal with competition, inadequate

product base, recession in industry, dependence on few buyers, lack of proper
distribution channel, irregular deliveries leading to customer dissatisfaction ,and
accepting a large order involving long delivery schedule at a fixed price.

3. Deficient business model, making the Company unviable ab-initio.

4. Poor project implementation.

5. Faulty capital structure or too much of debt casting high interest burden on the
company.

6. Too fast expansion beyond the capacity of management to manage.

7. Undertaking diverse business in the name of diversion of income stream causing strain
on the management.

8. Improper financial planning which includes faulty costing and pricing ,diversion of
working capital for acquiring fixed assets, lack of follow up for recovery of receivables,
unplanned capital expenditure, and reporting to costly outside borrowings.
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9. Production problems including poor quality, low labour productivity, frequent break
downs of machinery, lack of production planning and control, faulty inventory planning
,and imbalance in plant and equipment.

10. External causes such as change in government policy, natural calamities, change in
fashion or consumer taste, and shortage of power and other essential inputs.

11. Technological changes which renders the technology used by the company obsolete.

12. It is expected that by revival, idle investments in sick units will become productive and
by closure, the locked up investments in unviable units would get released for
productive use elsewhere.

23. Causes for units becoming sick

Ans:

Mismanagement including lack of proper organizational set up, dissention among the
key managerial personnel, poor industrial relations, lack of coordination and control,
and dishonesty.
Lack of proper marketing including inability to deal with competition, inadequate
product base, recession in industry, dependence on few buyers, lack of proper
distribution channel, irregular deliveries leading to customer dissatisfaction, and
accepting a large order involving long delivery schedule at a fixed price.
Deficient business model, making the Company unviable ab-initio.
Poor project implementation.
Faulty capital structure or too much of debt casting high interest burden on the
company.
Too fast expansion beyond the capacity of management to manage.
Undertaking diverse business in the name of diversion of income stream causing strain
on the management.
Improper financial planning which includes faulty costing and pricing ,diversion of
working capital for acquiring fixed assets, lack of follow up for recovery of receivables,
unplanned capital expenditure, and reporting to costly outside borrowings.
Production problems including poor quality, low labour productivity, frequent break
downs of machinery, lack of production planning and control, faulty inventory planning
,and imbalance in plant and equipment.
External causes such as change in government policy, natural calamities, change in
fashion or consumer taste, and shortage of power and other essential inputs.
Technological changes which renders the technology used by the company obsolete.
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It is expected that by revival, idle investments in sick units will become productive and
by closure, the locked up investments in unviable units would get released for
productive use elsewhere.
24. Rephasement?

Rephasement is rescheduling with enhancing the repayment period only. In genuine cases of
retail loans granted to individuals, the rephasement can be considered by Regional Authority
after satisfying the genuineness of rephasement provision, but repayment period shall not
exceed 60 years in the case of borrower in the case of salaried class and 65 years of age in
respect of others.

25. Restructuring?

In Restructuring following may be considered:

A) Changing existing repayment period

B) Changing existing outstanding exposure

C)Changing nature and quantum of existing credit facilities

D) Sanctioning any fresh credit facility or additional limit whether within the existing
outstanding exposure or beyond

26. Grievance redressal committee of BOB

Grievances Redressal Mechanism in Bank of Baroda :

In accordance with RBI guidelines, BOB has put the following measures in place:
a) Branches/ROs while identifying and recommending cases of Willful Defaulters,
should well document the reasons satisfying the norms and supported by requisite
evidence. The issue should normally be spelt out with reasons for which the borrower is
being considered as willful Defaulter vis--vis RBI guidelines.
b) With a view to imparting more objectivity in identifying cases of Willful Default,
decisions to classify the borrower as Willful Defaulter, a Committee has been formed
under the Chairmanship of Executive Director at BCC (Baroda Corporate Centre ).
Dy. Gen. Manager (Recovery)- Convener of the Meeting.
Minimum Quorum: Executive Director plus two General Managers.
Once the name/s as willful Defaulters has been approved, the borrower should
thereafter be suitably advised about the proposal to classify him as Willful Defaulter
along with the reasons therefor. The concerned borrower should be provided
reasonable time ( say 15 days) for making representation against such decision, if he so
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desires, to a Grievance Redressal Committee headed by the Chairman & Managing

Director.
CMD will be the Chairman of the Grievance Redressal Committee and minimum two
senior officials (as members) consisting of:
-General Manager ( Recovery )
-Any other executive not below the rank of Dy. Gen. Manager of the Bank.
The Grievance Redressal Committee shall give a hearing to the borrower if he
represents that he has been wrongly classified as willful defaulter.
A final declaration as willful Defaulter will be made after a view is taken by the
Committee on the representation and such name/s are to be notified to RBI (Non suit
filed)/ CIBIL (Suit filed) by BCC and the borrower should be suitably advised.
Depending upon the facts of the case even criminal action can be initiated under Sect.
403 and 415 of the Indian Penal Code. But Competent Authority has to take a decision in
this regard.
26. LADs

Ans: letter of acknowledgment of debt

Forms used: LDOC 59, LDOC 59 A

27. ASCROM , CAD, CADU, PCR, floating provision

Ans: ASCROM asset classification and credit monitoring

CAD- critical amount default- as account slips to NPA, entire default amount along with
penalty is to be recovered to make it a standard asset. This amount is CAD

CADU- critical amount due the recovery of this amount postpones the account slipping
into NPA for another 30 days

FLOATING PROVISION: Floating provision is not against any particular account but on the
entire advances portfolio as decided by the Board. Floating provision can be used only for
contingencies under extraordinary circumstances (as clarified by the Board) for making
specific provisions in impaired accounts after obtaining boards approval and prior
permission of RBI. It is clarified by RBI that extraordinary circumstances are-circumstances
where losses which do not arise in the normal course of business and are exceptional and
non-recurring in nature.

PROVISION COVERAGE RATIO (PCR):

 Recovery Important questions and anserws

Term-III, BMSB

As per RBI norms, the PCR should be to a minimum of 70% of Gross NPA including
Floating provision. the PCR of 70 percent may be with reference to the gross NPA
position in banks as on September 30, 2010. It may happen that the provisioning (gross)
exceeds the usual NPA provisioning requirements. The excess amount is called Counter
cyclical Provisioning Buffer which can be used by banks for making specific provisions
against NPAs during periods of system wide downturn, with prior approval of RBI.