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CHAPTER 12
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NON PERFORMING ASSETS

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 TABLE OF CONTENTS
Sl. No Particulars Page No

1 IRAC Norms 3

2 Securitization & Reconstruction of Financial Assets and 11

Enforcement of Security interest Act 2002 (SARFAESI Act)
3 Policy on Wilful Defaulters 23

4 Policy on Compromise / Negotiated settlement/ Write off 29

/Waiver of legal Action/ Appeal etc- (General)

5 Scheme for Resolution of Stressed MSME Assets 39

(SASHAKT)

6 Non Discriminatory DISCRIMINATYORY AND NON- 44

DISCRETIONARY SPECIAL OTS SCHEME 2019

2
7 Guidelines on Seizure of Vehicles 50

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8 Policy of Sale/Transfer of Financial Assets to 53
RCs/SCs/FIs/NBFCs
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9 Ways and Strategies to Management of NPA 63
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10 Policy on Engagement of Recovery Agency 70

11 Policy on Engagement of Supporting Agency 72

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12 Policy on Engagement of Detective Agency 74

13 Policy on Engagement of Resolutions Agents 76

14 Resolution of NPA through Lok Adalat 81

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15 Guidelines on Recovery Cases before DRT/Civil Suit 83

16 Resoultion of Stress Assets under IBC/NCLT & Insolvency 87
17

and Bankruptcy Code 2016

17 Miscellaneous 93
 Time Bound Action of Recovery
 Forensic Audit
 Mission Gandhigiri
 SOP & Look out Notice
 Sale of Shares

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 1.INCOME RECOGNITION, ASSET CLASSIFICATION,
PROVISIONING & RELATED ASPECTS (IRAC NORMS)
(SASTRA Division Circular nos. 3/2018, 8/2018, 29/2018,56/2019, 58/2019 and
08/2020)
Reserve Bank of India has prescribed prudential norms for income recognition, asset
classification and provisioning for the advances portfolio of the banks so as to ensure
consistency and transparency in the published accounts.
The policy of income recognition is based on record of recovery and objectivity rather
than on any subjective considerations. Similarly the classification of assets has to be
done on the basis of objective criteria which would ensure a uniform and consistent
application of the norms. Likewise, the provisioning needs to be made on the basis
of the classification of assets based on the period for which the asset has remained
non-performing and the availability of security and the realizable value thereof.
A. GUIDELINES FOR CATEGORIZING A BORROWAL ACCOUNT AS NPA:

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 An asset, including a leased asset, becomes Non-Performing when it ceases
to generate income for the bank. The basis for treating various credit facilities
as Non Performing is given below:
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A.1 Term Loan-
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 Term loan account will be treated as NPA if interest and/or installment of

principal remain overdue for a period of more than 90 days.
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A.2 Cash Credits and Overdrafts-

A.2.1 A cash credit or overdraft account will be treated as NPA if the account
remains „out of order‟.
A Cash Credit and Overdraft account is treated as ‗out of order‘ if:
(i) The outstanding balance remains continuously in excess of the sanctioned
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limit/drawing power for 90 days.

(ii) Even though the outstanding balance is less than the sanctioned
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limit/drawing power, there are no credits continuously for 90 days as on

the date of balance sheet or credits are not enough to cover the interest
debited during the same period.

A.2.2The outstanding in the account based on drawing power calculated from stock
statements older than three months, would be deemed as irregular.A working capital
borrowal account will become NPA if such irregular drawings are permitted in the
account for a continuous period of 90 days even though the unit may be working.

A.2.3 An account where the regular/ adhoc credit limits have not been reviewed /
renewed within 180 days from the due date/date of adhoc sanction will be treated
as NPA.

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A.3 Bills Purchased and Discounted-
The bills purchased/discounted account should be treated as NPA if the bill remains
overdue for a period of more than 90 days.

A.4 Agricultural Advances-

Sno. Crop Period Due Date of NPA Reckon Date

Repayment
1 Short Term Crop 12 Months ―Crop Season Period for IRAC‖
as 24 months (Two crop season).
In this ideal situation, KCC
account will become NPA at the
end of 36 months if not renewed
2 Long Term Crop 18 Months ―Crop Season Period for IRAC‖ as
18 months (One crop season) In
this ideal situation, KCC account

2
will become NPA at the end of 36

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months if not renewed.
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A.5 Securitization Transactions:
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In respect of securitization transaction if the amount of liquidity facility remains
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outstanding for more than 90 days.

A.6 Derivative Transactions:

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In respect of derivative transactions, the overdue receivables representing positive

mark-to-market value of a derivative contract, if these remain unpaid for a period of
90 days from the specified due date for payment.
A.7 Credit Card Accounts: (CREDIT CARD DIVISION CIRCULAR NO. 07/2019)
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A credit card account is treated as non-performing asset if the minimum amount due,
as mentioned in the statement, is not paid fully within 90 days from the Payment due
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date as mentioned in the statement.

A.8 In case of default in payment of interest only, Branches should classify an
account as NPA only if the interest charged during any quarter is not serviced fully
within 90 days from the end of the quarter.
A.9 OTHER IMPORTANT GUIDELINES:
A.9.1 Determination of NPAs: Borrower wise, not Facility wise-

It is reiterated that the accounts/Investments are to be classified and clubbed

Borrower wise only – i.e. all the facilities granted to a borrower/Investment made
have to be classified as NPA/NPI if one of them becomes NPA.
A.9.2. Advances against FDR/NSCs/KVP/IVP/LIP-
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Advances against Term Deposits, NSCs eligible for surrender, Indira Vikas Patras,
Kisan Vikas Patras and Life Insurance Policies, need not be treated as NPAs
provided adequate margin is available in the accounts.

A.9.3. Advances to Staff members, under Staff Welfare Scheme-

In respect of Housing/Car loans or similar advances granted to staff members where
interest is payable after recovery of principal, interest need not be considered as
`overdue' from the first quarter onwards. Such loans/advances should be classified
as NPA only when there is default in repayment of installment of principal or
payment of interest on due date of payment.
A.9.8 Consortium Advances-
In respect of consortium advances, each bank may classify the borrowal accounts
according to its own record of recovery and other aspects having a bearing on the
recoverability of the advances.
A.9.9 Advances guaranteed by Central Government-

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The credit facility backed by the Central Government Guarantee though overdue
may be treated as NPA only when the Government repudiates its guarantee
when invoked.
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A.9.10 Advances guaranteed by State Government-
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A state Government guaranteed advance, where interest and/or installment of

principal/or any other amount due to the bank remains overdue for a period more
than 90 days shall become a non performing advance.
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B. RECOGNITION OF INCOME & APPROPRIATION OF RECOVERY IN NPAS

B.1. Income Recognition Policy- As per guidelines income from non-performing
assets is not recognized on accrual basis but is booked as income only when it is
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actually realized. Therefore, the branches should not charge and take to income
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account interest on any NPA.

B.1.1 The guidelines also require that branches should not take to income any
fees/ commission and any similar income on non-performing assets until it is
actually realized. Similarly, charges/expenses/insurance etc. on such a Borrowal
account should not be debited to the Borrower‟s account unless recovered, the
same need to be recorded in the Memoranda Account after charging to Bank‟s
Revenue.

B.1.2However interest on advances against term deposits, NSCs, IVPs, KVPs

and Life Policies should be taken to income account on the due date, provided
adequate margin is available in the accounts.
B.2. Ascertainment of interest not realized (DI)/Reversal of Interest:

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 B.2.1When a credit facility is classified for the first time as NPA the entire interest
accrued & credited to the income account in the past periods, which has not been
realized should be ascertained and same should be reversed and should be
credited back in the respective account itself at the close of the year/half-
year/Quarter at the branch level by debiting Profit & Loss Account with following
particulars:
“Unrecovered Interest reversed and recorded in Memoranda A/c”
And stop further application of Interest. This will apply to Govt. guaranteed
accounts also.
B.2.2 For operational convenience and future records, it is necessary that
Branches should first charge interest (including Penal Interest, if any) up to the
date of classification of account as NPA and then simultaneously ascertain the
quantum of interest not realized (DI) which is required to be reversed as above.
This amount will be recorded separately in Memorandum Account.
B.3 Ascertainment of interest realized/Appropriation of Partial Recoveries:

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B.3.1 Appropriation of Recoveries
In the absence of a clear agreement between the bank and the borrower for
appropriation of recoveries in NPAs, the appropriation of Recoveries in NPA
accounts (irrespective of the mode / status / stage of recovery actions) shall be
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regulated in the following order of priority:
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(i) Expenditure/Out of Pocket Expenses incurred for Recovery (earlier

recorded in Memorandum Dues);
(ii) Principal irregularities i.e. NPA outstanding in the account gets updated /
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adjusted, whichever is earlier;

(iii) Thereafter towards the interest irregularities/accrued interest.

B.3.2 Treatment in Cash Credit- NPA accounts with tagging facility:

Debits in Cash Credit - NPA account with tagging facility can be allowed
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dependent upon extent of tagging permitted by appropriate authority. The

proceeds received through tagging arrangement would also be utilized in the
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following order:

(i) Expenditure/Out of pocket Expenses incurred for recovery.

(ii) Principal outstanding balance in Working Capital Facility till it is brought
within the DP/Limit (Whichever is lower)
(iii) Instalments in arrear in Term Loan Account.
(iv) Recognition of Recorded Interest.

B.3.3 Assets purchased from other banks

Any recovery in respect of a non performing asset purchased from other banks
should first be adjusted against its acquisition cost. Recoveries in excess of the
acquisition cost can be recognised as profit.

C.GUIDELINES ON ASSET CLASSIFICATION

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All Borrowal accounts (including Borrowal Fraud accounts) need to be classified into
four categories taking into account the degree of well defined credit weaknesses,
period for which the asset has remained non performing, realisability of the dues and
extent of dependence on collateral security for realisation of the dues as given
under:
C.1. Standard Assets
C.1.1Standard asset is one which does not disclose any problem and which does not
carry more than normal risk attached to the business. Such an asset is not an
NPA.

C.1.2However, Central Govt. Guaranteed advances, although categorized as NPA

for the purpose of Income Recognition, are to be treated as Standard Assets (Govt
Guaranteed) unless Govt repudiates its guarantee when invoked.

C.1.3 State Govt. guaranteed advances are to be classified as sub standard or

doubtful or loss, after interest / principal / any other amount due to the bank remains

2
overdue for more than 90 days.

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C.1.4 Further, advances against term deposits, NSCs eligible for surrender, Indira
VikasPatra, KisanVikasPatras and Life Insurance Policies, are to be classified as
Standard assets provided adequate margin is available.
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C.2. Sub-standard Assets

A sub-standard asset is one, which has remained NPA for a period less than or
equal to 12 months; such an asset will have well defined credit weaknesses that
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jeopardize liquidation of the debt and are characterized by the distinct possibility that
the bank will sustain some loss, if deficiencies are not corrected.

C.3. Doubtful Assets

An asset is classified as doubtful if it remained in the sub-standard category
for 12 months.
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A loan classified as doubtful has all the weaknesses inherent in assets that were
classified as sub-standard with the added characteristic that theweaknesses make
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collection or liquidation in full, on the basis of currently known facts, conditions and
values, highly questionable and improbable.

C.4. Loss Assets

A loss asset is one where loss has been identified by the bank or internal or external
auditors or the RBI Inspectors but the amount has not been written off wholly. In
other words, such an asset is considered uncollectible and of such little value that its
continuance as a bankable asset is not warranted although there may be some
salvage or recovery value.

D.GUIDELINES ON PROVISIONING
The Primary responsibility for making adequate provisions for any diminution in the
value of loan assets is that of the Branch Manager (and Concurrent Auditor,
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wherever posted). Therefore it shall be the responsibility of the Branch Manager to
ensure that proper data is fed into CBS records particularly with reference to Date of
NPA, Value of Security, and Special categories of the Assets etc. to enable the
system to correctly classify the NPA accounts and calculate the provisions. The
detailed instructions relating to provision requirements of different categories of
assets are given hereunder:

D.1. Standard Assets

S.No Category of standard asset Rate of
Provisioning

1 Direct Advances to agricultural and Small & Micro 0.25%

Sectors (**)

2 Advances to Commercial Real Estate (CRE) sector 1.00%

2
Advances to Commercial Real Estate – Residential 0.75%

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3
Housing Sector (CRE - RH)
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4 Housing loan granted at „Teaser Rates 2.00%
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5 All other loans and advances not included in „a‟ „b‟ & 0.40%
„c‟ above
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D.2. Sub-standard
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A general provision of 15 percent on total outstanding should be made without

making any allowance for ECGC guarantee cover and securities available.
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The „unsecured exposures‟ which are identified as „substandard‟ would attract

additional provision of 10 per cent, i.e., a total of 25 percent on the outstanding
balance.
D.3. Doubtful Assets
The provisioning requirement for unsecured „doubtful‟ assets is 100%.
In regard to the secured portion, provision may be made on the following basis:
Period for which the advance has Provision requirement (%)
remained in ‗doubtful‘ category

Up to one year DB-1 25%

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 One to three years DB-2 40%

More than three years DB-3 100%

D.4. Loss Assets

If loss assets are permitted to remain in the books for any reason, 100% of the
outstanding should be provided for.
D.5. Wilful Defaulters and Non-Cooperative Borrowers
Asset Period as NPA Provisioning(%)
Classification

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Sub-standard Upto 6 months 15

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(secured)
6 months to 1 year 25
Sub-standard Upto 6 months 25
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(unsecured ab- initio)
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6 months to 1 year 40
Doubtful I 2nd year 40(secured portion)
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100(unsecured portion)
Doubtful II 3rd & 4th year 100 for both secured
and unsecured

Doubtful III 5thyear onwards 100

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D.6. Provisioning requirements for credit card

Provisioning requirements for credit card receivables will be as per RBI guidelines
which are presently as follows
Sno. Nature of asset Rate of Provisioning
1 Standard asset Applicable rate (0.40% at present)
2 Sub-standard asset 25%
3 Loss asset 100%

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E. PRUDENTIAL NORMS FOR PROJECTS UNDER IMPLEMENTATION

Asset classification norms in case of Deferment of Date of Commencement of

Commercial Operations (DCCO) before commencement of commercial
operations
i. Revisions of the date of DCCO and consequential shift in repayment schedule for
equal or shorter duration (including the start date and end date of revised repayment
schedule) will not be treated as restructuring provided that:
a. The revised DCCO falls within the period of one year from the original DCCO
stipulated at the time of financial closure for CRE projects; and
b. All other terms and conditions of the loan remain unchanged.
ii In case of CRE projects delayed for reasons beyond the control of promoter(s),
banks may restructure them by way of revision of DCCO up to another one year
(beyond the one-year period quoted at paragraph i (a) above) and retain the

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„standard‟ asset classification if the account continues to be serviced as per the

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revised terms and conditions under the restructuring.
iii. Banks while restructuring such CRE project loans under instructions at (ii) above
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will have to ensure that the revised repayment schedule is extended only by a period
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equal to or shorter than the extension in DCCO.

iv. Banks may fund cost overruns that arise on account of extension of DCCO (within
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the limits at (i) and (ii) above), subject to the instructions issued vide circular
DBOD.No.BP.BC.33/21.04.048/2014-15 dated August 14, 2014 and the mailbox
clarification dated April 20, 2016.
v. It is re-iterated that a loan for a project may be classified as NPA during any time
before commencement of commercial operations as per record of recovery (90 days
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overdue). It is further re-iterated that the dispensation at (ii) above is subject to the
condition that the application for restructuring should be received before the expiry of
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period mentioned at paragraph (i) (a) above and when the account is still standard
as per record of recovery.
vi. At the time of extending DCCO, Boards of banks should satisfy themselves about
the viability of the project and the restructuring plan

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 2. Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (SARFAESI Act) .
(Sastra Div Cir no 31/2017 dated 30.06.2017

It is a well-established fact that SARFAESI Act can be used as an efficient tool for
expeditious resolution of NPAs. However, its efficacy is dependent on the chain of
actions initiated one after the other.
The Work Flow Chart of SARFAESI Action is given below as a ready reckoner
providing for time lines to be observed by the Branches/Circles/ZOs/Authorized
Officers for the various measures of SARFAESI Action culminating into recovery
and reduction in NPAs, ultimately.

2
Actions Under SARFAESI Act Timeline For
Initiating Steps

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Under
SARFAESI Act
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An account becomes NPA

Prepare SI-2 (SARFAESI Manual). Get administrative sanction Day-1

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for Recall and taking SARFAESI Action, which lies with Branch
Head irrespective of scale.
Issue 60 Days‟ “Notice under Section 13(2)” of SARFAESI Act- Day 2nd/4th
cum-Recall Notice/Invocation of Guarantee as per format revised
SI-4 (Annexure-1 of this circular) for borrowers and revised SI-
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4A (Annexure-2 of this circular) for guarantors.

Notice served: Notice un-served: By 9th/11th Day
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In the ordinary Within a reasonable period, say of 7

course, service of days or so, if service of notices on
notices is effected all/some of the borrowers who have
within a reasonable created security interest is found to be
period, say 7 days or not effected, fresh steps be taken for
so. Check and ensure service / Substituted Service by
that notice stands affixation of 13(2) Notice where borrower
served on all /mortgagor ordinarily resides or carries
on business and also by publication in
the borrowers who
two newspapers, one of which should be
have created security
interest.Proof of in vernacular language. Authorized
sending notices, Officer to satisfy that service is
(Postal Receipts, AD complete. Proof of sending notices,
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Cards, POD, etc. be (Postal Receipts, Notices received back
kept on records). (without opening /tearing them), AD
Notice can also be Cards, POD, and publications in the
served through hand newspapers etc. be kept on records.)
delivery.

Representation by the borrower under Section 13(3A) By 69th/ 71st

In case borrowers submit representation/raise objections under Day
Section 13(3A), suitable reply to be submitted by Authorized
Officer within maximum mandatory time limit of 15 days from
the date of receipt of representation from the borrowers,
{preferably within the 60 days period of having issued Notice
under Section 13 (2)}.

STEPS AFTER SECTION 13 (2) NOTICE

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Engagement of Supporting Agency and its role All these steps

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For pre-take over examination of identified secured assets, taking to be
over possession, obtaining assistance of DM/CMM for taking simultaneously
over possession, acting as custodian, providing security for completed by
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02
protection and preservation of assets taken in possession and 69th/71st Day
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assisting bank for sale of assets.

Take permission of Circle Head/ZM for engagement of supporting All these steps
agency to be
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Letter to the Supporting Agency to be issued by Authorized simultaneously

Officer as to its engagement and specific services/support it has completed by
to render to Authorized Officer, as per policy guidelines pertaining 69th/71st Day
to Supporting Agencies.
Pre-Possession Notice (Form SI-6 of SARFAESI Manual) On 69th /71st
In case service of notice is found to be complete and Day
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representation u/s 13(3A), if any received, stands duly replied,

issue “Notice to deliver possession of secured assets” (Form SI-
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6) giving reasonable time to hand over possession of secured

assets.
Taking over of possession On 79th/ 81st
Wait for 10 days after issue of “Notice to deliver the possession Day
of secured assets” and in case still there is no response, proceed
under Section 13(4) to take Possession on or after the date
given in the said Pre-Possession Notice. Check up that there
is no stay granted by DRT/ Court/High Court.
Possession Day Possession Day (Immovables) On 79th/ 81st
(Movables) 1) Take Possession of immovable Day
1) Take possession of property by delivering Possession Notice
movables. to the borrower.
2) Prepare (2) Simultaneously affix such

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Panchnama form Possession Notice on the outer door or Publication by
revised SI - at such conspicuous place of the 82nd/84th Day
7A/7B/7C/7D property.
3) Prepare inventory (3) Prepare inventory as per format (SI -
under rule 4(2) as per 9- SARFAESI Manual).
format (SI -8). In terms of Govt. of India notification
(4) Deliver a copy of dated 03.11.2016, All notices under
inventory (SI-8- new sub rule (2 B) of Rule 4
SARFAESI Manual) “ All notices under these rules may also
to the person entitled be served upon the borrower through
to receive the same. electronic mode of service in addition to
However, in case of the modes specified under Rule 3.
refusal to give (4) Deliver a copy of Possession Notice
acknowledgement, and inventory (SI-9) to the person
send it by Regd.Post entitled to receive the same. However, in
AD/Speed case of refusal to give
Post/Courier etc acknowledgement, send it by Regd.Post

2
(5)Take Valuer with AD/Speed Post/Courier etc
you for valuation as it (5)Publication of Possession Notice

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would obviate delay in As per Rule 8(2), for immovable
getting valuation of properties it is mandatory to get the
movables. ―Possession Notice‖ which may be
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suitably modified as circumstances
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warrant published in the two leading

newspapers within 7 days out of which,
one in vernacular language having
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sufficient circulation in the locality.

Valuation of secured assets By 82nd/84th
• Obtain Valuation Report from Board Approved Valuer Day
• (No need to wait for actual possession of immovable secured
assets)
Actual physical possession not delivered voluntarily/ File DM/CMM
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resisted by borrower application by

If there is resistance in delivering actual possession: 90th/ 92nd Day
17

• Filing of application before DM/CMM for taking possession u/s

14 of SARFAESI Act.
• When application is allowed, possession be taken as per orders
of the DM/CMM. The District Magistrate/Chief Metropolitan
Magistrate will pass suitable orders for taking possession of the
secured assets within a period of 30 days
Fixation of Reserve Price of secured assets (movables & By 84th/86th
immovables) Day
Authorized Officer to send recommendations to COCESI along
with valuation reports and get fixed the Reserve Price and the
mode of sale. COCESI to finalize the Reserve Price maximum
within 2 days.
Movables Immovables Issue of Notice

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 Issue “Notice for  Issue “Notice for intended Sale by of intended
intended Sale by Auction/Tender” of 30 Days (Form Sale and
Auction/Tender” of 30 SI-13). Publication by
Days  Issue Public Notice (Proclamation 87th/89th Day
 Issue Public Notice of Sale)
(Proclamation of Sale)  Serve notice of intended sale by
 Serve notice of Auction/Tender SI-13 sale by Day of Auction
intended sale by Auction/Tender and Proclamation of 121st/123rd
Auction/Tender SI-13 and Sale SI-14 /Invitation for Tender -
Proclamation of Sale SI- form SI-24 on the Borrower
14 /Invitation for Tender - /Mortgagor and guarantors.
form SI-24 on the  Proclamation of Sale Notice (SI-
Borrower and guarantors. 14)/ Invitation for Tender -form SI-24
 Publish Public Notice is to be affixed on
(Proclamation of Sale SI- the conspicuous part of the property
14) /Invitation for Tender - to be sold/auctioned.
form SI-24, in the two  Publish Public Notice

2
leading newspapers, out (Proclamation of Sale SI-14)/
of which, one in Invitation for Tender -form SI-24 in

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vernacular language the two leading newspapers, out of
having sufficient which, one in vernacular language
circulation in the locality. having sufficient circulation in the
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 There should be locality.
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minimum 30 days gap  There should be minimum 30

(Expiry of 30 days) days gap (Expiry of 30 days)
between the date of between the date of publication and
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publication and the date of the date of Auction or date of

Auction or date of opening opening the tenders.
the tenders.
• Sale through E- Auctions is to be conducted as per extant guidelines. In case of E-
Auctions, Sale Notice is to be compulsorily placed at (i) www.pnbindia.in (ii)
www.tenders.gov.in and (iii) www.pnbindia.biz for at-least 30 days in addition to
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publication in the newspapers. For adopting the mode to conduct auction e.g e-
auction, manual auction etc. please refer to the latest guidelines issued by the
17

recovery Division.

Auction Process (Manual Tender Process On

Auction)
 Auction be held at the place,
time and on the day mentioned
in Public Notice.
 Earnest Money Deposit: Get
EMD from the
Participants/Bidders as notified
in the Public Notice (Generally
10% of the reserve price). No
bidder, whose bid is below
 Tenders be opened at the 121st/123rd
place, time and on the day Day
mentioned in Public Notice in the
presence of bidders.
 Recording of Tenders. All the
Tenders received from individual
bidders be recorded on the Bid-
Sheet on the format SI-19. Each
bid be checked up that Terms
&Conditions Form (SI-25) of

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Reserve Price, be allowed to
participate.
 Acceptance of Terms &
Conditions by Bidders-Form SI -
18 A. Before commencement of
bid, read out terms of sale to
bidders and obtain signatures in
token of acceptance of these
terms and conditions.
Recording of Bids After
completing all the above
formalities, start inviting inter se
bids from the bidders. All the
bids received from individual
bidders be recorded on the Bid-
Sheet on the format SI-19.
Tender is duly accepted and
signed by bidder and is
accompanied with EMD. Take
care that bidder/participant has
not changed any condition of
tender. Sort out the eligible bids.
 As Terms &Conditions Form
(SI-25) duly signed have already
been submitted there is no need
to take Form SI 18 A.
However, before commencement
of bid. read out Terms &
Conditions of sale to bidders.
 Recording of Bids: Decide the
tenderer which has made the
highest bid.

