Академический Документы
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Культура Документы
Date: 23-09-2014
S.K. Sharma
General Manager (Rec. & Law)
1
CONFIDENTIAL
FOR USE OF BANK OFFICIALS ONLY
RECOVERY
POLICY
ORIENTAL BANK OF COMMERCE
Plot No. 5, Sector-32
Institutional Area, Gurgaon-122001
Phone : 91-124-4126551, 4126552
Fax : 91-124-4126570
2
S.L. BANSAL
Chairman & Managing Director
PREFACE
In order to ensure better understanding by all field functionaries, Recovery & Law
Department has brought out a revised and updated version of the Banks
Recovery Policy. This revised booklet also covers the entire framework and legal
changes brought about from time to time as well as guidelines issued by Reserve
Bank of India.
I am sure that field functionaries will find this booklet very useful in their day-today working.
I would urge all filed functionaries to go through this valuable document and make
concerted recovery efforts which will enable the Bank to improve its profitability.
(S.L. BANSAL)
Gurgaon
ACKNOWLEDGEMENT
We are grateful to the Top Executives at Head Office, the Regional Heads and field
functionaries for providing us valuable suggestions / inputs which have gone a long way
in revising existing Recovery Policy. Our approach has been to provide a systematic and
simplified approach for handling the NPAs. Branches / Regional Offices are advised to
meticulously go through the policy and for any clarification, Recovery and Law
Department at Head office may be contacted. All field functionaries are advised to
ensure compliance of the policy.
(S.K. SHARMA)
Gurgaon
INDEX
S.NO.
CHAPTER
1.
6-31
2.
32-43
3.
44-49
4.
50-91
5.
LOK ADALAT
92-97
6.
7.
144-182
183-189
9.
WILFUL DEFAULTERS
190-207
10.
208-222
11.
223-225
12.
226-249
13.
250-291
PAGE NO.
98-143
CHAPTER - I
Right from the beginning, our Bank has been following the prudential norms
introduced by the RBI in letter and spirit. Though the prudential norms were
operative from 01.04.1992 but as a prudent banker, our Bank did a special
exercise to identify the NPA portfolio as on 31.03.1992 instead of 31.03.1993 as
directed by RBI. The said exercise proved a landmark for the Bank in controlling
the NPAs. The exercise revealed that our NPAs stood at about ` 324 Crore
against the total loan portfolio of about ` 1850 crore i.e. 17.5%. The position being
alarming, the Bank immediately started recovery drive. The NPAs of the Bank
were brought down to ` 293 crore (12.63%) during the following year ended
March 1993. Despite increase in the business, the NPAs of the Bank were on
reducing side thereafter and the same stood at ` 221 crore (6.14%) as on
31.03.1995.
There has been gradual increase in gross NPAs although in percentage terms the
NPAs decreased from 1996-97 till 2000-01.
The Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
has made some impact/ fear in the minds of the borrowers and attitudinal change
is visible. Erstwhile Global Trust Bank has been merged with the Bank w.e.f.
14.08.2004 and thereby gross NPA of the Bank has increased to ` 2513 crore as
on 31.03.2005. At the time of amalgamation, the NPA of eGTB was to the extent
of ` 1339.00 crore.
The Apex Bank introduced Income Recognition norms effective from 01.04.1992
but our Bank introduced the system of not debiting unrealized interest to the
borrowers accounts and recording it separately from 01.01.1987 itself, which
proved a turning point in containing our NPAs at the lower level. Due to economic
slowdown there has been increase in NPA during the last few years. The Gross
NPA of the Bank as on 31.03.2014 is ` 5617.86 crore (3.99% of Gross Advances
of the Bank).
STANDARD
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
24984.05
33432.25
43940.63
54047.36
68006.59
82715.19
94918.36
109469.32
126002.21
135147.21
SUBSTANDA
RD
415.53
203.72
269.58
363.69
310.53
679.28
872.14
2496.10
2458.60
3081.84
DOUBT
-FUL
1523.56
1391.30
877.23
784.88
670.53
731.79
1002.21
1063.25
1704.42
2536.02
LOSS
573.73
521.29
307.24
131.53
77.06
57.68
46.19
21.14
20.94
0.00
GROSS
NPA
GROSS
ADVANC
ES
2512.82
2116.31
1454.05
1280.10
1058.12
1468.75
1920.54
3580.49
4183.96
5617.86
27496.87
35548.56
45394.68
55327.46
69064.71
84183.94
96838.90
113049.81
130186.17
140765.07
% OF
NPA
TO
GRO
SS
ADV
ANC
ES
9.13
5.95
3.20
2.31
1.53
1.74
1.98
3.17
3.21
3.99
NET
ADVANC
ES
25299.20
33577.24
44138.47
54565.83
68428.37
83280.17
95569.28
111461.26
128027.51
138374.71
2. DEFINITIONS
2.1 Non Performing Assets
2.1.1 An asset, including a leased asset, becomes non performing when it ceases to
generate income for the bank.
2.1.2 A non performing asset (NPA) is a loan or an advance where;
% OF
NET
NPAs
TO
NET
ADVA
NCES
1.30
0.49
0.49
0.99
0.65
0.87
0.98
2.21
2.27
2.82
i. interest and/ or installment of principal remain overdue for a period of more than
90 days in respect of a term loan,
ii. the account remains out of order as indicated at paragraph 2.2 below, in
respect of an Overdraft/Cash Credit (OD/CC),
iii. the bill remains overdue for a period of more than 90 days in the case of bills
purchased and discounted,
iv. the installment of principal or interest thereon remains overdue for two crop
seasons for short duration crops,
v. the installment of principal or interest thereon remains overdue for one crop
season for long duration crops,
vi. the amount of liquidity facility remains outstanding for more than 90 days, in
respect of a securitisation transaction undertaken in terms of guidelines on
securitisation dated February 1, 2006.
vii. 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.
As a facilitating measure for smooth transition to 90 days norm, banks had been advised
by RBI to move over to charging of interest at monthly rests, (by April 1, 2002).
However, the date of classification of an advance as NPA should not be changed on
account of charging of interest at monthly rests.
2.1.3 In case of interest payments, banks should, classify an account as NPA only if the
interest due and charged during any quarter is not serviced fully within 90 days from the
end of the quarter.
2.1.4 In addition, an account may also be classified as NPA in terms of paragraph 4.2.4.
i.e. Accounts with temporary deficiencies.
2.2 Out of Order status
An account should be treated as 'out of order' if the outstanding balance remains
continuously in excess of the sanctioned limit/drawing power. In cases where the
outstanding balance in the principal operating account is less than the sanctioned
limit/drawing power, but 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, these accounts should be treated as 'out of order'.
2.3 Overdue
Any amount due to the bank under any credit facility is overdue if it is not paid on the
due date fixed by the bank.
3. INCOME RECOGNITION
3.1 Income Recognition Policy
3.1.1 The policy of income recognition has to be objective and based on the record of
recovery. Internationally income from non -performing assets (NPA) is not recognised on
accrual basis but is booked as income only when it is actually received. Therefore, the
banks should not charge and take to income account interest on any NPA. This will
apply to Government guaranteed accounts also.
3.1.2 However, interest on advances against term deposits, NSCs, IVPs, KVPs and Life
policies may be taken to income account on the due date, provided adequate margin is
available in the accounts.
3.1.3 Fees and commissions earned by the banks as a result of renegotiations or
rescheduling of outstanding debts should be recognised on an accrual basis over the
period of time covered by the renegotiated or rescheduled extension of credit.
3.2 Reversal of Income
3.2.1 If any advance, including bills ;purchased and discounted, becomes NPA, the
entire interest accrued and credited to income account in the past periods, should be
reversed if the same is not realised. This will apply to Government guaranteed
accounts also.
3.2.2 In respect of NPAs, fees, commission and similar income that have accrued should
cease to accrue in the current period and should be reversed with respect to past
periods, if uncollected.
3.2.3 Leased Assets
The finance charge component of finance income [as defined in AS 19 Leases issued
by the Council of the Institute of Chartered Accountants of India (ICAI)] on the leased
asset which has accrued and was credited to income account before the asset became
non performing, and remaining unrealised, should be reversed or provided for in the
current accounting period.
3.3 Appropriation of Recovery in NPAs
3.3.1 Interest realised on NPAs may be taken to income account provided the credits in
the accounts towards interest are not out of fresh/ additional credit facilities sanctioned to
the borrower concerned.
3.3.2 In the absence of a clear agreement between the bank and the borrower for the
purpose of appropriation of recoveries in NPAs (i.e. towards principal or interest due),
banks should adopt an accounting principle and exercise the right of appropriation of
recoveries in a uniform and consistent manner.
10
11
credit limits is already on and would be completed soon. In any case, delay
beyond six months is not considered desirable as a general discipline. Hence, an
account where the regular/ ad hoc credit limits have not been reviewed/ renewed
within 180 days from the due date/ date of ad hoc sanction will be treated as NPA.
4.2.5 Upgradation of loan accounts classified as NPAs
If arrears of interest and principal are paid by the borrower in the case of loan accounts
classified as NPAs, the account should no longer be treated as non-performing and may
be classified as standard accounts.
4.2.6 Accounts regularised near about the balance sheet date
The asset classification of borrowal accounts where a solitary or a few credits are
recorded before the balance sheet date should be handled with care and without scope
for subjectivity. Where the account indicates inherent weakness on the basis of the
data available, the account should be deemed as a NPA. In other genuine cases, the
banks must furnish satisfactory evidence to the Statutory Auditors/Inspecting Officers
about the manner of regularisation of the account to eliminate doubts on their performing
status.
4.2.7 Asset Classification to be borrower -wise and not facility -wise
i) It is difficult to envisage a situation when only one facility to a borrower/one
investment in any of the securities issued by the borrower becomes a problem
credit/investment and not others. Therefore, all the facilities granted by a bank to a
borrower and investment in all the securities issued by the borrower will have to
be treated as NPA/NPI and not the particular facility/investment or part thereof
which has become irregular.
ii) If the debits arising out of devolvement of letters of credit or invoked guarantees
are parked in a separate account, the balance outstanding in that account also
should be treated as a part of the borrowers principal operating account for the
purpose of application of prudential norms on income recognition, asset
classification and provisioning.
iii) The bills discounted under LC favouring a borrower may not be classified as a
Non-performing advance (NPA), when any other facility granted to the borrower is
classified as NPA. However, in case documents under LC are not accepted on
presentation or the payment under the LC is not made on the due date by the LC
issuing bank for any reason and the borrower does not immediately make good
the amount disbursed as a result of discounting of concerned bills, the outstanding
bills discounted will immediately be classified as NPA with effect from the date
when the other facilities had been classified as NPA.
iv) Derivative Contracts
a) The overdue receivables representing positive mark-to-market value of a
derivative contract will be treated as a non-performing asset, if these remain
unpaid for 90 days or more. In case the overdues arising from forward contracts
and plain vanilla swaps and options become NPAs, all other funded facilities
12
granted to the client shall also be classified as non-performing asset following the
principle of borrower-wise classification as per the existing asset classification
norms. However, any amount, representing positive mark-to-market value of the
foreign exchange derivative contracts (other than forward contract and plain
vanilla swaps and options) that were entered into during the period April 2007 to
June 2008, which has already crystallised or might crystallise in future and is /
becomes receivable from the client, should be parked in a separate account
maintained in the name of the client / counterparty. This amount, even if overdue
for a period of 90 days or more, will not make other funded facilities provided to
the client, NPA on account of the principle of borrower-wise asset classification,
though such receivable overdue for 90 days or more shall itself be classified as
NPA, as per the extant IRAC norms. The classification of all other assets of such
clients will, however, continue to be governed by the extant IRAC norms.
b) If the client concerned is also a borrower of the bank enjoying a Cash Credit or
Overdraft facility from the bank, the receivables mentioned at item (iv) above may
be debited to that account on due date and the impact of its non-payment would
be reflected in the cash credit / overdraft facility account. The principle of
borrower-wise asset classification would be applicable here also, as per extant
norms.
c) In cases where the contract provides for settlement of the current mark-tomarket value of a derivative contract before its maturity, only the current credit
exposure (not the potential future exposure) will be classified as a non-performing
asset after an overdue period of 90 days.
d) As the overdue receivables mentioned above would represent unrealised
income already booked by the bank on accrual basis, after 90 days of overdue
period, the amount already taken to 'Profit and Loss a/c' should be reversed, and
held in a Suspense Account-Crystalised Receivables in the same manner as
done in the case of overdue advances.
e) Further, in cases where the derivative contracts provides for more settlements
in future, the MTM value will comprise of (a) crystallised receivables and (b)
positive or negative MTM in respect of future receivables. If the derivative contract
is not terminated on the overdue receivable remaining unpaid for 90 days, in
addition to reversing the crystallised receivable from Profit and Loss Account as
stipulated in para (d) above, the positive MTM pertaining to future receivables may
also be reversed from Profit and Loss Account to another account styled as
Suspense Account Positive MTM. The subsequent positive changes in the
MTM value may be credited to the Suspense Account Positive MTM, not to
P&L Account. The subsequent decline in MTM value may be adjusted against the
balance in Suspense Account Positive MTM. If the balance in this account is
not sufficient, the remaining amount may be debited to the P&L Account. On
payment of the overdues in cash, the balance in the Suspense AccountCrystalised Receivables may be transferred to the Profit and Loss Account, to
the extent payment is received.
13
f) If the bank has other derivative exposures on the borrower, it follows that the
MTMs of other derivative exposures should also be dealt with / accounted for in
the manner as described in para (e) above, subsequent to the
crystalised/settlement amount in respect of a particular derivative transaction
being treated as NPA.
g) Since the legal position regarding bilateral netting is not unambiguously clear,
receivables and payables from/to the same counterparty including that relating to
a single derivative contract should not be netted.
h) Similarly, in case a fund-based credit facility extended to a borrower is
classified as NPA, the MTMs of all the derivative exposures should be treated in
the manner discussed above.
4.2.8 Advances under consortium arrangements
Asset classification of accounts under consortium should be based on the record of
recovery of the individual member banks and other aspects having a bearing on the
recoverability of the advances. Where the remittances by the borrower under consortium
lending arrangements are pooled with one bank and/or where the bank receiving
remittances is not parting with the share of other member banks, the account will be
treated as not serviced in the books of the other member banks and therefore, be treated
as NPA. The banks participating in the consortium should, therefore, arrange to get their
share of recovery transferred from the lead bank or get an express consent from the lead
bank for the transfer of their share of recovery, to ensure proper asset classification in
their respective books.
4.2.9 Accounts where there is erosion in the value of security/frauds committed by
borrowers
In respect of accounts where there are potential threats for recovery on account of
erosion in the value of security or non -availability of security and existence of other
factors such as frauds committed by borrowers it will not be prudent that such accounts
should go through various stages of asset classification. In cases of such serious credit
impairment the asset should be straightaway classified as doubtful or loss asset as
appropriate:
i. Erosion in the value of security can be reckoned as significant when the
realisable value of the security is less than 50 per cent of the value assessed by
the bank or accepted by RBI at the time of last inspection, as the case may be.
Such NPAs may be straightaway classified under doubtful category and
provisioning should be made as applicable to doubtful assets.
ii. If the realisable value of the security, as assessed by the bank/ approved
valuers/ RBI is less than 10 per cent of the outstanding in the borrowal accounts,
the existence of security should be ignored and the asset should be straightaway
14
classified as loss asset. It may be either written off or fully provided for by the
bank.
4.2.10 Advances to Primary Agricultural Credit Societies (PACS)/Farmers Service
Societies (FSS) ceded to Commercial Banks
In respect of agricultural advances as well as advances for other purposes granted by
banks to PACS/ FSS under the on- lending system, only that particular credit facility
granted to PACS/ FSS which is in default for a period of two crop seasons in case of
short duration crops and one crop season in case of long duration crops, as the case
may be, after it has become due will be classified as NPA and not all the credit facilities
sanctioned to a PACS/ FSS. The other direct loans & advances, if any, granted by the
bank to the member borrower of a PACS/ FSS outside the on -lending arrangement will
become NPA even if one of the credit facilities granted to the same borrower becomes
NPA.
4.2.11 Advances against Term Deposits, National Savings Certificates (NSCs),
Kisan Vikar Patra (KVP)/Indira Vikas Patra (IIVP), etc
Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs and life
policies need not be treated as NPAs, provided adequate margin is available in the
accounts. Advances against gold ornaments, government securities and all other
securities are not covered by this exemption.
4.2.12 Loans with moratorium for payment of interest
i. In the case of bank finance given for industrial projects or for agricultural
plantations etc. where moratorium is available for payment of interest, payment of
interest becomes 'due' only after the moratorium or gestation period is over.
Therefore, such amounts of interest do not become overdue and hence do not
become NPA, with reference to the date of debit of interest. They become
overdue after due date for payment of interest, if uncollected.
ii. In the case of housing loan 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 a default in repayment of installment of principal or
payment of interest on the respective due dates.
4.2.13 Agricultural advances
i. A loan granted for short duration crops will be treated as NPA, if the installment
of principal or interest thereon remains overdue for two crop seasons. A loan
granted for long duration crops will be treated as NPA, if the installment of
principal or interest thereon remains overdue for one crop season. For the
purpose of these guidelines, long duration crops would be crops with crop
season longer than one year and crops, which are not long duration crops,
would be treated as short duration crops. The crop season for each crop, which
means the period up to harvesting of the crops raised, would be as determined by
15
the State Level Bankers Committee in each State. Depending upon the duration
of crops raised by an agriculturist, the above NPA norms would also be made
applicable to agricultural term loans availed of by him.
The above norms should be made applicable to all direct agricultural advances as
listed at paragraph III (1.1) of the Circular on Priority Sector Lending Targets
and Classification RPCD.CO.Plan.BC.9/04.09.01/2013-14 dated July 1, 2013 . An
extract of the list of these items is furnished in the Annex - 2. In respect of
agricultural loans, other than those specified in the Annex - 2 and term loans given
to non-agriculturists, identification of NPAs would be done on the same basis as
non-agricultural advances, which, at present, is the 90 days delinquency norm.
ii. Where natural calamities impair the repaying capacity of agricultural borrowers,
banks may decide on their own as a relief measure conversion of the short-term
production loan into a term loan or re-schedulement of the repayment period; and
the sanctioning of fresh short-term loan, subject to guidelines contained in RBI
circular RPCD. No.PLFS.BC.6/05.04.02/2013 -14 dated July 2, 2013.
iii. In such cases of conversion or re-schedulement, the term loan as well as fresh
short-term loan may be treated as current dues and need not be classified as
NPA. The asset classification of these loans would thereafter be governed by the
revised terms & conditions and would be treated as NPA if interest and/or
installment of principal remains overdue for two crop seasons for short duration
crops and for one crop season for long duration crops. For the purpose of these
guidelines, "long duration" crops would be crops with crop season longer than one
year and crops, which are not 'long duration" would be treated as "short duration"
crops.
iv. While fixing the repayment schedule in case of rural housing advances granted
to agriculturists under Indira Awas Yojana and Golden Jubilee Rural Housing
Finance Scheme, banks should ensure that the interest/ installment payable on
such advances are linked to crop cycles.
4.2.14 Government guaranteed advances
The credit facilities backed by guarantee of the Central Government though overdue may
be treated as NPA only when the Government repudiates its guarantee when invoked.
This exemption from classification of Government guaranteed advances as NPA is not
for the purpose of recognition of income. The requirement of invocation of guarantee has
been delinked for deciding the asset classification and provisioning requirements in
respect of State Government guaranteed exposures. With effect from the year ending
March 31, 2006 State Government guaranteed advances and investments in State
Government guaranteed securities would attract asset classification and provisioning
norms if interest and/or principal or any other amount due to the bank remains overdue
for more than 90 days.
16
17
advance
Period for which the advance has remained in NPA category as on 30 th June
2011: 1 year 3 months (i.e. A/c is doubtful upto one year- D-1)
Provisioning requirement as per the rates of Provisioning:
As on
Asset
Provisions on
Provision on
Classification secured portion
unsecured
portion
%
Amt.