2
 When the auction reaches at In case inter se bidding is
the climax, where no bidder is contemplated as per terms of

2:5
ready to increase the bid as tender terms, inter se bidding
against the highest bid received,from the bidders be called and
the second highest bidder be these bids be recorded.
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02
asked whether he wants to  Where no bidder is ready to
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increase the bid and on refusal, increase the bid as against the
the fact be recorded and his highest bid received, the second
signature be obtained. Similarly,highest bidder be asked whether
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all the bids received from he wants to increase the bid and
individual bidders be recorded on refusal, the fact be recorded
on the Bid- Sheet (Form SI-19) and his signature be obtained.
and their signatures be obtained.Similarly, all the bids received
Highest bidder be declared as from individual bidders be
successful bidder. recorded on the Bid- Sheet (Form
/0

SI-19) and their signatures be

Initial deposit: The successful obtained. Highest bidder be
17

Highest Bidder is required to declared as successful bidder.

make initial deposit of 25%
immediately of the bid /sale Initial deposit: The successful
amount after adjusting the EMD. Highest Bidder is required to
Balance 75% is to be paid within make initial deposit of 25%
15 days. immediately i.eas per Govt.
notification dated 03.11.2016 on
Get Bio-data of the Highest the same day or not later than
Bidder‟s per format SI- 20. the next working day, of the bid
 On getting initial deposit, /sale amount after adjusting the
communication of acceptance of EMD. Balance 75% is to be paid
bid be given to the Highest within 15 days of confirmation of
Bidder as per format-SI-21. sale by secured creditor or such

15 | P a g e

 In case of Immovable, Move to
Circle Office (Committee of
Officers) immediately but not
later than 15 days, to get
confirmation of sale from them
as a Secured Creditor. And this
confirmation of sale be
communicated to the Highest
Bidder as per format-SI-22. No
confirmation of sale of
Secured Creditor is required in
case of sale of movables.
 Execution of Agreement to
Sell: be executed with the
purchaser as per format SI-23.
 Balance bid amount of 75% is
extended period as may be
agreed upon in writing between
the purchaser and the secured
creditor, in any case not
exceeding 3 months.
Get Bio-data of the Highest
Bidder as per format SI- 20.
 On getting initial deposit,
communication of acceptance of
bid be given to the Highest Bidder
as per format-SI-21.
 In case of Immovable, Move to
Circle Office (Committee of
Officers) immediately but not later
than 15 days, to get confirmation

2
received within time of 15 days of sale from them as a Secured
as per Terms &Conditions of the Creditor. And this confirmation of

2:5
auction. sale be communicated to the
Highest Bidder as per format-SI-
22. No confirmation of sale of
02 1
02
Secured Creditor is required in
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case of sale of movables.

 Execution of Agreement to Sell:
be executed with the purchaser
97

as per format SI-23.

 Balance bid amount of 75% is
received within time of 15 days as
per Terms &Conditions of the
Tender.
Certificate of sale be issued (when sale price is received in full and asset sold is
/0

delivered.) Form SI-15/ or SI 16 for Movables and Form 17 for Immovables

(revised forms attached as Annexures in this Circular).
17

Appropriation of sale proceeds

• All the costs, charges and expenses incurred for SARFAESI action which inter-alia
include postage, publication, watch & ward,
• Insurance, godown charges, fees of supporting agency need to be recovered.
• Care must be taken that sale expenses are to be appropriated first from the sale
proceeds. The balance proceeds of the sale be credited in the NPA account for
liquidation of Principal bank dues, then to interest as per Recovery Division HO
Circular no.26/2013 dated dated 04.06.2013. The residue/balance amount shall be
paid to the person entitled thereto.
SARFAESI ACTION CONCLUDES

16 | P a g e
 SARFAESI Act : CONSOLIDATION OF IMPORTANT ASPECTS-
 AUTHORIZED OFFICER: The Rule 2 (a) of the Security Interest
(Enforcement) Rules 2002 defines the “Authorized Officer” as:
“An officer not less than a Chief Manager of a public sector bank or
equivalent, as specified by the Board of Directors or Board of Trustees of the
secured creditor or any other person or authority exercising powers of
superintendence, direction and control of the business or affairs of the
secured creditor, as the case may be, to exercise the rights of a secured
creditor under the Ordinance”.

 FIXATION OF RESERVE PRICE:

o Formation of Committees for Fixation of Reserve Price- The
structure of committee constituted for the enforcement of Security
Interest under SARFAESI Act 2002, shall be as under:
Circle Office Committee for Enforcement of Committee at LCB

2
Security Interest (COCESI)

Head of Circle Office (Chairperson)

2:5 Head of branch
02 1
02
3/2 98

Deputy Circle Head Second in command

Chief Manager/Senior Manager, Recovery Relationship/Dealing Manager

97

Section of Circle Office

Senior Manager (Law)/ Manager (Law), if posted

The Committee shall extend the guidance and support to the Authorized Officer
for effective utilization of mechanism of SARFAESI. The Committee at LCB shall
/0

refer & recommend the fixation of Reserve Price and other warranted matters to
ZM for approval.
17

To take stock of the actions taken by the Authorized Officer, „Monthly Review
Meetings‘ shall be convened by the committees at Circle Office/Branch
Office for LCB level.

 Committee of Officers for Confirmation of Sale:

 For exercising the rights of Secured creditor under the SARFAESI Act
“Committee of Officers‖ to be constituted at the Circle Office/LCB,
details of which are given below:

17 | P a g e
Sno Particulars Committee To Members of Committee
Confirm the Sale

1 For COCESI (Circle Office 1. Circle Head (Chairperson)

Branches Committee for 2. Second in command at Circle
other than Enforcement of Office
LCBs Security Interest) 3. Chief Manager/Sr. Manager
(Recovery Section) of Circle
Office
2 For LCBs Committee at LCB for 1. Head of the LCB
enforcement of 2.Second in Command
Security Interest 3.Realtionship / Dealing Manager

2
 NPA ACCOUNTS UNDER MULTIPLE / CONSORTIUM LENDING:

2:5
In case of financing by more than one secured creditor (Multiple Banking) or
joint financing by several Secured creditors (consortium advances), SARFAESI
Act vide Section 13(9) lays down that no Secured creditor shall be entitled to
02 1
02
exercise any or all of the rights as conferred by Section 13(4) of the Act, unless
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exercise of such rights is agreed upon by Secured creditors representing 60% in

value.
 As a prudent measure it is always desirable that the Leader Bank initiates
97

action under SARFAESI Act on behalf of all the consortium members.

 While dealing with NPA accounts of High Value, it has been observed that at
times there are more than one consortium e.g one consortium of Term
Lenders and another consortium for Working Capital Lenders. Similarly it has
been observed that at times the securities are also cross-charged and
interlinked with different consortiums/lenders and across other Associated &
/0

Allied concerns of the same Group.

 In such situations, generally in the absence of a common meeting ground,
17

absence of consensus among various lenders/group of lenders, a joint

approach towards recovery does not get developed and such situations are
exploited by such recalcitrant borrowers to their advantage and Lenders come
to a disadvantageous position to enforce their securities.
 These issues have come up for discussions at various platforms and it has
been suggested that recovery in such accounts be pursued as a joint and
common approach by the Leader of all Lenders by developing a common
consensus among all lenders/group of lenders.

In pursuit to the above, the following measures be taken by our

Branches/Circle Heads/ZMs in such accounts in NPA category:

18 | P a g e
  Immediately after an account becomes NPA, as a proactive measure, the
Branches irrespective of our share in the lending should press for convening
the Consortium/Joint Lenders Meet even in cases where we may not be the
leader and/or formal consortium may not exist like in case of Multiple Banking.
 In case of large consortiums/multiple consortiums/cross charging of securities
in Associated & Allied concerns/Multiple Banking etc a Core Committee of 4-
5 Banks be formed to handle day to day affairs and to develop a
common consensus/approach towards recovery and a leader be elected
for this Core Committee.
 Before giving our consent to support such Recovery Measures, a prior
mandate from the competent authority is mandatory and is of great
importance to quicken the pace of Recoveries.
 For taking SARFAESI Action in all such accounts, the leader bank be
authorized by all the member banks for taking all actions for recovery of dues
of all consortium members as prescribed in the Act. The leader has to take all
actions for and on behalf of all member banks in accordance with the
provisions of the SARFAESI Act.

2
2:5
STRATEGIES FOR SUCCESSFUL SALE PROCESS UNDER SARFEASI
ACT – IMPORTANT ASPECTS

Under the SARFAESI Act when we go for sale of secured assets, the aim is
02 1
02
to secure maximum price for the assets to be sold. Effective methods of
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sale of the secured assets are:

 Public Auction including auction through e-auction mode and
 Inviting Tenders
97

In pursuit of free, fair and transparent auctions Ministry of Finance directed

the Banks to adopt the Electronic medium for conducting auctions also known
by the name ―E-Auctions‖. However, to improve the success rate of even e-
auctions, we need to initiate certain steps, which are given below:
/0

 Valuation of secured assets- Valuation Report relied upon should normally

17

be not more than a year old.

 Fixation of Reserve Price- This is the most important factor to decide the
success rate of E-Auctions. A realistic Reserve Price will always improve
the chances of successful sale process.
 Publicity- In the current scenario, publicity plays a vital role to make an E-
Auction a successful event. Publicity can be bifurcated mainly into two parts:

i. As per statutory/regulatory guidelines - The Sale Notice is to be loaded at

the following two websites, compulsorily:
www.pnbindia.in
&
www.tenders.gov.in
In case of e-auction notice must also be compulsorily loaded at
www.pnbindia.biz
19 | P a g e
ii. General practices for fetching better quotes/price

o Sale Notice can be displayed on Notice Boards of all the branches of the
Circle/ATM Cabins etc.
o Other than the statutory requirement of publishing the Sale Notices in two
Newspapers, it can be published in some additional Newspapers, having
good circulation in that particular area.
o To give wider publicity, a Strip can be displayed on the Local Cable
TV/Other TV Channels for some period say a week/fortnight/month.
o Hand Bills/Pamphlets can be circulated through Newspaper Vendors,
which a low cost publicity medium with wider reach.
o For sale of properties with high Reserve Price (1 crore & above),
pamphlets/brochures containing description and photos of the property
(wherever possible) can also be considered for circulation.
o Preparation of list of potential buyers and Mobilization of bids.
o Spot Inspection of the property and Enquiries by the Prospective

2
Buyers.
o Actual /Physical/Symbolic Possession.

2:5
o Utilization of services of Supporting Agencies.
o Updation of data at SARFAESI portal
02 1
02
FAILURE/ CANCELLATION OF SALE PROCESS
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In terms of Govt. gazette notification dated 03.11.16, a new para has been
introduced after the provision of Rule 6 {sub rule(2)} of ―The Security
97

Interest (Enforcement) Rule, 2002‖, which deals with the failure of sale
processes, which states as under:

“Provided further that if sale of immovable property by any one of the methods
specified under sub rule (1) fails and the the sale is required to be conducted
again, the Authorized Officer shall serve, affix and publish notice of sale of
/0

not less than fifteen days to the borrower for any subsequent sale.‖
17

STAY AGAINST SARFAESI ACT

We come across several cases where stay is granted by the DRTs/Courts
against the SARFAESI Action initiated by the Bank, on some ground or the other.
Thus there is always a need to analyze on case to case basis and remedial
measures be adopted for vacation of the stay.

Given below is the list of some of such instances where stay has been
granted on account of various reasons and remedial measures there
against:

20 | P a g e
Sno Reasons for Stay
1 Section 13(2) and other Notices
under SARFAESI Act are sent
by UPC or ordinary post or
improper service of such
Notices is furnished in the
Court/DRT.
2 Representations received under
Section 13(3A) made by the
borrowers/co-
borrowers/guarantors in the
DRTs/Courts against the action
initiated by the Bank under the
2:5
SARFAESI Act, are not
responded/replied by the bank,
in the prescribed time frame of
02 1
15 days and/or in an
02
appropriate manner.
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3 As per Rule 8 of the Security
Interest (Enforcement Rules)
97
2002, in case of possession of
immovable properties, the
possession is taken by affixing
Possession Notice as per
Appendix-IV by affixing it on the
outer door or conspicuous
/0
place of the property. However,
proof submitted in the shape of
17
photographs give a very closed
view of the door of the property,
not establishing conclusively
that the possession has been
taken of the property in
question.
4 Copy of the Possession Notice
is not delivered to the
borrower/mortgagor and proof
of sending such copy to them is
not furnished in the DRT/Court
and/or improper recording of
the proof for having possession.
Remedial Measures
Authorized Officer must ensure that Section 13(2)
Notices are sent through Registered Post
(acknowledgement due)/Speed Post/Hand
Delivery and got served through as per the
prescribed guidelines mentioned in the SARFAESI
Act. In case the acknowledgment of service is not
received by the Authorized Officer, steps must be
initiated for tracking the same from Indian Post
internet site (http://www.indiapost.gov.in/), as
given in this Circular.
It must be ensured that a proper reply is submitted
within 15 days and guidelines mentioned in this
Circular are complied with.
Possession Notice should not be issued without or
prior to giving reply to the representation of the
2
borrower
Compliance of Rule 8 of Security Interest must be
ensured. Further, for submission of the proofs for
having Symbolic/Actual Possession, photographs
must be taken from close as well as far angles, so
as to cover optimum area of the required
area/asset showing picture of the Borrower/his
representative / Witnesses / Authorized/Other
Bank Officer. Possibility may be explored for
capturing the details through Videography.
Subsequent to taking of the possession of the
secured assets, copy of the Possession Notice be
delivered to the borrower/mortgagor against
receipt and in case of refusal the same may be
recorded and copy of the Possession Notice be
sent through Registered Post (Acknowledgement
Due)/Speed Post and further, in terms of
amendments in the Security Interest
21 | P a g e
 (Enforcement) Rules introduced through
notification dated 03.11.16, all notices under
these rules may also be served upon the
borrower through electronic mode of service

5 Not adhering to the prescribed Time line of 7 days and of publication of

time limits for publication of possession notice in two newspapers, must be
Possession Notice in the two strictly adhered to.
Newspapers within 7 days

6 30 days Notice is not issued to As the borrower/mortgagor has a right of

the borrower/mortgagor for redemption, therefore, 30 days Noticeas per
holding of Auction/Sale. prescribed format (SI-13 of the SARFAESI
Manual) must be issued to the
borrower/mortgagor for holding of Auction /Sale

7 In case of NPA accounts of In case of Educational Institutions, possession

Educational Institutions, plea is may preferably be taken when their academic
taken that any action initiated sessions are off/vacation period and applications

2
under SARFAESI Act may ruin may be filed for granting orders to the defaulting

2:5
the career of the students etc. borrowers, for depositing of the fees deposited by
the students, with the concerned bank
02 1
8 While filing the appeal against In case any OTS/Compromise/Restructuring
02
the SARFAESI action initiated Proposal has been received from the borrower,
3/2 98

by the Bank, plea is taken by the same must be processed without any delay
the borrowers that an and the decision in that regard be immediately
OTS/Compromise/Restructuring conveyed to the borrower so that no stay is
97

etc. Proposal is pending with granted on such grounds

the bank.
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17

22 | P a g e
3.POLICY FOR CLASSIFICATION AS WILFUL DEFAULTERS IN NPA A/cs
(Sastra Div Cir no 22/2015 dated 31.08.2015)

PURPOSE
To put in place a system to disseminate credit information pertaining to
Wilful defaulters for cautioning banks and financial institutions so as to
ensure that further Bank Finance is not made available to them.

DEFINITION OF WILFUL DEFAULT

A „Wilful Default‟ would be deemed to have occurred, if any of the following
events is noted:
 The unit has defaulted in meeting its payment / repayment obligations to
the lender even when it has the capacity to honour the said obligations.
 The unit has defaulted in meeting its payment / repayment obligations to

2
the lender and has not utilised the finance from the lender for the specific

2:5
purposes for which finance was availed of but has diverted the funds for
other purposes. Such as :-
 Utilization of short-term working capital funds for long-term purposes
02 1
02
not in conformity with the terms of sanction;
3/2 98

 Deploying borrowed Funds for purposes / activities or creation of

assets other than those for which the loan was sanctioned;
 Transferring borrowed funds to the subsidiaries / Group companies or
97

other Corporates by whatever modalities;

 Routing of funds through any bank other than the lender bank or
members of consortium without prior permission of the lender;
 Investment in other companies by way of acquiring equities/
debt instruments without approval of lenders;
/0


17

The unit has defaulted in meeting its payment / repayment obligations to the
lender and has siphoned off the funds so that the funds have not been
utilised for the specific purpose for which finance was availed of, un-related
to the operations of the borrower nor are the funds available with the unit in
the form of other assets. e.g.: Not depositing of sale proceeds and
receivables in the account are instances of siphoning off funds.

 The unit has defaulted in meeting its payment / repayment obligations to

the lender and has also disposed off or removed the movable fixed assets
or immovable property given for the purpose of securing a term loan without
the knowledge of the bank / lender. (Unauthorized Disposal of Charged
Assets)

23 | P a g e
DEFINITION OF „LENDER‟ and „UNIT‟

Lender :The term „lender‟ appearing in the circular covers all banks/FIs to
which any amount is due, provided it is arising on account of any banking
transaction, including off balance sheet transactions such as derivatives,
guarantee and Letter of Credit.

Unit: The term „unit‟ includes individuals, juristic persons and all other
forms of business enterprises, whether incorporated or not. In case
of business enterprises (other than companies), banks/FIs may also report
(in the Director column) the names of those persons who are in charge and
responsible for the management of the affairs of the business enterprise.

2
IDENTIFICATION OF WILFUL DEFAULTERS

2:5
The decision to report the names of Borrowers as Wilful Defaulters, who
have defaulted in the repayment of loans will be taken after carrying out
following procedure:
02 1
02
Cut off Limits
3/2 98

Guidelines relating to „Wilful Defaulters‟ would be applicable to all non-

performing borrowal accounts with outstanding (funded facilities and
97

such non-funded facilities which are converted into funded facilities)

aggregating Rs.25 lac and above, where „wilful default‟ is identified by the
Bank.

Identification of Events of Wilful Default:

/0

Immediately on classification of an account as NPA, Branches are advised

to examine and identify any event of “Wilful Default” which seems to
17

have occurred as defined above.

Identification of persons who are Wilful Defaulters

The term „unit‟ defined here in above has to be taken to include individuals,
juristic persons and all other forms of business enterprises, whether
incorporated or not. In case of business enterprises (other than companies),
banks/FIs may also report (in the Director column) the names of those
persons who are in charge and responsible for the management of the
affairs of the business enterprise. Such as :-

Such persons may be:

i. Individual Borrower(s)
24 | P a g e
 ii. Karta of HUF
iii. Partners/ Sole Proprietor/ Trustees etc. in individual capacity
iv. Promoter directors of the Company
v. Whole Time Director
vi. Directors o f C o m p a n y , ( at t h e t i m e w h e n i n c i d e n t o f
W i l l f u l Default happened)
vii. Present Directors
viii. Independent Directors
ix. Nominee Directors

(The above list is only indicative and not exhaustive)

As regard a non-promoter/non-whole time director, it should be kept in

mind that Section 2(60) of the Companies Act, 2013 defines an officer who is
in default to mean only the following:

2
2:5
(i) Whole Time Director
(ii) Where there is no key managerial personnel, such director or
directors as specified by the Board in this behalf and who has or have
02 1
02
given his or their consent in writing to the Board to such specification,
3/2 98

or all the directors, if no director is so specified.

(iii) Every director, in respect of a contravention of any of the provisions
97

of this Act, who is aware of such contravention by virtue of the receipt

by him of any proceedings of the Board or participation in such
proceedings and who has not objected to the same, or where such
contravention had taken place with his consent or connivance.
/0

Guarantees furnished by Group Companies, Individuals and Non-group

17

companies:

While dealing with „wilful default‟ of a single borrowing company in a Group,

the Bank should consider the track record of the individual company, with
reference to its repayment performance to its lenders. However, in cases
guarantees furnished by the companies within the Group on behalf of the
wilfully defaulting units are not honored when invoked by the Bank, such
Group companies should also be reckoned as wilful defaulters.

In terms of Section 128 of the Indian Contract Act, 1872, the liability of the
surety is co-extensive with that of the principal debtor unless it is otherwise
provided by the contract. Therefore, when a default is made in making

25 | P a g e
 repayment by the principal debtor, the banker will be able to proceed
against the guarantor/surety even without exhausting the remedies against
the principal debtor.

As such, where a banker has made a claim on the guarantor on account of

the default made by the principal debtor, the liability of the guarantor is
immediate.In case, the said guarantor refuses to comply with the demand
made by the creditor/banker, despite having sufficient means to make
payment of the dues, such guarantor would also be treated as a wilful
defaulter.

RBI has clarified that this (declaring the guarantors as wilful

defaulter) would apply only prospectively i.e w.e.f. September 9, 2014 and
not to cases where guarantees were taken prior to RBI circular September 9,
2014. Banks/FIs may ensure that this position is made known to all
prospective guarantors at the time of accepting guarantees.

2
2:5
Therefore, in view of the above clarification given by RBI, it is to be noted
that-
02 1
02
I. In case of Guarantors, they can be declared Wilful Defaulters only when
3/2 98

demand is made on them and despite having sufficient means they refuse
to comply with the demand of the bank.
97

II. These guidelines in respect of Individual, Group Companies and Non-

Group Companies guarantors would apply prospectively i.e. w.e.f.
September 9, 2014. In the already classified NPA accounts prior to the
RBI circular, Guarantors cannot be declared as wilful defaulters.
/0

III. That the bank has put on notice of such a condition to the guarantor at the
17

time of accepting the guarantee. IRMD, HO, New Delhi, has issued
detailed guidelines vide its LA Circular No.18/2015 dated March 02,2015
p r e s c r i b i n g the modified format of the Guarantee Deed /Agreement to be
obtained from the guarantors incorporating the clauses/ conditions as
prescribed by RBI that in default guarantor can be declared as Wilful
Defaulter. Therefore, Branches to check and ensure that modified
Guarantee Deed/ Agreement is held on record.

PROCESS/ WORKFLOW FOR DECLAING BORROWER/ GUARANTOR

AS WILFUL DEFAULTERS

26 | P a g e
Step 1 Identification of wilful default on person/entity with in 5 days of
classification the account as NPA.
Step 2 Issuance of 10 Days notice to Rectify Default (Ann I of Cir 22/15) on 13-
14 days of classification the account as NPA .
Examine the representation of borrower if any and suit able reply
maximum with in 7 days bringing out the factual position leading to
event of Wilful Default. Watch whether the default is rectified or not.
Step 3 Sending Proposal (on ANN II) to Recovery Division HO along with
recommendation and evidence/documents for declaring the borrowers as
wilful defaulter within 40 days of classification the account as NPA
Step 4 Placing the proposal before The Committee on Wilful Defaulters thereof
by Head Office along with decision of branch/co/zo

Step 5 Show Cause Notice- Consequent upon receiving the decision of

The Committee from Recovery Division, Head Office, Branch to serve
15 days' Notice (As per Annexure-III) through registered post with AD

2
and email with in 3 days.

Step 6
2:5
Representation by the Borrower/ Proposed Defaulter - If any
representation is received from the borrower/ proposed defaulter, submit
02 1
the representation along with Para-wise comments and
02
recommendations through Controlling Office to Recovery Division, Head
3/2 98

Office for placing the matter before The Committee.

Step 7 Notice for personal hearing by The Committee-

97

Serve Notice (As per Annexure IV) for personal hearing by The
Committee through registered AD and E-mail within 2 days on
receiving communication of the date fixed for personal hearing from the
Recovery Division, Head Office.
Step 8 Meeting of The Committee and personal hearing of borrower-
-Recovery Division, Head Office will place the matter before The
/0

Committee.
-The Committee will give a personal hearing to such
17

borrowers/proposed defaulters who have made representation.

Step 9 Decision of the Review Committee—
The decision/ order of The Committee will be placed before the
Review Committee for approval.
•On approval of decision/order by the Review Committee on Wilful
Defaulters declaring the Borrower/ Proposed Defaulter as Wilful
Defaulter, the decision would be communicated to the said
Borrower/ Defaulter within 3 days.
Step Show Cause Notice- As a precautionary measure, branches may send a
10 Notice through Registered Post to the Wilful Defaulters
(borrower/guarantor) in the local language, intimating that in case of non-
repayment of the pending amount in the loan account, within 7 days from
the date of Notice, their names and photographs will be published in the
27 | P a g e
 newspapers as given in Annexures A, B, C & D, which may be suitably
amended as per requirement (refer Cir No 17/2018.)
Step Submission of Information of publication - Branch/ Circle Office/
10 Controlling Office would submit information to the Recovery Division,
Head Office as per prescribed format (Annexure V) reporting to
CICs.

 Kindly note that following measure for recovery against wilful

defaulters be taken simultaneously

•Foreclosure of mortgaged properties

•Recovery Suits/SARFAESI Actions
•Criminal Proceedings wherever necessary
•Removal of Director/ Promoter, who is a Wilful Defaulter, in case loan documents
incorporate such clause that borrower company shall not induct a person who is a
Promoter/ Director of a Wilful Default Company.

2
2:5
For more details and various Annexures/ proformas please refer to SASTRA
Division cir no 22/2015,20/2017,17/2018,31/2019 and 43/2019.
02 1
02
3/2 98

*******
17
/097

28 | P a g e
 4.Policy on Compromise / Negotiated settlement/ Write off/
Waiver of legal Action/ Appeal etc.
(Sastra Div Cir no 57/2019 dated 13.11.2019
Compromise settlement refers to a negotiated settlement under which Bank
endeavours to recover maximum amount in a minimum time with minimum
expenses. Normally under a Negotiated Settlement, a borrower offers to pay and
the Bank agrees to accept in full and final settlement of its dues an amount less than
the total amount due to Bank under the relative contract.
From time to time, RBI has been issuing guidelines to be followed by the Banks
while entering into compromise/negotiated settlements with the borrowers or
considering waiver/write off of dues.
ELIGIBILITY CRITERIA for OTS under General Policy
All Borrowal/ Loan accounts identified as NPA in terms of extant RBI guidelines

2
outstanding as at the end of last quarter shall be eligible for considering under these
Policy guidelines for compromise/negotiated settlement/one-time settlement and/ or

2:5
write off.
02 1
CALCULATION OF RECOVERABLE DUES
02
Recoverable Dues shall be calculated w.e.f. the date of NPA on the Book
3/2 98

outstanding as existing on the date of NPA (inclusive of SI/DI reversed

subsequently) duly adjusted for recoveries/further debits in the account, ignoring the
97

interest, if any credited/debited in the account after the date of NPA, on simple basis
on daily reducing balance @ Base Rate or Contractual Rate of interest, whichever is
lower as prevailing on the date of consideration of proposal.

VALUATION OF SECURITIES
Proper distinction has to be made between Market Value and Distress Sale Value
/0

(Realizable Value) of the securities while considering/recommending OTS proposals.

17

Valuation Report should indicate Distress Sale Value (Realizable Value) in

addition to the Market Value, in terms of the guidelines circulated by IRMD in
respect of Valuation of Properties.
 Validity/Periodicity of Valuation Reports.

o Arriving at realistic value of securities is an important aspect in considering an

OTS. It is thus necessary that, for the purpose of OTS, especially in respect of
the accounts involving book outstanding of upto Rs. 2 crore, the
valuation report should be as recent as possible but not more than 1
year old.
o However, in respect of accounts where book outstanding and/or Value of
Securities is more than Rs. 2 crore, valuation of property(ies) and other

29 | P a g e
 details should not be more than 6 months old to assess the proposals with
more justice.
o Further, wherever properties are valued at Rs. 5 crore or above, minimum
two independent latest Valuation Reports from Bank‘s Board approved
valuers shall be obtained.

 Variation in Valuation Reports

While considering an OTS/Compromise etc. proposal:

(i) In case the difference in valuation is less than 15%, the average value
may be taken.
(ii) In case the difference in valuations is more than 15%, fresh valuation may
be got done from independent third valuer (approved by the Bank‟s Board)
and average of those two valuation reports be taken, in which the variation is
less than 15%.

2
 Vetting of valuation by Bank officials

2:5
The valuation assessed by the Board‟s approved valuer on Bank prescribed
proforma shall be verified and vetted by the Bank officials after due
02 1
cognizance of the above guidelines as under, depending upon the
02
outstanding balance in the account.
3/2 98

Up to Rs.50 lacs Valuation to be verified/vetted by an official of the bank

97

independently not below the rank of Scale II.

More than Rs. 50 Valuation to be verified/ vetted by 2 officials of the
lacs and up to Rs. Bank independently, one of the officials should not be
5.00 crores below the rank of Chief Manager.
More than Rs. 5.00 Valuation to be verified/ vetted by 2 officials of the
crores Bank independently, one of the officials must not be
/0

below the rank of Chief Manager.

17

Further additional vetting shall be done by two

Circle Office officials independently, one of whom
should not be less than the rank of Chief Manager.

NET PRESENT REALISABLE VALUE (NPRV)

“As the payment of the compromise amount may be in installments, the net present
value of the settlement amount should be calculated and this amount should
generally not be less than the net present realizable value of securities.”

Present Market Value of the charged securities net of cost of realization

discounted appropriately for the attendant factors affecting its reliability shall
30 | P a g e
be called Net Present Realizable Value of Securities. It may kindly be noted
that Realizable Value and/or Distress Value as calculated by the Valuers in
their Reports cannot be considered for arriving at Net Present Realizable Value
of the securities.
The Market Value of the Charged Securities (excluding Plant & Machinery) net of
cost of realization shall be discounted as under:-

Nature of Discount/Attendant Factors Rate of

Discount

a) General Discount (Sale through Bank attracts tax burden/sharing of 10%

increase in value of IP with lessor etc. and results in diminutive
realizable value)

b) Specific Discount
i) IPs having old/multiple tenancy/multiple suits and / or dispute 20 %
about validity / enforceability of the mortgage/charge

2
ii) More than 1 year old stay against SARFAESI Action and/or 10%
SARFAESI action initiated and IPs put on auction but auction failed

2:5
as no bidder came forward.
iii) Attachment of IP by Sale Tax / Income Tax / Other Revenue 10%
Authority
02 1
02
(If there is no priority charge)
3/2 98

iv)IP not demarcated/Undivided Share mortgaged/no independent 10%

Access
v) Mortgagor is dead 10%
97

The maximum discount having more than one attendant factors attached to IP
shall be restricted to 40% only.


/0

For Plant & Machinery

In case of Plant & Machinery, only Realizable Value (as mentioned in the Book
17

on instructions on loans) should be taken into consideration after taking

cognizance of brand name/make of Plant & Machinery/Year of installation/Original
cost/ Depreciation/ Current physical conditions/technical changes and
obsolescence/present industry scenario and future viability etc.

 Where 2 or more Bids under SARFAESI have failed, the last Reserve
Price or NPRV as above, whichever is lower, shall be accepted as NPRV.

 In Consortium/Multiple Banking Accounts, Bank’s share in Valuation

adopted by Consortium/Joint Lenders shall be accepted as NPRV.

MINIMUM INDICATIVE OTS AMOUNT

31 | P a g e
Minimum indicative OTS amount will be arrived at as under:

Situation Minimum Indicative OTS Amount

1. Where NPRV > Recoverable Dues Recoverable Dues.
2. Where NPRV < Recoverable Dues but NPRV of the securities
more than Book Outstanding

3. Where NPRV < less than Book NPRV of the securities

Outstanding

4. Where NPRV is Zero Whatever maximum can be recovered

The basis for negotiation shall always be Memoranda Dues and should aim at
recovering maximum share of the same.

However, Minimum Indicative OTS Amount in case of Direct Agricultural

2
Advances (now known as Farm Credit advances-PSFID circular 69/2018

2:5
dated 11.12.18)having balance outstanding up to Rs. 10 lacs, will be as
under where NPRV (so calculated as mentioned above ) is less than Book
Outstanding
02 1
02
3/2 98

o Sub-Std NPAs: Minimum 50% of Book O/s

o Doubtful NPAs: Minimum 40% of Book O/s
In such direct agricultural advances also, with balance outstanding up to Rs. 10 lacs,
97

if NPRV is zero, the guidelines mentioned above at Sr.No 4 will be applicable

(whatever maximum can be recovered). However, the negotiation should always
be for Memoranda Dues and aim should be to recover the maximum amount.

Minimum Indicative Amount is only for Bank’s internal use and under no
circumstances should be made known to the borrower or their
/0

representatives.
17

Deviation Cases (When the borrower is not able to pay indicative OTS amount)
If the borrower, under compelling circumstances, is unable to pay the indicative OTS
amount, the best possible offer involving higher sacrifice, depending upon merits and
attendant circumstances of individual case, can be considered by the next higher
authority.

Powers to consider OTS in Willful Default/Frauds (RBI Reported)/Criminal

action cases shall be as under:-

A. Cases, where OTS offer is higher than NPRV/Book O/s (whichever is

higher)

Committee Book (Balance) Outstanding

32 | P a g e
COCAC Up to Rs. 75 lacs
ZOCAC More than Rs. 75 lacs upto Rs. 115 lacs
HOCAC-I More than Rs. 115 lacs upto Rs. 150 lacs
HOCAC-II More than Rs. 150 lacs upto Rs. 300 lacs
HOCAC-III More than Rs. 300 lacs upto Rs. 500 lacs
MC/Board More than Rs. 500 lacs (Full Powers)

B. Cases, where OTS offer is lesser than the NPRV/Book O/s

Committee Book (Balance) Outstanding

ZOCAC Up to Rs. 75 lacs

HOCAC-I More than Rs. 75 lacs upto Rs. 115 lacs
HOCAC-II More than Rs. 115 lacs upto Rs. 150 lacs
HOCAC-III More than Rs. 150 lacs upto Rs. 300 lacs
MC/Board More than Rs. 300 lacs (Full Powers)

2
2:5
It shall be ensured that the staff accountability has been initiated before
considering OTS and finalized before considering Write off in such accounts
involving Willful Default/Borrowal Frauds/Criminal action, otherwise the same shall
02 1
be treated as a Deviation case.
02
3/2 98

OTS/WRITE OFF IN STAFF ACCOUNTS

The OTS/ Write off proposals in accounts where an existing or ex-staff is a
97

borrower/guarantor shall be considered by an authority not below the level of

COCAC subject to delegated powers.

DOWN PAYMENT/ UPFRONT PAYMENT

OTS cases without upfront are generally not entertained, therefore efforts should be
made to get upfront as under:-
/0

Sr. No Details of OTS Offer Upfront Amount

17

1 OTS Offer up to Rs. 10 lacs Upfront 20%

2 OTS offer more than Rs. 10 lacs up to Rs. 50 Upfront 15%

lacs

3 OTS offer more than Rs. 50 lacs Upfront 10%

Even in such cases, where it is considered that upfront amount is difficult to be

insisted in advance (reasons to be recorded specifically), minimum amount to be
deposited shall be insisted upon before considering the OTS proposal.

PAYMENT TERMS OF OTS AMOUNT.

33 | P a g e
 „One Time Settlement,‟ obviously acceptance of negotiated amount as one time
down payment is preferable way of settlement

Cases where the OTS amount is to be paid beyond a period of 3 months from the
date of conveying approval, and/ or payment in installments, future interest on
the settlement amount to be charged at least @ 6-10% on simple basis on
reducing balance from the date of conveying approval in writing to the
borrower by the branch. OTS amount should normally be paid within a maximum
period of 12 months. HOCAC Level II and above may consider proposals under their
powers with payment period up to 24 months and cases beyond 24 months shall be
placed before the Management Committee for consideration irrespective of the
amount of waiver involved.

EXTENSION OF TIME PERIOD FOR PAYMENT OF OTS AMOUNT

Without further Sacrifice:

2
Extension of time period beyond the originally stipulated due date of payment for
OTS amount in already approved OTS cases without any further sacrifice can

2:5
be granted by respective sanctioning authorities maximum up to:

COCAC Level - I ZOCAC HOCAC HOCAC HOCAC

02 1
02
Level-I Level-II Level-III
3/2 98

12 Months 15 Months 24 Months Full Powers * Full Powers

97

*HOCAC-II will have full powers in the cases falling up to HOCAC-II level only
Same/Similar powers shall be exercised by a higher authority for the OTS proposal
approved by their lower authority.
HOCAC Level III may approve extension in cases sanctioned by HOCAC level-
III and MC.
/0

With Further Sacrifice:

17

Extension of Time Period with further sacrifices i.e. without/partial payment of

interest shall be placed to the next higher authority other than who had originally
approved the OTS, who shall exercise the above powers subject to his delegated
authority provided total sacrifice (sacrifice at the time of approval plus further
proposed sacrifice of interest loss) remains in his powers. Proposals approved
originally by MC shall be placed to MC only.

FAILURE OF OTS
In case of obligants‟ failure to pay the OTS amount as per schedule of payment, the
OTS should be declared as failed with the prior approval of Circle Head. The
failure should be notified to the party maximum within one month after giving due
notice

34 | P a g e
 APPROPRIATION OF PROVISION/DEBIT TO BANK REVENUE.
After receipt of principal OTS amount but before recovery of entire amount of interest
if any, as per terms of sanction, the sacrifice by way of debit to bank‟s revenue may
be sought for from the finance division to liquidate the residual balance in the
account. An amount of Rs. 100/- shall be left outstanding in the account for further
follow up w.r.t. recovery of interest. Similarly, provision of Rs.100/- shall continue to
outstand till final recovery of interest in the account.
Recovery of Delayed Period Interest on OTS approved cases should be
credited to ―Income: Recovery in Written Off A/cs‖ instead of ―Income: Interest
on Advances‖.

Powers delegated to various functionaries to approve sacrifice are as follows:

At ARMBs/Circle Offices/Head Office (Rs. In Lacs)

Particulars CM AGM DG COCA COCA ZOC HOC HOC HOCA MC/

AR ARM M C- C- AC AC AC C BOAR

2
MB B* ARM Level-I Level-I Level Level Level D
* B* headed heade I II III

2:5
by d by
AGM DGM
as CH as CH
02 1
Sacrifice being 15 40 80 50 100 150 200 300 500 Full
02
debit to bank
3/2 98

revenue/
Waiver of RI/
97

PI/ legal &

other
expenses on
entering into
OTS/negotiat
ed settlement.
/0

Sacrifice 15 40 80 50 100 150 200 300 500 Full

being debit to
17

bank revenue/
Waiver of RI/
PI/ legal &
other
expenses on
**Write off of
bad debts/
loss assets
Waiver of 15 40 80 50 100 150 200 300 500 Full
legal action in
terms of
recoverable
dues.
)***Waiver of 15 40 80 50 100 Full Full Full Full Full
35 | P a g e
appeal

*At ARMBs, powers shall be exercised only by the Branch Head in accordance with
the Scale in which he/she is placed.

At Branch Level Including LCBs (other than ARMBs)

Powers to BM BM BM BM BM BM
approve sacrifice Scale-I Scale-II Scale-III Scale-IV Scale-V Scale-VI
on entering
OTS/negotiated 0.50* 1.00* 2.00* 5.00** 10.00** 25.00**
settlement

* Sacrifice being only on account of waiver of RI/PI/legal and other expenses. Cases
involving Debit to Revenue, if any shall be considered by respective competent

2
authorities at CO/HO level.
** Sacrifice involving Debit to Revenue maximum up to the provision held in the

2:5
account as on last quarter can also be considered besides the sacrifice on account
of Waiver of RI/PI/legal & other expenses within the above delegated powers. Cases
beyond these powers shall be considered by the respective competent authorities at
02 1
02
CO/HO level.
3/2 98

For more details and various Annexure/proforms about General Policy on OTS
please refer to SASTRA Division cir no 57/2019 dated 13.11.2019.
97

One Time Settlement (OTS): in Credit Card

(Cir no 7/2019 dated 15.06.2019 from Credit card Division)

Credit card outstanding is a clean advance i.e. not backed by any security. In order
/0

to reduce NPA, all out efforts must be made. OTS is an effective tool of recovery
and be explored on merits of the case.
17

 Coverage
i. All credit card accounts identified as NPA on or before the previous quarter shall
be covered under the scheme.

ii. OTS approved but declared failed due to non- recovery of full/ part amount shall
also be eligible for consideration of OTS afresh.
 Calculation of recoverable dues
Recoverable dues shall be card dues as per Memoranda records upto the preceding
month of the date of preparation of OTS Proposal.

 Settlement formula: Effort will be to recover entire recoverable dues as

stated in para 11 b above. However, certain NPA card accounts may require

36 | P a g e
 waiver of finance and other charges depending upon merits of the case.
Indicative OTS amounts may be arrived at as given below:

(i) For card accounts where memoranda balance is up to Rs.25000/-

Age of NPA Indicative OTS Amount

Up to 6 months Ledger balance + 25% of finance charges, service
charges, etc. after transfer to NPA
Above 6 months Ledger balance

(ii) For card accounts where memoranda balance is more than Rs.25000/- but up to
Rs.1 lac.

Age of NPA Indicative OTS Amount

Up to 6 months Ledger balance + 50% of finance charges, service
charges, etc. after transfer to NPA
Above 6 months to 1 Ledger balance + 25% of finance charges, service

2
year charges, etc. after transfer to NPA

2:5
Above 1 Year Ledger balance

(iii) For card accounts where memoranda balance is more than Rs.1 lac.
02 1
02
Age of NPA Indicative OTS Amount
3/2 98

Up to 6 months Ledger balance + 75% of finance charges, service

charges, etc. after transfer to NPA
97

Above 6 months to 1 Ledger balance + 50% of finance charges, service

year charges, etc. after transfer to NPA
Above 1 Year Ledger balance

Payment Terms of OTS Amount in Credit Card

/0

 Acceptance of OTS amount as one time down payment should be preferred

compared to payment in instalments.
17

 However, the cases where OTS amount is payable/or is paid within three
months from the date of settlement card holder may be allowed to pay OTS
amount without any interest.

 Cases where the OTS amount is to be paid beyond a period of 3 months from
the date of conveying approval, interest should be charged at Base Rate
(simple) from the date of conveying approval. In such cases, Post Dated
Cheques (PDCs) from the cardholder may be obtained.

 OTS amount should normally be paid within a maximum period of 12 months.

In exceptional cases, the repayment period may be extended up to 24 months

37 | P a g e
 with normal finance charges commencing from the next month after paying
minimum 10% of the amount.

 10% upfront payment is to be made at the time of request for OTS. This would
show cardholder‟s seriousness in settlement.

 In case card holder fails to pay the dues as per terms of OTS, the
entire concessions allowed will stand withdrawn and the total outstanding will
become recoverable. This condition shall be conveyed to the cardholder in
sanction of OTS.
Recovery Through Recovery Agents/Agencies:

 The delinquent credit card accounts difficult of recovery may be assigned to

bank approved recovery agencies, adhering to Bank‟s procedure for recovery.

 Eligible Accounts:

2
All delinquent card accounts after 60 days of payment due date, NPA accounts

2:5
(whether non-suit filed, suit filed or decreed), all written off accounts shall be covered
under the scheme except accounts where compromises have been approved
including those settled in Lok Adalats.
02 1
02
 COMMISSION:
3/2 98

Age of NPA Commission payable to Recovery Agency(ies)

97

Delinquency /Overdue for 60- 10 %

90 days
Up to I Year 15 %
Above 1 Year Up to 2 Years 20 %
Above 2 Year Up to 3 Years 30 %
Above 3 Year 40 %
/0
17

Competent Authority to sanction proposals of OTS:

Sacrifice Amount Sanctioning Authority Postfacto

Rs.2.00 Lacs COCAC ZOCAC
Above Rs.2.00 Lacs to 3.00 DGM, CCD HO HOCAC - I
Lacs
Above Rs.3.00 Lacs to 5.00 ZOCAC HOCAC – II
Lacs
Above Rs.5.00 Lacs GM, CCD HO HOCAC – II

For more details please refer to Credit card Division cir no 07/2019 dated
15.06.2019.
****************************
38 | P a g e
5.Scheme for Resolution of Stressed MSME Assets (SASHAKT) : For
Assets with Outstanding above Rs 50.00 lacs to Rs 50.00 crores
(Sastra Div Cir No 29/2019, 06/2020)
Salient Features & Eligibility Criteria

 The scheme shall be applicable to all Borrowal NPA MSME units with balance
outstanding above Rs 50.00 lacs and upto Rs 50.00 crores categorized as NPAs
on or before 31.03.2019 under Sub-Std, DB-I, DB-II, DB-III & LOSS category.
 Concession to be given as per the IRAC status of the account as on 31.03.2019.
 Waiver of notional interest from data of NPA in respect of all eligible accounts.
 Cases pending before Courts / DRTs will also be eligible. However, consent
terms with default clause to be filed before presiding officer of Court/ DRT for
obtaining consent decree.
 Cases where Bank has issued notice u/s 13(2) or taken action u/s 13(4) of the
Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest Act (SARFAESI-2002) will also be eligible.

2
 Accounts under Consortium or Multiple Banking arrangements will also be

2:5
eligible to be covered under the Scheme.
 Accounts referred for Revenue Recovery action under State Recovery Laws will
also be eligible, subject to requisite charges, if any payable, being recovered
02 1
02
separately and remitted to the State Authorities.

3/2 98

NCLT Cases, under sole banking/Multiple Banking/Consortium where Corporate

Insolvency Resolution Process (CIRP) has been filed/admitted, however
Expression of Interest (EOI) has not yet been issued, may also be covered
97

provided the borrower comes forward with a settlement offer as per OTS
Scheme.
 Cases where OTS was earlier approved but not implemented and has already
been declared failed on or before 31.03.19.
 Units where rehabilitation / restructuring have failed are eligible.
/0

Exceptions
17

Following accounts will not be considered under the scheme: -

 Central Govt. / State Govt. guaranteed accounts.
 NPA account where bank has already entered into a compromise/settlement.
Units under rehabilitation / restructuring.
 Units under liquidation

Applicability of the Scheme

 The schemes will remain in vogue till 31st March, 2020

39 | P a g e
 Sanctioning Authority
All eligible cases, satisfying the eligibility criteria mentioned above, the
Sanctioning authority will be as under: -

S.N. Sanctioning Authority Category (Ledger outstanding as

on 31.03.2019)

1 Branches headed by Scale V Ledger outstanding above Rs 50.00

(including ARMBs & LCBs headed lacs and upto Rs 4.00 crores
by Scale V)

2 COCAC (headed by AGM) & Ledger outstanding above Rs 50.00

LCBs headed by DGMs lacs and upto Rs 15.00 crores

3 COCAC (headed by DGM) Ledger outstanding above Rs 50.00

lacs and upto Rs 30.00 crores

4 ZOCAC Ledger outstanding above Rs 50.00

2
lacs and upto Rs 50.00 crores

2:5
02 1
Other Conditions:
02
 Cases where sanctioning authority & OTS approval authority is same person,
3/2 98

such cases shall be considered by next competent authority.

 Accounts classified as Fraud and Wilful Defaulters would be considered by next
97

higher authority and not below HOCAC-I level.