%
Amt.
30th June Doubtful
25 2,00,000
100 2,00,000
2011
upto one year
(D-1)
18
Total
(Rs.)
4,00,000
20
v) Upon termination, the Project Authority has an obligation of (i) compulsory buyout and (ii) repayment of debt due in a pre-determined manner.
In all such cases, banks must satisfy themselves about the legal enforceability of the
provisions of the tripartite agreement and factor in their past experience with such
contracts.
d) Banks should also disclose the total amount of advances for which intangible
securities such as charge over the rights, licenses, authority, etc. has been taken as also
the estimated value of such intangible collateral. The disclosure may be made under a
separate head in "Notes to Accounts". This would differentiate such loans from other
entirely unsecured loans.
5.5 Standard assets
Provision on Standard Assets is looked after by Accounts Deptt., Corporate Office,
Gurgaon.
5.6 Prudential norms on creation and utilisation of floating provisions
5.6.1 Principle for creation of floating provisions by banks
The bank's board of directors should lay down approved policy regarding the level to
which the floating provisions can be created. The bank should hold floating provisions for
advances and investments separately and the guidelines prescribed will be applicable
to floating provisions held for both advances & investment portfolios.
5.6.2 Principle for utilisation of floating provisions by banks
i The floating provisions should not be used for making specific provisions as per
the extant prudential guidelines in respect of non performing assets or for making
regulatory provisions for standard assets. The floating provisions can be used only
for contingencies under extraordinary circumstances for making specific
provisions in impaired accounts after obtaining boards approval and with prior
permission of RBI. The Boards of the banks should lay down an approved policy
as to what circumstances would be considered extraordinary.
ii To facilitate banks' Boards to evolve suitable policies in this regard, it is clarified
that the extra-ordinary circumstances refer to losses which do not arise in the
normal course of business and are exceptional and non-recurring in nature. These
extra-ordinary circumstances could broadly fall under three categories viz.
General, Market and Credit. Under general category, there can be situations
where bank is put unexpectedly to loss due to events such as civil unrest or
collapse of currency in a country. Natural calamities and pandemics may also be
included in the general category. Market category would include events such as a
general melt down in the markets, which affects the entire financial system.
Among the credit category, only exceptional credit losses would be considered as
an extra-ordinary circumstance.
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5.6.3 Accounting
Floating provisions cannot be reversed by credit to the profit and loss account. They can
only be utilised for making specific provisions in extraordinary circumstances as
mentioned above. Until such utilisation, these provisions can be netted off from gross
NPAs to arrive at disclosure of net NPAs. Alternatively, they can be treated as part of
Tier II capital within the overall ceiling of 1.25 % of total risk weighted assets.
5.6.4 Disclosures
Banks should make comprehensive disclosures on floating provisions in the notes on
accounts to the balance sheet on
(a) opening balance in the floating provisions account,
(b) the quantum of floating provisions made in the accounting year,
(c) purpose and amount of draw down made during the accounting year, and
(d) closing balance in the floating provisions account.
5.7 Additional Provisions for NPAs at higher than prescribed rates.
The regulatory norms for provisioning represent the minimum requirement. A bank may
voluntarily make specific provisions for advances at rates which are higher than the rates
prescribed under existing regulations, to provide for estimated actual loss in collectible
amount, provided such higher rates are approved by the Board of Directors and
consistently adopted from year to year. Such additional provisions are not to be
considered as floating provisions. The additional provisions for NPAs, like the minimum
regulatory provision on NPAs, may be netted off from gross NPAs to arrive at the net
NPAs
5.8 Provisions on Leased Assets
i) Sub standard assets
a) 15 percent of the sum of the net investment in the lease and the unrealised
portion of finance income net of finance charge component. The terms net
investment in the lease, finance income and finance charge are as defined in
AS 19 Leases issued by the ICAI.
b) Unsecured (as defined in paragraph 5.4 above) lease exposures,, which are
identified as substandard would attract additional provision of 10 per cent, i.e., a
total of 25 per cent.
ii) Doubtful assets
100 percent of the extent to which the finance is not secured by the realisable
value of the leased asset, should be provided for. Realisable value is to be
estimated on a realistic basis. In addition to the above provision, provision at the
following rates should be made on the sum of the net investment in the lease and
the unrealised portion of finance income net of finance charge component of the
secured portion, depending upon the period for which asset has been doubtful:
22
Period
for
which
the
remained in doubtful category
Up to one year
One to three years
More than three years
advance
has Provision
requirement (%)
25
40
100
23
balance in respect of the amount guaranteed by the Corporation and then provision
made as illustrated hereunder:
Example
Outstanding Balance
` 4 lakhs
ECGC Cover
50 percent
Period for which the advance has More than 2 years remained doubtful
remained doubtful
(say as on March 31, 2014)
` 1.50 lakhs
Value of security held
Provision required to be made
Outstanding balance
Less: Value of security held
Unrealised balance
Less:
ECGC
Cover
(50% of unrealisable balance)
Net unsecured balance
Provision for unsecured portion of
advance
Provision for secured portion of
advance (as on March 31, 2014)
Total provision to be made
` 4.00 lakhs
` 1.50 lakhs
` 2.50 lakhs
` 1.25 lakhs
` 1.25 lakhs
` 1.25 lakhs (@ 100 percent of
unsecured portion)
` 0.60 lakhs (@ 40 per cent of the
secured portion)
` 1.85 lakhs (as on March 31, 2014)
5.9.5 Advance covered by guarantees of Credit Guarantee Fund Trust For Micro
and Small Enterprises (CGTMSE) or Credit Risk Guarantee Fund Trust for Low
Income Housing (CRGFTLIH)
In case the advance covered by CGTMSE or CRGFTLIH guarantee becomes nonperforming, no provision need be made towards the guaranteed portion. The amount
outstanding in excess of the guaranteed portion should be provided for as per the extant
guidelines on provisioning for non performing advances. An illustrative example is given
below:
Example
Outstanding Balance
` 10 lakhs
75% of the amount outstanding or 75% of
CGTMSE/CRGFTLIH Cover
the unsecured amount or ` 37.50 lakh,
whichever is the least
Period for which the advance has More than 2 years remained doubtful
remained doubtful
(say as on March 31, 2014)
` 1.50 lakhs
Value of security held
24
` 10.00 lakh
` 1.50 lakh
` 8.50 lakh
` 6.38 lakh
` 2.12 lakh
` 0.60 lakh
` 2.12 lakh
` 2.72 lakh
The loss on revaluation of assets has to be booked in the bank's Profit & Loss
Account.
In addition to the provisioning requirement as per Asset Classification, the full
amount of the Revaluation Gain, if any, on account of foreign exchange fluctuation
should be used to make provisions against the corresponding assets.
25
Banks are required to make provision for country risk in respect of a country where its
net funded exposure is one per cent or more of its total assets.
The provision for country risk shall be in addition to the provisions required to be held
according to the asset classification status of the asset. However, in the case of loss
assets and doubtful assets, provision held, including provision held for country risk,
may not exceed 100% of the outstanding.
Banks may not make any provision for home country exposures i.e. exposure to India.
The exposures of foreign branches of Indian banks to the host country should be
included. Foreign banks shall compute the country exposures of their Indian branches
and shall hold appropriate provisions in their Indian books. However, their exposures to
India will be excluded.
Banks may make a lower level of provisioning (say 25% of the requirement) in respect of
short-term exposures (i.e. exposures with contractual maturity of less than 180 days).
5.9.9 Excess Provisions on sale of Standard Asset / NPAs
(a) If the sale is in respect of Standard Asset and the sale consideration is higher
than the book value, the excess provisions may be credited to Profit and Loss
Account.
(b) Excess provisions which arise on sale of NPAs can be admitted as Tier II
capital subject to the overall ceiling of 1.25% of total Risk Weighted Assets.
Accordingly, these excess provisions that arise on sale of NPAs would be eligible
for Tier II status in terms of paragraph 4.3.2 of Master Circular
DBOD.No.BP.BC.9/21.06.001/2013-14 dated July 02, 2013 on Prudential
guidelines on Capital Adequacy and Market Discipline - New Capital Adequacy
Framework (NCAF).
5.9.10 Provisions for Diminution of Fair Value
Provisions for diminution of fair value of restructured advances, both in respect of
Standard Assets as well as NPAs, made on account of reduction in rate of interest and /
or reschedulement of principal amount are permitted to be netted from the relative asset.
5.9.11 Provisioning norms for Liquidity facility provided for Securitisation
transactions
The amount of liquidity facility drawn and outstanding for more than 90 days, in respect
of securitisation transactions undertaken in terms of RBI guidelines on securitisation
dated February 1, 2006, should be fully provided for.
5.9.12 Provisioning requirements for derivative exposures
Credit exposures computed as per the current marked to market value of the contract,
arising on account of the interest rate & foreign exchange derivative transactions, credit
26
default swaps and gold, shall also attract provisioning requirement as applicable to the
loan assets in the 'standard' category, of the concerned counterparties. All conditions
applicable for treatment of the provisions for standard assets would also apply to the
aforesaid provisions for derivative and gold exposures.
5.9.13 Provisioning for housing loans at teaser rates
It has been observed that some banks are following the practice of sanctioning housing
loans at teaser rates i.e. at comparatively lower rates of interest in the first few years,
after which rates are reset at higher rates. This practice raises concern as some
borrowers may find it difficult to service the loans once the normal interest rate, which is
higher than the rate applicable in the initial years, becomes effective. It has been also
observed that many banks at the time of initial loan appraisal, do not take into account
the repaying capacity of the borrower at normal lending rates. Therefore, the standard
asset provisioning on the outstanding amount of such loans has been increased from
0.40 per cent to 2.00 per cent in view of the higher risk associated with them. The
provisioning on these assets would revert to 0.40 per cent after 1 year from the date on
which the rates are reset at higher rates if the accounts remain standard.
5.10 Provisioning Coverage Ratio
i. Provisioning Coverage Ratio (PCR) is essentially the ratio of provisioning to gross nonperforming assets and indicates the extent of funds a bank has kept aside to cover
loan losses.
ii. From a macro-prudential perspective, banks should build up provisioning and capital
buffers in good times i.e. when the profits are good, which can be used for absorbing
losses in a downturn. This will enhance the soundness of individual banks, as also the
stability of the financial sector. It was, therefore, decided that banks should augment
their provisioning cushions consisting of specific provisions against NPAs as well as
floating provisions, and ensure that their total provisioning coverage ratio, including
floating provisions, is not less than 70 per cent. Accordingly, banks were advised to
achieve this norm not later than end-September 2010.
iii. Majority of the banks had achieved PCR of 70 percent and had represented to RBI
whether the prescribed PCR is required to be maintained on an ongoing basis. The
matter was examined and till such time RBI introduces a more comprehensive
methodology of countercyclical provisioning taking into account the international
standards as are being currently developed by Basel Committee on Banking
Supervision (BCBS) and other provisioning norms, banks were advised that :
a) the PCR of 70 percent may be with reference to the gross NPA position in
banks as on September 30, 2010;
b) the surplus of the provision under PCR vis-a-vis as required as per prudential
norms should be segregated into an account styled as countercyclical
provisioning buffer, computation of which may be undertaken as per the format
given in Annex - 3; and
27
c) this buffer will be allowed to be used by banks for making specific provisions for
NPAs during periods of system wide downturn, with the prior approval of RBI.
iv. The PCR of the bank should be disclosed in the Notes to Accounts to the Balance
Sheet.
V. In terms of the Discussion Paper on Introduction of Dynamic Loan Loss Provisioning
Framework for Banks in India dated March 30, 2012, banks are required to build up
Dynamic Provisioning Account during good times and utilise the same during downturn.
Under the proposed framework, banks are expected to either compute parameters such
as probability of default, loss given default, etc. for different asset classes to arrive at
long term average annual expected loss or use the standardised parameters prescribed
by Reserve Bank of India towards computation of Dynamic Provisioning requirement.
Dynamic loan loss provisioning framework is expected to be in place with improvement in
the system. Meanwhile, banks should develop necessary capabilities to compute their
long term average annual expected loss for different asset classes, for switching over to
the dynamic provisioning framework.
6. Writing off of NPAs
8.1 In terms of Section 43(D) of the Income Tax Act 1961, income by way of interest in
relation to such categories of bad and doubtful debts as may be prescribed having
regard to the guidelines issued by the RBI in relation to such debts, shall be chargeable
to tax in the previous year in which it is credited to the banks profit and loss account or
received, whichever is earlier.
8.2 This stipulation is not applicable to provisioning required to be made as indicated
above. In other words, amounts set aside for making provision for NPAs as above are
not eligible for tax deductions.
8.3 Therefore, the banks should either make full provision as per the guidelines or writeoff such advances and claim such tax benefits as are applicable, by evolving appropriate
methodology in consultation with their auditors/tax consultants. Recoveries made in such
accounts should be offered for tax purposes as per the rules.
8.4 Write -off at Head Office Level
Banks may write- off advances at Head Office level, even though the relative advances
are still outstanding in the branch books. However, it is necessary that provision is made
as per the classification accorded to the respective accounts. In other words, if an
advance is a loss asset, 100 percent provision will have to be made therefor.
28
Annexure-1
(Cf. para 3.5)
Part A
Details of Gross Advances, Gross NPAs, Net Advances and Net NPAs
(` in crores up to two decimals)
Particulars
Amount
1. Standard Advances
2 Gross NPAs *
3. Gross Advances ** ( 1+2 )
4. Gross NPAs as a percentage of Gross Advances (2/3) (in %)
5. Deductions
(i) Provisions held in the case of NPA Accounts as per asset
classification (including additional Provisions for NPAs at
higher than prescribed rates).
(ii) DICGC / ECGC claims received and held pending
adjustment
(iii) Part payment received and kept in Suspense Account or
any other similar account
(iv) Balance in Sundries Account (Interest Capitalization Restructured Accounts), in respect of NPA Accounts
(v) Floating Provisions***
(vi) Provisions in lieu of diminution in the fair value of
restructured accounts classified as NPAs
(vii) Provisions in lieu of diminution in the fair value of
restructured accounts classified as standard assets
6. Net Advances(3-5)
7. Net NPAs {2-5(i + ii + iii + iv + v + vi)}
8. Net NPAs as percentage of Net Advances (7/6) (in %)
Principal dues of NPAs plus Funded Interest Term Loan (FITL) where the corresponding
*
contra credit is parked in Sundries Account (Interest Capitalization - Restructured Accounts),
in respect of NPA Accounts.
** For the purpose of this Statement, Gross Advances' mean all outstanding loans and
advances including advances for which refinance has been received but excluding
rediscounted bills, and advances written off at Head Office level (Technical write off).
*** Floating Provisions would be deducted while calculating Net NPAs, to the extent, banks
have exercised this option, over utilising it towards Tier II capital.
Part B
Supplementary Details
(` in crores up to two decimals)
Particulars
Amount
1. Provisions on Standard Assets excluding 5(vi) in Part A above
2. Interest recorded as Memorandum Item
3. Amount of cumulative Technical Write - Off in respect of NPA
accounts reported in Part A above
29
Annexure - 2
(Cf. para 4.2.13)
Relevant extract of the list of direct agricultural advances, from the Circular
Priority Sector Lending Targets and Classification - paragraph III (1.1) of
RPCD.CO.Plan. BC.9/04.09.01/2013-14 dated July 1, 2013
Direct Agriculture
A. Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability
Groups (JLGs), i.e. groups of individual farmers, provided banks maintain
disaggregated data on such loans] engaged in Agriculture only.
(i)
Short-term loans to farmers for raising crops, i.e. for crop loans. This will
include traditional / non-traditional plantations and horticulture.
(ii)
(iii)
(iv)
(v)
Loans to small and marginal farmers for purchase of land for agricultural
purposes.
(vi)
(vii)
(viii)
(ix)
30
Annexure 3
Format for Computing Countercyclical Provisioning Buffer
Amount in ` in Crores
Computing Countercyclical Provisioning Buffer as on September 30, 2010
1
1.
Gross NPA
@ Plus
Technical /
Prudential
Write-off *
Specific
Provisio
ns for
NPAs
held/req
uired
Provisions
for
diminution
in fair value
of the
restructure
d accounts
classified
as NPAs
Techni
cal
writeoff
Total
(4+5+6)
Ratio of
(7) to (3)
Sub-Standard Advances
2.
< 1 year
1-3 Years
>3 years
3.
4.
Total
5.
6.
7.
8.
9.
10.
11.a
11.b
31
CHAPTER 2
MANAGEMENT OF NPAS AND GUIDELINES FOR FOLLOW UP
The bank has well established set-up consisting of Recovery & Law Deptt. at Head
Office and Recovery & Law Deptt. at all the Regional Offices . Each office has
specialised Law Officers alongwith Legal Retainer to effectively deal with NPA accounts.
Recovery Officers are also provided in branches having large NPA portfolio. The system
gets activated immediately once an account is declared as NPA. All out efforts, at all the
three tiers of the bank are made to get it upgraded or to get the account
liquidated/adjusted through persuasion. Officials from the Branch(es) & Regional
Office(s) contact the defaulting borrowers to effect recovery in NPA accounts. In
the NPA accounts, where the stakes of the Bank are high, officials from Recovery & Law
Department also visit the concerned Branch(es) /Regional Office(s) and contact such
borrower(s) to get the accounts upgraded/adjusted through persuasive efforts.
The following broad guidelines for management and follow-up for all NPA accounts have
been issued by the Bank and circulated vide our Circulars No. HO/REC & LAW /15
/2008-09/ 489 dated 06.12.2008 and HO/REC & LAW /07 /2010-11/ 552 dated
15.11.2010:
1. Prevention of NPAs.
1.1 EAS/SMA Accounts.
Our bank introduced the concept of Standard Irregular Accounts as early as 1995 to
identify those Standard accounts which have the tendency of becoming NPAs, if proper
watch is not kept on them. These are the accounts falling between Standard & Substandard category and the concept has been appreciated by the RBI officials and the
same have been renamed as Special Mention Accounts.
Bank has introduced a system of monitoring of EAS/SMA Accounts, which was circulated
vide CAD Circulars No. HO/ADV/42/2008-09/205 dated 28.07.2008 and other CAD
Circulars dated 12.06.2008 and 16.07.2008. Effective monitoring by field functionaries
may help detecting the irregularity at an early stage and enabling them to initiate
remedial measures to prevent slippage of such accounts to NPAs.
In order to identify incipient stress in the borrowal account before it turns into Non
Performing Asset (NPA), Bank vide Circular No: HO/CAD/127/2013-14/1164 dated
19.03.2014 are henceforth required to have three sub-categories under the SMA
category as given in the table below:
SMA SUB-CATEGORIES
SMA-0
SMA-1
SMA-2
32
33
4. Recovery
4.1 Recovery through Govt. Agencies : For the purpose of recovery in non performing
borrowal accounts, services of Government Officials such as District Collector,
Tehsildar, Revenue Recovery Officers, Panchayat Officers, etc., wherever available,
may be availed of fully at the prescribed rate of fees under respective State Recovery
Act, so that dues are recovered as early as possible.
34
with Fee schedule, payment guidelines and ground rules to be observed by them have
been incorporated in Chapter 6 on SARFAESI Act- 2002.
35
Amount
Upto ` 10.00 Crore
Full powers
Full powers
36
37
38
8. Incentive Scheme
To make concerted and coordinated recovery efforts both at Regional Office level as
well as at Branch level Bank has formulated Incentive Scheme for Staff Members on
eligible cash recovery in NPA accounts with outstanding / TWO upto ` 50.00 lacs as
per CS&P Department Circular No: HO/ CS&P/ 28/2014-15 dated 25.07.2014.
39
Limitation Aspect
Limitation is to be kept alive at all times. Limitation Register (OF-257) should be
maintained properly and Balance Confirmation Letters / Letter of Revival are to be
obtained from the obligants at regular intervals as per system in vogue. In case,
there is no alternative but to initiate legal proceedings, the matter should be referred
to the Competent Authority six months before the date of expiry of limitation period.