Settlement Amount

For Eligible Accounts with balance above Rs 50.00 lacs and upto Rs 50.00
crores
/0

Settlement Amount for Sub-Standard Assets

17

Security OTS amount

Coverage
Below 50% Min 75% of outstanding
Above 50% to Minimum amount equal to value of security subject to at
110% least 75% of outstanding and upto Balance outstanding

Above 110% Balance outstanding + Whatever maximum can be

recovered upto maximum of memoranda dues

40 | P a g e
 Settlement Amount for Doubtful and Loss Assets

Security Coverage OTS amount

75% to 110% Minimum amount equal to value of security subject to at

least 75% of outstanding and upto Balance outstanding

Above 110% Balance outstanding + Whatever maximum can be

recovered upto maximum of memoranda dues

 For accounts where security is less than 75%

SN Outstanding balance IRAC Minimum OTS Minimum

as on 31.03.2019 Classification Amount for OTS

2
as on Secured Amount for

2:5
31.03.2019 portion Unsecured
( primary + portion
collateral
security)
02 1
02
subject to
3/2 98

maximum of
memoranda
dues
97

1 Above Rs 50 lakhs and DB -I 80 % 50 %

up-to Rs 5 crores DB -II 75 % 50 %
DB –III & Loss 70 % 50 %
2 Above Rs 5 crores and DB -I 80 % 60 %
up-to Rs 50 crores DB -II 75 % 60 %
/0

DB –III & Loss 70 % 60 %

17

 In respect of NPA accounts where claims under CGTMSE Scheme have been
received and credited to the account (refer Recovery Division Circular no.
32/2013 dated 06.07.13), the credit/entry of CGTMSE claim received, be ignored
i.e. the credit received on account of CGTMSE claim received, be added back to
the ledger outstanding while computing the OTS amount.

 Legal expenses, Insurance Charges and all other debited/recorded expenses

incurred by the bank are to be recovered in full. However, DI/SI/RI is not required
to be added to the book outstanding for the purpose of calculation of OTS
amount. During the period, this Special scheme remains in force, the existing
OTS Policy of the Bank will also continue to be applicable on all the accounts

41 | P a g e
 Valuation of Securities:
The basis of valuation of securities shall be as under:

 MARKET VALUE of the Securities is to be considered at the time of assessment

of the value of security under Model Scheme. Further, it should be ensured that
the valuation reports are analyzed and self-assessment is adequately made
about the genuineness of the Market Value of the securities given by the valuer,
keeping in mind the real estate market and other attendant factors prevailing in
the area so that it proves to be an effective tool for realistic valuation.
 Arriving at realistic value of securities is an important aspect in considering an
OTS. It is thus necessary that, for the purpose of OTS under the Scheme, the
valuation report should be as recent as possible but not more than 1 year old.
Further, wherever properties are valued at above Rs. 5 crore, minimum two
independent latest Valuation Reports (not more than one year old) from Bank‟s
approved valuers‟ be obtained.
 The valuation assessed by the approved valuer shall be verified and vetted by
the Bank officials after due cognizance of the above guidelines as under,
depending upon the outstanding balance in the account:

2
Value of Norms

2:5
Security
More than Rs. 50 Valuation to be verified/ vetted by 2 officials of the Bank
lacs and up to independently, one of the officials should not be below the
02 1
02
Rs. 5.00 crores rank of Chief Manager.
3/2 98

More than Rs. Valuation to be verified/ vetted by 2 officials of the Bank

5.00 crores independently, one of the officials must not be below the rank
of Chief Manager.
97

Further additional vetting shall be doneby two Circle

Office officials independently, one of whom should not
be less than the rank of Chief Manager.

 In case of Plant & Machinery, only Realizable Value (as mentioned in the Book of
/0

instructions on loans) should be taken into consideration as per latest valuation

report. However, valuation report should not be more than 1 year old
17

 Valuation of stocks be done by personal inspection by the branch officials and the
report of the branch official should not be more than one month old. Further, the
valuations be corroborated with the last stock statements, wherever available,
submitted by the borrower.

Terms of Payment:
 The borrower to deposit 10% of the OTS Amount (As per the settlement formula)
at the time of submission of the application (in the form of letter addressed to
branch head) to indicate his willingness for OTS, failing which the application will
not be processed. In the event the application for OTS is rejected by the Bank,
such payment, which shall be held in a separate account, will be refunded without
interest within three months.
 The borrower to deposit 20% of the OTS amount as upfront money within thirty
days from the date of conveying approval of OTS failing which the OTS shall be
42 | P a g e
 deemed as failed and all concessions/relaxations given under OTS shall be
withdrawn by the Bank. Further, Bank shall recover entire bank dues as per
contractual rate.

 In case the entire OTS amount, as per the installment terms finalized in the
sanction, is paid within 3 months/90 days of conveying approval to the borrower,
no interest will be charged. However interest @ MCLR for one-year (applicable
on the date of sanction) on simple basis on reducing balance will be charged
where OTS amount is proposed to be paid beyond 3 months, effective from the
date of Sanction. However, maximum time period for payment of OTS shall be 6
months or 180 days. No extension beyond 180 days is to be given.
 In case borrower proposes to pay OTS in installments, then default in payment
of one installment shall render the OTS as failed.

Other Stipulations
 The application will be processed within 10 days in case it falls under Branch
power, 20 days in case proposal falls under CO power and 30 days in case
proposal falls under ZOCACI power. The time period will be calculated from the

2
date of deposit of 10% of application money


2:5
Staff accountability aspects, if any, should have been examined and put up to the
appropriate authority before entertaining the OTS proposal, as required, as per
02 1
extant guidelines. However, in case staff accountability has not been examined,
02
proper remarks regarding the same shall be made in the proposal and such
3/2 98

proposal shall be considered by next competent authority

 In all those cases, where OTS is approved and CGTMSE claim has been
97

received and credited in the borrowal account, CGTMSE be informed, in terms of

the extant guidelines. Recoveries made in the account from the borrower be
remitted to CGTMSE as per the extant guidelines.

 In those cases wherein insurance claim or any other claim on third parties is
received after the settlement of the account under the Scheme, the amount of
/0

sacrifice be appropriated from the claim amount and the remaining amount, if
any, be credited to the borrower‟s account.
17

 In case of OTS is being generated with the efforts of

Supporting/Recovery/Enforcement agency, the bank shall pay the respective
commission to the agency as in the case of other recoveries.

 In case of any deviation (apart from deviation in eligibility of accounts, Minimum

OTS amount, valuation and staff accountability matters), the specific case be
referred to SASTRA Division, HO with recommendation of ZOCAC. HOCAC-II
shall be the competent authority to permit the deviation, if any, for the specific
reference.

For more details and various Annexure/proformas about Special Policy on

OTS please refer to SASTRA Division cir no 29//2019 dated 27.05.2019.

43 | P a g e
 6.NON DISCRIMINATORY AND NON-DISCRETIONARY SPECIAL
OTS SCHEME 2019- FOR NPA ACCOUNTS UP TO Rs.5.00 CRORES.
(SASTRA Div Cir No 44/2019) dated 06.09.2019.)

Nomenclature: Non-Discriminatory and Non-Discretionary Special OTS Scheme

for NPA Accounts upto Rs 5.00 crores

Salient Features:

The scheme will remain in force upto 31st March, 2020

Scheme is Non-Discriminatory and Non-Discretionary in nature.
This scheme shall cover all NPA accounts upto Rs 5.00 crores as on
31.03.2019

Eligibility Criteria:

All NPA accounts under Sub-Standard, Doubtful- I, Doubtful-II, Doubtful III

2
and LOSS category with ledger outstanding (also termed as balance) u p to

2:5
Rs.5.00 crores a s on 31.03.2019 shall be eligible under this Scheme.
MSME Accounts above Rs 5.00 crores upto Rs 50.00 crores will be
covered under Scheme for Resolution of Stressed MSME Assets
02 1
02
(SASHAKT) circulated vide SASTRA Division Circular No 29/2019 dated
3/2 98

27.05.2019.
The eligible accounts shall also include:
97

Cases p e n d i n g b e f o r e C o u r t s / D R T s w i l l be eligible. However,

consent terms with default clause will have to be filed before presiding officer
of Court/ DRT for obtaining consent decree.

Cases where Bank has initiated the action under Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest Act
/0

(SARFAESI-2002) will be eligible.

17

Eligible accounts referred for Revenue Recovery action under State

Recovery Laws will be eligible, subject to requisite charges, if any payable,
being recovered separately and remitted to the State Authorities.

Agriculture accounts with balance outstanding more than Rs 10.00 lacs

will be covered under this scheme. For accounts with balance upto Rs
10.00 lacs, guidelines given in para 10.1 of SASTRA Division Circular No
56/2018 dated 24.12.2018 will remain in force.

Cases where OTS was earlier approved but not implemented and has
already been declared failed on or before 31.03.19, will be eligible.

Eligible NPA accounts under this scheme in which OTS has already been
approved under:- (i) Special OTS Scheme 2019 – For NPA Accounts upto
44 | P a g e
Rs. 50.00 Lacs circulated vide SASTRA Division No. 28/2019 dated
27.05.2019 and (ii) Scheme for Resolution of Stressed MSME Assets
(SASHAKT): For Assets with Outstanding above Rs 50.00 lacs to Rs
50.00 crores circulated vide SASTRA Division No. 28/2019 dated
27.05.2019 and have already been declared failed on or before
06.09.2019, will be eligible.

Units where rehabilitation / restructuring have failed are eligible.

Exceptions

 Central Govt. /State Govt. guaranteed accounts.

 Units under rehabilitation/restructuring (Already approved).
 Cases referred to NCLT under Insolvency and Bankruptcy Code,
2016.
 Loan against Gold/Jewellery and other liquid securities e.g.

2
LIC/NSCs/KVPs etc.
 Staff Accounts.

2:5
 The scheme shall not be applicable for those NPA accounts, where
bank has already entered into a compromise/settlement.
 OTS in written off accounts will not be covered in this scheme and
02 1
02
OTS in such cases shall be considered as per “Special guidelines for
3/2 98

OTS in Written off Accounts” as circulated vide SASTRA Division

Circular no. 56/2018 dated 24.12.2018.
97

Sanctioning Authority and Settlement Amount



The competent authority for approval of OTS proposals

under different categories of ledger outstanding are as under:

S.N Category (Ledger O/s as on Sanctioning Authority

/0

31.03.2019)
17

1 Upto Rs.25.00 lacs *Branch Head in

Scale II on the recom
2 Upto Rs 50.00 lacs *Branch Head in
Scale III on the recom
3 Upto Rs. 1.00 Cr *Branch Head in
Scale IV on the recom
4 Upto Rs. 2.00 Cr *Branches headed by
Scale V (including
ARMBs & LCBs headed by
Scale V)

45 | P a g e
 5 A. Above Rs. 2.00 Cr Upto Rs. 5.00 Cr COCAC

B. Above Rs. 25.00 lacs upto Rs. 5.00 Cr (For

Branches headed by upto Scale-II Officers)

C. Above Rs. 50.00 lacs upto Rs. 5.00 Cr (For

Branches headed by upto Scale-III Officers)

D. Above Rs. 1.00 Cr upto Rs. 5.00 Cr (For

Branches headed by upto Scale-IV Officers)

E. Above Rs. 2.00 Cr upto Rs. 5.00 Cr ( For

Branches headed by upto Scale V Officers)

However, in those cases where loan sanctioning authority and OTS

considering authority is the same person, such cases shall be
considered by next competent authority.

2
Note:


2:5
In respect of eligible accounts below Rs. 3.00 Cr classified as
Fraud/ Wilful Default, Quick mortality, cases shall be
considered by ZOCAC.

02 1
For all eligible accounts of Rs. 3.00 Cr and above upto Rs.
02
5.00 Cr, classified as Fraud/ Wilful Default, Quick mortality,
3/2 98

such cases shall be considered by HOCAC-I.

 For all eligible accounts upto Rs. 5.00 Cr, where staff
accountability has not been examined and also not classified
97

as Fraud/ Wilful Default, Quick mortality, such cases shall be

considered by ZOCAC.

Settlement Amount
/0

(A) Sub-Standard Assets –

For eligible accounts with balance o/s upto Rs. 5.00 Cr.
17

S.No Security Coverage OTS amount (%

of outstanding)
1 Below 50% 75%
2 Above 50% to 110% 90%
3 Above 110% 100%

46 | P a g e
 (B) For Doubtful & LOSS Assets
(1) For eligible accounts with balance o/s upto Rs. 50.00 Lakhs.

SN Security OTS amount (% of O/s)

Coverage Balance upto Balance Balance >25
(MV) 10 lacs >10 lacs- lacs – 50
25 lacs lacs

1 Below 10% 25% 30% 50%

2 10% to 30% 30% 35% 55%
3 Above 30% to 45% 45% 65%
50%
4 Above 50% to 60% 60% 70%
75%
5 Above 75% to 75% 75% 75%
110%

2
6 Above 110% 90%

2:5
(2) For eligible accounts with balance o/s above Rs. 50.00 Lakhs and
upto Rs. 5.00 Cr.
02 1
02
S Security IRAC OTS Amount for OTS
3/2 98

N Coverage Classification Secured portion Amount for

as on (Primary + Collateral Unsecured
31.03.19 Security) portion
97

1 Below 75% DB-I 80% 50%

DB-II 75% 50%
DB-III, LOSS 70% 50%
2 Above 75% to DB-I, DB-II, 90% 50%
/0

110% DB-III & LOSS

3 Above 110% DB-I, DB-II, 100% NA
17

DB-III & LOSS

Note:

 Cases where variation in valuation of security is more than 25 %

(Compared to last valuation report), reasons for the same along with
justification shall be commented in the proposal invariably.
 Legal expenses, Insurance charges are to be recovered in full.
However, DI/SI/RI is not required to be added to the book outstanding
for the purpose of calculation of OTS charges.

47 | P a g e
 The OTS amount given above have been formulated keeping the Model
Scheme for Resolution of Stressed Assets- SME Resolution Approach
circulated by IBA as the base.

 In respect of NPA accounts where claims under CGTMSE Scheme have

been received and credited to the account (refer SASTRA Division
Circular no. 32/2013 dated 06.07.13), the credit/entry of CGTMSE claim
received, be ignored i.e. the credit received on account of CGTMSE
claim received, be added back to the ledger outstanding, while
computing the OTS amount.
 If any account eligible under this scheme is considered under
General OTS Scheme, all terms and conditions of the OTS shall be
applicable as per General OTS Policy as circulated vide SASTRA
Division Circular No
56/2018 dated 24.12.2018

Valuation of Securities:

2
The basis of valuation of securities shall be as under:
 MARKET VALUE of the Securities is to be considered at the time of assessment

2:5
of the value of security under Model Scheme. Further, it should be ensured that
the valuation reports are analyzed and self-assessment is adequately made
about the genuineness of the Market Value of the securities given by the valuer,
02 1
02
keeping in mind the real estate market and other attendant factors prevailing in
3/2 98

the area so that it proves to be an effective tool for realistic valuation.

 Arriving at realistic value of securities is an important aspect in considering an
OTS. It is thus necessary that, for the purpose of OTS under the Scheme, the
97

valuation report should be as recent as possible but not more than 1 year old.
Further, wherever properties are valued at above Rs. 5 crore, minimum two
independent latest Valuation Reports (not more than one year old) from Bank‟s
approved valuers‟ be obtained.
 The valuation assessed by the approved valuer shall be verified and vetted by
the Bank officials after due cognizance of the above guidelines as under,
/0

depending upon the outstanding balance in the account:

17

Value of Norms
Security
More than Rs. 50 Valuation to be verified/ vetted by 2 officials of the Bank
lacs and up to independently, one of the officials should not be below
Rs. 5.00 crores the rank of Chief Manager.
More than Rs. Valuation to be verified/ vetted by 2 officials of the Bank
5.00 crores independently, one of the officials must not be below the
rank of Chief Manager.

Further additional vetting shall be done by two Circle

Office officials independently, one of whom should
not be less than the rank of Chief Manager.

48 | P a g e
  In case of Plant & Machinery, only Realizable Value (as mentioned in the Book of
instructions on loans) should be taken into consideration as per latest valuation
report. However, valuation report should not be more than 1 year old
 Valuation of stocks be done by personal inspection by the branch officials and the
report of the branch official should not be more than one month old. Further, the
valuations be corroborated with the last stock statements, wherever available,
submitted by the borrower.

Terms of Payment
 Upfront amount of 15% of the OTS amount (for NPA
accounts with balance upto Rs 25.00 lacs) and 20% of the OTS
amount (for NPA accounts with balance outstanding from Rs
25.00 lacs upto Rs 5.00 crores) is to be deposited along with OTS
offer in writing.
 Upfront amount deposited with the Bank shall be appropriated
in the account before conveying the approval to the Borrower.

2
 Party to be impressed upon to deposit OTS amount
immediately preferably within a week/month and maximum within 90

2:5
days.
 In case the entire OTS amount, as per the installment terms
finalized in the sanction, is paid within 3 months/90 days of
02 1
02
conveying approval to the borrower, no interest will be charged.
3/2 98

However, simple interest @ MCLR for one-year (applicable on the

date of sanction) on reducing balance basis will be charged where
OTS amount is paid beyond 3 months, effective from the date of
97

Sanction.
 If borrower fails to pay OTS amount within 90 days and approach the
Bank for extension of time, then extension of time may be considered
by sanctioning authority upto 180 days. No extension is allowed
beyond 180 days.
 In case borrower proposes to pay OTS in installments, then
/0

default in payment of one installment shall render the OTS as failed.

17

Treatment of multiple accounts of the borrower while

considering OTS proposal under ―Non-Discriminatory and Non-
Discretionary Special OTS Scheme For NPA Accounts upto Rs 5.00
crores
 When there are multiple accounts of a borrower of the same unit,
eligibility criteria shall be reckoned by clubbing all accounts.
 When multiple accounts of a borrower are of different units,
eligibility criteria shall be reckoned “unit wise”.

For more details and various Annexure/proforms about Special Policy

on OTS please refer to SASTRA Division cir no 44//2019 dated
06.09.2019.
49 | P a g e
7. Guidelines for Seizure and Sale of Vehicles (including tractors) of
defaulter
Borrowers (SASTRA Division Circular no. 24/2019)
A sizeable amount of NPAs under the segment of below Rs.10 lac is locked up in
vehicle loans particularly Tractor advances. Besides, a large number of vehicle /
tractor loans are running irregular and are likely to slip to NPAs, if immediate
corrective action is not taken.

 In cases of deliberate default, at times effective recovery measures need to

be taken so as to enforce our security interests including seizure of tractors,
cars, trucks and other vehicles, taking physical possession and realizing its
value by sale for credit to the borrower‟s loan account as per the covenants
of the contract / provisions of law.

 As per terms of various agreements, like Priority Sector Term Loan

Agreement (PNB – 639), Letter of Hypothecation (PNB – 504), Hypothecation

2
Agreement (PNB – 1041) the bank has a right to demand, have possession of

2:5
and sell charged securities in case of default by borrower.

 Bank should not initiate any legal or other recovery measures including
02 1
repossession of the security without giving due notice in writing. It is to be
02
ensured that all reasonable care is taken for ensuring the safety and security
3/2 98

of the property after taking custody, in the ordinary course of the business;
and that the entire process is fair and transparent.
97

Procedure is to be followed by Branch Manager for repossession and

disposal of the security of vehicle including Tractors:

a) Branches shall resort to repossession of security only for the purpose of

realization of its dues in default as the last resort.
/0

b) In addition to the usual / normal recovery reminders / notices / efforts, a 15

17

days‘ notice calling upon the borrower to remedy the default shall be given
(with copy to guarantor/s) in writing in local vernacular language stating that in
the event of failure on the part of the borrower / guarantor to do so within the
prescribed time, the bank shall be entitled to seize the vehicle and proceed for
selling it to recover its dues as per terms of the loan agreements and in
consonance with the law.

c) In case the default persists, another possession-cum-sale notice of 10 days

shall be given to borrower / guarantors in writing in local vernacular language
intimating the date of taking over possession of the vehicle / tractor.

50 | P a g e
 d) The borrower shall be at liberty to repay bank‟s dues on any day before the
date fixed for sale and get back possession of his vehicle. In such an
eventuality further action of sale shall be stopped.

e) Estimated price of vehicle shall be ascertained and notified to the borrower

/guarantor, and on the notified date for sale, the vehicle shall be sold by
Public Auction/Tender/Quotations and/or through a private contract at the sole
discretion of the bank in a fair and transparent manner, where borrower will
also be advised to be present.

In case of Cars and Tractors Valuation of old vehicles to be done at current

invoice price of the new vehicle less depreciation @ 15% p.a. on straight line
method and in case of Trucks, Buses, Tempos, Taxis etc. Valuation of the vehicle
should be the prevalent price of the new vehicle less depreciation @ 20% p.a. on
straight line method for a period starting from the date when the vehicle was first
put on the road OR the value assessed through some independent agency like

2
the Automobile Association, whichever is less.

2:5
f) In case auction fails once, then for the subsequent auction, as a one time
02 1
02
exercise, reserve price may be fixed at 10% lower than the last reserve price.
3/2 98

If auction fails for 2nd time also, then Circle Office Committee for Enforcement
of Security Interest (COCESI) may at its discretion, revise reserve price by
giving further discount for the subsequent auctions.
97

g) Proceeds of sale, net of expenses incurred in this regard, shall be promptly

credited to borrower‟s loan account towards liquidation.

 For taking possession and /or for sale services of a suitable Agency can be
taken out of the list provided by Circle Office.
/0

 Intimation to Police authorities can be sent for information only, though it is

not mandatory.
17

 In case the borrower refuses to sign the paper/possession memo, copy of

same be sent to the borrower through Registered Post (Acknowledgement
Due) when bank repossess the vehicle.
 On repossession of the vehicle by the Bank, immediate information be also
provided to the local Police Authorities, intimating time and place when the
vehicle was repossessed.
 After seizure of the vehicle, prompt and quick steps shall be taken to dispose
off /sell the vehicle but in any case not exceeding 60 days from the date of
seizure, failing which the vehicle / tractor may be restored back to the
borrower.

The following fee structure has been approved for these Seizure & Disposal
Agents:

51 | P a g e
S Service rendered Fee Payable
No.
1 Seizure and transporting the Maximum Rs.3000/- per vehicle for Cars,
vehicle to a nearby godown Trucks etc.
Maximum Rs.4000/- per vehicle for
Tractors.
2 Acting as custodian of vehicle Maximum Rs.125/- per day for a
/ StorageCharges maximum period
of 60 days during which either the
possession is to
be restored to the borrower or the vehicle
is sold

2
3 Sale of vehicle 5% of amount realized.

4 2:5
Recovery without seizure/sale 5% of amount recovered.
02 1
02
of vehicle/ Tractor
3/2 98
97

************
/0
17

52 | P a g e
 8. Policy on sale/transfer of financial assets to Securitization
Companies (SCs) / Reconstruction Companies (RCs) / Other Banks
/ FIs & NBFCs
(SASTRA DIVISION Circular no 35/2018, 26/2019 and 30/2019, 04/2020)

Scope

 This policy is applicable to transfer / sale of financial assets by the Bank to

Securitization Companies / Reconstruction Companies, under the
Securitization and Reconstruction of Financial Assets & Enforcement of
Security Interest Act, 2002 (SARFAESI Act)/Other Banks/FIs/NBFCs
(excluding RRBs), including portfolio sale.
 The policy shall comply with the guidelines issued by RBI from time to time
and shall be transparent and fair.
 A financial asset may be transferred to Securitization Company /

2
Reconstruction Company on outright sale basis under Sections 5(1)(a) and

2:5
5(1)(b), or Agency basis under Section 10(1) of the SARFAESI Act.

Objectives of the Policy

02 1
02
3/2 98

 It helps in resolution of NPAs by transfer / sale and also Non Performing

Investments (NPIs) in case of sale to other Banks/FIs/NBFCs.
97

 It helps in swiftly realizing as much of total dues as possible depending upon

valuation of underlying security interest. In case of a running business the
realization shall be based upon its economic potential, which ordinarily should
be more than its liquidation value
 It reduces expenditure on NPA maintenance (legal expenditure, follow-up
requirements etc.) and releases resources for core operations.
/0

 It sends signals that the Bank is serious in resolution of NPAs, even by off-
17

loading them.
 It helps in creating an active and vibrant market for NPA/ Restructured debt
papers. To develop a healthy secondary market for NPAs/NPIs.

Eligibility of the SCs/RCs for Purchase of financial assets of

the Bank
 Financial assets would be offered for transfer / sale to only those
Securitization Company (ies) / Reconstruction Company (ies) who has /
have obtained the Certificate of Registration from RBI under Section 3
of the SARFAESI Act before providing information in respect of a
financial asset to them.

53 | P a g e
  Asset Reconstruction Companies (ARCs) shall not acquire financial
assets from the following on a bilateral basis, whatever may be the
consideration:
(i) a bank / financial institution which is the sponsor of the ARC;
(ii) a bank / financial institution which is either a lender to the ARC or
a subscriber to the fund, if any, raised by the ARC for its
operations;
(iii) an entity in the group to which the ARC belongs. However, they
may participate in auctions of the financial assets provided such
auctions are conducted in a transparent manner, on arm‟s length
basis and the prices are determined by market forces”
 Whenever Bank‟s financial assets are placed for sale to the
SCs/RCs/NBFCs/FIs/Banks etc. (whether Bank approaches them or
they approach the Bank), it must be ensured that invitation is sent to
minimum 5 SCs/RCs/Banks/NBFCs etc. in order to get better offers.