As and when obligants repay some amount, they should be asked to sign the pay-inslip in the same style and fashion in which they had signed the loan documents.
However, in no case limitation should be allowed to expire on the basis of
documents/BC/Letter of revival. In exceptional cases, where limitation is expiring
shortly, suit/claim must be filed before the competent court/DRT within limitation and
thereafter ratification of action should be sought from the competent authority.
40
21.
41
42
ANNEXURE-I
RECALL NOTICE
REGD. POST/UPC
To be issued to all concerned i.e. Borrowers/Partners/Directors/Guarantors etc.
Ref. NO.
____________
Date _______
____________
Dear sir,
CREDIT FACILITIES AVAILED IN THE NAME OF ______________________
The above account has been running irregular for quite some time and you have taken
no steps to regularise/adjust the account which has turned NPA as on ...
In such circumstances, the Bank has decided to recall the advance granted to you and
you are advised to repay the same with upto date interest within a period of 7 days failing
which the bank shall be constrained to take recourse to legal action against you for
recovery of the dues at your risk and responsibility and enforce the securities held with
us at your costs and consequences.
Details of outstandings
Outstandings as on
Yours faithfully,
BRANCH MANAGER
43
CHAPTER - 3
COLLECTION OF DUES AND REPOSSESSION OF SECURITY
In pursuance to the guidelines of the Reserve Bank of India on Banking Code of
Conduct, Policy on Collection of Dues and Repossession of Security was approved by
the Board of Directors vide BR No. F-6 in their meeting held on 24.01.2007. Accordingly,
the guidelines were circulated vide Head Office Circular No.HO/REC& LAW/ 11/2006-07
dated 12.02.2007.
Subsequently, Banking Codes and Standards Board of India (BCSBI) has conveyed
some observations on the Model Policy Documents circulated by the IBA. After
incorporating the suggestions/observations of BCSBI, the revised policy has been
approved by the Board of Directors vide Item No. F-9 dated 17.08.2007.
The revised approved policy (superseding the earlier policy circulated vide Head Office
circular supra dated 12.02.2007) was circulated vide Circular No. HO/REC & LAW/03
/2007-08/254 dated 12.09.2007. The guidelines are given as under:-
1.
Introduction
The debt collection policy of the bank is built around dignity and respect to
borrowers. The policy is built on courtesy, fair treatment and persuasion. The
bank believes and is of the opinion in following fair practices within legal
parameters with regard to collection of dues and repossession of security and
thereby fostering borrower confidence and long-term relationship.
The repayment schedule for any loan sanctioned by the bank is fixed taking into
account cash flow pattern and paying capacity of the borrower. The bank
explains to the customer upfront the method of calculation of interest and how the
Equated Monthly Installment (EMI) or any other mode of repayment will be
appropriated against interest and principal due from the customers. The method
of collection of EMI (say post dated cheque, direct debit, ECS etc.) would be fixed
taking into consideration the convenience of the borrower. The bank would
expect the customer to adhere to the repayment schedule agreed to and
approach the bank for assistance and guidance in case of genuine difficulty in
meeting repayment obligations.
Banks Security Repossession Policy aims at recovery of dues in the event of
default and is not aimed at whimsical deprivation of the property. The policy
recognizes fairness and transparency in repossession, valuation and realization of
security. All the practices adopted by the bank for follow up and recovery of dues
and repossession of security will be in consonance with the laws of land /
practices and procedure of Banking Industry.
44
2.
General Guidelines
All the members of the staff or any person authorized to represent our bank in
collection or/and security repossession would follow the guidelines set out below :
3.
honour the settlement by the borrower would be considered as Wilful Default and
settlement shall stands withdrawn automatically without any further notice thereby
making entire outstanding dues payable by the borrower.
4. Repossession of Security
In case there is deliberate avoidance in acknowledging the notice or
establishing contact with the Bank, the Bank upon giving notice may proceed
to go for repossession of property.
Repossession of security is aimed at recovery of dues and not to deprive the
borrower of the property. The recovery process through repossession of security will
involve repossession, valuation of security and realization of security through
appropriate means. All these would be carried out in a fair and transparent manner.
Due process of law will be followed while taking repossession of the property. The
bank will take all prudent measures for ensuring safety and security of the property
after taking custody at the expense of the borrower.
5. Valuation and Sale of Property
Valuation and sale of property repossessed by the bank will be carried out as per law
and in a fair and transparent manner. A separate notice for sale of property shall be
given and each notice shall contain the basic information as may be required in law to
enforce each such notice. The borrower mortgager shall also be given notice of the
time, date and venue of the auction.
The valuation given by the approved valuer will be conveyed to the borrower before
proceeding with sale of property. Even while finalizing sale of the property the
offer(s) received by the bank will be informed to the borrower and he will be having an
opportunity to bring in a higher price bid. The bank will have right to recover from the
borrower the balance dues, if any, after sale of property. The Banks right to General
Lien and its implications will be made clear to the customer at the time of financing.
Excess amount, if any, after having satisfied the outstanding dues of the Bank from
the money obtained on sale of property will be returned to the borrower/ mortgager
after meeting all the related expenses provided the Bank is not having any other
claims against the customer / mortgager etc.
6. Opportunity for the borrower to take back the security
As indicated earlier in the policy document, the bank will resort to repossession of
security only for the purpose of realization of its dues as a last resort and not with
intention of depriving the borrower of the property. Accordingly, the bank will be
willing to consider handing over possession of property to the borrower any time even
after repossession and before concluding sale transaction of the property, provided
the bank dues are cleared in full. If satisfied, with the genuineness of borrowers
inability to pay the loan installments as per the scheduled repayment programme,
which resulted in the repossession of security, the bank may consider handing over
the property after receiving the installments in arrears. However, this would be
subject to the bank being convinced of the arrangements made by the borrower to
ensure timely repayment of remaining installments in future.
46
In case the borrower has paid the required sum/ dues of the Bank, repossession of
the property/ title deeds shall be handed over to the borrower. Where repossession of
the property is involved that will be handed over within 15 days. Where return of title
deeds/ documents is involved, in case where the title deeds are with the Bank or after
receipt from DRT / Court etc., as the case may be, shall be handed over to the
borrower/mortgagor within 7 days from receipt of entire amount or receipt of title deed
from DRT / Court etc. as the case may be, whichever is later and provided that there
is no other issue as regards delay, interest or lapse of settlement etc. If due to above
reason, repossession of property / title deeds is not given to the borrower, the same
shall be conveyed to the borrower within 15 days.
The aforesaid guidelines shall be treated as part of Recovery policy and shall also be
placed on website of the Bank for information of General Public. Copy of final
reminder letter to be issued to the obligants is again enclosed for ready reference of
the Field Functionaries
47
1. ____________________
____________________
____________________
2.
____________________
____________________
____________________
3.
____________________
____________________
____________________
4.
____________________
____________________
____________________
48
You have also acknowledged the outstanding dues in respect of the aforesaid facilities
by executing, confirmation of balances and revival letters and other documents from time
to time.
That operation in your aforesaid CC/Term Loan Account since ______ have become
irregular. Therefore the debt has been classified as non-performing asset on
__________ in accordance with the directives/guidelines relating to assets classification
issued by the Reserve Bank of India. Despite repeated requests made vide bank on
_______ & _______, you have failed and neglected to repay the said dues/outstanding
liabilities, which along with interest and charges as on ______________ is `
_____________.
Therefore, the Bank hereby calls upon you to clear and/or regularise in full the entire
outstanding dues in aforesaid account/s within 10 days from the date of this notice as,
your entire facilities have been recalled, since despite informing about the irregularity
telephonically as well as during visits of banks representative to your place, no steps
were taken to regularise your accounts.
You are also liable to pay future interest at the rate of ___ per annum with
monthly/quarterly rests on the outstanding balance along with aforesaid amount together
with incidental expenses, cost, charges etc.
If you fail to repay to the Bank the aforesaid sum dues and payable by you, the Bank on
complying with stipulations as may be laid down in this regard may initiate any action,
civil/criminal as may be available and advised to the bank including repossession of
securities as you have failed to furnish any details of hypothecated stocks/statement of
account, since ________. The bank also apprehends that despite using banks funds you
may have deliberately and intentionally misappropriated/siphoned off hypothecated
stocks, which were being held in trust as you have also stopped depositing collected
payments in your aforesaid account. You are thus put on notice to not to transfer by sale,
lease or otherwise alienate or create any third party interest in any secured assets
without obtaining written consent of the Bank.
The Bank reserves its right to call upon you to repay any further contingent liabilities that
may arise including the Bills Discounting Facilities, Bank Guarantee Facilities and Letters
of Credit Facilities issued and established on your behalf that may also arise in future.
Yours faithfully,
(Authorized Official)
49
CHAPTER-4
POLICY FOR COMPROMISE AND NEGOTIATED SETTLEMENTS IN
NPA ACCOUNTS
The Reserve Bank of India vide notification bearing No. DBOD NO.
BP.BC.34/21.04.048/2007-08 dated 04.10.2007 on Guidelines on Purchase/Sale of Nonperforming Assets has directed as under:
1. Banks should, while selling NPAs, work out the net present value of the estimated
cash flows associated with the realizable value of the available securities net of the
cost of realization. The sale price should generally not be lower than the net present
value arrived at the manner described above.
2. Same principle should be used in compromise settlements. 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 value of the realizable value of securities.
In conformity with the above directions of the Apex Bank, the amendments in Policy on
Compromise and Negotiated Settlements in NPA Accounts of the Bank was approved
by the Board of Directors vide Agenda Items No. 60 and 91 dated 16.05.2011 and
02.07.2011 respectively.
Government of India, Ministry of Finance, Deptt. of Financial Services vide letter dated
3rd April 2012 has advised all Nationalised Banks for setting up of Credit Committees at
the Corporate, Regional and Zonal level in Nationalised Banks.
Accordingly, the Bank has to constitute Credit Committees at Head Office Level and
Regional Office Level for the sanction of credit/ Loan compromise proposals, which was
approved by Board of Directors vide agenda item No. 71 dated 30.04.2012.
Further, in view of the latest development, the Board of Directors has approved the
amendments in Settlement Policy and guidelines related to action under SARFAESI Act,
2002 vide Board resolution no. A-14 dated 30.12.2013 and no. A-24 dated 19.06.2014.
The Settlement Policy with the approved amendments is given hereunder:
50
2.
n
R.V./ [1 + r / 100]
R.V.= Reasilable Value of charged primary/ collateral securities
r = Prevailing Base Rate + 2% simple interest.
*n = No. of years for realization of securities based on the complicity of the case.
(b) *From the amount calculated as (a) above, expenses towards cost/ expenses/
Fee payable to Enforcement Agent etc. for realization of securities be deducted.
(c) Net Present Value of Realizable Value of Charged Securities = (a) (b)
*The number of years taken for realization of securities and the expenses deducted
should invariably be backed by cogent reasons and justifications.
Note: For the calculation of NPVRV, Reasilable Value of the property(ies) charged in
the account should be taken.
51
Further;
In case of Agricultural Land where the local State Laws prohibit sale of Agricultural
land upto a particular ceiling the Bank cannot legally sale such assets as such
NPVRV is treated as NIL.
Number of years taken for discounting the Realisable Value (RV) to arrive at
NPVRV depends from case to case. In case of long ongoing litigations, family
disputes in property, HUF or Trust property there is possibility of long process
delaying the sale and accordingly discount of RV in such cases may be for more
number of years. This also applies to tenanted property or property with the legal
heirs due to death of the borrower.
There are cases where the Bank comes to know about substantial amount of
Statutory dues from various bodies and the prospective buyer may not bid with the
apprehension that he will have to meet these liabilities in future. In such cases also
the NPVRV is adjusted with such statutory liabilities.
The period of discounting applied should be justified, in case it is more than one year,
keeping in view factors mentioned above.
However, factors affecting calculation of NPVRV and valuation as mentioned above are
illustrative only and are not exhaustive.
There needs to be a proper dialogue with the empanelled valuers in the Region by
showing concern in regard to valuation reports being furnished by them and full
justification needs to be given by them for reducing the Market Value to the extent of
Realisable Value.
This issue also becomes important in the wake of recent failure of auctions in some
cases when no bid could be mobilized for the Reserve Price fixed by the Bank. If the
valuer has done his home work properly, we do not find any reason for failure of auction
except where the physical possession is not with the Bank.
Valuation should not be older than one year.
The calculation of Net Present Value of the Realizable Value of Securities has been
illustrated hereunder by way of an example by taking following values:1. Reasilable Value of charged primary/ collateral securities = ` 100000.00
2. Prevailing Base Rate (10.25%) + 2% simple interest.
3. No. of years for realization of securities = One Year / Two Years / Three Years
4. Expenses towards cost / expenses / Fee payable to enforcement Agent etc. for
realization of securities = ` 4500/-
52
EXAMPLE
i)
1. Reasilable value of
the
charged
primary / collateral
securities as per
valuation report
ii)
iii)
` 100000.00
` 100000.00
` 100000.00
12.25
12.25
12.25
One Year
Two year
Three year
2. Base Rate + 2%
simple interest
3. No. of years ,
estimated
for
realization
of
securities
4. (a)(Gross) Present
100000.00 /
100000.00 /
Value of Realizable [1+12.25/100]1
[1+12.25/100]2
Value of charged
=100000/1.122 =100000/1.1225x1.122
securities
5
5=100000/1.26000625
100000.00 /
[1+12.25/100]3
=100000/1.1225x1.122
5x1.1225
=100000/ 1.41435702
= ` 89086.86
= ` 79364.69
= ` 70703.51
5. (b)
Expenses
towards
cost
/
expenses / Fee
payable
to
enforcement Agent
etc. for realization
of securities
` 4500.00
` 4500.00
` 4500.00
` 84586.86
` 74864.69
` 66203.51
53
3.2 In case NPVRV (Net Present Value of Realizable Value) of charged securities is
more than or equal to the recoverable dues (calculated as per amended module
approach), the minimum settlement amount will be equal to the said recoverable
dues.
3.3 In case NPVRV of charged securities is less than the recoverable dues (calculated as
per amended module approach) but exceeds the principal outstanding as on date, the
minimum settlement amount will be equal to the principal outstanding as on date.
However, the negotiations for OTS amount should aim at recovering maximum over
and above Recoverable Dues.
Generally, the settlement amount should not be less than the NPVRV of
charged securities.
3.4 In case NPVRV of charged securities is less than the principal outstanding as on
date, the minimum settlement amount will be equal to the NPVRV of charged
security(ies).
However, the negotiations for OTS amount should aim at recovering maximum share of
Recoverable Dues.
3.5 Where the NPVRV is zero, i.e. in those cases where there are no securities charged
in the account or where all the charged securities in the account have been disposed
of, but the recoverable dues have still not been satisfied, the minimum settlement
amount will be whatever maximum can be recovered.
3.6- Minimum indicative settlement amount in accounts covered under CGTMSE, should
be amount equal to or more than the amount to be recovered from Corporation. In
case the claim is rejected / declined by CGTMSE minimum indicative settlement
amount shall be as per General Settlement Policy of the Bank.
3.7- NPVRV for property/ies already put on auction shall be equal to the last reserve
price of the charged securities in case of failure of auction of the property.
Further, the present occupation and net worth of borrowers / guarantors will invariably be
ascertained and reported to Competent Authority in all settlement proposals by the
branch.
No Future Interest from the date of settlement shall be charged in the account, if
the same is adjusted within 3 months of the date of settlement, failing which
interest shall be charged from the date of approval of settlement at the Rate as per
point No. 1.1/1.2/1.3, as applicable, till the adjustment of account on reducing
balance.
Note:- These are the guidelines for calculation of minimum indicative settlement amount,
however branch should endeavor to recover maximum possible amount.
54
56
Commercial property:
Occupied by tenant(s) for the purpose of establishing the tenants shop/
business etc, as it will affect the saleability since the tenants will not be inclined
to vacate in a shorter duration.
Another factor which commonly applies to all these different type of properties is that
the approach to the property is not clear/thorough. Such properties are also not easily
saleable and the Bank may have to offer such properties to the owner of the
adjacent/front property. This will also affect adversely the Market Value of the
property.
Note:- As far as negative lien is concerned, the amount of valuation is approved
to be taken as nil for consideration of OTS proposal.
Valuation Report of property(ies) should be Marked For Bank Purpose and not for
General Purpose
Visit To Properties
All properties shall invariably be got visited by the Branch Manager for verification and
giving his own assessment with regard to the total value obtained from the approved
valuer. His assessment will be based on local market enquiry and input provided by
real estate agents.
Properties having market value of ` 5.00 crores and above at the time of sanction
shall be visited by official duly authorized by Regional Head or RH himself/ herself in
case the properties are located at the same city or near by areas where RO is
situated.
Properties which are located far away form RO, the same be got visited by the local
Branch Manager or the official from local RO to give their independent assessment
over the market value given by the approved valuer.
Property/ security shall be valued at the time of settlement from one Govt. approved
valuer on Banks Panel to arrive at realistic value for consideration of settlement
proposal and to arrive at NPVRV.
However, in all cases where the realisable value of the property is ` 5.00 crores and
above as per first valuation report, second valuation shall be obtained from another
valuer appointed by Regional Office. (Circular No. HO/RMD/46/2014-15/507 dated
19.09.2014.
Such valuation shall be accompanied by independent assessment by official from RO/
Branch.
57
DELEGATION OF POWER
Particulars
Name
of
the
Committee
Composition of the
Committee
Mandatory Members
Quorum
Periodicity of the
Meeting
Arranging Meetings,
Recording of Minutes
Prior screening by
Settlement Advisory
Committee
Placing, Appraising &
Recommending
of
the Proposals to the
Committee
Reporting of Minutes
to
10
Reporting
Sanctions to
of
Approved Guidelines
Regional Office Level Credit Committee headed by Regional Head
(RLCC RH)
a) Regional Head - Head of Committee
b) Second man at RO
c) In-Charge of Credit Deptt. at RO
d) In-Charge of Risk Management Deptt. at RO*
e) In-Charge of Credit Monitoring Deptt. / Planning Deptt. at RO
f) In-Charge of Recovery Deptt. at RO
* The alternate member for Officer in-charge of Risk Management
Deptt. shall be Officer in-charge of Credit Monitoring at RO.
a) Regional Head - Head of Committee
b) For Credit Proposals In-Charge of Credit Deptt. at RO
c) In-Charge of Risk Management Deptt. at RO*
d) For Loan compromise / write off Proposals In-Charge of Recovery
Deptt. at RO
* The alternate member for Officer in-charge of Risk Management
Deptt. shall be Officer in-charge of Credit Monitoring at RO.
The quorum of the Committee shall be three members including
mandatory members.
Weekly once or More Often
Recovery Department at RO shall organise all necessary functions
such as arranging meeting of RLCC RH, recording minutes of the
meeting, placing the minutes before HLCC ED.
The concept of independent Settlement Advisory Committee at
Regional Office level has been discontinued.
The presentation of Loan Compromise & Write-Off Proposals to RLCC
RH for approval shall be undertaken by respective Officer of
Recovery Deptt.
The minutes of the meetings of the RLCC RH shall be sent by
Regional Office to Recovery & Law Department, Head Office and the
department shall place these minutes before HLCC ED for reporting
in the next meeting.
The compromise proposals sanctioned by RLCC RH shall be placed
to the authority as per the chart below.
Particulars
Proposals Sanctioned by RLCC-RH headed by
Reporting of GM
DGM
AGM
sanctions to
HLCC-ED
GM (Recovery & Law) at H.O.
58
S No.
11
12
Particulars
Reporting
of
Sanctions by Branch
Heads
Reconstitution
RLCCRH
of
Approved Guidelines
Compromise settlements approved by the Branch Heads will be
reported to RLCC-RH. The Regional Offices shall submit the
consolidated Report of all cases approved by Branch Heads/
RLCC-RH during the month to Recovery & Law Department, Head
th
Office by 7 of the succeeding month.