2
Eligibility criteria for accounts to be placed for sale/transfer
S.No.
SCs/RCs 2:5
List Of Financial assets Which can be Sold To
Banks/FIs/NBFCs
02 1
02
3/2 98

1 A NPA, including a non- A financial asset, including assets under

performing bond/debenture. multiple/ consortium banking
arrangements, would be eligible for sale
97

2 A Standard Asset, where:

to Banks/FIs/NBFCs etc. if it is non-
(a) The asset is under performing asset / nonperforming
consortium/multiple banking investment in the books of the Bank.
arrangements,
(b) At least 75% by value of
/0

Banks will be permitted to sell their

the asset is classified as
NPAs to other Banks/FIs/NBFCs
nonperforming assets in the
17

(excluding SC/RC) without any initial

books of other Banks/FIs
and
(c) At least 75% by value of
the banks/FIs who are under
consortium/multiple banking
arrangements agree to sale
of the asset to SC/RC.
holding period. However, the non-
performing financial asset should be
held by the purchasing bank for a
period of 12 months before it is sold to
other Banks/FIs/NBFCs (excluding
SC/RC).

Additional Sub-Category of accounts permitted for sale

54 | P a g e
 S.No Category Of Accounts Remarks
1 Wilful defaulters/Criminal Proposal for approval shall be
Action (only non-fraudulent considered by the Management
cases) cases. As per RBI Committee on merits of the case
guidelines, fraud cases cannot
be considered for sale.
2 Accounts backed by Govt. Such cases may also be considered for
Guarantees sale, subject to approval by the Board.
3 A written off NPA may also be considered for transfer / sale.
4 A financial asset in respect of which any case is pending before a
Court/DRT/BIFR etc. may also be considered for sale
5 All the financial assets due from a single debtor shall be considered for
transfer / sale. Similarly, financial assets having linkages to the same

2
collateral/common security shall be considered for transfer / sale

2:5
simultaneously. Both fund and non-fund based financial assets may be
included in the list of assets for transfer / sale.
6 Retail NPAs of homogeneous nature may also be sold on portfolio basis
02 1
02
to SCs/RCs/Other Banks/FIs/NBFCs etc
3/2 98

Exempted category of advances for sale

97

For the time being, NPAs falling under following categories shall be excluded
from sale / transfer to SCs / RCs/Other Banks/FIs/NBFCs etc.:
 Any loan originated fraudulently or has been classified as fraud as on the
date of sale. This is equally applicable to standalone/ bilateral sale of
/0

accounts.
 NPAs in respect of which OTS is already concluded and is under
17

implementation.
 NPAs where restructuring is already approved and is under implementation.

Identification and approval of accounts to be placed for sale

“Identification of accounts for sale will be carried out twice a year, in the months
of June (after finalization of Bank‟s annual accounts) and December every year
and the same will be got approved by Management Committee of Board (MC).

Looking to sensitivity involved in cases relating to sale of financial assets, the

proposal(s) shall be considered for approval by the Management Committee
(MC) through:
55 | P a g e
 Circle Office Asset Sale Committee(COASC)
 Zonal Office Asset Sale Committee (ZOASC)
 Head Office Assets Sale Committee(HOASC) and
 Head Office Settlement Advisory Committee(HOSAC)(Approval is taken
in the beginning of the sale process)

2
2:5
02 1
02
3/2 98
17
/097

56 | P a g e
Public Notice to prospective buyers

At the time of commencement of sale process (i.e when invitations are being
sent through mail to ARCs/NBFCs, whose email ids are available), the invitation
will also be placed on the Bank‟s website and in case of need, advertisements
may also be published in two newspapers to give an open public offer, to have
wider reach and fetch better sale price.
While placing the invitation on the Bank‘s website, list of accounts will also
be up-loaded, which are being offered for that particular sale process and
not the complete list got approved from the MC.

Sale Consideration for the Financial Assets Sold to SCs/RCs (only)-

In case of sale of financial assets to the SCs/RCs, minimum cash component will
be 15% of the sale price and rest 85% in the form of Security Receipts/Bonds
etc.

2
Trusteeship Fee/Management Fee


 2:5
Management Fee shall be payable to the ARCs at a flat rate of 2%.
Management fees shall be calculated and charged as percentage of the
02 1
02
Net Asset Value (NAV)at the lower end of the range of the NAV specified
3/2 98

by the Credit Rating Agency (CRA)(rather than on the outstanding value

of SRs as at present) provided the same is not more than the acquisition
value of the underlying asset.
97

Cash Incentive
 An incentive on Cash Value of SRs redeemed, will also be paid in addition to
the Management Fee mentioned above, at the following rates:
1 st year & 2nd year 4.00%
/0

3 rd year 3.50%
17

4 th year & above 3.00%

Other Important Aspects-

 The Bank shall pursue the staff accountability aspect as per the existing
instructions in respect of NPAs sold to Purchaser i.e. SCs/RCs/Other
Banks/FIs/NBFCs etc. till taken to the logical end.
 The financial asset including the underlying secured assets, if any, shall be
sold on „as is where is‟ basis.
 The Bank may, if it considers appropriate, give a notice to the borrower at the
last address available with the bank about acquisition of the financial asset by
57 | P a g e
 the Securitization Company / Reconstruction Company/ other banks/ FIs/
NBFCs etc.
 Status of ECGC/DICGC Claim received/to be received-ECGC/DICGC
claim received/to be received shall be retained by the Bank, subject to sharing
of sale proceeds proportionately in terms of extant guidelines i.e. the claim
amount will be given the same treatment as in case of recovery/OTS. Pro-rata
shares shall be refunded to the corporation on account of recoveries. The
same procedure shall be followed as being done in OTS policy.

Procedure for Transfer / Sale of Financial Assets-

 Legal Due Diligence Exercise (LDDE) and Financial Due Diligence Exercise
(FDDE) in respect of the assets for exposing any potential / commercial fall
outs arising out of the intending sale shall be undertaken or shall be got
carried out by the intending purchaser i.e. SCs/RCs/Other Banks/FIs/NBFCs
etc.


2
Financial assets shall be transferred / sold through an agreement of
assignment as per Standardized Assignment Agreement.

2:5
The effect of the sale of the financial assets shall be such that the asset is
taken off the books of the bank and after the sale there shall not be any
02 1
known liability devolving on the bank, i.e., sale of the financial asset be made
02
only on „without recourse‟ basis.
3/2 98

 Sale of financial assets will be made by inviting bids from SCs/RCs/Other

Banks/FIs/NBFCs etc so as to get the best price.
97

 “Whenever Bank‟s financial assets are placed for sale to the

SCs/RCs/NBFCs/FIs/Banks etc. (whether Bank approaches them or they
approach the Bank), it must be ensured that invitation is sent to minimum 5
SCs/RCs/Banks/NBFCs etc. in order to get better offers. The above condition
of giving invitation to minimum 5 buyers, will not be applicable in those cases,
where a prospective buyer offers 100% Memoranda Dues.
/0

 Process of bid-evaluation shall be indicated upfront and modifications, if any,

17

of such terms of auction shall be made after giving a sufficient notice.

 Similarly, terms of payment and the mode of payment whether Cash and/or
Security Receipts, to be clearly indicated. At the time of opening of bid, the
highest bidder to be declared.
 Bank will not use auction process for sale of NPAs as a price discovery
mechanism for such assets, where the bids are invited from SCs/RCs and no
bid is accepted without assigning any reason.
 Clauses for non-acceptance of the bids will be conveyed to the bidders.
 If a bid received is above the Reserve Price and a minimum 50% of sale
proceeds is in cash and also fulfills the other conditions specified in Offer
Document, acceptance of that bid would be mandatory for the Bank.

58 | P a g e
Important aspects associated with fixation of Reserve Price& Bid Amount
More Than Memorandum Dues
 The Reserve Price for the account(s) placed for the sale, will be disclosed to
the ARCs/Banks/FIs etc. before sending invitation to them to start the Due
Diligence exercise along-with the PIMs, Management Fee, Cash Incentive etc

 Separate Reserve Price may be fixed for offers received on-

 100% cash basis and
 Other than 100% cash basis

 Where 50% (by value) or more, Banks/FIs have already sold/assigned their
share in a financial asset to any ARCs/Banks/NBFCs etc., the Reserve Price
at which the Other Banks have sold their shares to the ARCs, may be
considered as an Indicative Price, wherever the information is available,
which however shall not be binding on our Bank to sell our share.

2
Bid received more than Memoranda Dues

2:5
 In several cases the bid amount received is more than Memoranda Dues.
For accounting treatment in such cases, HO: Law Division has opined:
 “There is no legal issue in assigning a debt for a sale consideration
02 1
02
amount more than the memorandum dues”. Thus, the excess amount
3/2 98

received may be credited, proportionately to the respective heads of

―Income Interest on Loan and Advances‖, say Income Intt. on CC/
term Loan etc. In case, subsequently, the excess amount is to be
97

returned due to e.g DRT/Court orders or any other eventuality, the same
head may be debited to refund the excess amount recovered.

Assignment of Assets
 Financial assets could also be transferred by an Agreement of
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Assignment of Rights to Securitization Company / Reconstruction

Company to act as “Manager” and/or „Agent‟ for the purpose of
17

recovering dues from the borrower on payment of fees / charges as may

be mutually agreed upon between the Bank and the Securitization
Company / Reconstruction Company.
 When the SC/RC does not take over the asset but acts as an agent for
recovery, the asset will not be removed from the books of the bank but
realizations as and when received will be credited to the asset account.
Provisioning for the asset will continue to be made by the bank in the
normal course.

Pricing/Valuation

 The objectives of the valuation are essentially to:

59 | P a g e
 a) arrive at Net Present Realizable Valueof the assets;
b) provide a basis for fixation of Reserve Price, evaluation and
acceptance of offer of Securitization Companies /
Reconstruction Companies/ other banks/FIs/NBFCs etc for sale
/ transfer of assets.
Valuation Reports
 The bank shall make internal assessment to determine Net Present
Realizable Value(NPRV), which will be preferably based on the latest
valuation report obtained from the Bank‟s approved valuer, wherever
feasible.
 Latest Valuation Report which should not be older than 1 year, as on
the date of submission of PIM to the intending buyer.
 “In case the value of immovable property is Rs.5 crore & above each,
branches shall get valuation of such IP done from minimum two
valuers on the Bank‟s approved panel.
 In case the difference in valuation by the two valuers is less than 15%,

2
the average value may be taken.

2:5
and
 In case the difference in valuation by the two valuers is more than 15%,
then the higher value be considered for calculation of NPRV/Reserve
02 1
02
Price.
3/2 98

 In case of sale of accounts, the cost of valuation will be borne by the

Bank.”
97

Evaluation of offer given by buyers, Due Diligence Exercise & First Right
of Refusal
 As per the requirement of CVC, offers shall be invited under two
separate sealed covers namely Technical Bid (TB) and Price Bid
(PB).
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 Technical Bid consists of terms and conditions of Bank (Annexure-

Technical Bid) for sale of NPAs to be accepted unconditionally by the
17

intending buyers i.e SC/RC/ Other Banks/FIs/NBFCs etc.

 Price Bid covers the offers of the intending buyers for the acquisition
of NPAs on individual basis and/ or on portfolio basis. Final decision on
acceptance of their offer shall be vested with the Management
Committee.
 Time for Due Diligence Exercise- As advised by RBI in its circular
dated 01.09.16, minimum period of two weeks will be given to the
prospective buyers to complete their Due Diligence Exercise.
 The committees at the Circle, ZM and Head Office level shall make a
study of Reserve Price and the offer made by the SCs/ RCs/ Other
Banks/FIs/NBFCs as the case may be for deciding whether to

60 | P a g e
 recommend acceptance of the offer or reject the same and also
calculate sacrifice amount against the offer.
 Further, in case highest bid is lower than the Reserve Price, the Bank
may scrap the process for said individual asset/assets under
portfolio. However, in exceptional cases negotiation with the highest
bidder may be considered in view of CVC letter dated 03.03.2007.
 The COASC shall fix the Reserve Price as per the latest present
realizable value of available security net of cost of realization, as per
Annexure-NPRV and recommend to the ZOASC, which will review it
and after finalization will inform to the HO SASTRA Division. It is to
be ensured that Sale Price should not be lower than the net
present realizable value arrived at.
 Head Office Assets Sale Committee (HOASC) will examine &
recommend the Reserve Price on the basis of recommendations
received from the Zonal Assets Sale Committee (ZOASC).There after
the Reserve Price so recommended by the HOASC will be placed to

2
the Head Office Settlement Advisory Committee (HOSAC) for

2:5
consideration and final approval. Thereafter, complete terms &
conditions including Reserve Price approved by the HOSAC will be
placed to the HOCAC-III, seeking permission to start the Sale process.
02 1

02
Para No. 6.4 {d (ii)-on sale of financial assets} of the RBI Master
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Circular dated1st July, 2014 on IRAC norms, provides that in the

case of consortium / multiple banking arrangements, if 75% (by value
of amount outstanding) of the banks / FIs decide to accept the offer,
97

the remaining banks / FIs will be obligated to accept the offer.

 Debt Aggregation-First Right of refusal
In terms of Para 6 of the RBI Circular dated 01.09.16, to enhance debt
aggregation of the SCs/RCs, first right of refusal will be given to the
SC/RC, which has already acquired the highest and at the same time
/0

a significant share (approximately 25%-30%).

In case of a normal sale process, invitation is sent to all the ARCs
17

having RBI registration through mails, as per the available data base of
e-mail ids. In future as advised by RBI, invitation is to be publically
solicited, for which invitation will be up-loaded on Bank‟s website also,
thus the SC/RC having the highest as well as a significant share,
will automatically get the right to refusal, in case they decide not
to bid.

Capital Adequacy
 For the purpose of capital adequacy, the bank should assign risk
weights to the investments in debentures/ bonds/ security receipts/
PTCs issued by Securitization Company/ Reconstruction Company and
held by the bank as investment, as per extant RBI guidelines and

61 | P a g e
 Treasury Division/Finance Division of the Bank shall monitor all
aspects relating to Capital Adequacy.

Exposure Norms
 Bank‟s investments in debentures/ bonds/ security receipts/PTCs
issued by a Securitization Company/Reconstruction Company will
constitute exposure on the Securitization Company/Reconstruction
Company. Wherever sale consideration is to be received in the
form of such instruments, the Head Office Asset Sales Committee
shall be required to obtain clearance of Treasury Division at Head
Office who shall monitor all aspects relating to prudential
exposure ceiling on a case-to-case basis as per RBI‘s guidelines
in force from time to time.

Documentation & Preservation of Records

 A Non-Disclosure Agreement (Annexure-NDA) shall be executed at

2
Head Office by the intending buyers i.e. SCs/RCs/Other

2:5
Banks/FIs/NBFCs etc. This Agreement will remain valid for 5 years.
 All charges relating to Stamp Duty, Registration etc. shall be borne by
the Securitization Company / Reconstruction Company / Other Banks /
02 1
02
FIs / NBFCs etc.
 Now, since the Assignment Agreement is in line with the IBA
3/2 98

stipulations, no change is permitted, without taking consent from the

Bank. Any amendments proposed by the ARC/Buyer, will be duly
97

vetted by the Head Office Law Division.

 Documents will be executed by two Power of Attorney holders of the
respective branches having the related accounts.
 Statement of Account and Memoranda Register- A copy of the
statement of account as prepared in the ledger as well as in the
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memoranda register, duly certified as per Banker‟s Book Evidence Act

be furnished to the SC/RC/Other Banks/FIs/NBFCs etc. as Purchaser.
17

Further, statement of account as well as memoranda register be

preserved and shall not be destroyed.
 Documents relating to credit facilities- An inventory of all the
documents relating to the account be made out, kept in seriatim and in
a presentable manner. Further, 3 or 4 sets of copies of the documents
be prepared. One set of copies should be kept safe. When documents
are delivered to Purchaser i.e. SC/RC/Other Banks/FIs/NBFCs etc.
along-with or after execution of assignment agreement, a receipt on the
inventory prepared be obtained and the same be kept on record.
 As regards the mortgage created by deposit of title deeds, the relevant
entries made in the title deed register for creation as well as further
creations, should not be disturbed. If original title deeds are delivered
to purchaser, in the remarks column, the purchaser may give a
62 | P a g e
 receipt with the remarks „taken for further custody‟. The entry
should not be closed or cancelled.

Handing over of documents and files to ARCs/Buyers-

 Once the account has been closed after sale to the ARCs/Other
Buyers, the necessary documents/files should be handed over to them
within 15 days by the concerned branch. Concerned Circle Office
should ensure that there is no dispute in all such matters.
 For branch‟s records, necessary photocopies and the receipt from the
buyer for having received the documents must be kept in records for
any future reference.

Resolution of Disputes-If there is any dispute between Securitization

Company/Reconstruction Company/Other Banks/FIs/NBFCs etc. and
PNB or Qualified Institutional Buyers in respect of securitization or

2
reconstruction or non-payment of any amount due including interest, it

2:5
shall be settled in accordance with Section 11 of the SARFAESI Act. The
disputes between Securitization Company/ Reconstruction
Company/Other Banks/FIs/NBFCs etc., Bank and Qualified Institutional
02 1
02
Buyers cannot be taken to civil court.
3/2 98

Monitoring- SASTRA Division, Head Office shall monitor progress in the

matter of sale of financial assets to Securitization Companies /
97

Reconstruction Companies/ /Other Banks/FIs/NBFCs etc.

***********
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63 | P a g e
9. WAYS & STRATEGIES TO IMPROVE MANAGEMENT OF NPAs
(SASTRA Division Circular No-57/2019)

SEGMENT-A- MONITORING & IDENTIFICATION OF NPAs

IRACP (Income Recognition, Asset Classification & Provisioning)
Norms:
Based on the latest regulatory guidelines issued by Reserve Bank of India,
the guidelines on Income Recognition, Asset Classification and Provisioning
are circulated by HO: SASTRA Division from time to time.These guidelines
are to be meticulously followed by all concerned.

Responsibility and Validation for proper Asset Classification

Functionaries responsible for proper Asset Classification/Provisioning in Loan
Accounts are:

2
2:5
Loan Accounts With Responsibility &validation level for proper
Balance Outstanding of asset classification
Rs.1 crore and above Circle Head/ Branch Head of LCB (Under
02 1
02
intimation to Zonal Manager)
3/2 98

Rs.10 lac and above but AGM/Chief Manager of ELBs/VLBs/MCB/ Circle

below Rs.1 crore Office (Under intimation to Circle Head &Zonal
97

Manager in case of LCB)

Loan accounts of below Branch Heads jointly with the Concurrent Auditor
Rs. 10 lac wherever posted.
In other branches, Branch Head jointly with the
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Incharge of Loans Department.

17

Incharge of Loan Department in respect of

ELBs/VLBs/LCBs jointly with Concurrent Auditor
wherever posted (Loan Officer Incharge wherever
Concurrent Auditor is not posted)

Channel to settle doubts in asset Classification due to any reason:

Level seeking Authority to settle the Maximum Time period
clarification doubts
Branch Heads of AGM/ CM of respective Within 48 hours of
Branches other than Circles reference received.

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ELBs/ VLBs
Branch Heads of Circle Head of Within 3 days of
ELBs/VLBs/MCB respective Circles reference received.
Circle Heads/ DGM of Zonal Manager or any Within 3 days of
LCB functionary authorized reference received.
by ZM

Ascertainment of Interest not Realized (DI)-

When a credit facility is classified for the first time as NPA interest accrued &
credited to the income account in the past periods, which has not been
realized is ascertained and same has to be reversed and credited back in the
respective account itself at the close of the year/half-year/Quarter at the
branch level by debiting Profit & Loss Account with following particulars:
―Unrecovered Interest reversed and recorded in Memoranda A/c‖

2
In respect of NPAs, fees, commission and similar income that have accrued,
ceases to accrue in the current period, has to be reversed with respect of past

2:5
periods, if uncollected, as above.
02 1
Order of Appropriation of Recoveries in NPAs-
02
Recoveries in NPA Accounts (irrespective of the mode / status / stage of
3/2 98

recovery actions), henceforth shall be appropriated in the following order of

priority:
97

1. Expenditure/Out of Pocket Expenses incurred for Recovery, including

under SARFAESI action (earlier recorded in Memorandum Dues;
2. Principal irregularities i.e. NPA outstanding in the account gets
upgraded / adjusted, whichever is earlier;
3. Thereafter towards interest irregularities/accrued interest.
/0

Monitoring & Review of NPA Accounts-

The most important step in resolving/reducing NPAs is close, intensive and
17

prompt monitoring of accounts so as to evolve Accounts Specific Resolution

Strategies.

Physical verification of securities/Immovable properties etc.

 Branch Head should ensure that title deeds of the charged IPs are
intact and mortgage continues to be legally enforceable.
 Branch Head to ensure immediate visit of the unit/location and verify
the primary and collateral securities and thereafter regularly at
irregular intervals so that the same are not diluted/disposed
off/alienated by the obligants.

65 | P a g e
  Details of other attachable assets of the obligants are also required to
be ascertained/verified and placed on bank‟s record with the help of
Detective Agencies etc.

SEGMENT-B- SPEEDING UP THE PACE OF RECOVERIES

Up-gradation Through Tagging Arrangements-
In certain cases, bank permits operation in the account by tagging
arrangement.
Powers to allow need based Tagging have been delegated as follows:
1. Tagging of 15% and above is to be sanctioned by Branch Head.
2. Tagging from 10% to less than 15% is to be sanctioned by Circle Head.
3. In exceptional cases if tagging is to be fixed below 10%, the proposal
are to be sent to Zonal Manager for sanction {previously GM(HO) as
per Recovery Div. Circular no. 21/2009 but as per Recovery Division

2
(Now SASTRA Division) Circular no. 17/2012 changed to ZM}.

2:5
Accounting System (Appropriation of credits) in NPAs with Tagging
Arrangement-
 Even in case of recoveries through tagging arrangement, the chain of
02 1
02
appropriation will remain same, as in case of other NPA accounts.
3/2 98
97

Viability of Tagging Arrangement-

 Analysis of future cash flows and expected credits available through
tagging vis-à-vis overdues would be done to ascertain the viability of
up-gradation and accordingly a specified time period be spelt out in
the sanction for upgradation of accounts.
/0

Securities
 There should be no dilution in securities and all other aspects relating
17

to security i.e. receipt of inventory and inspection thereof shall be as

per extant guidelines of the Bank.

Operations in the account

 Tagged amount out of each credit would be retained in the CC a/c and
balance would be allowed to be withdrawn by the party.
 Debits in the account will be allowed with the written permission of
Branch Head through Overdraft Sanction Register to ensure that
tagging arrangement is being implemented in strict compliance of the
sanction.

66 | P a g e
 Termination of Tagging Arrangement
 Tagging arrangement should be reviewed on half-yearly basis to take
decision to continue or terminate the said arrangement.
 Up-gradation of account with exercise of tagging be ensured within the
specified time period.
 On failure of recovery as above the tagging arrangement should be
terminated immediately after giving a notice of 15 days and recovery
action should be initiated.
Up-gradation through Restructuring/ Change in Management-
The circumstances leading to the account becoming NPA should be
examined in detail and in genuine cases of default, the matter may also be
examined for Resolution by way of Restructuring / Re-phasing / Amendment
in repayment terms / Change in ownership etc. To put in place a transparent
mechanism for restructuring of debts of potentially viable entities facing

2
temporary problems bank has already put in place Policy & Framework For
Resolution Of Stressed Assets vide IRMD LA Circular 93/2019 dated

2:5
17.08.2019 & IRMD LA Circular 67/2019 dated 10.06.2019. (The extant
instructions on resolution of stressed assets such as Framework for
Revitalising Distressed Assets, Corporate Debt Restructuring Scheme,
02 1
02
Flexible Structuring of Existing Long Term Project Loans, Strategic Debt
3/2 98

Restructuring Scheme (SDR), Change in Ownership outside SDR, and

Scheme for Sustainable Structuring of Stressed Assets (S4A) stand
withdrawn by RBI vide their circular dated 7th June 2019.)
97

However, it is expected that, before any loan account turns in to NPA or even
at a stage of financial stress before occurring a default, it is expected that
lenders initiate process of finding and implementing a resolution plan.
/0

Restructuring encompasses both financial restructuring and operational

restructuring,
17

NPA A/Cs under CGFT/CGTMSE Guarantee Cover

Timely and correct identification of such accounts or NPA, quickly lodging the
claims with CGTMSE and ensuring their settlement in terms of their
Guarantee Cover and its appropriation as above should be ensured.