The CMD shall be empowered to constitute and reconstitute from time
to time the RLCCRH including induction of Branch Head of
Specialized branches.
The constitution, composition and functioning & reporting of HLCC-ED shall be as under:
S. No.
1
2
Particulars
Name
of
the
Committee
Composition of the
Committee
Mandatory Members
Quorum
Periodicity of the
Meeting
Arranging Meetings,
Recording of Minutes
Prior screening
9
10
11
Approved Guidelines
Head Office Level Credit Committee headed by Executive Director
(HLCCED)
a)
Executive Directors
b)
GM (Respective Credit Verticals)
c)
GM (Recovery)
d)
GM (Accounts)
e)
GM (Credit Monitoring)
f)
GM (Risk Management)
a)
One Executive Director
b)
GM (Respective Credit Verticals) for Credit Proposal
c)
GM (Recovery)for Loan Compromise / Write-Off Proposal
d)
GM (Risk Management)
Note: In case any GM mentioned as mandatory members is not
present in the office then the Alternate GM shall act as mandatory
member.
The quorum of the Committee shall be four members including
mandatory members.
Weekly once or more often
The respective departments shall organise all necessary functions
such as arranging meeting of HLCC ED, recording minutes of the
meeting, placing the minutes before CAC etc.
Prior screening by High Level Settlement Advisory Committee
(HLSAC)
The presentation of Loan Compromise & Write-Off Proposals to
HLCC ED for approval shall be undertaken by convenor& member
secretary of HLSAC.
Credit Approval Committee (CAC)
Credit Approval Committee (CAC)
The CMD shall be empowered to constitute and reconstitute from time
to time the HLCCED.
59
The constitution, composition and functioning and reporting of CAC is given hereunder:
S. No.
1
Particulars
Name of the Committee
Approved Guidelines
Credit Approval Committee
Composition
Committee
Mandatory Members
Quorum
Arranging
Meetings,
Recording of Minutes
Prior screening
of
the
60
Quorum of this committee shall be four and mandatory members will be as per serial
No. i), two out of serial No. ii),iii) & iv) and one out of serial No. v) & vi).
Settlement Recommending Committee at Branches:
The cases shall be settled by the Branch Incumbent falling under his power and
Recommending Committee shall be formed for this purpose by the Branch Incumbent
preferably consisting of members given hereunder:
a) 2nd Man at Branch (Mandatory)
b) One Official from Loans Department
c) One Official from Operations.
Any one official at b) & c) shall form the quorum besides IInd Man at Branch.
Note:- Where only one officer is posted apart from the Branch Incumbent, the settlement
cases shall be forwarded to Regional Office (RLCC-RH) with recommendations for
consideration/ approval.
5.2 Power Structure
In order to arrive at the extent of sacrifice, the total dues in the settlement proposal shall
be calculated by Module Approach. The amount of sacrifice/relief shall be calculated as
difference of amount arrived at under Module Approach and Offer Amount. Now it is
decided that the Authority for approval of settlement proposal be determined based on
the amount of sacrifice/ relief calculated as per Module Approach within the powers
mentioned hereunder:
Functionaries
Particulars
Amount
(` in Lacs)
NIL
1.00
2.00
5.00
10.00
15.00
25.00
Full Power
35.00
75.00
100.00
400.00
Recorded
Recorded
Recorded
Recorded
Recorded
*Sacrifice/ relief means recoverable dues as per Module Approach (Point 1) less
amount offered.
61
Note:-i) The powers vested in officers at Regional Office level and officers at Head
Office Level (GM, ED & CMD) shall cease to exist.
ii) For ARM Branches, the Branch Incumbent will exercise the powers as
delegated to Branch Heads in the above mentioned power chart.
iii) No Authority (by name) is empowered to settle NPA account in which the credit
facilities were sanctioned by him / her. These cases shall be placed before the
next higher authority.
iv) Accounting system in vogue shall be followed /complied with meticulously.
5.3 Delegation of Powers for allowing Write off / Waiver in Principal O/S and
T.W.O. without Settlement
There may be some NPA accounts, depending upon non-availability of security to fall
back upon/death of obligants(s)/ or other reasons and there are no chances of
recovery and accounts need to be fully written off from the books of the Bank without
any settlement/recovery.
Such cases shall be approved at H.O. level on merits based on the recommendations
of Regional Office. The Competent Authority (Committee) at Head Office shall be in
consonance with powers of Head Office functionaries as mentioned in Chapter-11 on
Guidelines / Policy for final closure of Technically Written Off ( TWO) accounts with
meagre present outstanding of ` 1/- or more.
5.4
In certain cases, the compromise proposals do not get materialized/ implemented due to
failure of the borrower/ guarantor to pay the approved compromise amount on account of
factors like inability to sell the assets, deterioration in the financial status of the borrower,
further losses etc. The settlement proposals approved invariably should contain the
clause to the effect that on default, all concessions allowed to the borrower shall stand
automatically withdrawn.
However, if in such cases, the borrowers again approach the Bank with compromise
proposal where the amount offered is lower than the earlier approved compromise
amount, such cases can be re-opened and re-settled any number of times keeping in
view the factors mentioned at point No. 6.1 in this chapter and the circumstances of each
case on merit. Such cases may preferably be reopened provided that some upfront
amount is deposited by the borrower/ third party in No Lien Account at the time of
reopening of settlement. The power to reopen the settlements approved earlier should
be exercised judiciously & sparingly. The power to re-open such cases shall be
exercised in accordance with the delegated power structure mentioned at point No. 5.2.
However, wherever the settlements have been approved as per the
directives/advice of the court, the same shall not be reopened as per the approved
amended Recovery Policy irrespective of the facts that these are being honoured
or not.
It is pertinent to mention that Compromise Decree is / shall be obtained from respective
Court/ DRT to safeguard the interest of the Bank in respect of Suit Filed Accounts.
62
5.5
Branch incumbent
Regional Head
Head Office
63
6.
Endeavour should be to recover the maximum amount from the defaulting borrowers
through compromise/negotiated settlement i.e. even more than the dues calculated
by applying Module Approach taking cognizance of the factors stated under Para No.
6.1. However, each case will be considered on merits by the Competent Authority to
arrive at negotiated settlement with the concerned borrower.
Collaterals in the shape of Govt. securities/ bonds / NSCs/ KVPs/ LICs/ Term
deposits shall be appropriated in the account before settlement. Regional Offices
and Branches have already been advised to appropriate the liquid securities
immediately the account is classified as NPA. As such, at the time of settlement the
recoverable dues be worked out after appropriating any of the above mentioned
available liquid securities.
In case, where the party offers to deposit the interest component of the settlement
amount, on which further interest is not to be charged by the Bank, in lump sum
before the expiry of settlement period with a request to get relief in interest to some
extent, such proposals can be considered by the competent authority who has
approved the settlement proposal provided total amount of relief comes within the
delegated power (as per point No. 5.2). It shall enable the Bank to get the twin
advantages of availability of immediate liquidity and income generation by recycling of
blocked funds.
6.1
Factors to be taken
Settlement Proposal
into
Account
for
considering
Genuineness of the case and difficulties of borrower(s) and his/ their intention to enter
into compromise for repayment of the dues.
Present financial position and repaying capacity of the defaulting borrower / guarantor
and the party who intend to take over the unit / business of the borrower for
repayment of banks dues.
64
Death of the borrower(s)/ partner(s)/ guarantor(s) during the course of the account(s)
with the Bank materially affecting the affairs of the borrower(s) and repayments.
Present business activity of the borrower(s), partner(s) and guarantor(s) and source
of funds for compromise/ negotiated settlement.
Counter claim(s) filed by the borrower or some other litigation pending before any
Court in respect of the assets charged to the Bank.
Stay obtained by the borrower(s)/ any other person from the Court/ DRT against the
Bank for enforcing the charged securities through court or under the SARFAESI Act,
2002.
Failure of the Bank to sell charged securities under DRT Act/ SARFAESI Act due to
absence of bids.
In case of tenanted properties where there are less chances/ difficulty in vacation of
the same or sale price may not be enough to square off the dues of the Bank.
Assessment of the chances and extent of recovery for the bank, if recovery of the
dues has to be achieved through Court proceedings.
In the Suit Filed Accounts, possibility may be explored for compromise/ negotiated
settlement without pursuing suits any further for early realization of Banks dues.
65
Sometime, after slipping an account into NPA category or after filing of suit or
obtaining decree, another party comes forward to purchase the Unit/ business
interest of the Debtors(s). Bank can consider compromise/ negotiated settlement with
the third party with the consent of the borrower(s)/ partner(s)/ guarantor(s)
or
without the consent of the borrower(s)/ partner(s)/ guarantor(s)under the SARFAESI
Act,2002/direction of the Court or in special circumstances after permission from R&
L Deptt. at Head Office.
6.2
No future interest from the date of settlement shall be charged in the account if the
same is adjusted from sale proceeds of collateral security(ies) within 6 months of the
date of settlement, failing which interest shall be charged from the date of approval of
settlement @ (Base Rate +2%) or applicable rate of interest, whichever is lower, on
simple basis till the adjustment of account on reducing balance.
6.3
The NPA accounts under Govt. Sponsored Schemes with sanction amount upto `
2.00 lacs may be settled by RLCC-RH at settlement amount equivalent to total sum
advanced i.e. loan amount and by giving 100% relief in the shape of income booked.
However, miscellaneous expenses incurred by the bank on account of insurance etc.
should be recovered. e.g. if `1.00 lac was advanced and Bank earned an income of
`10,000/-, then the account can be settled by accepting ` 0.90 lac and granting
concession of ` 10,000/- besides recovering misc. expenses. Such an action may be
taken after exploring the possibility of recovery under the respective State Agriculture
Recovery Act. No TPO in such cases shall be sent by Head Office to the
Branches/Regional Offices. The Branches shall debit to CHARGES GENERAL
(OTHERS)-DEBT SETTLEMENT REVERSAL EXPENSES to the extent of Scaling
Down of principal amount after due approval from the competent authority.
Under the CBS SYSTEM the necessary entries shall be passed by the user manually,
so that details of amount reversed by way of scaling down are available at any point of
time.
The NPA accounts under Govt. Sponsored Schemes with sanction amount upto `
2.00 lacs may be settled by RLCC-RH as per above norms or as per provisions of Para
No. 3, whichever is lower, on merits of each case.
66
6.4
Settlement of FundBased liability(ies) in which Non-Fund Based facilities
remain outstanding
In the cases where non-fund based facilities e.g. LC/Guarantee is/are outstanding in
the books of the bank, the fund based outstanding shall be settled as above subject to
the condition that the liability outstanding in non fund based facility(ies) is/are fully
secured by way of collateral security/property and/or cash margin. The Regional Head
shall have the power to settle the cases under the power delegated to them.
However, where non-fund based facilities are secured by less than100% margin, the
settlement proposal shall be submitted to next higher authority at Head Office.
In such cases, Conditional No Dues Certificate shall be issued stating therein the
outstanding in non fund based facility (ies).
7.
REPAYMENT MODE
The obligants shall honour the settlement as approved by the competent authority
by accepting the same within 7 days of conveying the same to them in writing.
To prove their bonafides, the obligants shall deposit upfront amount, i.e. 10% to
25% of the settlement amount or negotiated amount, while submitting/ approving
the settlement proposal. The same shall be kept in No Lien Account. If the
settlement is approved by the competent authority, the said amount shall be
appropriated immediately without referring to the borrower/ third party.
In case the settlement proposal is rejected by the competent authority, the amount
kept in No Lien Account shall be refunded to the obligants / borrowers. The
Regional Head shall have the power to refund the amount kept in No Lien
Account irrespective of the fact that the settlement was rejected by the authority
other than the Regional Head.
If the upfront amount is deposited by a third party other than the borrower and
kept in No Lien Account, the same shall also be immediately credited to the
account on approval of the settlement proposal by the competent authority. An
undertaking shall be obtained from the third party to the effect that the amount
kept in No Lien Account shall be appropriated by the bank in case of approval of
the settlement proposal without referring to the said person/party.
67
8.
In those cases, where despite prolonged negotiations with the borrower, the offered
amount is lower than the minimum Settlement Amount arrived at as per policy,
Competent Authority one rank above the normal Competent Authority may consider
deviation in the settlement amount within their delegated powers in exceptional cases
keeping in view availability of security, statutory dues, natural calamities and other
circumstances on merits of the each case. This will be applicable upto the level of
RLCC-RH at respective Regional Offices. The Higher authority can approve the
deviation cases also within their powers. Any other deviation, if any, shall also be
dealt as above.
In case of Agriculture advances having outstanding upto` 10.00 lacs, RLCC-RH at
respective Regional Offices can settle the cases with deviation with proper justification
on merits basis provided the total relief falls within its powers.
8.1
In respect of cases to be settled before Lok Adalat /DRT Lok Adalat, the GM (Rec. &
Law)/ Executive Director/ Chairman and Managing Director may delegate powers, if
deemed fit, to Regional Head or any other officer at Head Office/ Regional Office for
taking on the spot decision before the Lok Adalats. Thereafter, such cases shall be
placed before the HLCC-ED/ CAC for ratification of action.
8.2
In respect of important, intricate and exceptional cases, the proceedings of which are
going on before court, the GM (Rec. & Law)/ Executive Director/ Chairman and
Managing Director may exercise the powers of HLCC-ED/ CAC/ MCB/ Board under
exigencies. However, they will get their action ratified from the competent authority,
immediately, in the next meeting of the respective Committee.
The Bank may enter into settlement with the borrowers by deviating from the above
norms keeping in view the factors mentioned, realizable value of security (ies), time
to be taken for recovery, time value of money and applying commercial wisdom.
68
9.
The securities charged to the Bank may be released by obtaining liquid securities in
the shape of Term Deposits, NSCs/ LICs (equivalent to surrender value)/ KVPs/ Indra
Vikas Patras and other Govt. securities after creation of proper charge / lien /
assignment and execution of necessary documents.
The bank may consider substitution of existing property/ security by accepting alternate
property/ security of value equivalent to or more than the value of the existing property
at the time of settlement of an account subject to satisfaction of Regional Head.
In such cases, the competent authority shall be the authority who has approved the
settlement proposal. As regards the settlement proposals approved by MCB, the
competent authority shall be HLCC-ED/ CAC.
69
10.
In the settlements containing purchase of properties by the bank, the matter shall
have to be first referred to Services Department, Head Office for their concurrence,
whereafter the matter shall be placed before the competent authority.
The guidelines issued by Services Department, Head Office, for purchase of property
of the borrower by the Bank towards liquidation of its dues may be adhered to, while
entering into settlement with the borrowers. However, the following points may be
kept in mind while negotiating settlements in NPA accounts.
10.1
Absolving Guarantor
The Bank may consider absolving guarantor / any of the guarantors (if they are
more than one) in an account after receiving part of settlement amount / part
payment on obtaining written consent from the borrower and other guarantors (if
they are more than one). Wherever necessary, legal opinion from the Legal
Retainer at Regional Office / Head Office may be obtained for taking a decision in
the matter.
In the event of partial liquidation of dues, the bank may consider to absolve one or
more guarantors/ partners/ directors by accepting their share of dues or by retaining
the existing securities or obtaining the additional securities on merits, as the case
may be, provided the bank remains fully secured for the remaining amount of dues
and wherever necessary legal opinion from the Legal Retainer at Regional Office /
Head Office may be obtained for arriving at a decision for settlement of such
account. The different functionaries shall exercise the power to absolve the
guarantor/partner/director as per schedule given below:
S.
No
1
2
3
70
10.2
11.
TO
BE
OBTAINED
AFTER
THE
With a view to ensure that the parties coming forward for the settlements may not
go back from their commitments and offers, a declaration deed (Tamasuk Deed)
is / shall be obtained at the time of settlement/ after approval of the settlement
from the obligants individual / Proprietor / Partners / Directors, as the case may
be, on the prescribed format.
Tamasuk Deed is to be obtained on stamp paper of requisite value and signed by
all the obligants viz. Borrowers I Guarantors. Tamasuk Deed shall contain the
terms of sanction of settlement / compromise besides default clause to the effect
that in case of default in repayment of settlement amount, the obligants shall be
liable to pay the whole amount due on the date of default alongwith upto date
interest liability on entire dues of the Bank and litigation expenses incurred/ to be
incurred by the Bank.
12.
71
settlement for more than two and half years thereby violating the aforesaid RBI
guidelines and causing the Tribunal to unnecessary waste its valuable time.
3. The banks are, therefore, hereby advised to invariably ensure that once a case is
filed before a Court/DRT/BIFR, any settlement arrived at with the borrower is
subject to obtaining a consent decree from the Court/DRT/BIFR concerned.
Therefore, in all Suit Filed cases, where offer of the obligants to settle the dues of
the Bank is acceded to by the competent authority and the borrower deposits the
settlement amount as per approved terms, pending suit shall be withdrawn as
satisfied after repayment of entire settlement amount including interest.
Meanwhile a Compromise Decree is / shall be obtained from respective Court /
DRT to safeguard the interest of the Bank on the undernoted terms and
conditions:
12.1 For Suits Pending Before Civil Courts
The defendants hereby consent to suffer simple money decree against them and in
favour of the plaintiff Bank.
The Bank's case shall be decreed for entire suit amount with costs & pendentelite/
future interest as claimed in the suit from the date of filing of suit till realization with
the stipulation that if the defendants repay the settlement amount with or without
interest as per the terms of settlement, the whole decretal amount shall be deemed
to have been satisfied.
In cases where the dues of the Bank are secured by mortgage of immovable
property, final mortgage decree shall be obtained as per the provisions of Order 34
CPC in favour of the Bank so that the Bank is not required to move in the Court
again for obtaining a separate final mortgage decree in its favour.
The securities held with the Bank shall continue to remain charged to the Bank till
the adjustment of the account in full.
The consent decree must contain a default clause to the effect that in case the
defendants/judgment debtors commit default in repayment of the agreed
installments, all the concessions allowed under the settlement shall stand withdrawn
automatically and the entire suit / decretal amount with cost and pendentelite /future
interest as claimed in the plaint / awarded by the court shall become recoverable and
the Bank shall be entitled to execute the simple decree or mortgage decree for the
entire amount.
12.2
Joint petition for compromise on approved terms will be filed for the entire amount as
claimed in the Claim Application under Section 19 of the Recovery of Debts Due to
the Banks and Financial Institutions Act, 1993 for passing of Award/Recovery
Certificate for the entire amount with costs & interest as claimed in the Claim
Application with the stipulation that if the opposite party/ respondents repay the
settlement amount with or without interest as agreed under the settlement approved
72
by the Competent Authority, the entire debt specified in the Recovery Certificate
issued by the Debts Recovery Tribunal shall be deemed to have been satisfied.
The securities held with the Bank shall remain charged to the Bank till the adjustment
of the account in full as per the terms of settlement and in other cases as per the
orders of the Tribunal.
In case of default, all the concessions allowed under the settlement shall stand
withdrawn automatically and the entire debt, as mentioned in Recovery Certificate
issued by the Debts Recovery Tribunal with costs and interest shall be recovered by
attachment and sale of the movable and immovable property(ies) of the defendants
through the Debts Recovery Tribunal.
12.3
Decreed Accounts
In decreed accounts, the terms of settlement shall be got recorded with the Executing
Court I DRT so that the dues of the Bank are recovered in terms of the compromise
arrived at with the borrower(s) along with the stipulation that in the event of default of
any of the terms of settlement, the concession(s) allowed shall automatically stand
withdrawn and the entire dues of the Bank shall be recovered as per the terms of
decree passed by the respective Court/ DRT and Bank is at liberty to file fresh
execution application for the full amount.
Note :
Recovery of OTS amount shall not be delayed for obtaining Joint
Compromise Decree (JCD) especially in cases where settlement amount is to
be paid within a short span of time.
13.