NPA A/cs under Consortium/Multiple Banking Arrangement

Vide Recovery Division (Now SASTRA Division) Circular No. 37/2013
dated 31.07.13, detailed guidelines to handle/tackle NPA A/cs under
Consortium/Multiple Banking Arrangements have been laid down viz:

 In case of consortium advances, where our bank is Lead Bank or the 2nd
largest participating bank, meeting would be attended by the Circle
67 | P a g e
 Heads/Second in command. In case of limits under LCBs power, the Branch
Head /other senior officials, not below the rank of Scale-IV after having
mandate from Branch Head of LCBs would attend the meeting.

 Where the Bank is neither the Lead Bank nor the 2nd largest participating
bank, the meeting to be attended by second in command from the Circle
Offices and in case of advances under LCBs power, senior officer not below
the rank of Scale-IV from LCBs to attend the meeting.

 An official who is participating in the consortium meetings should be well

versed with the history of the account. The officer attending consortium
meetings should do necessary ground work like preparation of notes etc.
before attending the meeting.

 Branch/Circle Office should obtain/provide in principle approval/mandate from

the competent authority in advance on the Agenda item.

2
 Consortium meetings should be held regularly.

2:5
 On receiving the minutes of the meetings, CH/representative who attended
the meeting should ensure that Bank‟s viewpoint has been adequately and
properly incorporated. If not, the matter should be taken up immediately with
02 1
02
the Lead Bank.
3/2 98

 In order to have effective participation in Joint Lenders Meet convened by the

respective lead bank/FI in respect of High Value NPA A/cs (say having
97

outstanding of Rs.25 crore & above) a Senior Level functionary from the
Recovery Division (Now SASTRA Division) should also be attending such
meetings. Further it should be ensured that such meetings are attended by
Zonal Manager/Circle Head himself also.

 Therefore, it should be ensured that Agenda Notice along with Background

/0

Papers and specific views/recommendations of the Circle Head/Branch Head

LCB are sent to the competent authority (in case of outstanding above Rs.25
17

crore to Recovery Division (Now SASTRA Division) HO also) in advance to

enable to take in principle approval to provide a mandate while attending the
meeting on the stand to be taken in such consortium/Jt. Lender Meetings.

 Immediately after an account becomes NPA, as a proactive measure, the

Branches irrespective of our share in the lending should press for convening
the Consortium/Joint Lenders Meet even in cases where we may not be the
leader and/or formal consortium may not exist like in case of Multiple Banking.
Where ever we are the leader and/or major shareholder, Branches should
suo-motto convene such meetings, with a view to discuss ways and means of
bringing back the Account to normalcy and/or taking further recovery
measures.

68 | P a g e
  Obviously the initial efforts/actions should aim at helping the borrower to come
out of genuine business difficulties and help him draw out a plan for up-
gradation of the accounts through Tagging arrangements, Rescheduling/
Restructuring/ Rehabilitation etc. either through CDR mechanism or
otherwise.

 A specific mandate from the competent authority to support or not to

support such plans should be obtained in advance, based on the merits
of the case. If normalcy cannot be brought out in near future, a common
consensus needs to be developed in a time bound manner for initiating
measures viz Restructuring/CDR, SARFAESI Action, Filing Recovery Suit
with DRT, exploring negotiated settlement, declaring them as Wilful
Defaulters, filing of FIRs/Criminal complaints declaring the account as Fraud.

E-Auction Portal –As per extant guidelines of the Bank, under the
SARFAESI Act, Auction Notices are required to be uploaded on following
websites, besides publication in two newspapers immediately after

2
publication (i.e. on the date of publication)

2:5
(i) www.pnbindia.in (Regulatory Disclosure)  Bank‘s website
(ii) https://eprocure.gov.in/epublish/app. The Indian Government Website
(iii) www.pnbindia.biz  Bank‘s portal for e-auctions
02 1
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E-BIKRAY Portal
3/2 98

 To provide a common platform to display details of properties to be auctioned

online by Banks, Indian Banks Association (IBA) under the overarching policy
97

of the Department of Financial Services (DFS), Ministry of Finance, has

developed a portal named “E-Bikray”. The link of the said portal is
https://ibapi.in (Indian Banks Auction Properties Information).

 The main purpose of this portal is to provide a centralized platform for all
/0

Public Sector Banks to upload and display their securities to be auctioned

under SARFAESI Act, 2002 (including IPs, Plant & Machinery etc). The portal
17

will give prospective buyers a common platform to search for properties to be

auctioned, as per various search parameters. Necessary guidelines on E-
Bikray Portal have been circulated through SASTRA Division Circular
No. 32/2019 dated 19.06.2019.

Recovery Camps/ RinMuktiShivirs

 For faster and quicker resolution of NPAs, besides taking legal actions and/or
enforcing the charged securities under SARFAESI or otherwise, establishing
a one to one dialogue with such defaulting/NPA borrowers with a view to
explore the possibilities of OTS/ Negotiated Settlement/ Compromise on
mutually acceptable terms, is perceived to be an effective and useful tool.
69 | P a g e
 Therefore, ―Recovery Camps/RinMuktiShivirs‖ particularly for
Agriculture/Retail Loans in Small/Mid Cap NPAs (i.e. accounts with balance
below Rs.10 lacs) are to be conducted periodically in an effective and
structured manner after doing proper spade work so as to explore the
possibilities of OTS with a view to Maximize the Recoveries in Minimum Time.

 Every month each circle should endeavour to hold at-least 3-4 Mega
Recovery Camps/RinMuktiShivirs in each quarter by clustering 9-10 branches
at one camp, where Circle Head and/or his Deputy (concerned AGM/CM)
should personally be present to accord on the spot approvals of OTS,
preferably with immediate payments. ZMs may also participate in such
RinMuktiShivirs for better results.

*****

2
2:5
02 1
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17
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70 | P a g e
 10. Policy for Engagement of Recovery Agency
(Sastra Div Cir no 20/2019)
Objective
The scheme aims to significantly supplement efforts of branch officials in recovering
bank‟s dues in NPAs under doubtful and loss category upto Rs 10 lacs and also
written off accounts, thus achieving substantial reduction in number of NPAs. The
scheme also aims at recovering as much amount as possible in written off accounts.

Eligibility criteria for allocation of accounts to Recovery Agencies

All NPA accounts under Doubtful and Loss category (whether non-suit filed, suit
filed or decreed) with ledger outstanding not exceeding Rs 10 lac and also all written
off accounts shall be covered by the scheme except accounts where compromises
have been approved (including those reached at in LokAdalats) and have not been
treated as failed.

2
Circle Head shall be the Competent Authority to approve empanelment of the

2:5
Recovery Agencies and any decision in this regard would be final. There
would be no review process by any higher authority. Zonal Manager may
permit to utilize the services of a Recovery Agency in other Circles under his
02 1
02
jurisdiction.
3/2 98

Involvement of Recovery Agencies during negotiations with borrowers

Branches/Circles should generally involve the Recovery Agents to participate during
97

settlement discussions with the borrowers. In fact, presence of Recovery Agents who
are responsible for follow-up with the borrowers is beneficial for settlement through
negotiations and can result
into higher settlement. This facilitates to integrate the efforts of the Recovery/
Resolution Agents and Bank officials and avoids any communication gap.
/0

It must be ensured that parting of documents to the Recovery Agencies is not

permitted under any circumstances.
17

The Agency shall furnish to the Bank‘s Circle Office, a Bank guarantee for an
amount of Rs 1,00,000/-.

Allocation of job/accounts to Recovery Agencies

Branches will allocate the account(s) to Recovery Agency. However, Circle Office
should monitor the process of allocation of accounts by the branches to ensure that
proper mix of Doubtful/Loss accounts (difficult to resolve) is allocated to the
Recovery Agencies. This will motivate the Recovery Agencies to make sincere
efforts with keen interest for recoveries in NPAs so that the assignment becomes
commercially viable and becomes win win situation for the Bank and them. Circle
Head shall ensure that sufficient number of accounts, are(approximately 500 in
number) allocated to each Recovery Agent to get optimum results. In case one

71 | P a g e
branch is unable to provide requisite number of accounts, Recovery Agents be
allocated accounts from nearby branches.

Further, allocation process be completed within 15 days from the date of

allotment of Recovery Agency for the concerned branches by the Circle Office.

As far as possible all eligible accounts be allocated to the Recovery Agencies.

The branch will specifically issue a Job Card (as per Annexure-5) to the person,
working on behalf of Recovery Agency containing particulars of the accounts allotted
to him for recovery, giving brief details of the borrower, dues and security available
as per Annexure-5 of the circular.

Withdrawal of accounts
Since allocation of accounts to the Recovery Agencies is done by the Branch,
Branch Head may consider withdrawing of allocated accounts from Recovery
Agencies after 6 (six) months of allocation, in case no effective result is yielded by

2
them. For this, a Withdrawal Notice must beinvariably sent by the Branch to the
Recovery Agency and its copy be sent to the Circle Office and kept in the records of

2:5
the Circle Office/Branch to avoid any disputes/complications/payments in the future.

Commission payable to Recovery Agencies is as under:-

02 1
02
Age of NPA Commission payable on amount of Recovery
3/2 98

For Suit Filed/ non Suit Filed For Decreed

For A/Cs with O/s For A/Cs with O/s Accounts
upto Rs 1 lac above Rs 1 lac
97

Upto 3 years 7.5 % 5.0 % 5.0 %

Above 3 years upto 10.0 % 7.5 % 7.5 %
5
years
Above 5 years 15.0 % 10.0 % 10.0 %
/0

The above mentioned rates payable to all categories of Resolution Agents are
all subject to Goods & Services Tax (GST)
17

Competent Authority for payment and settlement of disputes :

Incumbent Incharge of the branch will be the competent authority to finalize the
bill/claim submitted by the Recovery Agencies and its payment, based on their
record of recoveries and as per the Bank‟s extantguidelines.

In case of any dispute, Circle Head may take the final decision, considering
facts of the case and for LCBs the concerned ZM shall be the competent
authority for settlement of disputes.
Commission is to be paid by the branches to the debit of Expenditure:
Outsourcing of Financial Services {P & L- GL Report Code 11427 (Account
No.<solid> 1142702)} as mentioned in Inspection & Audit Division Circular no.51/08
dated 18.09.2008.

72 | P a g e
 13. POLICY ON ENGAGEMENT OF SUPPORTING AGENCIES UNDER
SARFAESI ACT 2002 ( Sastra Div Cir No 23/2019)

The Securitization and Reconstruction of Financial Assets and Enforcement of

Security Interest Act (SARFAESI Act) - 2002 provides for enforcement of security
interest for realization of dues without the intervention of Courts or Tribunals.

Provisions of SARFAESI Act

Section 13 of Chapter III of SARFAESI Actdeals with enforcement of security
interest. Sub-Section 4 of Section 13 stipulates that in case the borrower fails to
discharge his liability in full within the period of 60 days from the date of notice to pay
up, the secured creditor may take recourse to following measures to recover his
secured debt.

I. take possession of the secured assets of the borrower including the right to
transfer by way of lease, assignment or sale

2
II. take over management of the business of the borrower including the right to

2:5
transfer by way of lease, assignment or sale for realizing the secured assets,

III. appoint any person to manage the secured assets the possession of which
02 1
02
has been taken over by the secured creditor.
3/2 98

Nature of services required from Supporting Agencies

I. Pre-take over examination of identified units/assets including survey.
97

II. Facilitating the Bank in seizure of securities/taking possession of movable and

immovable assets.
III. To provide security for preservation and protection of assets taken in
possession.
IV. To act as Custodian of secured assets.
V. Obtaining assistance of District Magistrate/Metropolitan Magistrate for taking
/0

over possession of securities. For this services of an advocate from Bank‟s

panel may be utilized.
17

VI. Assisting the Bank for sale of assets taken in possession through auction or
otherwise.

Circle Head is the competent authority for empanelment of a Supporting Agency.

Assignment of task/Allocation of account

The Authorized Officer shall assign the task/issue work order to the Supporting
Agencies on panel, by issuing a letter as per draft given in Annexure-VI of the
circular. In the letter, nature of task assigned shall be categorically mentioned
including amount of fee payable after accomplishment of task successfully, to
obviate the possibility of complaints for non/less payment of fees. Authorized
Officer shall be responsible for payment of fees to the Supporting Agencies, as per
the Bank‟s guidelines.

73 | P a g e
Withdrawal of account from a Supporting Agency
Since allocation/assignment of task to the Supporting Agency is done by the
Authorized Officer, in case a Supporting Agency fails to perform the assigned task
allotted to them, a Withdrawal Notice must be invariably sent by the Authorized
Officer to that Supporting Agency, under intimation to the Circle Office/Branch and
must be kept in records byCircle/Branch/Authorized Officer to avoid any
disputes/complications in the future

Utilization of services of Property Dealers / Real Estate Agencies for sale

ofsecured assets
In case a Property Dealer/Real Estate Agency, who although is not working as
Supporting Agency on behalf of the Bank, but brings a buyer for a property/any other
secured asset, put on sale by the Bank, commission of 1% of the total sale price
shall be payable to the
dealer/agency by the bank. In that case no commission shall be payable to the
Supporting Agency, who was assigned the task of sale of the property/any other

2
secured asset, originally, as that Supporting Agency has not played any active role in
identification of theprospective buyer.

2:5
The fees be paid only when the Supporting Agencies have played active role
for sale of assets.
02 1
02
3/2 98

In case where supporting agencies have played a proactive role in recovering bank‟s
dues through OTS or otherwise (normal recoveries) after taking possession
97

under the Act but there is no sale of assets, Circle Head may approve fee to the
Agency at the rate of 50% of normal fee (i.e. fee payable for sale of asset) with the
ceiling of Rs.1,50,000/- (one lac fifty thousand only).

Payment of fees to the Supporting Agencies will be payable after deduction of

GST, as per details given in the Annexure-II of this circular.
/0

Commission is to be paid by the branches to the debit of Expenditure:Outsourcing

17

of Financial Services-Supporting Agencies {P & L- GL Report Code 11427

(Account No. <solid>1142703) as mentioned in Inspection & Audit Division Circular
no.51/08 dated 18.09.2008. The expenditure incurred shall be part of the
memoranda dues.

***************************

74 | P a g e
 12. Policy On Engagement of Detective Agencies
(Sastra Div Cir No 21/2019)

Objective
The policy aims to significantly supplement efforts of the field officials in recovering
bank‟s dues in NPA accounts by utilizing services of the Detective Agencies :
 Locate the borrower(s)/ co-borrower(s)/ guarantor(s)/ mortgagor(s), including
their‟s legal heirs.
 Ascertain latest information about their present address/ occupation,
business.
 Confirm present state of ownership of the secured assets by personal
visit(s)/market report, duly confirmed by the documents.

Eligibility criteria for allocation of accounts to Detective Agencies

All NPA accounts under any category i.e Sub-Standard, Doubtful and Loss category
(whether non-suit filed, suit filed or decreed) shall be covered by the Policy in which

2
engagement of detective agency is deemed appropriate, as per the requirement.

2:5
Zonal Manager will be the competent authority to empanel any Detective
Agency.
02 1
02
Circle Head (ZM in case of LCBs) will be the competent authority to assign any
3/2 98

task to the Detective Agency, based on the recommendations received from the
Branches on a particular account.
97

Circle Office (ZM in case of LCB) must ensure that while assigning any task, a
letter must be given to the Detective Agency clearly stating the nature of task and the
fees which will be payable for that task, to avoid any dispute/complaint at a later
stage.
/0

Time Frame for submission of reports by the Detective Agency

A time frame of maximum 60 days will be allowed to the Agency for submission of
17

report. However, in emergent circumstances, further extension of 30 days (total Time

frame will be of 90 days) may be permitted by the Circle Head (ZM in case of LCBs),
keeping in view complexity of the case.

Competent Authority for payment of fees

Incumbent Incharge of the branch will be the competent authority to finalize the
bill/claim on appropriate rates (as per Bank‟s extant guidelines), submitted by the
Detective Agencies and its payment.

A fee of the same is as under:

S.No. Nature Of Task Assigned Fee Payable
1 On receipt of information about Rs. 7,500/- per person
whereabouts of the subject to maximum fee
missing/absconding borrower / guarantor / of Rs. 45,000/- under this
75 | P a g e
 coborrower category, per account.
/ director etc. subject to production of
documentary proof/evidence.
2 For locating properties other than details of Rs. 20,000/- for each
which property located, subject
are available in Bank‟s records, which may to maximum fee of Rs.
lead to 1.50 lacs under this
attachment of the same along-with the category per account.
documentary proof.
(All the properties in one title deed to be
considered as one property)
3 For providing any other information, which Rs. 2,500/- per piece of
may be helpful for recovery of Bank‟s dues information, with
e.g information maximum amount of
about other businesses, credit facilities Rs.30,000/- per account.
from other
banks, accounts with other banks including

2
verification of present position of properties
as per Bank‟s records, subject to

2:5
production of documentary
proof/evidence.
4 Payment of reasonable out of pocket expenses may also be
02 1
02
sanctioned subject to maximum of Rs. 10,000/- per account. Circe
3/2 98

Head will be the competent Authority to take a decision for payment of

such out of pocket expenses. The Detective Agency to give details of
visits/proof of expenditure.
97

5 In case the Detective Agency fails to Maximum fee of Rs.

trace the borrower/guarantor etc. 3,000/- per
account can be paid.
6 In case the Detective Agency fails to Maximum fee of Rs.
trace the property. 7,000/- per
/0

account can be paid.

In exceptional circumstances, keeping in view complexities of the case, in case

17

Detective Agencies brings to the notice of the Circle Head beforehand, any special
efforts/expenses required, the Circle Head may consider sanction of maximum
of 25% extra fees/reimbursement of expenses. Further, ZMs (in case of
recommendations of Circle Heads or LCBs) may consider sanction of
maximum of 40% extra fees/reimbursement of expenses.

The fees will be paid by the branches to the debit of Expenditure: Outsourcing of
Financial Services-Supporting Agencies {P & L- GL Report Code 11427 (Account
No. <solid>1142703) as mentioned in Inspection & Audit Division Circular no.51/08
dated 18.09.2008.

*********************
76 | P a g e
 13. Policy on engagement of Resolution Agents/Resolution
Officers
(Sastra Div Cir No 15/2018, 53/2019)

(i) Securitization /Reconstruction Companies (SCs/RCs)

(ii) Firms/Companies (other than SCs/RCs)
(iii) Retired PNB Employees

Eligibility Criteria for empanelment of Resolution Agents

SCs/RCs Other Firms PNB Employees

The A Firm/Company Honourably retired bank employees
Securitisation / promoted by and/or (including Voluntarily Retired
Reconstruction employing Employees). Keeping in view the high

2
Companies professional standards under the norms of
(SCs/RCs) which person/persons like Corporate Governance, following

2:5
have obtained Chartered Accountant terms and conditions will be
the certificate of /Company Secretary / applicable, while engaging PNB retired
registration from Cost Accountant and / employees as Resolution Agents on
02 1
02
RBI under or honourably retired behalf of the bank: Condition-1 PNB
3/2 98

Section 3 of the Senior Executives of retired employees who have worked in

SARFAESI Act the Banks (not less the last 5 years of their service in the
and having than DGM/GM) with Head Office Recovery Division/
97

Object Clause of minimum 3 years Recovery Sections at Zonal

Memorandum of experience in the Office/Circle and/or in ARMBs, there
Association resolution of NPAs. will be a cooling period of 2 years
permitting them Firms/Companies between the retirement date of the
to act as not having 3 years‟ PNB retired employees and date of
Resolution Agent experience but having their engagement as Resolution
/0

for the bank. professionals with Agent.

minimum 3 Condition-2 There will be no bar on
17

years‟experience will Maximum age of the PNB retired

also be eligible. For all employees, working as Resolution
other cases, the Agent of the Bank, however, after
matter may be attaining the age of 65 years,
referred to the Head performance of the PNB retired
Office, Recovery employee will be reviewed by the
Division, to consider Circle Head and on finding the same
on merits of the case as satisfactory, the tenure of
engagement may be extended for
further 2 years.
This will be applicable to the existing
PNB retired employees also, who are
working as Resolution Agents.

77 | P a g e
Invitation of Applications/Empanelment/Execution of Documents /Agreements
SCs/RCs
Invitation of
applications Head Office,
Recovery Division shall
invite applications from
SCs/RCs. Competent
Authority for
Empanelment Executive
Director shall be the
competent Authority for
empanelment of SCs/RCs
as Resolution cum
Recovery Agents and
allocation of NPAs under
Retail Loans on portfolio
basis
The Resolution Agent
shall execute a Non-
Disclosure Agreement
(Annexure-4-SCs/RCs)
(already drafted by Law
Division, HO & enclosed
with the circular) with PNB
at Head Office New Delhi.
Each Resolution Agent
shall be required to
execute an Agreement at
Head Office and on behalf
of PNB. Agreement shall
be signed by DGM / AGM
/ Chief Manager-(Any two
Other Firms PNB Employees
Invitation of Invitation of applications
applications Concerned HRD and/or Recovery
Zonal Manager shall Division of concerned
invite applications from Circle office shall invite
Firms / Companies (other applications from the
than SCs/RCs). honourably retired bank
Competent Authority for employees (including
Empanelment Zonal Voluntarily Retired
Manager shall be the Employees).
competent authority to Competent Authority of
approve the name for EmpanelmentUpto
empanelment of scale-III Circle Head
Resolution Agents. After Scale IV & V Zonal Mgr
2
engagement of Scale VI & VII Executive
Resolution Agents Circle Director (through HRD)
2:5
Heads may advise the This panel shall be
dealing official from the circulated to all the offices
office to visit the for the utilization of their
02 1
02
site/office of the services for resolution of
3/2 98
Firms/Companies (other non performing accounts
than SCs/RCs, which are under the scheme.
having registration
97
certificate from RBI under
SARFAESI Act) to verify
their address and
infrastructure so that
Bank‟s interest is not
jeopardized
/0
The Resolution Agent shall execute a NonDisclosure
Agreement (Annexure-4-Other Firms & Annexure-4
17
PNB Retired employees) and an Agreement containing
the Terms & Conditions of PNB including Indemnity
Clause (already drafted by Law Division, HO &
enclosed with the circular 17/17).
For Other Firms (other than SCs/RCs) and PNB
Retired Employees irrespective of the Scale, one
Official (DGM/AGM/Chief Manager) from Zonal Office
and second official (DGM/AGM/Chief Manager) from
the Circle Office will sign the documents on behalf of
the Bank at Circle Office and original set of documents
will be retained at the Circle Office and copy of the
documents may be sent to their Zonal Office. Draft of
the Agreement is as per the Annexure Agreement-
78 | P a g e
officials). Intimation for Other Firms, enclosed with the circular in the light of
engagement of SCs/RCs RBI guidelines on Fair Practice Code for Lenders,
as Resolution Agents guidelines on managing risk and Code of Conduct in
shall be circulated to all outsourcing of Financial services by the Bank, IBA
the Offices, for information model code for collection of dues and repossession of
and record. Draft of the security (CDRs Code), and the decision of Supreme
Agreement is as per Court in the matter of ICICI Bank Ltd. Vs Prakash Kaur
Annexure-Agreement-SCs & others.
/ RCs, enclosed with the
circular containing Terms
& Conditions of PNB
including Indemnity
Clause and contemplating
RBI guidelines on Fair
Practice Code for
Lenders, guidelines on
managing risk and Code

2
of Conduct in outsourcing
of Financial services by

2:5
the Bank, IBA model code
for collection of dues and
repossession of security
02 1
02
(CDRs Code)
3/2 98

Eligibility of accounts for allotment to Resolution Agents:

Three types as mentioned below
97

 NPA accounts categorized as Doubtful / Loss whether non suit filed,

suit filed or decreed accounts shall be covered under the Scheme. above.
 A financial asset in which any case is pending before a Court / DRT /
BIFR / Action under SARFAESI may also be considered for allocation under
the Scheme.

/0

The financial assets where non funded facilities are yet to be

crystallized are not to be allocated.
17

In case of written off accounts, outstanding balance at the time of write off,
shall be taken as Notional outstanding.

Identification & Allocation of Accounts-Delegation of Powers.

Zonal Manager/Circle Head shall identify the accounts for allocation to Resolution
Agents and shall ensure that adequate numbers of accounts with proper mix are
given to the Resolution Agents.

79 | P a g e
Powers of approval for allocation of identified accounts to the Resolution agents
shall be vested as under:

SCs/RCs Other Firms PNB Retired Employees

Rs.1 Zonal More than Circle Upto Rs.25 Clerical
crore – Manager Rs.10 Head lac Staff
Rs.5 lacs upto
crore Rs. 5 cr
and
Above Domain Above Rs. Zonal Above Rs. ScaleI,II&
Rs.5 ED (of 5 crore to Head 1 lac but III Circle
crore* Zone) Rs. 10 Upto Rs. Head
crore 100 lacs
Above Rs. GM Above Rs. Scale IV
10 Cr to (SASTRA) 10 lacs & Scale-
Rs.50 Cr upto Rs. V

2
250 lacs

2:5
Above Domain Above Rs. Scale-VI
Rs.50 Cr Ed 10 lacs and
upto Rs. above
02 1
500 lacs
02
3/2 98

* *For allocation of above Rs. 10 crore accounts to other firms/ARCs, Zonal

Manager will be the recommending authority.
97

Limit for number of Accounts to be allocated to the Resolution Agents

SCs/RCs Other Firms PNB Retired Employees

25-50 accounts and Maximum 100 accounts Maximum 50 accounts at
Maximum 50 Accounts at a time a time
/0

per Circle with a

maximum celling of 8
17

Circle with 400 Accounts

Period for resolution of accounts and Withdrawal of accounts

Maximum period for resolution of allocated accounts shall be 12 months if
Resolution Agent fails, accounts will be taken back. However, same can be
extended upto 24 months by Zonal Manager on merits of the case, keeping in view
the steps taken by the Agent for recovery.

80 | P a g e
Commission Payable to the Resolution Agents

For SCs/RCs/Other Firms/Companies

SCs/RCs and Firms/Companies other than SCs/RCs may be paid commission at

the rate of 5% of the recoveries, as fixed component.In addition to the above
mentioned fixed component of 5% of the recoveries, the SCs/RCs and
Firms/Companies other than SCs/RCs may also be paid the variable component
with a cut of maximum ceiling amount wise.
PNB Retired Employees

Outstanding If the age of NPA is upto If the age of NPA is more

3 years than 3 years
Upto Rs.1 lac 8% 10%
Above Rs.1 lacs upto 7% 9%
Rs.50.00 Lacs
Above Rs.50 lacs upto 6% 8%

2
Rs. 1 crore

2:5
Above Rs. 1 crore upto 5% 6%
Rs.5 crores (Maximum Rs.15.00 (Maximum Rs.15.00
Lacs) Lacs)
02 1
02
3/2 98

Head/Account for Payment of Commission

Commission is to be paid by the branches to the debit of Expenditure: Outsourcing
97

of Financial Services {P & L- GL Report Code 11427 as mentioned in Inspection &

Audit Division Circular no.51/08 dated 18.09.2008. Further as informed by IT
Division vide their letter ITD/CBS dated 11.05.2011 that commission payable to the
Resolution Agents, be debited to SGL Code 1142710-Payment to Resolution
Agents, already opened and replicated to all Sols.)
/0

**********
17

81 | P a g e
 14. RESOLUTION OF NPA THROUGH LOK ADALAT
(SASTRA Division 12/2013)

Background and Legal Sanctity for constitution of Lok Adalats

The institution of Lok Adalat constituted under Legal Services Authorities Act, 1987
enables resolving of the disputes between the parties by conciliation, mediation,
compromise or by amicable settlement.
Lok Adalats have been established generally at the District level under the provisions
of “The Legal Services Authorities Act, 1987”. These Lok Adalats provide an easy
and cost effective platform for disposal of large number of cases.
All proceedings before a Lok Adalat are deemed to be judicial proceedings and they
shall be deemed to be a civil court.

2
Powers of Lok Adalats
The Lok Adalat for the purpose of holding any determination under the Act, have the

2:5
same powers as are vested in a civil court under the code of civil procedure, 1908
while trying a suit in respect of the following matters :
02 1
02
 The summoning and enforcing the attendance of any witness and examining
3/2 98

him on oath.
 The discovery and production of any document.
97

 The reception of evidence on affidavits.

 The requisitioning of any public record or document or copy of such record or
 Document from any court or office and
 Such other matters as may be prescribed.

Jurisdiction of Lok Adalats

/0

Lok Adalats have jurisdiction to determine and to arrive at a compromise or

17

settlement between the parties to a dispute:

 Any case pending before any court or
 Any matter which is falling within the jurisdiction of, and is not brought before,
any court for which the Lok Adalat is organised.
 If the parties to the litigation agree or
 One of the parties thereof makes an application to the court for referring the
case to the Lok Adalat for settlement and if such court is prima facie satisfied
that there are chances of such settlement or
 The court is satisfied that the matter is an appropriate one to be taken
cognizance by the Lok Adalat.
Cases that cannot be taken up

82 | P a g e
  The offences which are compoundable under any law cannot be brought
within the purview of Lok Adalat.
 It has no authority of its own to pass judgements.
Awards of Lok Adalat
Every award of the Lok Adalat is deemed to be a decree of a Civil Court and no
appeal can be made against the award made by the Lok Adalats. In case of non
compliance of terms of award by the concerned party, it can be executed like a
decree.
Every award made by the Lok Adalat shall be final and binding on all the parties to
the dispute, and no appeal shall lie to any court against the award.
Safeguard regarding limitation period
Pendency of matters with the Lok Adalat in non suit filed cases does not save
limitation.Care must be taken for filing suits within the limitation period.
Eligibility Criteria for accounts under consideration of Lok Adalats

2
All NPA accounts, both suit filed and others, can be considered for reference to Lok

2:5
Adalats for settlement.
For coverage under Lok Adalat the claim amount should not exceed Rs. 20.00 lac.
02 1
Committee System
02
Lok Adalat cases shall be examined in advance by the Compromise Committees
3/2 98

formed at various levels (in tune with the NPA Policy guidelines) to arrive at a
“range” within which compromise can be considered in a given case.
97

The decision regarding waiver can be considered by the competent authority

keeping in view the sacrifice involved in compromise/negotiated settlement under the
General Guidelines.
Sanctioning authority and /or one of the senior members of the Compromise
/0

Committee in Circle Office with a proper mandate from the sanctioning authority,
should attend the Lok Adalat.
17

Reporting and Monitoring

Progress achieved by the bank towards recovery through the forum of Lok Adalats is
monitored at the level of Reserve Bank of India.
Branches shall send information relating to Lok Adalats to their Circle Offices and the
Circle Offices shall submit the consolidated position to Head Office SASTRA Division
within 15 days from the close of the concerned quarter.
**************

83 | P a g e
 15. GUIDELINES ON RECOVERY CASES THROUGH DRT/CIVIL
COURT
(LAW DIVISION CIR NO 4/2014)
Recovery of dues in respect of advances relating to agricultural and allied activities is
done through Agricultural Credit Acts enacted by various States.

For Recoverable amount of less than Rs.20 lacs recovery suit can be filed before the
Civil Courts, in terms of Civil Procedure Code.
For recoverable amount of Rs.20 lakh and above application can be filed before the
Debt Recovery Tribunal, as per the provisions of Recovery of Debts Due to the
Banks & Financial Institutions Act (RDDB Act).
Recovery action against the secured assets SARFAESI Act provides for it and to be

2
taken by the authorised officers of the Bank.

2:5
For amount Rs.3 crore and above original application should be sent to the Law
Officers/Legal Retainers at Circle Offices and the same be forwarded along with
his/her comments to Law Division, HO for vetting.
02 1
02
3/2 98

In respect of cases where the suit amount/claim is Rs.1(one) crore and above, the
copies of pleadings etc. be sent to Law Division, HO after filing the case.
Developments of the case be also intimated to Recovery Division and Law Division
97

from time to time.

Preliminary steps for filing of recovery application/suit before debt recovery
tribunal (DRT)/court
Before filing a Suit/Original Application (OA), it should be examined whether the
securities available in the account are enforceable under SARFAESI Act.
/0

Simultaneous action under SARFAESI Act as well as before Civil Court/DRT is

17

legally possible.
Wherever the pledged goods are available, efforts be made for disposal of these
goods before filing of suit
Claim of Penal Interest
Interest debited to a/c can be capitalized & thus form part of Principal sum.

Penal interest cannot be capitalized meaning thereby that penal interest cannot be
compounded.

Banks are to make an averment in the plaint that interest/compound interest has
been charged at such rates, and capitalized at such periodical rests , as are
permitted, and do not run counter to, the directives of the Reserve Bank of India .
84 | P a g e
Debit entries relating to interest in the statement of account shall also set out the rate
of interest and the period for which interest is charged.

If the Court is prima-facie satisfied about the entries and even if a dispute is raised in that
regard, the onus would be on the Borrower to show why the amount of debit balance
claimed as principal sum cannot be so accepted and adjudged.

The Principal sum actually advanced coupled with interest on periodical rests so capitalized
is capable of being adjudged as Principal sum, on the date of filing of the suit.

Pendente lite and post decree interest needs to be claimed on the Principal sum (amount of
suit) as per documents.

Calculation of Suit Amount as on Date of Filing of Suit

Balance as on the date of NPA ………

2
2:5
Add : Other charges, if any(Subsequent to the date of NPA) ………
Add : Interest from date of NPA to the date of filing of suit …………
02 1
02
Penal interest from the date of NPA to the date of suit without compounding……….
Total claim ………..
3/2 98

Filing and follow-up of recovery application/suit before DRT / Civil Court

97

A copy of model draft application and check list can be given to the dealing
advocate, if necessary, so that he/she can draft the OA in compliance with the
requirements.
Various stages & steps to be taken for proceedings before DRT / Civil Court
Before DRT
/0

The recovery process is initiated by filing an application commonly known as Original

17

Application (OA) before the Registrar of the concerned Debt Recovery Tribunal
(DRT).

DRT is headed by a Presiding Officer (PO).

DRT issues summons in the names of defendants and the services of summons are
required to be made upon each of the defendant. On service of summons, the
defendant is required to file reply within 30 days or further time granted.

In case the defendant sets up a counter claim against the bank in the written
statement, reply to the same should be filed before the next hearing to avoid delay
on this ground.

85 | P a g e
A copy of the OA, along with copy of documents and other Annexure(s),attached
with OA, is required to be served on each of the defendants together with the
summons issued by DRT. The practice prevailing in a particular DRT be checked up
and the requirement be complied with.
If bank desires to obtain an Injunction, Stay or Attachment Before Judgement (ABJ)
in respect of any assets, separate application with Affidavit needs to be moved
before the DRT, making out a ground that the defendants are about to dispose of the
property in question. For this purpose, the Dealing Advocate be provided the details
of assets which are to be got attached or against which Injunction/Stay is sought for.

On getting Summons, within 30 days, the defendants have to file their reply. The
number of adjournments to be given to the parties has been curtailed and maximum
adjournments will be three per person and in case there are more than three
persons, maximum adjournments shall not exceed six.

After filing of the written statement by the defendants, the evidence of the parties are
taken by way of affidavit. In DRT proceedings, generally cross examination is not

2
allowed unless specific cause is shown for summoning the witnesses for cross
examination.

2:5
After completion of pleadings, the Presiding Officer (PO) of DRT fixes the matter for
final hearing/arguments. Hearing of OAs filed will be held on day-to-day basis. PO
02 1
02
passes Final Order and Recovery Certificate (RC) is issued to RO (Recovery Officer)
3/2 98

of DRT to affect the recovery of the amount of debt as specified in the RC.

In case the matter is resolved between the parties, at any stage, before the final
97

order is passed, by way of OTS etc., the court fee paid by the bank may be refunded
to the bank at such rate as shall be decided by the Government.

Before Civil Court

The proceedings before Civil Court commence by filing of plaint along with the
/0

documents relied upon. The defendant appears and files written statement within 30
days from the date of service of Summons. Evidence by both sides has to be
17

adduced. Cross-examination is allowed as a matter of right.

Service of summons may be made by Speed Post, by Courier Services, as approved

by the High Court or by any other means of transmission of documents (including fax
message or electronic mail service) as may be provided by the rule framed by the
respective High Court.

The limitation period available for filing application for final decree is three years from
the date of expiry of the time specified in the preliminary decree.

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Expeditious disposal of DRT/Court cases

The most time consuming part in the whole process of a case is service of summons
upon the defendants. If summons are not served in 2-3 attempts, the same be got
served by way of publication in Daily Newspaper as per the order of DRT/Court.

Appointment of Receiver

DRT/Court may appoint a Receiver for protection, management and preservation of

properties. It is DRT/Court‟s discretion to appoint a Receiver. If possible, the
concerned dealing official can get himself or any other Panel Advocate of the Bank
appointed as Receiver.

When the Bank offers its own Officers as Receivers, Bank may not claim any amount
as remuneration. However, it may pray for payment of Out-of Pocket expenses
including TA/DA to be paid to the Officer / Receiver or any other personnel engaged
to assist the Receiver, as cost to be deductible from the sale proceeds or other

2
recoveries made.

2:5
Execution of Decrees/Recovery Certificates

The very purpose of filing suit/DRT application is recovery of amount due to the
02 1
02
Bank. Recovery is possible only when the Decrees/Recovery Certificates (RCs) are
3/2 98

executed promptly and diligently. Decrees/RCs can be executed by sale of securities

and other attachable assets of the judgment debtors.
97

Special focus be given to those Decrees/RCs which are pending for over 3 years.
Circle Offices shall take up such matters with special attention so as to ensure
recovery without further loss of time.

Compromise approved by Bank and Recoveries made in Pending cases

/0

Whenever any compromise is entered into or recovery is made, it should be

informed to the Dealing Advocate in writing and requisite steps be taken for filing of
17

Memo of Compromise and to obtain consent decree etc. If full & final satisfaction is
reached as per compromise terms, satisfaction should be got recorded before PO,
DRT and/or Recovery Officer, as the case may be.

Correct Statement of account, duly certified as required by Banker‟s book evidence

act, be filed while filing statement of account in DRT/Civil Court to avoid delays.

Filling of certificate proceedings will not save the limitation period for filing of suit for
recovery of bank Dues before the Civil Court / DRT. Instructions of Priority Sector &
Lead Bank Division, H.O. in respect of waivement of Legal action or other aspects
regarding certificate proceedings issued from time to time be followed.

*******
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 16. RESOLUTION Of STRESSED ASSETS UNDER IBS/NCLT
(SASTRA DIVISION CIR No. 22 / 2019, LAW DIVISION CIR NO.
3/2019 and SASTRA DIVISION Cir No. 02/2020 dated 04.01.2020)

Insolvency and Bankruptcy Code (IBC 2016) came into force and functional
regulations have been made effective with effect from 01.12.2016 and National
Company Law Tribunals (NCLTs) have been bestowed with the powers to act as
the adjudicating authority for corporate persons. The Insolvency Resolution process
is to be carried by Insolvency Resolution Professionals (IRPs) who are registered
with Insolvency and Bankruptcy Board of India (IBBI).
The proposed framework gains significant importance in light of the fact that if the
proposed framework for personal guarantors operates with the same efficiency, seen
qua the corporate insolvency resolution process, the banks should be able to make a

2
considerable recovery from defaulting guarantors, in a time-bound manner.

2:5
 APPLICATION FOR INITIATION OF INSOLVENCY PROCESS

The creditors have been given the right to file for initiation of insolvency
02 1
02
process themselves or through a RP as per the notified Form-C (Annexure-II)
3/2 98

against the personal guarantor of the corporate debtor before the NCLT
before which the CIRP or Liquidation proceedings of a Corporate Debtor is
pending. Prior to filing of such application, the creditor has to serve a demand
97

notice in the format prescribed under Form-B (Annexure I) to the guarantor

demanding payment of the amount in default within 14 (fourteen) days from
the receipt of the notice and if payment is not made, the creditor may file an
application for initiation of the insolvency process in the format prescribed
along with fees of Rs. 2000/-. Notice of the application filed has to be served
/0

on the guarantor as well the corporate debtor for whom the guarantor is a
personal guarantor.
17

 ADJUDICATION OF APPLICATION

 INTERIM MORATORIUM- When an application is filed for initiation of

insolvency process as stated aforesaid by a creditor or a guarantor; an
interim-moratorium shall commence from the date of the application in
relation to all the debts and shall cease to have effect on the date of
admission of such application and during such period all pending legal
actions shall be stayed and creditors shall be forbidden from initiating any

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 legal action or proceedings in respect of any debt with regard to the
guarantor.
 APPOINTMENT OF RP- If the application is filed through a resolution
professional, the Adjudicating Authority shall confirm the appointment of the
RP. Where the application has not been filed through the RP, the
Adjudicating Authority shall, within 7 days of the application, direct the IBBI to
appoint an RP. In this regard, the regulations provide that the IBBI may share
with Adjudicating Authority, a panel from which RPs may be appointed as well
as a database of the RPs which would inter-alia display information regarding
any disciplinary proceedings against the RPs. The Applicant shall have to
share a copy of the application to the RP as well as the board within three
days of the appointment of the RP.
 REPORT OF RP- The RP as appointed aforesaid will examine the application
filed and submit a report to the Adjudicating Authority recommending
approval or rejection of the plan within 10 (ten) days of his appointment. In
the examination, the RP shall, inter-alia, ask the guarantor to prove if the debt

2
has been paid by adducing proof. RP shall submit a report recording with

2:5
reasons the recommendation for approval or rejection of the application. A
copy of the report shall also be provided to the debtor or creditor.
 ADMISSION/REJECTION OF APPLICATION-The Adjudicating Authority will
02 1
02
within 14 days of the submission of the report by the RP, admit or reject the
3/2 98

application. The Adjudicating Authority will provide a copy of the order of

admission or rejection to the creditors within 7 days of the order along with a
copy of the application as well as the report of the RP.
97

 POST ADMISSION OF APPLICATION

 MORATORIUM
/0

The moment an application is admitted, a moratorium will commence with

regard to all debts of the guarantor and shall remain in place till 180 days from
17

the date of admission or till the date the Adjudicating Authority passes an
order on the repayment plan, whichever is earlier. The guarantor will not be
able to alienate its assets during such period nor will any legal actions, by the
creditors of the guarantor, be continued i.e. they will be stayed during the
moratorium period.

 INVITATION OF CLAIMS
The Adjudicating Authority shall issue a public notice within 7 (seven) days of
the order admitting the application, inviting claims from all creditors which are
to be submitted within 21(twenty- one) days of such notice. The creditors shall
register their claim with the RP along with proof. The creditors may prove their

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 claim on the basis of records available in an information utility or any other
documentary evidence which substantiates the existence of claim.
The RP shall, within 30 days of the issuance of notice prepare a list of
creditors including their names, amounts claimed, amounts admitted as well
as security interest, if any, on the basis of the claims received as well as the
application on the basis of which insolvency proceedings were initiated. The
aforesaid list shall be made available to the creditors, guarantor, etc.. The RP
shall also prepare a statement of affairs of the guarantor which shall include
its assets, liabilities etc.

 PREPARATION OF REPAYMENT PLAN

The guarantor shall in consultation with the RP prepare a repayment plan

containing a proposal for their creditors to restructure the guarantor‟s debts.

2
The repayment plan must include, inter-alia, justification for preparation of

2:5
such repayment plan and reasons on the basis of which the creditors may
agree upon the plan; and provision for payment of fee to the resolution
professional and such other matters as may be specified. The repayment plan
02 1
02
may also provide for, inter-alia, administration or disposal of any funds of the
3/2 98

guarantor, satisfaction or modification of any security interest etc.

Thereafter, the RP must submit the repayment plan to the Adjudicating
Authority within 21 days of the last receipt of claim from the creditors. The RP
97

must also examine the repayment plan and submit a report certifying that the
repayment plan is in compliance with the law.

 MEETING OF CREDITORS
/0

The RP shall, thereafter, issue a notice, along with necessary documents

such as the repayment plan etc., to the entire list of creditors prepared by the
17

RP, calling for the meeting of the creditors at least 14 (fourteen) days before
the date fixed for such meeting. The RP shall also be bound to convene a
meeting of creditors whenever a request is made by creditors having 33% of
voting share among the creditors. The RP shall preside over the meeting of
the creditors. The quorum required for a meeting of the creditors shall consist
of creditors representing at least 33% of voting share present in person, by
proxy or through video conferencing. The creditors on the meeting may
approve, reject or modify the repayment plan and their voting share shall be in
proportion to the debt owed to the creditor.

 APPROVAL OF REPAYMENT PLAN BY THE ADJUDICATING

AUTHORITY-
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 Subsequent to the voting, the RP will submit a report on the meeting of
creditors approving or rejecting the resolution plan to the Adjudicating
Authority with a copy to guarantor and the creditors. The Adjudicating
Authority will accept or reject the repayment plan on the basis of the reports
submitted or it may even send the same back to the creditors if the
Adjudicating Authority feels that modifications are necessary. An order
approving the repayment plan will make the repayment plan binding on the
creditors as well as the debtors. An order rejecting the plan would make the
debtor and the creditors entitled to file an application for bankruptcy of the
guarantor under Chapter IV.

 IMPLEMENTATION OF REPAYMENT PLAN

The RP shall be responsible for supervising the execution of the repayment
plan. Within 14 days of the completion of the repayment plan, the RP has to
send a notice to all the parties bound by the repayment plan as well as the
Adjudicating Authority intimating the completion of the same as well a report

2
on the execution of the resolution plan and can apply to the Adjudicating

2:5
Authority for the discharge of the debt of the Guarantor.

In case of failure of the insolvency process, the creditors have the right to
02 1
02
initiate bankruptcy proceedings against the Guarantor just as liquidation is
3/2 98

ordered in the case of corporate debtors where the resolution process fails.

 LIMITATION FOR FILING APPLICATION

97

The given remedy can be resorted to against the Personal Guarantors only in
those cases where the limitation period with respect to the guarantors is still
alive. As such, before filing an application for initiation of insolvency
proceedings against the personal guarantor of the Corporate Debtor, it is to
/0

be ensured that the limitation period of 3 (three) years from the date of default
for enforcement of specific remedy still subsists.
17

 Insolvency & Bankruptcy Code (Amendment) Ordinance, 2019

The salient features of the amendment introduced by the Govt. of India
through an ordinance passed on 28.12.2019 are as under:

1. Scope of Interim Finance: The amendment proposes to expand the

definition of „interim finance‟ to include, „such other debt as may be
notified‟ suggesting that „last mile funding‟ options to „prevent insolvency‟ is
likely to be included as interim finance and thereby enjoying highest
priority in the insolvency or liquidation process under the IBC.
2. Threshold for filing applications: In 2018, home-buyers were
categorized as financial creditors for the purpose of IBC. Since then,
developers have claimed that this provision has hampered successful
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 completion of various projects as construction was getting stalled due to
filing of insolvency applications by home buyers. Now, the amendment
proposes that an insolvency application in relation to a real estate project
must be filed by a minimum of 100 allottees or not less than 10% of the
total number of allottees, whichever is lesser. The ordinance prescribes
the same threshold for insolvency applications to be filed by financial
creditors holding securities or deposits. Therefore, if a trustee or agent
files an insolvency application, it has to represent the instructions of such
minimum number of financial creditors.
3. Extension of moratorium: To help keep the corporate debtor a „going
concern‟, the amendment extends the scope of moratorium to prohibit the
following during the moratorium period:
a. Suspension or termination of arrangements that involve conferment
of rights by any government authority on the „grounds of
insolvency‟, so long as there is no default in the payment of current
dues arising out of use of such benefits during the moratorium

2
period; and

2:5
b. Termination of arrangements relating to supply of goods and
services that the resolution professional considers critical to, inter
alia, protect the value of the corporate debtor.
02 1
4. Immunity to successful resolution applicants: The amendment
02
proposes to insert an additional section after section 32 i.e. Section 32-A
3/2 98

which provides as under:

 The liability of the corporate debtor in relation to an offence committed
97

prior to the commencement of insolvency shall cease on approval of a

resolution plan in terms of the Code; and
 No action including attachment shall be taken against the property of a
corporate debtor in relation to any offence committed prior to the
commencement of insolvency on approval of a resolution plan or the sale
/0

of such property during liquidation.