STAFF ACCOUNTABILITY
Staff Accountability aspect shall also be looked into by the Competent Authority while
considering settlement in NPA accounts as per Staff Accountability Policy circulated
vide Establishment Circular No. HO/HRD/70/45/2012-13/614 dated 03.12.2012 or as
amended from time to time. However, it would be ensured that Staff accountability
aspect must be reported in all settlement cases by mentioning its status/ outcome
while recommending the settlement proposal to H.O. or for the cases settling under
R.O. powers.
73
14.
REPORTING OF SETTLEMENTS
All compromise settlements approved by the Competent Authorities at HO/ RO
shall be placed before the next higher authority to fall in line with RBI guidelines.
15.
16.
In case of borrowers who are related to staff members and where there is no
guarantee or any undertaking from the concerned employee, such matters shall be
dealt with by the competent authority purely on merits of the case.
In all those borrowal accounts, where an Officer/ award staff member has stood as
guarantor, the settlement proposal shall be considered/ allowed by CAC at Head
Office provided that the single borrower exposure is upto ` 250.00 Crore and amount
of relief/ sacrifice does not exceed ` 4.00 Crore (as per Module Approach). Cases
involving single borrower exposure of above ` 250.00 Crore and amount of relief/
sacrifice involving above ` 4.00 Crore (as per Module Approach), will be placed
before MCB.
In case of all those borrowal accounts, wherein Officer/ award staff has guaranteed /
availed the loan and has retired or is not alive, the settlement proposal shall be
considered / allowed by CAC at Head Office provided that the single borrower
exposure is upto ` 250.00 Crore and amount of relief/ sacrifice does not exceed `
4.00 Crore (as per Module Approach). Cases involving single borrower exposure of
above ` 250.00 Crore and amount of relief/ sacrifice involving above ` 4.00 Crore (as
per Module Approach), will be placed before MCB.
74
17.
The bank has been meticulously following the guidelines by not permitting the fresh
credit limits to defaulting borrower(s) who had adjusted their accounts through
compromise/ negotiated settlements. After approval of Board of Directors by way of
amendments in the said policy vide BR No. F-7 dated 18.8.2001, the request for fresh
credit facilities by previous borrower(s) and borrowers of other banks who have
adjusted their accounts through settlement / compromise can be considered by the
bank on the following terms and conditions:
The Board has directed that whenever a proposal for fresh approval in a compromise
account is put up, the same be clearly indicated on the first page of the note.
Besides, copy of the last settlement proposition must be enclosed. The aforesaid
directions of the Board shall be meticulously followed while considering fresh
proposal for approval in a compromise account.
17.1
1. The applicant(s) had not been a wilful defaulter and account has not been
declared fraud.
2. The account became bad in normal course for the reasons which were beyond
their control.
3. Rebate was in respect of interest portion only.
4. The applicants agree to make good the sacrifice (on account of settlement/
comprise ) made by the Bank alongwith simple interest at Base Rate. However, in
the case of Direct Agriculture loan to individual farmer, the NPA borrower will be
eligible for lending again after settlement, subject to the following conditions that:a) Facility is sanctioned for the next crop season.
b) There was no sacrifice in principal amount while settling the account and if
there was any sacrifice in principal, the same is compensated to the Bank at
the time of fresh loan.
17.2
Clients of other Banks who had adjusted their accounts with their previous Bankers
under a Compromise/Settlement may also apply for sanction of credit facilities.
Their request shall be considered on merits provided that they had liquidated their
dues in those Banks.
75
The above provision now enables the Bank to sanction credit facilities in genuine
cases, to all types of borrowers, including Non Industrial Units, on merits, after
critical examination of their financial papers, who have adjusted their previous
account(s) through settlement by availing certain concessions.
.
17.3
Competent Authority
The Management Committee of the Board will be the competent authority to consider
and sanction the credit facility(ies) to such clients.
18.
The cases of wilful default less than ` 25.00 lac may be settled by the competent
authority under whose powers the case falls and it will be deemed to be a commercial
decision based on merits of each case.
All cases of fraud and malfeasance, reported to Vigilance Deptt. / I&C Deptt. at
Head Office, irrespective of amount involved, are presently being placed before
Management Committee of the Board for approval. Now with the constitution of
Credit Approval Committee (CAC), it has been approved that if the single
borrower exposure is upto ` 250.00 Crore and amount of relief/ sacrifice does not
exceed ` 4.00 Crore (as per Module Approach), such settlement proposal will be
placed before CAC for its approval. Cases involving single borrower exposure of
above ` 250.00 Crore and amount of relief/ sacrifice involving above ` 4.00 Crore
(as per Module Approach), will be placed before MCB.
19.
The proforma enclosed as Annexure-I (Part I to V) may be used by the branches while
forwarding the case to Regional office/Head office, as the case may be, depending upon
the amount of relief claimed. Format of No Dues Certificate to be issued in accounts
adjusted through Compromise/Negotiated settlements is enclosed as Annexure-II.
Format of Tamsuk Deed is enclosed as Annexure-III. Format of Statement of settlement
/compromise of debts approved under R.O. power is enclosed as Annexure-IV. Format
of Statement of claim of T.P.O. for the amount written off for the cases settled / approved
below principal outstanding under R.O. power for the month is enclosed as Annexure-V.
If in future, any amendment is required in the Format for Settlement (Annexure-I),
the ED/ CMD shall have the powers to amend the same.
76
ANNEXURE I
Reg: One Time Settlement in NPA account of: ------------------------- B/o --------------R/o ---------------------Under General Recovery/ Special policy
Settlement falling under the Powers of ---------------------Gist Of Proposal:
(` in lacs )
77
Part-I
(Amount in `)
A. Details of Proposal:
1.
2.
12. Security
___________(Date) ` ___________
i)Principal O/s
ii)T.W.O Amount
iii)Amount of interest as per
Module approach
iv)Legal/ Other expenses
v)
DICGC/
ECGC/
CGTMSE claim settled and
appropriated
vi) Charges to be Paid to
the Enforcement Agent (If
SARFAESI action started)
Total Recoverable Dues
At the time of Settlement
At
the
time of
sanction
Market
Valuation- 1
Value
Name of valuer--Dt. Of valuation
-------------------MV
RV
Valuation- 2
Name of valuer--Dt. Of valuation
-------------------MV
RV
NPVR
V
RV
High
er of
two
Primary Security
(Stock & bookdebts)
(Description
of
security.
Please
mention
the
securities and their
values separately)
Collateral Security
(Description
of
security.
Please
mention
the
securities and their
values separately)
Total of Primary
Security
&
collateral security)
In cases where the market value of any individual property exceeds ` 1.00 crores, two
valuation reports are required to be obtained.
78
`
`
`
`
`
`
i) Amount to be appropriated
towards Principal O/s
ii)Amount to be taken to
Commission Recd (Bad Debt
written off recovered account)
iii) Amount to be taken to
Revenue Account (Recorded
Interest received account)
iv) Amount to be taken to
Commission
Received
(Others) e.g. Legal expenses
etc.
v)Share of DICGC/ ECGC to
be remitted
vi) Charges to be Paid to the
Enforcement
Agent
(If
SARFAESI action started)
Vii) Total amount to Revenue
(ii+iii+iv)
79
alongwith interest @ _____ p.a. (simple) on reducing balance basis from the date of
conveying approval till the date of final payment.
4. Post dated cheques for the instalments be obtained simultaneously at the time of
conveying approval. However, the last instalment shall be paid for the balance amount
plus remaining interest, if any, on the Settlement amount.
5. In case of compromise agreement reached with the borrower/s in non-suit filed cases, a
Tamasuk Deed (Deed of Declaration) shall be obtained from all the obligants on NonJudicial Stamp Paper of requisite value and same be kept on records.
6. Consent decree/ Settlement agreement/ Memorandum of Settlement in respect of debt
due, shall be obtained. Consent decree for full debt as claimed with default clause shall be
obtained. The draft of the consent decree to be obtained should be got approved/ vetted
by law officer at Regional Office. However, on receipt of the payment in terms of the
Settlement, the satisfaction of the consent decree be recorded. On non-adherence to any
80
of the terms and conditions of the Compromise/ Settlement, the consent decree as
obtained by the bank shall be enforced/ executed.
7. Delay in obtention of consent decree/Settlement agreement shall not be taken as a
ground by the borrower for non-compliance of the terms and conditions of the Settlement
arrived at with the Bank.
8. In case of any default for non-payment of one/two instalments, all the concession allowed
under the Settlement shall stand withdrawn by the bank automatically and the Bank shall
be entitled to recover the entire dues outstanding in the account with uptodate interest
thereon. In addition to it, the proceedings under the SARFAESI Act, 2002 initiated by the
Bank shall automatically stand continued without any further notice, and the bank shall be
fully authorized and entitled to take over the physical possession of the mortgaged
properties for which borrower(s)/guarantor(s) shall not raise any objection thereto and
shall hand over the vacant and peaceful possession to the Bank besides initiating legal
recourse.
9. The NOC for sale of immovable property mortgaged to the Bank shall be issued by the
bearing whatsoever on the ongoing criminal case/investigation, if any, being carried out by
the CBI/Police/any other agency and the same shall proceed as per law.
11. Party shall withdraw their claims/ counter claim /criminal case, if any, filed against the
and all reliefs and concessions shall lapse automatically and bank will be entitled to
recover the entire dues as per documents/ prayer in the plaint after adjusting the payment
received, if any.
13. Charge on security/ title deeds shall be released only after receipt of entire Settlement
it should be mentioned that account has been adjusted through concession rather than
liquidation in normal due course.
E. Recommendation of the Branch Incumbent:
DEPARTMENTAL INCHARGE
BRANCH INCUMBENT
MANAGER/ARM
CHIEF MANAGER
REGIONAL HEAD
81
ANNEXURE I
Part-II
Date
of
sanction
Amount of
Sanction
Name
Designation
Present Place of
Posting
Original Sanction
Last
Renewal/
Enhancement
At Branch Level
At RO Level
`
`
`
`
`
`
`
Date of NPA
Amount of NPA
Credits in the Account on account of Recovery after the date of NPA
Other Credits in the Account (specify) after the date of NPA
Interest, if any, debited in the Account after the date of NPA
Debits (other than interest) after the date of NPA
Present Ledger Outstanding as on (date)____________ (ii-iii-iv+v+vi)
At the time
of sanction
Market
Value
(Amount: ` in lac)
At the time of Settlement
82
Market
Value
NPVRV**
Date
of
Valuation &
Name of the
Valuer
Name (Sh./Smt./Ms.)
(Amount: ` in lac)
CR Date
(Latest)
(Amount: ` in lac)
CR Date
(Latest)
Name (Sh./Smt./Ms.)
7. Present Business Activity: (Present level of activity of the Unit and present business
activity of the Obligants and their Financial Standing)
8. Limitation Aspects:
Limitation for filing suit(s) is available upto _____________.
REGIONAL HEAD
83
Annexure-I
Part-III
Calculation of NPVRV
Account: ____________________
84
ANNEXURE I
Part-IV
CALCULATION OF RECOVERABLE DUES
(In Case of All Suit filed and Non-Suit filed NPA Accounts)
Principal Outstanding as on the date of NPA
Add: Interest as per i) Interest reversed on the date of
Amended
Module
NPA
Approach
ii) *Interest @ Base Rate p.a. simple
or contracted rate of interest,
whichever is lower, on principal
outstanding (as above) after
giving due effect of recoveries, if
any, after the date of NPA till the
last completed quarter
1.
2.
4.
Suit Amount
2.
i)
3.
85
ANNEXURE I
Part-V
Branch Incumbent
Name
:
Designation :
86
ANNEXURE-II
Dated :
ACCOUNT : M/S.________________________________________________.
This is to certify that the subject account has been adjusted by the obligants through
concessions granted to them under a settlement entered into between the party and the
Bank rather than liquidation in normal due course.
BRANCH INCUMBENT
87
ANNEXURE - III
TAMASUK DEED
PROFORMA OF UNDERTAKING TO BE OBTAINED AT THE TIME OF SETTLEMENT
OF NPA ACCOUNTS FROM THE BORROWER(S)/ GUARANTOR(S)
This undertaking is made here at ______________ on this ____day of ____________
by the following :
1.
2.
3.
Whereas we, the above named, are the proprietor/ partners/ Director
of M/s
______________ with its registered office at ___________________ confirm that
Oriental Bank of Commerce, had sanctioned ____________ limit of `______________
on ______________ to M/s __________________ bearing interest @ _________ over
PLR with a minimum of _________ p.a. on quarterly rests in accordance with the
agreement with them and other documents executed by the partners. This facility was
enhanced to `_____________ lacs w.e.f. ___________ against the securities of
__________________________________________________ and personal guarantee
of _____________________________. Our firm/company accordingly availed the said
loan facilities. However, due to bad luck, the activities of the firm/company had to be
stopped due to reasons _______________________________________ and the
account of M/s ________________________________________ with the Oriental Bank
of Commerce B/o ____________________________ became irregular.
Whereas the amount in subject account of M/s ___________________________
outstanding as on ____________ is `______________. The amount as outstanding
liability/debt is acknowledged and confirmed by us on behalf of the firm.
Whereas pursuant to the legal/demand notices dated ___________ and _____________
served on us as well as on M/s ________________________ by the Oriental Bank of
Commerce, the Bank has informed us about its intentions to institute civil suit/ action
under the Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 for recovery of their outstanding amount. However, we as
proprietor/ partners/ director(s) of the firm / company as well as in our personal capacity
as guarantors do not want any suit to be filed against us and/or against the firm.
Now, therefore, we
___________________,
___________________ and
___________________ in our personal capacity as well as on behalf of M/s
88
89
ANNEXURE-IV
ORIENTAL BANK OF COMMERCE
REGIONAL OFFICE:
STATEMENT OF SETTLEMENT /COMPROMISE OF DEBTS APPROVED UNDER R.O. POWER
DURING THE MONTH OF ----------------------------------------(` in thousands)
Sr
.
N
o.
10
11
12
13
14
15
Remark
s
in
case of
Govt.
sponso
red
scheme
income
already
booked
be
mention
ed
if
settlme
nt
is
below
the
prinicpa
l
amount
16
1
2
CERTIFIED THAT ABOVE SETTLEMENTS HAVE BEEN APPROVED AS PER THE SETTLEMENT POLICY OF THE BANK.
ARM
90
REGIONAL HEAD
ANNEXURE V
ORIENTAL BANK OF COMMERCE
REGIONAL OFFICE : __________________
STATEMENT OF CLAIM OF TPO FOR THE AMOUNT WRITTEN OFF FOR THE CASES
SETTLED / APPROVED BELOW PRINCIPAL OUTSTANDING UNDER RO POWER FOR
THE MONTH ENDED ____________
(Amount in `)
S.No. Branch Name of Date
of Principal O/S Amount of Amount
Amount
to
the
Approval of as on date of settlement recovered be written off
Borrower Settlement settlement
for
which
TPO
is
claimed
Certified that above settlements were approved as per settlement policy of the Bank and
settlement amount has been recovered from the concerned borrowers as per terms of
approved settlements and the branch has closed the accounts. TPO for ` _______ be sent
to us for reversal of suspense entry at our end.
ARM
CM / AGM / DGM
91
REGIONAL HEAD
CHAPTER - 5
LOK ADALAT
INTRODUCTION
Article 39 A of the Constitution provides that the State shall secure the operation of the legal
system which promotes justice on the basis of equal opportunity and shall in particular
provide free legal aid by suitable legislation or schemes or in any other way, to ensure that
opportunities for securing justice are not denied to any citizen by reason of economic or
other disabilities. Following the report of the Committee for implementing Legal Aid Schemes
under the Chairmanship of Mr. Justice P N Bhagwati, the Government of India enacted
Legal Services Authorities Act, 1987. Most of the states in India also implemented the Act in
their states.
Under the Act, the National Committee and the State Committees have been constituted to
supervise the effective Legal Aid Schemes. Under this Act, Lok Adalats have been
constituted at various places in the country for disposal of disputes in a summary way and
through the process of arbitration and settlement. Functioning of Lok Adalat is entirely
voluntary and conciliatory. Thus, it is a speedier system of administration of justice. Lok
Adalats have taken justice to the door-steps of the poor and needy and made justice quicker
and less expensive.
The Awards passed by the Lok Adalats are enforceable like the decrees of civil court and
are binding on all the parties to the dispute. These Awards are final as there does not lie any
appeal against an Award passed by a Lok Adalat.
All legal disputes pending in civil, criminal, revenue Courts or a tribunal as well as the
matters which are not pending in any court can be taken to Lok Adalats for amicable
settlement except criminal cases which are non-compoundable
PERMANENT LOK ADALATS
The Legal Services Authorities Act, 1987 as amended in 2002 enables the establishment of
Permanent Lok Adalats for pre-litigation, conciliation and settlement in respect of disputes of
Public Utility Services.
The permanent and continuous Lok Adalats have been established in almost all the Districts
in the country to provide a statutory forum to the public for amicable settlement of legal
disputes.
The Bank has taken recourse to this cost effective mechanism of dispensation of justice in
the Northern States and system is proving useful in settlement of NPA cases particularly in
the State of Delhi. It is observed that some Regional Offices are not taking whole hearted
interest in participating Lok Adalats by referring maximum number of cases even after advise
by Head Office as well as by the concerned Legal Authority from time to time.
92
1.
2.
3.
COVERAGE OF BORROWERS
In order to make a definite impact on reduction of NPAs, the policy covers all NPAs,
both suit filed and non-suit filed accounts. (No cut off date and amount has been
suggested since Lok Adalat is an on-going process).
4.
5.
REPAYMENT PERIOD
RBI has suggested repayment period of 1-3 years in order to make immediate impact
on reduction of NPAs. The repayment of banks dues may be considered even
beyond 36 months period approved earlier depending upon merits & circumstances of
each case.
93
6.
PAYMENT
The amount of settlement arrived at in both the above cases, should preferably be
paid in lump sum. In cases where the borrowers are unable to pay the entire amount
in lump sum, 10-20% of the settlement amount or negotiated amount must be
deposited at the time settlement and balance amount may be recovered in monthly
installments within the stipulated period under the terms of settlement.
7.
DEFAULT CLAUSE
The negotiated agreement with the borrower shall contain a default clause in terms of
which if the borrower does not pay two installments due regularly, within the
repayment period, the entire debt will fall due for payment and bank may initiate legal
proceedings while withdrawing all the concessions allowed as per settlement.
8.
CONDONATION OF DELAY
The delay in repayment of settlement amount may be considered by the Competent
Authority as per the provisions at Para No.5.5 of Chapter-4 of this Recovery Policy.
9.
10.
ORGANISATION ARRANGEMENTS
The Apex Bank directed that individual banks and financial institutions should be
more pro-active and should take the responsibility of organizing Lok Adalats. The
experience of implementation of RBI guidelines issued to public sector banks on onetime settlement from time to time may be kept in view. They further directed that the
institutions should get in touch with State/District/Taluk level Legal Services
Authorities for organizing Lok Adalats. The Banks / Financial Institutions should
prescribe clear guidelines to their operating staff and monitor the progress regularly
and report the same on quarterly intervals within one week from the quarters ending
March, June, September and December as per format. RBI would monitor the
progress made by the institutions in effecting recovery under the scheme. The
convener banks of State Level Bankers' Committee (SLBC) and lead banks of
districts should give necessary publicity to the Scheme on behalf of our bank through
various modes, under their areas of operations, the expenses of which will be shared
by our bank.
11.
Cell was constituted at each Regional Office. The Regional Offices were advised to
post trained staff preferably having legal background in this Cell on the lines of Asset
Recovery Management Branches who are responsible for preparing and submitting
the Process Sheet of each case to Regional Office for seeking their prior approval
before presenting them in the Lok Adalats in coordination with the parent branch.
The officials from the Parent Branch have also to be present before Lok Adalats on
the date of hearing/settlement. The same system shall be continued to be followed.
12.
PUBLICITY
All the Regional Office were advised to carry out necessary publicity to the scheme of
Settlement of cases through Lok Adalats through various modes under their areas of
operation i.e. giving advertisements in the leading newspapers in Hindi, English and
vernacular language in the local newspapers to make the borrower(s) aware of the
scheme.
13.