5. Financial creditors exempt to be classified as related parties:
17

Inclusion of related parties in committee of creditors often raises questions

relating to conflict of interest. IBC recognizes this and prescribes that
related parties of the Corporate Debtor are rendered ineligible from being
part of the committee of creditors.
Now, the ordinance has clarified that the Central Government may
prescribe certain additional transactions that shall not render such financial
creditors as ineligible by virtue of being a related party. The ordinance may
seek to cover situations such as mergers of financial creditors, acquisition
of debt, or exercise of rights or entitlements of financial creditors that may
result in such financial creditor becoming related parties of the Corporate
Debtor.

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 Powers for approval of sacrifice in NCLT cases at various levels were
circulated vide SASTRA Division Circular 18/2018 dated 15.05.2018 as
under:
Authority Powers to approve sacrifice in
NCLT Cases
ZOCAC Rs.5.00 Cr
HOCAC-I Rs.10.00 Cr
HOCAC-II Rs.20.00 Cr
HOCAC-III Full Powers

 Existing Powers to approve Operational issues during CORPORATE

INSOLVENCY RESOLUTION PROCESS (CIRP)-

2
Aggregate Type of Mandate Authority
Exposure in the for

2:5
Account Mandate
Upto Rs.30 Crore All operational issues during a CIRP/ COCAC
02 1
02
Liquidation proceedings excluding approval
3/2 98

for Insolvency Resolution Process Cost

(Interim Finance/ Corpus Funding)/ issuance
of NOC for ceding Banks charge resulting into
97

dilution of security or Merger/ Demerger of the

Corporate Debtor.
Above Rs.30 All operational issues during a CIRP/ ZOCAC
Crore including Liquidation proceedings excluding approval
limits sanctioned for Insolvency Resolution Process Cost
/0

by LCBs (Interim Finance/ Corpus Funding)/ issuance

of NOC for ceding Banks charge resulting into
17

dilution of security or Merger/ Demerger of the

Corporate Debtor

******

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 17. MISCELLANEOUS
NPA MANAGEMENT THROUGH Time Bound actions of Recovery
(Sastra Div Cir No 37/2019)

During the review of NPA accounts in the Special Committee of Board meeting on
Recovery, MD & CEO along with other Directors of the Board expressed that in the
present scenario, there is a need for continuous monitoring of NPA accounts along
with time bound follow-up w.r.t Recovery Action. The Committee was of the view that
guidelines with regards to ―NPA Management through Time Bound Actions‖
needs to be drafted and circulated amongst the field staff. Such guidelines will
enable the field staff to identify what recovery action has to be initiated and at what
stage in an NPA account.
Further the members were of the view that Non-compliance in initiation of
Recovery actions within the stipulated timeline should attract staff side
accountability

2
Flow Chart of Time bound actions for NPA accounts is as under: -
Sr.
No
Proposed Actions
2:5 Time Line
02 1
02
1 On the Day of slippage of the account into NPA, the Borrower Day 1
3/2 98

is to be contacted through telephone/E-mail/Letter informing

him/her about the slippage of the account. The communication
should advise the borrower to regularize his/her/their account
97

at the earliest.
2 Personal meeting with the defaulting borrower/guarantor/co- Day 3
borrower be held and During deliberations, Borrower be asked
to submit details of any resolution plan for the account with
definite time lines for regularization of the account etc.
3 In case of no response to the personal contact/recalcitrant Day 5-6
/0

borrowers, following actions be undertaken:

 Issue of recall notice to all the borrowers/co-
17

borrowers/guarantors. The borrowers/co-

borrowers/guarantors will be asked to resolve their
account within 7 days from the date of letter.
 Issue of notice under Section 13(2) under SARFAESI
Act, in the eligible cases. After issuance of 13(2),
ensure acknowledgement of the same within a
week‘s time. In case acknowledgement is not
received, substitution service of 13(2) be done
through paper publication immediately.
 Realization/Appropriation of proceeds of Financial
Assets: e.g. FDR/Other Bank Deposits/Cash
Margin/LIC Policies and other liquid securities etc.

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  Post-dated cheques be presented for clearance in
case of retail loan accounts and other such
accounts where PDCs are available. In case of
cheques being returned unpaid, case under section
138 of NI Act be filed.
4 Complete review of account be done by respective authorities Day 7-12
as per table given in mentioned circular. This will include the
following:
 Examining the position of Secured assets/ drawing
CRILIC reports
 Visit of unit be organised to ascertain the working level
of the unit, stock position etc.
 Last stock statement be analysed and debtors of the
party be contacted regarding deposit of sale proceeds
with Bank to get valid discharge
 For accounts with Balance more than Rs 50.00 crores,
discussion on examination of possible fraud angle be

2
also held. For cases under Sole Banking and where

2:5
PNB is Lead Bank, Zonal Vertical under the supervision
of Zonal Manager to initiate necessary action including
calling quotes for Forensic Audit, wherever case is
02 1
deemed fit for the same. For such accounts report from
02
Central Economic Intelligence Bureau (CEIB) be also
3/2 98

called for as per guidelines given in L&A Circular No. 28

dated 26.02.2014 and Recovery Division (now SASTRA)
circular no 48/2017 dated 13.12.2017
97

Note: These actions once initiated should be taken to their

logical conclusion.
5 In eligible cases, Annexure-I of Wilful Default Notice be issued Day 13-14
6 The said time period be utilized in the following activities: Day 15-40
/0

i. Submission of status notes to appropriate reporting authority

(CO/ZO/HO) depending on the outstanding of the NPA
17

account.
ii. Based on the visit report to the unit premises and other
attending factors, BO/CO/ZO to examine quick mortality aspect
and in eligible cases, approvals for filing FIR be obtained.
iii. Continuous monitoring of the operations of the defaulting
company. In case unit is operational, matter be taken up with
the defaulting company for deposit of sale proceeds.
iv. The CR‟s of borrower‟s and guarantors be cross-checked for
any attachable assets. In case of need, service of Detective
Agencies be engaged.
v. It must be ensured that limitation is available against the
borrower and/or guarantor
vi. Move for permission to competent authority for suit filing and
vetting of documents by Bank‟s advocate
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 vii. Meetings be held with panel advocates for filing of DRT suit.
Further, meetings with Supporting Agencies be also held for
planning out actions related to symbolic/physical possession.
viii. Option of Resolution under the ambit of NCLT be also
looked into. However, before filing the petition in NCLT, the
following aspect be looked into:-
 It is to be ensured that all liquid securities such as FDR
/ KVP / NSC etc pledged to the Bank either as security
or as margin money, where bank has right of set off are
appropriated against the irregularities persisting in the
account before the account is admitted for CIRP.
 Ensue that DRT suit is filed before admission of case
into NCLT. In the absence of any previous notice, a
demand notice of the amount due with a reasonable
period, minimum 14 days, must be given to the
Corporate Debtors.
 The bank can initiate CIRP against Corporate

2
Guarantors & Personal Guarantors as well besides the

2:5
Corporate Debtor. Thus, notice should be given to such
Corporate Guarantors/ Personal Guarantors also, if the
Bank intends to initiate action against such guarantors.
 Annexure-II of Wilful Default be sent.
02 1
02
7  File suit in the DRT/Court including Attachment Before Day 41-50
3/2 98

Judgment Application (ABJ) and passport impounding

 CIBIL report of obligants be drawn. If the report does not
show proprietors/ partners/guarantors as defaulters,
97

matter be taken up with MISD, HO for rectification.

8  Issue notice u/s 13(4) of SARFAESI Act and take Day 61-64
Symbolic possession simultaneously. Publish notice
within stipulated time i.e. within 7 days of taking
symbolic possession
 Move application to DM for permission of physical
/0

possession simultaneously
17

9 Bank to move for physical possession of mortgaged property, Day 90

after taking due permission.
10 Property mortgaged to be placed for auction (either on Day 104-
symbolic or physical possession basis) within 30 days of taking 120
symbolic/physical possession

*****

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 FORENSIC AUDIT POLICY- IMPORTANT GUIDELINES
(Sastra Div Cir No 28/2018, 43/2018, 34/2019, 45/2019 and 55/19)

The Policy on Forensic Audit was framed for the first time and circulated by the
Fraud Risk Management Division (FRMD) vide FRMD Circular no. 8/2016 dated
31.03.2016. The revised Policy has been circulated vide FRMD Circular no.
12/2017 dated 31.03.2017. The said policy contains the scope and process of
conducting Forensic Audit in the account.
Procedure to seek permission to conduct Forensic Audit
 While seeking permission to conduct forensic audit in “Other than Red
Flagged Accounts (RFAs)” with exposures of Rs. 50 crore & above, Zonal
Office Committee (not any official in the individual capacity) will send
recommendations to Head Office Recovery Division, to be placed in the Head

2
Office Committee for consideration. Recommendations are to be sent to the
Head Office, on Annexure-1 of the Sastra Div Circular 28/2018.

2:5
Once Head Office permits to conduct the forensic audit in an account, final
allocation of task to a particular forensic auditor, will be done by the respective
02 1
02
ZO.
3/2 98

With the advent of the Insolvency & Bankruptcy Code, 2016, a large number of
Big Borrowal NPA Accounts have been referred to NCLT for resolution. When matter
97

is taken up with field offices, for their views and recommendations on Fraud Angle
w.r.t NPA Accounts of Rs 50.00 crores above, the reply received for majority of
NPA accounts, (which have either been referred to or admitted with NCLT) is that
Resolution Professional (RP) has to conduct Forensic Audit in the account, as part of
the Corporate Insolvency Resolution Process (CIRP),hence,any view on Fraud angle
will be taken by COC, subsequent to the completion of Forensic Audit.
/0

The matter was taken up with Law Division, HO who have informed that the audit
17

which the RP has to mandatorily carry out as part of the CIRP process is a
Transaction Audit and not Forensic Audit. The contours of the Transaction
Audit are defined as under:
The Transactions Audit under IBC, 2016:
The IBC, 2016 in its pursuit to provide provisions for fair & transparent corporate
resolution proceeding (CIRP), has empowered the Liquidator or the Resolution
Professional to examine the transactions of the Corporate Debtors to the extent of
time limit of 2 years where some related party is found involved in the transaction
and that of 1 year where other person other than a related party is involved. If the
liquidator or the Resolution Professional is of the opinion that the Corporate Debtor
has at a given time, has made any transaction which falls under the following

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categories, they may make an application to the respective NCLT (Adjudicating
Authority) to pass the appropriate order including but not limited to, declaring such
transaction void and reverse the effect of such transaction:
 Preferential Transactions (Sec. 43)
 Undervalued Transactions (Sec. 45)
 Transactions defrauding creditors (Sec. 49)
 Extortionate Credit Transactions (Sec. 50); and
 Fraudulent or wrongful trading ( Sec.66)
It is further to add that audit required under the said provisions, is specific and
restrictive to the review of related transactions and not comprehensive as
being carried out under Forensic Audit .

2
The scope of Forensic Audit as defined in FRMD policy circular no. 12/2017

2:5
dated 31.03.17, is as under:
Capacity to pay: Examine as to if the borrower has defaulted in meeting its payment
02 1
02
/repayment obligations to the bank even when it has the capacity to honour the
3/2 98

same.
Money trail & End use of funds financed by the Bank/lenders.
97

Diversion of funds: diversion of funds on the part of borrower would be construed in

any of the undernoted occurrences:
Utilization of short term working capital funds for long term purposes not in
 conformity with the terms of sanction; Deploying borrowed funds for
/0

purposes/activities or creation of assets other than

 those for which the loan was sanctioned.
17

Transferring borrowed funds to the

subsidiaries/group companies or other
 Corporate by whatever modalities. Routing of funds through any bank other than
the lender bank or members of
 consortium without prior permission of the bank/lenders. Investment in other
companies by way of acquiring equities/debt instruments
 without approval of lenders. Shortfall in deployment of funds vis-à-vis the amounts
disbursed/drawn and the
 difference not being accounted for.

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Siphoning of funds: siphoning of funds on the part of borrower would be construed
to occur if any funds borrowed from bank are utilized for purposes un-related to the
operations in the account of the borrower and to the detriment of the financial health
of the entity and/or the lender.

Capital Structure: Tracing the source of contribution by promoters by analysing

equity/debt infused by promoters/partners.
Abnormal trade transactions: Commenting on transactions of substantial amount,
which seem not to be normal trade transactions at arm‟s length.
Sales: Verifying revenue from operations including checking sale order, invoices and
controls in billing process. The focus should be on inflated turnover / fictitious sales
and / or Sales on Return (SOR) basis where profit has been booked and sales
returned in the subsequent accounting period leading to writing off of stocks /
debtors and reversal of booked profits. The sustainability of sales in future years

2
should be co-related with Technical and Viability (TEV) study

2:5
Escrow / Trust & retention Account (TRA): Commenting on adherence to escrow /
Trust & Retention Account (TRA) arrangements made with various banks. Details of
all transactions with banks outside the consortium / other than nominated account.
02 1
02
3/2 98

Concentrating transactions : Sole customer, sole supplier, major transactions with

related parties / group companies, analysis of relationship in two-way deals with the
same party or indirect payments made by customers of the borrower to the vendors
97

of borrower.
In both scenarios, the scope of audit and time period for completion of audit
should be well defined as mentioned above.
At the time of allotment of Forensic Audit , the scope of work should include the
/0

following clause(s):

17

The Forensic Audit Report to categorically state that either there is a fraud or
otherwise.
 The Forensic Audit should be completed and report submitted within 2 months
of allocation of work
********

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 NPA RESOLUTION THROUGH MISSION GANDHIGIRI
(SASTRA DIVISION CIRCULAR NO. 27/2017)

Importance of Gandhigiri
Gandhigiri is no longer a neologism in India, to express tenets of Gandhian
philosophy. It is a universal truth that Gandhigiri, which is a silent and non-
violent expression of right and lawful thinking, has proved to be an effective
tool to bring wrong doers on right path. The cardinal principle will be to ―name
& shame‖ the defaulting borrowers without saying a word but through more
visibility.

Applicability of the scheme

The concept will be implemented on Pan India basis, covering all districts,
depending upon location of the borrower‟s
office/shop/residence/factory/business activity location etc.

2
Nature of Work


2:5
The employees selected to implement Mission Gandhigiri will be provided with
bags and a Jeep/Car etc. by the Circle Office, carrying banners with Bank‟s
name & Logo (on maroon background with yellow paint) in vogue . On banner
02 1
following words are to be painted:
02
―PNB Recovery Team- Bank on wheels to recover bad loans‖
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 All the employees in the recovery team, will wear sleeveless jackets in
maroon color with PNB Logo in yellow color and slogan ―PNB Recovery
97

Team‖ which will be supplied directly by the Corporate Communication

Division to the Circles. Further, each employee will be carrying placards with
following slogans which may be translated into vernacular language as per
the requirement.
―Repay PNB loan to secure a peaceful sleep at night‖
―PNB KaKarzChukayen, Samaj Mein IzzatPayen‖
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
17

The employees will sit/stand with placards silently in front of the

office/shop/factory/business location of the borrower. Duration and periodicity
of the silent dhrana will be decided by the Circle Head, depending upon the
requirement and results achieved.
 Circle Heads to ensure to form Recovery Teams comprising of minimum 4
employees in each team. For formation of teams, the Circle Heads may also
utilize services of their Agricultural Officers, if required. The Team may be
headed by an Officer, preferably, a Chief Manager.

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 Selection criteria for employees under Mission Gandhigiri-
 Employees, irrespective of cadre, will be identified by the Circle Head, based
on the feedback from the branches under their jurisdiction, satisfying
preferably following criteria:
o Employees who have more inclination for field job and are willing to be
mobile
o Aptitude for recovery in NPA accounts
o Knowledge of the local area/local language

Selection criteria for NPA accounts

 Although Circle Heads may select any NPA account but it is desirable that
those accounts are selected where other recovery methods e.g SARFAESI
notices, personal contacts, OTS attempts, sale of secured assets etc. have

2
failed to produce desired results. So to start the process, preference be given
to the Doubtful accounts having sufficient securities and/or where

2:5
business activity is still continuing.

Monitoring of the scheme

02 1
02
 Circle Heads to depute selected employees to the different locations and
3/2 98

assess the outcome which will be purely on the basis of recoveries effected in
the NPA accounts through Gandhigiri. Circle Heads to constantly oversee
97

the “Mission Gandhigiri” and submit progress on monthly basis to their Zonal
offices. Further, Zonal Office will submit Circle-wise progress to HO:
Recovery Division on quarterly basis on the following format starting from
June, 2017 onwards:
Sno. Circle No. of No. of Partial NPA
/0

Officers Borrowers Recoveries Accounts

Used for covered made through adjusted/
17

Mission Mission upgraded

Gandhigiri Gandhigiri
No Amount No Amount

Zonal Managers/Circle Heads to create necessary hype through media

(pamphlets, posters, jingles, news items, TV channels etc.) so that the
borrowers are under pressure to repay.
*******

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 Model Scheme and Standard Operating Procedure(SOP) for Making
Request for Issuance of Look Out Circular (LOC)
(Sastra Div Cir no 19/2019)
SOP for Look out notice Regarding Empowerment of Heads of Public Sector
Banks
Based on the guidelines issued by Ministry of Finance vide office memorandum no.
F.No6/3/2018-B.O-II, dated 04.10.2018, Office Memorandum issued by Ministry of
Home Affairs (Foreigners Division) No 25016/31/2010 dated 27.10.2010 and Broad
Parameters defined by IBA, the procedural guidelines/SOP to be followed for issuing
request for opening LOCs, is as under :-
Definitions
The definitions used hereinafter in this circular are as follows:
The Person means an individual person in relation to whom a request for LOC is
being made.

2
The Entity means any entity, of which the Person is a proprietor/partner/director/

2:5
managing director/ chairman; or where the Person is in a position to control such
entity by ownership or otherwise.
02 1
02
Indicative Basis and Trigger for making of request for issuance of LOC:
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Request for issuance of LOC has to be facts based and is to be made carefully and
judiciously.
97

Such request has to be based on objective parameters supported by evidence.

Request for issuance of LOC in relation to the Person may be made by a Bank
subject to all of the (A), (B) and (C)
(A) The Person or the Entity is a borrower or guarantor of our Bank.
/0

(B) There is an apprehension that the Person is likely to flee out of India based on
17

any reliable information, such as one or more of the following-

 detective/ intelligence report/ forensic audit report;
 Personal behaviour of the Person;
 Conduct of account with any bank of the Person or the Entity;
 There being a criminal case registered with Police, CBI, ED or any other
investigation agency against the Person or against the Entity;
 The Person or the Entity in default for any amount to any bank;
 In terms of guidelines issued by the Reserve Bank of India, Fraud is (or is in
the process of being) reported in any of the transactions of or dealings with
any bank of the Person or the Entity;

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  The Person or the Entity is (or is in the process of being) declared as Wilful
Defaulter: or (As defined by SASTRA Division Circular 22/2015 dated
31.08.2015)
The Person or the Entity is (or is in the process of being) identified as Non-
Cooperative Borrower. (As defined by L & A Circular 24/2015 dated 01.04.2015)
(The list above is illustrative and not exhaustive)
(C) The Person and all the Entities taken together have combined loan
outstanding (fund based and non- fund based) of not less than Rs. 50 crores
from the banking system.
Responsibility Sharing for Request For Issuance of LOC
Responsibility for request for issuance of LOC in respect of the Person will be as
follows:
In Consortium accounts:

2
On the PSB, when such PSB is the leader of the consortium; and

2:5
On the PSB, though not a leader, holding the biggest share or exposure amongst the
PSB members of such consortium.
02 1
02
In Multiple Banking Accounts :
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The PSB with largest exposure among PSB members of multiple lending
arrangement.
97

In Sole Banking Accounts :

The PSB which has exposure on the Person or the Entity
Any PSB not being responsible under the above mentioned points may also
make a request for issuance of LOC subject to meeting the other parameters
under this circular
/0

Procedure to Be Followed for Request of Issuance of LOC

17

Detection of Trigger Points: The trigger points have been defined in point No 2.
The trigger points may be detected at any level in the Bank i.e. Branch, Circle Office,
Zonal office and Head Office.

As the authority for issuing request for opening an LOC is MD & CEO, SASTRA
Division, HO will initiate the process based on the recommendations of Zonal
Manager. The performa for sending the recommendations for the account is
given in Annexure A. The Zonal office/Zonal Manager to also ensure that
minimum 3 out of 5 of the following details are provided w.r.t. the person
against whom Look Out Circular is to be issued:-

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 A. Name
B. Parentage
C. Exact Date of Birth
D. Valid Passport Details
E. Clear Photograph
Once recommendations are received at SASTRA Division, HO, respective Zonal
office desk at HO will place the proposal to Committee for Preliminary
Examination of Look Out Circular at HO comprising of the following:
a) GM- SASTRA (Recovery). At least 1
b) GM (Credit) OR GM- SASTRA (Monitoring). At least 1
c) DGM-SASTRA (Recovery). At least 1
d) DGM- Law

2
Once the proposal is recommended by the above committee, the same will be

2:5
placed to MD & CEO through domain Executive Director.
Upon receiving the consent of MD & CEO, the Performa for Issuance of Look Out
02 1
Circular ( As given in MHA OM No. 25016/31/2010-Imm dated 27.10.2010) , along
02
with the forwarding letter duly signed by the Nodal officer of the Bank for issuing
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LOC will be delivered to Deputy Director, Bureau of Immigration (BoI), East Block-
VIII, R.K. Puram, New Delhi-110066
97

In case of consortium accounts, if an LOC is issued based on the request made by

our Bank, respective Zonal office to subsequently send necessary communication to
all lenders in this regard.
Reporting and Monitoring
/0

As per DFS instructions communicated vide e-mail dated 01.03.2019, data on

request for opening of LOCs made by the Bank is to be submitted on fortnightly basis
17

to bo2@nic.in
As per MHA OM No. 25016/31/2010-Imm dated 27.10.2010, LOCs are valid for a
period of one year from the date of issue and name of the subject shall be
automatically removed from the LOC thereafter unless the concerned agency
requests for its renewal within a period of one year. Hence, SASTRA Division, HO
will place a review note to Committee for Preliminary Examination of Look Out
Circular preferably in the 10th month itself of issuance of request for LOC, so as to
take a call to continue the request or not. For this purpose, recommendations and
views of Zonal Manager will be sought.

******
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 INVOCATION OF PLEDGE OF SHARES / SALE OF PLEDGED SHARES
IN NPA ACCOUNTS – NEED FOR TAKING URGENT STEPS
(SASTRA Div Cir No 35/2019)
Where Bank is having security by way of pledge of shares, steps for invocation of
pledge / sale of pledged shares need to be taken immediately upon classification of
account as NPA to expedite recovery of Bank‟s dues.
Further, in case the pledged shares are of a listed company, the same are to be
sold through concerned stock exchange. In such cases, assistance of Treasury
Division, Mumbai, may be taken. In case the pledged shares are of unlisted
company/ies, Bank may proceed for sale of pledged shares by inviting
quotations from public through news papers / Bank‟s web site etc.
Before sale of pledged shares, a notice of invocation of pledge be issued to the
pledgor of shares. In case of any difficulty in this regard, guidance from Law Division,
HO may be obtained. A draft format of the Notice to be issued to the pledgors

2
(Annexure–I) as well as the notice to be published in the newspaper/s inviting

2:5
quotations for sale of shares (Annexure–II), as aforesaid, are available in Cir
35/2019.
Keeping in view the above, all field functionaries are advised as under :-
02 1
02
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I. In case our Bank is sole ledner, the steps for invocation of pledge / sale of
pledged shares be initiated immediately and in all eventuality, not later than a
week from the classification of the account as NPA.
97

II. In case of consortium accounts where our Bank is leader, the consortium
meeting be immediately called after slipping of account to NPA to initiate
steps to invoke pledge of shares / sale of pledged shares.
III. In case of consortium accounts where PNB is not the lead bank, the lead
/0

bank be requested to call consortium meeting immediately upon classification

of such account as NPA for initiating steps to invoke pledge of shares / sale of
17

pledged shares.
The steps initiated for invocation of pledge / sale of pledged shares be taken to
logical end without time gaps.

*******

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