REPORTING OF PROGRESS
The progress of cases settled under the forum of Lok Adalats is called on quarterly
basis on the prescribed format (enclosed as Annexure-I) from the Regions and after
consolidation, the same is placed before the board and also reported to the Apex
Bank for the quarter ending March, June, September and December every year.
14.
95
16.
17.
Encl.: Annexure I.
96
ANNEXURE-I
(Part-A)
CASES
REFERRED
No.
of
Accounts
Amt.
O/S.
CASES DECIDED
RECOVERY
EFFECTED
No.
of
Accounts
No.
of
Accounts
Amt.
OF
SETTLEMENT.
Amt.
DECIDED CASES
WHERE
REPAYMENT
IS
DUE
BEYOND
THE
AGREED
TIME
No.
of Amt.
Accounts
O/S.
1. Opening
Balance as
On
___________
2. During the
Quarter
Total (1+2)
(
Closing
Balance for
the quarter)
Number of Lok Adalats held during
the quarter under Report
Date and Names of Centres / places
where Lok Adalats were held during
the quarter under report.
ARM
CHIEF MANAGER
* Separate information be given for DRT and Non- DRT Lok Adalat.
97
REGIONAL HEAD
EXECUTION
FILED
No.
of
Accounts
Amt.
CHAPTER 6
THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS
AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002
INTRODUCTION
The Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Bill having passed by both the houses of Parliament received the
assent of the President on 17th December, 2002. It came on the Statutes Book as
THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND
ENFORCEMENT OF SECURITY INTEREST ACT, 2002 (54 of 2002) and was
amended time to time.
GUIDELINES OF THE BANK FOR TAKING ACTION UNDER THE SARFAESI ACT,
2002
1.
EMPOWERMENT TO BANKS/FIs
By virtue of the said Act, Banks/FIs have been empowered to take action against their
defaulting borrower(s) for recovery of their dues by enforcing the secured assets
without intervention of the courts.
2.
3.
All the accounts classified as NPAs in accordance with the definition of asset
classification of RBI are eligible for taking action under the said Act, namely :
Sub-standard
Doubtful
Loss
IDENTIFICATION OF NPAS FOR ISSUE OF NOTICE
Units where business is running but they are not paying the Banks dues.
Unit which is not working and business is not running and they have not paid the dues
of the Bank.
The value of primary and collateral security is sufficient to realize the entire or part
outstanding with up-to-date interest and other charges.
our Circular letter dated 27.12.2006 and reiterated in Circular No. HO / REC & Law /
04 /2007-08 / 279 dated 25-09-07. As such, the possibilities of simultaneous action
be explored and action be taken accordingly. It is left to the discretion of Regional
Head / Branch Incumbent to judge faster recourse to effect recovery on case to case
basis, taking into account limitation aspect, value of securities charged in the account
etc.
In cases where reference is pending before BIFR, such reference shall abate if the
secured creditors representing not less than 60% in value of the amount outstanding
against financial assistance disbursed to the borrower, have taken any measure to
recover their secured debt under Section 13 (4). We may also give consent to other
lenders /consortium leader for issue of joint notice on behalf of all other banks /FIs
including our Bank on the defaulting borrowers where reference is pending before
BIFR.
Explanation: The bank can independently go in for action under SARFAESI Act,
2002 where it has an exclusive charge over a property/third party collateral security in
the shape of immovable property without obtaining consent of secured creditors
representing not less than 60% in value of the amount outstanding.
ABATEMENT OF REFERENCE BEFORE BIFR
3.1
Reference before BIFR shall abate only if the secured creditors, representing not less
than in value of the amount outstanding against financial assistance disbursed to
the borrower have taken any measures to recover their secured debt u/s 13(4) of the
Act.
The cases where restructuring/ reschedulement is possible or is under consideration
of the Bank or cases where the amount due is less than 20% of the principal amount
and interest thereon, the Branches/ Regional Offices shall not issue notice in such
cases.
Issue notice to any person who has acquired any of the secured assets from the
borrower and from whom any money is due or may become due to borrower.
In case of rented properties, the rent may be claimed by the bank by issuing the
notice to the tenant.
EXCEPTIONS
3.2
LIMITATION
Before issuing notices Under Section 13 (2) to the borrower (s)/Guarantor ( s),
the branches have to ensure that reasonable period of limitation is available for
taking further action in the matter which shall not be less than twelve months.
The twelve months period has been suggested because in case of non recovery
of 100% dues of the Bank, a suit in Court of Competent jurisdiction might/will
have to be pursued. As regards limitation under SARFAESI Act 2002, we had
clarified this aspect vide our circular letter dated 06-05-2008 as under:As per Section 36 of the SARFAESI Act, the secured creditor is entitled to take action
U/Sec 13 (4) if the claim in respect of the financial asset is made within the period of
limitation under the Limitation Act 1963.
That for money claims, the limitation available is 3 years and in respect of
enforcement of mortgage, the same is 12 years. As the SARFAESI Act does not
specify as to the exact period of limitation, we have referred the matter to the IBA. In
the meeting of select member Banks held at IBA on 28th March 2008, at Mumbai,
amongst other issues, the above matter was also discussed and the general opinion
of the participants and also of Shri. Umarji, Legal Advisor, IBA was that, we give a
liberal interpretation of the provisions of SARFAESI Act. Accordingly, for sale of the
secured immovable property, the provisions applicable is Article 62 of Limitation Act,
which gives 12 years period from the date when the money sued for becoming due to
sell the mortgaged property under Section 13 (4) of the SARFAESI Act. For the sale
of Secured assets other than mortgaged ones, it shall be 3 years.
As regards completing the steps for the sale of the secured assets, once the claim in
respect of the financial assets is made within limitation, the opinion formed at the
meeting was that what was required to be done was it to be followed up by the
measures under sub-section (4) of Section 13. However, since the provision is not
clear about limitation for claiming the deficit amount after realizing the secured asset,
it is always safer to file suit in court or original application in DRT, as the case may be,
along with taking measures under SARFAESI Act, as at present simultaneous steps
are allowed.
3.3.2
2002, the authorized officer means an officer not less than a Chief Manager of a
Public Sector Bank. The Rule reads as under:2(a) authorized officer means 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.
The Board of Directors of the Bank has, vide BR No. 48 dated 27.09.2010, approved
that the policy of the bank with respect to appointment of Authorised Officers be
amended and the officers of the rank of Chief Manager and above shall only be
appointed as Authorised Officers.
In view of the same, the Bank shall appoint only Chief Managers and above as
Authorized Officers under SARFAESI Act and in the pending matters wherever
officers less than Chief Managers are Authorized Officers, they shall be replaced with
Chief Managers or above to proceed further with the matter under the Act.
3.4
ISSUE OF NOTICE
3.5
3.6
Residential House(s).
Shops.
Plots.
Commercial Property.
Moveable Assets, i.e. Hypothecated Stocks, Plant & Machinery, Debtors etc.
Possession of factory land & building should be avoided, if Statutory Dues, viz. Income
Tax, Sales Tax, Electricity Bill, Excise/Custom Duty etc. and Labour Dues are on higher
side.
102
The Branches /Regional Offices may follow the above seriatim while enforcing
securities against a particular borrower for realization of its dues.
3.7
The Authorized Officer shall also obtain valuation of the property obtained from Banks
Approved valuer and fix the Reserve price of the property in consultation with the
secured creditor before its sale thereof. The valuer must be registered as a valuer
under section 34 AB of the Wealth Tax Act, 1957 and should produce the registration
certificate, an attested copy of which should be kept in Banks records.
3.8 FIXATION OF UPSET PRICE (RESERVE PRICE) UNDER SARFAESI ACT, 2002:
It has now been decided that the upset price (reserve price) be fixed at Realisable
Value. The valuation for the same should be done by an approved valuer on Banks
Panel under SARFAESI Act, 2002. The valuation done by the approved valuer will be
further corroborated by the Branch Manager after visiting the site of the property and
ascertaining fair realisable value from local sources. Proper survey has to be
conducted and a report thereof will be kept on record giving full justification.
In case, the Realisable Value is less than Market Value by more than 20%, the valuer
should give proper justification for the same with cogent reasons in the valuation
report.
One valuation from the approved valuer on Banks Panel under SARFAESI Act, 2002
is sufficient for the fixation of upset price (reserve price) and the Authorised Officer
alongwith the Branch Incumbent should visit and satisfy himself of the same from the
prevailing circle rates, recent sales in the area and by contacting Real Estate Agents
etc., so as to fix up a realistic price.
If the Realisable value of the charged individual property at the time of going for
auction under the said Act is less than that assessed at the time of sanction of credit
facilities, the valuer must give the reasons for the same and the Authorised Officer
must satisfy himself of the same from the market sources, so as to fix up a realistic
price and should also record the same alongwith justifications.
If the Authorized Officer still feels that the auction will not be successful at this price,
103
with his recommendations based on cogent reasons, the RLCC-RH may lower down
the reserve price upto the range of 20% of the Realsiable Value, so that the auction is
made successful at the first attempt.
If this also does not materialize, HLCC-ED can allow total reduction not exceeding
30% of the Realsiable Value on the recommendations of the RLCC-RH.
CAC at Head office can allow total reduction not exceeding 40% of the Realsiable
Value on the recommendations of the HLCC-ED.
Note:- Once SARFAESI Notice is issued, symbolic/constructive/actual possession cannot be
deferred by the Branch Incumbents unless concurred by the Regional Head / Head
Office.
3.9
3.10
3.11
assets, the Bank may file an application before DRT having jurisdiction or a Competent
Court, as the case may be, for recovery of balance amount from the borrower within
limitation.
3.12
For better understanding of the procedures, the branches/regional offices are advised
to go through the Rules carefully while taking action against NPA borrowers under the
Act and if necessary, the Legal Retainer at Regional Office be consulted.
4.1
SECURITIZATION CELL at Head Office and at all the Regional Offices has been
created for exclusively dealing with the cases under the Act. It is headed by Chief
Manager / Asstt. General Manager at REGIONAL OFFICE and necessary staff has
been posted in this Cell so as to expedite action under the Act. Many of them have
been imparted training to develop in-house expertise for exercising the rights of the
secured creditors under the Act. Besides, Seminars, Workshops, group discussions
were also conducted to provide first hand experience to the concerned staff.
4.2
ENGAGEMENT OF COUNSEL
For the convenience of the Branches/ Regional Offices, draft of the application (as
Annexure - VI) duly approved by the Legal Advisor of the Bank is enclosed which may
be filed before CMM/ DM by the Authorized Officer for seeking his help in taking
possession of the secured assets in the cases where the borrowers have refused
/resisted taking possession of the assets by the Bank after expiry of 60 days notice
period.
Fees payable for the issuance of demand notices, the filing of application before Chief
Metropolitan Magistrate/ District Magistrate and the application/ appeal u/s 17(1) or
18(1) of SARFAESI Act 2002 through advocates has been given under Para 13.1.XXV,
13.1.XVI and 13.1.XV of Chapter 7 on Recovery through Legal Recourse.
Although service of demand notice U/s 13(2) or 13(11) is to be effected by the
concerned branch under the signature of the Authorised Officer, the fee has been
proposed envisaging complications in certain cases which require expert handling by
an advocate. The option may be exercised judiciously, sparingly and the fee may be
paid in lump sum after seeking permission from the concerned Regional Office.
The decision regarding engagement of counsel for filing application before
CMM/DM shall be taken by the concerned Regional Head only in those cases
where possession of secured assets is resisted by the Borrower /
guarantor/mortgagor.
4.3
insurance of the seized assets. An exhaustive exercise may be carried out to ascertain
the assets charged to the Bank in NPA accounts, which can be disposed easily in the
market.
The Branches/Regional Offices are requested to carefully go through the provisions of
the Act, The Rules and the guidelines issued by the Bank as above for taking action
against defaulting borrowers so that maximum recovery is effected in NPA accounts
and ultimately the quantum of NPAs of the Bank is reduced in the current fiscal as well
as the succeeding years.
5.
REPORTING
The progress of the notices issued, recovery effected under the Act shall be furnished
by the Branches to the Regional Offices on quarterly basis and which in turn have to
submit the same to Head Office on prescribed format Annexure-IX.
6.
7.
been entered into to the effect that the settlement by the bank is without prejudice to
its right under the Securitisation Act and/or any other legal remedy that may be
available to the bank for recovery of its outstanding dues and Authorized Officer shall
take possession of the secured assets in case of default by the borrower without
giving any fresh notice thereof under the Act. Format of the undertaking to be got
executed from the borrower(s) /guarantor(s) mortgagor(s) on stamp paper of
adequate stamp value duly purchased in the name of the borrower at the time of
conveying the approval of settlement of the account to the borrowers is enclosed as
Annexure-XI (Tamsuk Deed). Separate undertaking may be obtained from the
guarantor(s)/mortgagor(s) as the case may be. Such an undertaking will dispense
with the need of issuing fresh notice under SARFAESI Act 2002 in case of default of
settlement by the borrower pursuant to issue of notice under the said Act.
In a situation, where the bank has settled the account(s) by obtaining an undertaking
stated above, there is no need to issue a fresh notice in case the settlement is not
honoured by the concerned borrower. However, in cases where such undertaking
has not been obtained and settlement is arrived at after issuance of notice, the earlier
notice is deemed to have been waived off thereby occasioning the need for issuing a
fresh notice to the concerned borrower. The branches have to ensure before issuing
of second notice that reasonable period of limitation is available in an account so that
in case of need, suit/claim may be filed against the borrower before expiry of the
limitation.
8.
EMPANELMENT
OF
ENFORCEMENT
/SUPPORTING
AGENTS
ENFORCEMENT OF SECURITY INTEREST OF THE BANK UNDER THE ACT
FOR
The Board of Directors vide Item No.F-8 dated 02.09.2004 approved the guidelines for
empanelling the enforcement / security agents. At Head Office level, 69 agents have
been empanelled and circulated to all Regional Offices on 02.12.2004. To facilitate
faster decision at the Regional Office level, the Regional Head has also been
empowered to empanel /depanel any agency for enforcing the rights of the Bank. The
Regional Heads while empanelling the agents under their power must adhere to the
guidelines as approved by the Board of Directors vide abovementioned Resolution.
The Bank should issue the empanelment letter as per the Annexure-XV to the
approved enforcement agents containing terms and conditions mentioned in our letter
dated 02.12.2004, which should be duly accepted by the Enforcement Agents and
thereafter assign the job /work to the Enforcement Agents after getting the approval
from Head Office, if falls under H.O. power.
It is pertinent to mention that cases be assigned preferably to local Agents who
are well versed with the activity/ working to minimize the cost and to have quick
results. While assigning the case to an Agent, nature and details of assignment
of job should be specifically mentioned.
8.1
Under any method of sale, sale shall not take place before the expiry of 30 days
from the date on which public notice of sale is published in news papers or
notice of sale served on borrowers.
8.2 The first auction under the SARFAESI Act for immovable properties would be E-auction
107
only. In DRT matters, Bank will pray for E-auction only for immovable properties.
General Manager (Rec. & Law) will be competent authority to allow deviation in
eligible cases.
9.
A/c____________________________________________________________
___
(Name of the Account) drawn on any nationalized or scheduled bank.
The said deposit shall be adjusted in the case of successful bidder, otherwise
refunded on the date of opening the tenders itself / within a week of finalization
of tenders/ within a week of opening tender, as the case may be. The earnest
money deposit will not carry any interest.
5.
The offer alongwith the Earnest Money Deposit (EMD) should be called
in a sealed cover superscribed Offer for Purchase of Property (ies)
______________________________ (description of property) so as to reach
the office of Oriental Bank of Commerce _____________________________
(Address of Regional Office) on or before__________________ (date) by
5.00 PM.
All properties are being sold subject to conditions prescribed in the Second
Schedule to the Income Tax Act, 1961 and rules made thereunder. The
highest bid will be approved by Authorized Officer.
Inspection of property(ies) will be permitted at site to the Intending Offerers
on ______________ (date) at ___________________AM/PM (time).
Site: (Complete address of the Property(ies). In case of movable assets,
complete address where the assets are located.
The venue of the auction shall be informed to the public.
9. Authorized Officer is not bound to accept the highest offer or any or all offers
and reserves the right to accept or reject any or all the tenders without
assigning any reasons thereof.
In case all the tenders are rejected, authorized officer can negotiate with any of
the tenderors or other parties for sale of the properties by private treaty.
10. To the best of knowledge and information of the Authorized Officer, it must be
mentioned in the public notice that no other encumbrance exists on the
property. In case there is an encumbrance known to the Authorized Officer,
the same must be mentioned in the notice.
The drafts of Notice/Calling Tenders/e-auction duly approved by the Legal Advisor at
Head Office are enclosed as Annexures-XII, XIII & XIV respectively, which may be
used by branches for carrying out sale of the secured assets through Tender / eAuction.
9A. SALE ON CONSTRUCTIVE / SYMBOLIC /PAPER POSSESSION
The language of Section 13(4) (a), 13(6) of the ACT and Appendix III & V of the
RULES talks about the possession of the secured assets and the delivery of the
possession of moveable or immovable property. The said provisions do not say
anything about symbolic, constructive or physical possession of secured assets. The
Mortgagee under the Transfer of Property Act and the secured creditor under the
ACT can pass on the right, title or interest to the 3 rd parties on the sale of said assets,
which the mortgagee himself has, in the said asset. As far as moveable assets are
concerned, the possession can normally be physical possession only. But in the case
of immovable properties, the possession of the property may not mean only the
physical possession of the same unless specifically so provided. Therefore, as a
general proposition, it may not be appropriate to say that possession of immovable
property cannot be passed on without handing over the physical possession.
As per Section 14 of the ACT, the CMM/ DM shall assist the secured creditors in
taking possession of the secured assets. If the meaning of the possession is
restricted to symbolic /constructive possession, the assistance of CMM/ DM would not
be necessary and it will be required only where physical possession of the asset is
contemplated. Therefore, combined reading of Section 13 and 14 of the ACT
envisages taking over physical possession of the assets before the Secured creditor
take steps for sale of the same. If the Bank goes in for sale of secured assets on the
basis of constructive/ symbolic possession, it can pass on to the purchaser only
symbolic/ constructive possession of the said secured asset.
110
In the given circumstances, the secured assets be put to auction on the basis of
symbolic possession first if the secured assets is occupied by the borrower /
mortgager themselves. In other matters, it would be appropriate to expedite our
application before CMM/ DM to obtain physical possession of the assets by making
submission that the delay in disposal of application will frustrate the very purpose for
which the ACT has been enacted. In cases where the security is not occupied by the
borrower/mortgagor, after obtaining the physical possession of the asset, you may
resort to the sale of the same. However, each case has to be considered separately /
individually on merits and if satisfied as to the urgency of the sale of secured assets,
the assets may be sold in accordance with the provision of ACT and RULES provided
there is no stay order in that case.
The instructions contained in our circular dated 28.12.2002 regarding the
circumstances in which the Bank has to file application before CMM/DM for taking
possession of the secured assets may be followed.
10.
RELEASE OF SECURITY(IES)
In case the borrower(s)/guarantor(s) approached the bank for release of the security/
Property (ies) mortgaged to the bank after issuance of 60 days notice period the bank
may consider the request of the borrower(s) / Guarantor(s) on merits by accepting
cash / draft equivalent to the realizable value of the security / property (ies) for
which fresh valuation be got done from Banks approved valuer. However, the
borrower(s)/ guarantor(s) shall not be discharged from its/their liability to repay the
banks dues, if outstanding, and the bank will continue with the recovery process till
the adjustment of the account.
Power to Release Security:- RLCC-RH shall be empowered for release of these
security/ ies in the case the credit facility/ies is/are sanctioned by the Branch/ RO. In
case the credit facility/ies is/are sanctioned under HO power, power to release
security/ ies will vest with HLCC-ED.
11.
ENGAGING
EMPANELLED/
TO
BE
The Bank, where there is resistance from the obligants, may take the help of
Advocates on Banks Panel for filing of application before CMM/ DM for obtaining
physical possession of the secured assets.
The help of the outside agencies for enforcement of Secured Assets may be taken, if
needed, for filing application before CMM/DM, Security/ Maintenance/ Insurance
/ Advertisement, Valuation, Auction & Sale of Secured Assets and Management
of the Unit.
The powers for engaging the empanelled agencies have been approved by the Board
of Directors vide Item No. F-9 dated. 21.11.2005 and vide BR-F-1 dated 24-03-08 as
under :
111
At Regional Office
Region headed by General Manager
Region headed by Dy. General Manager
Region headed by Asstt. General Manager
At Head Office
Chief Manager
Asstt. General Manager (R&L)
Dy. General Manager (R&L)
General Manager at H.O. (R&L)
The above powers shall be exclusive of recorded interest and other charges.
12.
Maximum of ` 250/-
The above rates are indicative only and the rates may be fixed depending upon
the local conditions and in consultation with other banks operating in the area.
An upper cap of ` 10000/- (` Ten Thousand) only may be fixed. For very
specialized or high value properties the rates may have to be negotiated on
case-to-case basis in consultation with the owners of the property.
112
Service Tax as per rules and applicable from time to time shall be paid in
addition to the charges mentioned hereinabove.
The Fee alongwith service tax is to be recovered from the borrower.
113
12.3
12.3.1. The enforcement/ supporting agents may be paid the following fee for effecting
recovery in the accounts:
S.No.
1.
2.
3.
4.
Amt. Recovered
Fee Payable
114
Those Enforcement Agents may be considered by the Bank, which are a One Stop
Shop providing all the services under One Roof i.e. the advocates, security agencies,
115
Tax as applicable.
6. The 'Enforcement Agent' shall agree to carry out its functions at his risks and liabilities.
7. The 'Enforcement Agent' shall agree and declare that he shall not divulge the information
received from the Bank/ gathered during the course of performing its assigned functions
for anyone else except as required for the specific assignment.
8. The 'Enforcement Agent' shall agree and undertake that he shall exercise due care and
caution to protect the information which a reasonable and prudent person would exercise
to protect and maintain the confidentiality of information and prevent the unauthorized
use or disclosure of such information to third parties.
9. All information/ documents provided by the Bank to the 'Enforcement Agent' shall remain
the property of the Bank and nothing therein shall be construed as granting or conferring
any rights in on such information/documents to the 'Enforcement Agent' or any third
party.
10. The obligation of the 'Enforcement Agent' to keep the information confidential
shall
continue and survive even after termination of the arrangement.
11. The 'Enforcement Agent' upon termination of the arrangement by the Bank, shall
promptly return all copies of information/ documents in whatsoever form or media, to the
Bank or to any person authorized by the Bank or at the discretion of the Bank destroy the
same without retaining any copies thereof. The 'Enforcement Agent' shall certify in writing
to the Bank such return or destruction.
12. In case services of 'Enforcement Agent' are not found satisfactory, the Bank may de-list/
de-panel its name from the approved panel of the Bank and the Bank shall be entitled to
terminate the arrangement without assigning any reason at any time after issuing notice
and it will come into effect as stated in the notice.
13. The 'Enforcement Agent' shall not collect any amount in any form whatsoever from the
borrower or any other liable party.
14. The 'Enforcement Agent' shall not use any force or any pressure or commit any wrongful
act or offence against person/ property of the borrower, guarantor or any liable party.
The guidelines issued by the Government and/or RBI in this regard, if any, shall be
scrupulously followed by the 'Enforcement Agent'.
15. The 'Enforcement Agent' shall not further delegate the job assigned to it by the Bank to
any other agency without obtaining prior written consent of the Bank.
16. The 'Enforcement Agent' shall not do any act which shall be prejudicial to the interest of
the Bank or which shall adversely affect image of the Bank.
17. The 'Enforcement Agent' shall expressly indemnify and keep the Bank and its personnel
indemnified against all loss, liability or obligations arising out of its conduct or that of any
of its personnel.
18. In cases of any contravention of any obligation on the part of 'Enforcement Agent', the
Enforcement Agent shall be liable for the damages including special damages as
demanded by the Bank.
19. The 'Enforcement Agent' shall not be assigned/ shall not accept any enforcement job in
respect of the account/ property in which that 'Enforcement Agent' is having direct/
indirect interest.
117
118
TIPS
FOR BRANCHES/REGIONAL OFFICES TO BE FOLLOWED WHILE TAKING ACTION
UNDER THE ACT
1.
PROCEDURE
(Appendix I)*
Preparation of inventory
(Appendix II)*
(Appendix III)*
(Appendix V)*
(Appendix VI)*
Appointment of Manager
* Refer BARE Act on SARFAESI Act and Rules for appendix I to VI
2.
POINTS TO REMEMBER
2.1.
Act Empowers Banks/FIs to take action against NPA borrowers without
intervention of courts. So, immediately after an account becomes NPA, action to be initiated
by issuing notice, for enforcement by branch without intervention of Court.
120
2.4 GENERAL
The creditor may proceed against the guarantor and sell the pledged assets, without
exhausting the other remedies available to him, under the Act, 2002.
The assistance of Chief Metropolitan Magistrate or the District Magistrate can be
sought for taking possession / control of the secured assets.
No Civil Court shall have jurisdiction to entertain any suit or proceedings in respect of
any matter which a DRT or DRAT is empowered by or under this Act to determine
and no injunction shall be granted by any Court or other authority in respect of any
action taken in pursuance of this Act.
After serving of notice under section 13 (2), borrower / guarantor restrained from
transferring the secured assets without prior written consent of the Bank.
In case the borrower fails to discharge his liability in full within the period specified in
the notice, the secured creditor is entitled to take possession of the secured assets of
121
the borrower including the right to sell, take over management, appoint persons to
manage, call upon any person who has acquired, any of the secured assets from the
borrower and from whom any money is due or may become due to the borrower, by
notice in writing to pay to the secured creditor.
Persons aggrieved by any of the measures taken under Section 13 (4) and mentioned
in the foregoing paragraph, by the Bank, may file an appeal before DRT within 45
days.
However, if the action of the Bank is held by DRT as wrongful and directs for return of
security, the borrower will be entitled for compensation and cost.
Time-barred debts cannot be recovered
If dues are not paid or balance is left after enforcement, DRT/ civil court, as the case
may be, can be approached within the period of limitation.
Since simultaneous actions for recovery of dues are permitted after the decision in the
Transcore case by Honble Supreme Court, OA/ suit before the DRT/civil court, as the
case may be, can also be filed while taking steps under the SARFAESI Act, 2002.
This option is left to the competent authority to choose based on merits of each case.
122
ANNEXURE -I
DATE:____________
Dear Sir/Madam
Re:
Account
M/S__________________
Details of Outstandings
Credit facilities sanctioned/
availed
--------------------------------1.
2.
3.
Balance O/s
Recorded
(as on ________) Interest
------------------
-------------
(Amt. in `)
Total
Rate of Intt
Outstanding charged from
time to time
---------------- --------------
The above account has been running unsatisfactory for quite sometime and you are,
therefore, in default as you have failed to take steps to regularize /adjust your account in
respect of such debt as stated herein above. In view of the said default, your account has
been classified as a non-performing asset by the Bank on----------------.
In the
circumstances, the Bank has decided to recall the advance granted to you in terms of
Section 13(2) of The Securitization and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002. You are, therefore, now required to discharge in full the banks
liabilities with upto date interest as per the details mentioned above within a period of 60
days from the date of the notice failing which the bank shall take necessary action for
enforcement of the secured assets to realize its dues. The details of the secured assets
intended to be enforced by the bank, in event of non-payment of the full liabilities as stated
herein above, are stated here under :Details of Securities
1.
2.
3.
Yours faithfully,
AUTHORIZED OFFICER
123
ANNEXURE II
RECALL NOTICE UNDER SECTION 13(2) OF THE SECURITIZATION AND
RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY
INTEREST ACT, 2002
TO BE ISSUED TO GUARANTOR (S)
M/S /Shri _________________
_____________________
_____________________
DATE:____________
Dear Sir/Madam
REG: M/S_______________
M/s/Sh._______________________________ were granted the following credit facilities
and the same were secured with your personal guarantee.
(Amt. in `)
Credit facilities sanctioned/
availed
Balance O/s
Recorded
(as on ________) Interest
Total
Rate of Intt
Outstanding charged from
time to time
---------------- --------------
-------------------------------------------------------------1.
2.
3.
The above account has been classified non-performing assets on--------------------- and no
steps to regularize/adjust the said account have been taken by the subject party despite
assurances.. In the circumstances, the Bank has decided to recall the advance granted to
you in terms of Section 13(2) of The Securitization and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 and request the pay the same with upto date
interest within a period of 60 days from the date of the notice failing which the bank shall
without prejudice to its other rights against you or other borrowers, proceed against you or
sell the pledged / hypothecated / mortgaged assets without first taking any action against the
subject borrower(s) specified under section 13(4) of the said Act. The details of such assets
in respect of which the action is proposed in case of non compliance of this notice are
mentioned hereunder :Details of pledged/hypothecated/mortgaged assets
1.
2.
3.
Yours faithfully,
AUTHORIZED OFFICER
124
ANNEXURE -III
On Banks Letter head
DRAFT LEGAL NOTICE TO BE SENT TO THE PARTIES UNDER THE PROVISIONS OF
SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND
ENFORCEMENT OF SECURITY INTEREST ACT 2002 IN RESPECT OF SUIT FILED
CASES
Please note: The facts of each case are different therefore, the same be incorporated
accordingly and duly verified by the authorized and empowered person.
Further note that the facts of this notice be in conformity with the facts/pleading made
in the suits/claim application pending in Courts/Tribunals.
Regd. A/D/SPEED POST
Dated:_______________
WITHOUT PREJUDICE
1.
Shri/Smt/M/s. ____________________
_______________________________
2.
_________________________
_________________________
3.
________________________
________________________
Re:
Dear Sirs/Madam,
1. That you addressee(s) No.1/.. doing the business of _________ requested the bank
for financial assistance(s) and the bank sanctioned/allowed the following facilities in the
month of ________________ .
The details of facilities be mentioned
..
..
..
The above loan facilities were duly secured by way of hypothecation of
....
(Details
of
hypothecated
125
goods/items/details, its nature, plant & machinaries, fixed assets etc. , as far as
possible must be specific) and the same was also secured by way of equitable
mortgage/mortgage/charge in respect of immovable property i.e. (details of
immovable property be given) belonging to addressee No.____ .
(In case of companies, the details of assets charged and noted in the office of Registrar
of Companies be given)
2. That you addressee No.1 .. executed the various loaning documents,
in respect of the above loan facilities on .. and also agreed to pay the rate of
interest at the rate of _______ per cent per annum with quarterly/monthly rests and internal
guidelines of the bank from time to time, in respect of the above facilities. ( if there are more
than one facility and rate of interest are different then, different rate of interest are to be
mentioned)
3. That you addressee No.____ to _____ stood guarantor(s) for addressee No.1 in
consideration of the above said loan facilities and executed the deed of continuing
guarantee(s)/agreement of guarantee(s) on _____________ in favour of the bank and thus
the liability of you addressee(s) No.___ to No.____ is co-extensive and continuing with
addressee No.1 and you all are jointly and severally liable to pay the dues including interest,
costs and other usual bank charges to the bank.
4. That you addressees No. ______ created equitable mortgaged/mortgage/ charge in
respect of immovable property i.e. _____________________ bearing to secure the dues the
bank, in consideration of the above said loan facilities to addressee No.1 and thus the bank
has a right to sell, transfer and assign the said property to recover/realise the dues of the
bank with interest, costs and other usual bank charges.
The details of the property mortgaged is as under:a.
b.
c.
d.
e.
North:
West:
East:
South:
________________________
5. The said term loan amount was repayable in ____ instalments/equated monthly
instalments with interest/besides interest at the rate of ____ per annum with
quarterly/monthly rests, till the date of payment in full. (In case of term loan only)
126
6. That you agreed to pay the additional interest at the rate of ___ percent per annum over
and above the normal agreed rate of interest with quarterly/monthly rests, in case of default
in terms and conditions of the sanction and loaning documents.
7. (Give details/facts in case of enhancement with amount, rate of interest, extension of
charge/mortgage/guarantors etc.)
8. (Give details of the account date of non-performing assets, within the definition of section
2(o) of Act, 2002)
9. That since you had committed default of the repayment of the bank dues in the above
mentioned loan account(s)/facility(ies), the bank filed suit/claim application for the recovery
of `____________________ alongwith pendentelite and future interest at the rate of ______
% p.a. with quarterly rests, being case No._____________ (In the matter of : Oriental Bank
of Commerce Versus _______________________________ and other ) and the next date
of hearing is ___________ . The amount due and recoverable as per the suit/claim
application is `________________, which includes interest at the rate of ____ % per annum
with quarterly rests w.e.f. the date of filing of the suit till date i.e. ______ which you are liable
to pay to the bank. Apart from this costs of `________ is due and payable by you and thus a
total sum of `_______________ as mentioned above with above mentioned rates and rests
is due and payable by you.
10. That you shall not transfer, assign and lease or otherwise deal or part with the
possession of the secured assets to anyone.
11. That this notice is without prejudice to the rights and contentions of the bank before the
concerned court/tribunal in the above mentioned case.
I, therefore, by virtue of this notice, hereby call upon all of you i.e. addressees No.1 to
______, jointly and severally to make the payment & discharge in full liabilities amounting to
` ______________ as per details mentioned above in para No.9 with interest w.e.f.
________ with monthly/quarterly rests, to the bank within 60 days from the receipt of this
notice, failing which the bank shall be constrained to take measures for the recovery of
possession of the secured assets including the right to transfer by way of lease, assignment
or sale thereof under the provisions of chapter III of SECURITISATION AND
RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY
INTEREST ACT 2002, for the recovery of above secured dues and in that case you all will
be jointly and severally liable to pay for all cost and other expenses arising there from and
the balance amount thereof.
Please note that the copy of this notice has been retained in our office and being filed in the
suit/claim application pending in the Court/Tribunal.
AUTHORIZED OFFICER
127
ANNEXURE - IV
PROFORMA FOR INFORMING COURT/ DRT
Before the L.D. Presiding Officer, Debt Recovery Tribunal No.
Or
Honble Justice_____________________ (Name of Court)
Original Application/ Original Suit No. __________________
Oriental Bank of Commerce: Applicant / Bank
Versus
Defendant/Judgment Debtors: Opposite Party
The humble petition of the applicant / bank Named above
Most Respectfully showeth :
a.
b.
c.
That the applicant/bank shall keep informed further developments of the said
proceedings to your lordship from time to time
Hence it is prayed that this application shall be kept with the record for the ends of
justice and your petitioner / bank as is duty bound shall ever pray.
(DEPONENT)
AUTHORIZED OFFICER
(Seal of the Bank)
Notes :
1. This format may be used by the Branches/ROs for informing the Court/DRT where
case is is pending and the bank has taken action against the said
borrower(s)/guarantor(s) under the Securitisation Act, 2002.
2. It should be got typed on a demi paper.
3. It should be duly signed by the Authorised Officer.
128
ANNEXURE-V
(Undertaking to be obtained from the Borrower/ Guarantor/ Partner/ Director/
Mortgagors etc.)
Authorised Officer / BM
Oriental Bank Commerce
________________________
-------------------------------------Dear Sir,
Regarding :
This is to place on record :
1)
I/We have received the notice dated________ served by the bank under Sec. 13 (2)
of the Securitisation and Reconstruction of Financial assets and Enforcement of
Security Interest Act, 2002 and on date received the notice under section 13 (4) of the
said Act.
2)
I/We,
, the borrower/Guarantor failed to pay the dues of the
Bank in terms of the said notice, I/We hereby handover the symbolic possession of
the property mentioned in the said notice U/S 13 (4) of the said Act on _________
(date) to you, the Authorised Officer, peacefully and without demur. I/We/Am/Are
occupying the said property merely as your agent.
3)
Thanking you
Yours faithfully,
(
witness :
1)
2)
3)
(In case of company Pvt. Ltd./Ltd. Board Resolution shall be enclosed)
129
ANNEXURE-VI
BEFORE THE CHIEF METROPOLITAN MAGISTRATE/DISTRICT
MAGISTRATE, ___________________,_________________________
______________________________
In the matter of:
Oriental Bank of Commerce
_________________________
_________________________
Applicant
Versus
_________________________
_________________________
_________________________
Respondent
130
3.
The 60 days period in case of the aforesaid notice, referred to herein above and which
was dated ____________, expired on ______________. Although the said period of 60
days from the date of the notice, as prescribed has expired but respondent/s have not come
forward to repay the secured debt.
4.
*** The objection/ representation in reply to the aforesaid notice received from the
borrower has been considered by the applicant and reasons for non-acceptance of such
objection/ representation had been communicated to the borrower within time vide letter
dated _________.
5.
Since respondent/s have failed to discharge his/their liability in full within the
prescribed period, the applicant was entitled to take one or more recourse to any of the
measures prescribed in section 13(4) read with section 14 of the said Act to recover its
secured debt. In terms of Rule 8, the prescribed notice in appendix IV was also served by
affixing the possession notice on the outer door or at such conspicuous place of the property
as well as by publishing the same in two leading newspapers, one in vernacular language
having sufficient circulation in the locality where the property is situated.
6.
However, the physical possession of the secured asset/s and/or property/ies referred
to in the said notice has not yet been handed over by the borrowers/respondents so far. The
physical possession of the said assets/ properties is/ are required to be taken by the secured
creditor/ applicant since the said secured asset/s referred to in the said notice is/are required
to be sold or transferred by the applicant under the provisions of the said Act.
7.
The provisions of the Securitisation and Reconstitution of Financial Assets and
Enforcement of Security Interest Act, 2002 and the rules made thereunder had been
complied with.
Description of the Immovable Property/ies
a.
All that is part and parcel of the property consisting of Flat No.
____________/Plot NO. ________, which is registered as Document No. ___________,
Book No._______, Addl. Book No. ________at page No._____to ________with SubRegistrar___________, and bounded as under:North _____________
South _____________
East _____________
West _____________
b.
All that is part and parcel of the property consisting of Flat No.
____________/Plot NO. ________, which is registered as Document No. ___________,
Book No._______, Addl. Book No. ________at page No._____to ________with SubRegistrar___________, and bounded as under:North _____________
South _____________
East _____________
West _____________
***If the borrower has raised objections within 60 days, then only the para should be incorporated here.
131
1.
In facts and circumstances stated herein above and for purposes of securing
compliance with the provisions of section 13 of the said Act, the applicant craves leave of
this Honble Court to take or cause to be taken such steps and issue any appropriate
directions, orders etc., to any authority or official or cause to be used, such force, as may be
necessary in order to provide physical possession of the secured property/ies. It is,
therefore, respectfully prayed before this Honble Court :
a)
to take or cause to be taken such steps and issue any appropriate
directions, orders etc., to any authority or official or cause to use, such force, as may be
necessary in order to provide physical possession of the following property/ies :
(i)
All that is part and parcel of the property consisting of Flat
No._____/Plot No. ______, which is registered as Document No. ______, Book No. ______,
Addl. Book No. ______at page No. _____to______with Sub-Registrar _________,l and
bounded as under :
North _____________
South _____________
East _____________
West _____________
(ii)
All that is part and parcel of the property consisting of Flat
No._____/Plot No. ______, which is registered as Document No. ______, Book No. ______,
Addl. Book No. ______at page No. _____to______with Sub-Registrar _________,l and
bounded as under :North _____________
South _____________
East _____________
West _____________
b)
Any other or further order may be issued in facts and circumstances
as stated herein above to protect the interest of the certificate holder bank.
It is prayed accordingly.
AUTHORISED OFFICER
Place :
Dated:
132
Applicant
Versus
_________________________
_________________________
_________________________
Respondent
AFFIDAVIT
Affidavit of ____________aged about ________years ____________Manager, posted at
Oriental Bank of Commerce, ______________Branch, _______________.
The above named deponent does hereby solemnly affirm and declare as under ;1.
That the deponent is ___________Manager of the applicant bank and is conversant
with the facts and circumstances of the present case on the basis of the records maintained
by the applicant bank and as such the deponent is competent to swear the present affidavit.
2.
That I state that the accompanying application for taking action in terms of Section 14
of the Securitization and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002, is being drafted and filed on behalf of the applicant bank and the contents
of the same are true and correct to the best of my knowledge and belief.
3.
That aggregate amount of financial assistance (fund based and non-fund based)
granted is `_________and the total claim of the Bank is ` ____________as on the date of
filing the application.
4.
That the borrower has created security interest over various properties and that the
Bank is holding a valid and subsisting security interest over such properties and the claim of
the Bank is within limitation.
5.
That the borrower has created security interest over the property(s) details of which
is/are given hereunder:
________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
________________________________________________________________________
6.
That the borrower has committed default in repayment of the financial assistance
granted aggregating the specified amount as given above at Point No. 3.
7.
That the consequent to default, the account has been classified as NPA.
8.
That the period of 60 days notice has lapsed after duly serving the notice under
section 13 (2) on the borrower.
133
9.
*That the objections/ representation, if any, of the borrower has been considered and
reasons for non acceptance of such objections/ representation has been communicated to
the borrower vide letter dated _________.
10.
That the borrower has not made any repayment inspite of the above notice and the
Authorized Officer is, therefore, entitled to take possession of the secured assets under the
provision of sub-section (4) of section 13 read with section 14 of the SARFAESI Act, 2002.
11.
That the provision of this Act and rules made thereunder for taking physical
possession had been complied with.
DEPONENT
VERIFICATION
Verified at _________on this ___________day of _____________2014 that the contents of
the affidavit are true and correct based on the records maintained by the applicant bank and
nothing material has been concealed there from.
DEPONENT
*If the borrower has raised objections within 60 days, then only the para should be incorporated here.
134
ANNEXURE - VII
TAMASUK DEED
PROFORMA OF UNDERTAKING TO BE OBTAINED AT THE TIME OF SETTLEMENT OF
PROTESTED BILL/ SUIT FILED/ DECREED ACCOUNTS FROM THE BORROWER(S)/
GUARANTOR(S)
This undertaking is made here at ______________ on this ____day of ____________
by the following :
1.
2.
3.
Whereas we, the above named, are the proprietor/ partners/ Director
of M/s
______________ with its registered office at ___________________ confirm that Oriental
Bank of Commerce, had sanctioned ____________ limit of `______________ on
______________ to M/s __________________ bearing interest @ _________ over PLR
with a minimum of _________ p.a. on quarterly rests in accordance with the agreement with
them and other documents executed by the partners. This facility was enhanced to
`_____________
lacs
w.e.f.
___________
against
the
securities
of
__________________________________________________ and personal guarantee of
_____________________________. Our firm/company accordingly availed the said loan
facilities. However, due to bad luck, the activities of the firm/company had to be stopped due
to reasons _______________________________________ and the account of M/s
________________________________________ with the Oriental Bank of Commerce B/o
____________________________ became irregular.
Whereas the amount in subject account of M/s ___________________________
outstanding as on ____________ is `______________. The amount as outstanding
liability/debt is acknowledged and confirmed by us on behalf of the firm.
Whereas pursuant to the legal/demand notices dated ___________ and _____________
served on us as well as on M/s ________________________ by the Oriental Bank of
Commerce, the Bank has informed us about its intentions to institute civil suit/ action under
the Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 for recovery of their outstanding amount. However, we as proprietor/
partners/ director(s) of the firm / company as well as in our personal capacity as guarantors
do not want any suit to be filed against us and/or against the firm.
Now, therefore, we
___________________,
___________________ and
135
136
Annexure-VIII
NOTICE TO BE SERVED UPON BORROWER/GUARANTOR/MORTGAGOR BEFORE
EFFECTING SALE OF SECURED ASSETS
Date :_____________
Shri________________________
M/S ________________________
____________________________
____________________________
REG. : SALE OF SECURED ASSETS UNDER SARFEASI ACT, 2002
M/S
________________________________________________________________________
(name of the borrower with account number)
This is to inform you that
pursuant to the possession taken by the undersigned as
Authorized Officer under SARFAESI Act, 2002 on __________(date) vide possession notice
dated ____________ for
recovery
of
the
secured
debts
of
Oriental
Bank
of
Commerce _____________________ (name of the Branch)
amounting to `____________________ and interest thereon from__________(date) and
with costs and charges from M/s_______________________(name of borrower), the
undersigned intends to sell the following secured assets for recovery of the entire dues for
which necessary steps including publication in Newspapers have been taken / are being
taken :
Secured Assets:
1.
2.
3.
The valuation report of the aforesaid secured assets is/are enclosed with the request to send
your suggestions, if any, within 30 days time of receipt of this notice. The Reserve Price
(below which the property may not be sold) for the property has been fixed at ` _____.
Authorized Officer
Note : 1. The notice as above may be got typed or neatly handwritten on the letter pad
of the concerned branch before it is served on the borrower/guarantor/mortgagor.
1. The above notice shall also contain the following:
i)
The secured debt for recovery of which the property is to be sold.
ii)
Reserve price, below which the property may not be sold.
137
TENDER NOTICE
Annexure-IX
Pursuant to the possession taken by the Authorized Officer under SARFAESI Act, 2002 for
recovery of the secured debts of Oriental Bank of Commerce amounting to
`_________________ and
interest
thereon
from
________________
(date)
and
with
costs
and
charges
from
M/s__________________________________________ (name of borrower), OFFERS are
invited by the undersigned in sealed cover for purchase of each lot of movable and
immovable properties on AS IS WHERE IS BASIS and AS IS WHAT IS BASIS as per
brief particulars given hereunder :
Sl. Description
of Reserve Price (`)
No. Properties (with All
the details)
A. Immovable
B. Movable
The aforesaid properties shall not be sold below the reserve price mentioned above.
Intending bidders are required to deposit the earnest deposit stated above by way of pay
order/demand draft payable
at ____________________________ (Name of Place) and
favouring Oriental Bank of Commerce
A/c _______________________________________________________________(Name of
the Account) drawn on any nationalized or scheduled bank. The said deposit shall be
adjusted in the case of successful bidder, otherwise refunded on the date of opening the
tenders itself / within a week of finalization of tenders/ within a week of opening tender, as
the case may be. The earnest money deposit will not carry any interest.
The offer alongwith the aforesaid Earnest Money Deposit (EMD) should be made in a
sealed
cover
superscribed
Offer
for
Purchase
of
Property(ies)
_______________________________
(description
of
property)
so as to reach the office of Oriental Bank of Commerce _____________________________
138
2.
Offers so received by the undersigned will be opened and considered
on
________________(date)
at
Oriental
Bank
of
Commerce,
_________________________________(Address
of
Regional
Office)
at
_____________________ (time) .
3.
Inspection of property (ies) will be permitted at site to the intending Offerers
on _________ (date) at _________________ (time).
Site : (Complete address of the Property (ies). In case of movable assets, complete address
where the assets are located.)
4.
The successful purchaser shall deposit 25% of the amount of sale price, adjusting the
EMD paid already, within 48 hours of the acceptance of offer by the Authorized officer in
respect of the sale failing which the earnest deposit shall be forfeited. The balance 75% of
the sale price is payable on or before 15th day of confirmation of the sale by the Authorized
Officer or such extended period as agreed upon in writing by and solely at the discretion of
the Authorized Officer. In case of failure to deposit this balance amount within the
prescribed period, the amount deposited shall be forfeited.
5.
Authorized Officer is not bound to accept the highest offer or any or all offers and
reserves the right to accept or reject any or all the tenders without assigning any reasons
thereof.
In case all the tenders are rejected, authorized officer can negotiate with any of the
tenderors or other parties for sale of the properties by private treaty.
6. To the best of knowledge and information of the Authorized Officer, no other
encumbrance exists on the property. (In case there is an encumbrance known to the
branch, the same may be mentioned here).
Date :
Place:
Authorized Officer
Oriental Bank of Commerce
(Address of Regional Office)
139
Annexure-X
ORIENTAL BANK OF COMMERCE
(A GOVERNMENT OF INDIA UNDERTAKING)
...........................
PUBLIC NOTICE FOR E-AUCTION FOR SALE OF MOVABLE & IMMOVABLE PROPERTIES
LAST DATE & TIME OF SUBMISSION OF EMD (Earnest Money) AND DOCUMENTS .. UPTO .P.M.
Sale of immovable property mortgaged to Bank under Securitization and Reconstruction of Financial assets
and Enforcement of Security Interest (SARFAESI) Act, 2002 (No.54 of 2002)
Whereas, the Authorized Officer of Oriental Bank Of Commerce had taken possession of the following
property/ies pursuant to the notice issued under Sec 13(2) of the Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 in the following loan accounts
with our Branch with a right to sell the same on AS IS WHERE IS BASIS AND AS IS WHAT IS BASIS for
realization of Banks dues. The sale will be done by the undersigned through e-auction platform provided at the
website: .
Name of
the
Branch &
Borrower
Date/ Time
of e-Auction
Authorised Officer
ORIENTAL BANK OF COMMERCE
Place:
****** (This cl no 5 be included for properties in small/rural areas, where awareness of technology is not
very high)
140
Annexure-XI
ORIENTAL BANK OF COMMERCE
(Address of Regional Office)
Date ........................
M/s. ___________
_______________
_______________
Dear Sirs,
REG: EMPANELMENT OF ENFORCEMENT/SUPPORTING AGENT UNDER SARFAESI
ACT, 2002
This has reference to your application for approval of Enforcement/ Supporting Agent. We
are pleased to empanel you as Enforcement/ Supporting Agent of our Bank to assist the
Authorized Officer of our Bank under the SARFAESI Act, 2002 in realization of the Bank
dues on the following terms & conditions:
1. You shall hold all requisite Government and other licenses, approvals and consents as
required for providing to the Bank the service and shall undertake to maintain the same
valid and subsisting during the period of arrangement with the Bank.
2. Empanelment does not carry assured assignment of the cases. It is open to the Bank to
engage the services of the 'Enforcement/ Supporting Agent'.
3. You will carry out its functions as per written reference made by the Bank.
4. You will agree to provide its services in the matter referred at the fee to be decided on
case-to-case basis as per fee/payment schedule duly approved by the Bank.
5. You will agree to carryout its functions at its risks and liabilities.
6. You will agree and declare that it shall not divulge the information received from
the Bank/ gathered during the course of performing its assigned functions for any
one else except as required for the specific assignment.
7. You will agree and undertake to exercise due care and caution to protect the
information which a reasonable and prudent person would exercise to protect and
maintain the confidentiality of information and prevent the unauthorized use or
disclosure of such information to third parties.
8. All information/documents provided by the Bank to you shall remain the property of the
Bank and nothing therein shall be construed as granting or conferring any rights in/ on
such information/ documents to you or any third party.
9. The obligation of the 'Enforcement/ Supporting Agent' to keep the information
undisclosed to others shall continue and survive even after termination of the
arrangement.
10. The 'Enforcement/ Supporting Agent' upon termination of the arrangement by the
Bank, shall promptly return all copies of information/ documents in whatsoever
form or media, to the Bank or to any person authorized by the Bank or at the
discretion of the Bank destroy the same without retaining any copies thereof. The
'Enforcement Agent' shall certify in writing to the Bank such return or destruction.
141
11. In case, your services are not found satisfactory, the Bank may de-list/ de-panel its name
from the approved panel of the Bank and the Bank shall be entitled to terminate the
arrangement without assigning any reason at any time after issuing notice and it will
come into effect as stated in the notice.
12. You will not collect any amount in any form whatsoever from the borrower or any other
liable party.
13. You will not use any force or any pressure or commit any wrongful act or offence against
person/property of the borrower, guarantor or any liable party. The guidelines issued by
the Government and/or RBI in this regard, if any, shall be scrupulously followed by the
'Enforcement Agent'.
14. You will not further delegate the job assigned to it by the Bank to any other agency
without obtaining prior written consent of the Bank.
15. You will not do any act which shall be prejudicial to the interest of the Bank or which shall
adversely affect image of the Bank.
16. The 'Enforcement/ Supporting Agent' hereby expressly indemnifies and keeps the Bank
and its personnel indemnified against all loss, liability or obligations arising out of its
conduct or that of any of its personnel.
17. In cases of any contravention of any obligation on your part, you will be liable for the
damages including special damages as demanded by the Bank.
18. The 'Enforcement/ Supporting Agent' shall not be assigned / shall not accept any
enforcement job in respect of the account / property in which that 'Enforcement/
Supporting Agent' is having direct/ indirect interest.
19. That the Bank reserves the right to take appropriate legal action including filing/ lodging
complaint to the professional body, if there is any misconduct on the part of the
'Enforcement/ Supporting Agent' or information submitted by you to the Bank is incorrect
or false. This shall be without prejudice to Bank's right to de-list / de-panel you from its
panel.
20. That in case constitution of 'Enforcement/ Supporting Agent' undergoes any change the
same shall be informed to the Bank immediately.
If the above terms & conditions are acceptable to you, the duplicate of this letter may be
returned duly signed in token of having accepted the same.
Yours faithfully,
Regional Head
Note: This letter should be typed/ printed on the Regional Office letter head.
142
Annexure - XII
Complete details of the selected Tender
S.No Details
To be filled by RO
1 Tender Title (e.g., Auction cum sale
notice)
2 Product Category (e.g., Land /
Building / Shop)
3 Sub Category (e.g., Auction of
property)
4 Tender value (INR)
5 Earnest Money Deposit (INR)
6 Document cost (if any)
7 Tender Type (e.g., auction)
8 Location (where auction will take
place)
14 Pre-qualification
15 Pre-Bid meet date
16
1. Name
2. E-mail
3. Phone Office
4. Fax No.
5. Address
143
CHAPTER 7
RECOVERY THROUGH LEGAL RECOURSE
1.
1.1
1.2
2.1
2.2
EXECUTION OF DECREES
It has been observed that number of decrees awarded by the courts in favour of Bank
are lying unattended at branches for the last several years and no effective steps
have been taken by the branches in the matter of execution of such decrees as a
result of which the very purpose of filing suits against the defaulting borrowers is
defeated. The branches must ensure that execution application is filed immediately
after the decree is awarded by the court provided the decree passed in favour of Bank
is in terms of prayer made in the plaint / claim application and after satisfying that no
part of Banks claim has been disallowed by the Court. However, it must be kept in
mind that Banks remedy to execute the decree through competent court will become
time barred after expiry of a period of 12 years from the date of decree or from the
date when the decree become executable. Within the said period, the Bank can file
as many execution applications, as it is necessary to do so till the decree is fully
satisfied.
be conducted by e-auction mode. The list of companies/ service providers, which are
empanelled by our Bank and their fee schedule are as under:S.
Name of the
No. company/
Service
provider
1.
M/s C1 India
Pvt. Ltd
(Vice President
: Sh. Akshya
Rath)
&
Samir
Chakraborty
2.
M/s
Auction
Tiger
(Director: Sh.
Vishal Dhori)
&
Rikin
Brahmaxatriya
3.
M/s
Atishya
Technologies
Private Limited
(Contact
person
Mr.
Parshad
Shah & Karan
Soni)
Address
31st
August,
2015
` 5500/- +
Service tax as
applicable per
property /per
e-auction
/event
30th
January,
2015
28th
February,
2015
After issue of notice for auction (proclamation of sale) by the Recovery Officers, the
concerned Regional Office will arrange for e-auction through any of the companies/
service providers above. In respect of auction under SARFAESI Act, the Regional
office will arrange for e-auction through any of the above companies/ service provider
mentioned above. However the services of these service providers may be availed
after the validity period mentioned above subject to getting confirmation from the
Recovery & Law Department, Head Office regarding the approval of extention of
agreement.
146
2.3
2.4
closure of the financial year not later than 30th April of the succeeding month.
Note:- The five ARM Branches (Mumbai, New Delhi, Kolkata, Chandigarh and
Bangalore) shall also continue to act as intermediary between the Branch,
Regional Offices etc. and local counsel conducting the cases of DRTs / DRATs
for proper conduct / disposal of the matters even for other branches for which
cases have not been transferred and who are being catered to, in the present
structure for follow up of court cases.
2.4.2 PROCEDURE TO BE ADOPTED:
Following steps are to be taken:
1. After transfer of these accounts, the loan portfolio (asset side) of the parent branch
will be credited by outstanding amount and the asset side of ARM Branch will be
debited with this amount.
2. All the files, loaning documents and title deeds in original will be transferred to the
ARM Branch from the parent branch. However, the Mortgage Register maintained by
the parent branch shall continue to be held at the parent branch itself and
photocopies duly authenticated, of the necessary pages would be sent to ARM
Branches for records.
3. The ARM Branch after receiving files, documents and deeds shall take further steps
in the account as per the policy of the Bank under the general supervision of Regional
Office concerned. The ARM Branch shall take further steps from the stage at where
the file has been received by it.
4. The ARM Branch will report development in the NPA accounts to the Regional Office
and Head Office on regular basis.
5. All further follow up regarding so transferred accounts including action under
SARFAESI Act, sale of securities, negotiation for settlement, litigation at various
forum, execution / compliance of Tribunal /court orders, release of securities on
adjustment of account, withdrawal of suit / litigation, issuance of no dues or other
related actions will be done by the ARM Branch in consultation with the Regional
Office concerned or Head Office as the case may be in accordance with the policy of
the Bank.
6. All the accounting related transactions shall be carried out at the ARM Branches.
However, in case of cheque/ cash transactions including cash recoveries, the same
may be done through designated branch for operational convenience. The Regional
Office concerned shall designate nearby branch of the Region for this purpose.
7. All the establishment expenses including salary, conveyance, rent, taxes, electricity,
telephone and other misc. expenses shall be accounted for at and borne by the
148
the decision to waive legal action has been taken in such cases.
ATTACHMENT
COURT
OF
ASSETS
OF
BORROWERS/GUARANTORS
THROUGH
4.1
4.2
GARNISHEE ORDER
The bank may obtain Garnishee Order from the court of Competent Jurisdiction
against our borrowers if it is known that the said borrower is maintaining an account
with some other bank having credit balance in it. Such a step would ensure the
reduction of the dues of our bank to the extent of garnishee amount.
5.
6.
7.
CRIMINAL ACTION
If the obligants defraud/cheat the bank in any business transaction, an FIR be lodged
filed in the concerned Police Station to initiate criminal action besides filing civil suit.
In case the criminal action lies on account of unauthorized/unlawful sale of
security(ies) movable or immovable, the concerned branch/Regional Office shall
move fast in the matter and initiate criminal action without any delay so as to exert
pressure on the obligants.
8.
10.
11.
SALE OF DECREE(S)
The option of selling the decrees was examined and the Board of Directors vide B.R
No. F-1 dated 17.1.2000 permitted the Bank to sell the decree(s) provided the Bank
fetches full value/consideration of its dues against the defaulting borrowers.
However, in case the Bank does not get full consideration, the decree can be sold
through tripartite agreement i.e. amongst the Bank, borrower/guarantor and the
purchaser of decree. The Board further directed that the Bank may even sell the
decree(s) at a concession to realise its dues. However, no such instance of sale of
decree has been reported so far by the Branches/ Regions.
of the competent court. Decision in this regard, may be taken by the Regional Head.
Bank will continue with the recovery process till the adjustment of the account.
ii)
Length of practice and specialization in the area of law beneficial to the bank &
experience in conducting Banks cases.
iii)
Empanelled with other banks/ FIs/ PSUs / Central/state Governments etc. The
advocate shall not have been black listed /removed from panel by any other such
organizations & a declaration to this effect be obtained from the Advocate at the time
of empanelment.
iv)
v)
If the advocate is also empanelled by other bank/ PSU/ FI then opinion of that bank /
PSU/ FI may be obtained.
vi)
vii)
Advocates shall be willing to abide by the Banks terms and conditions as to fees,
152
charges, submission of pleadings for approval etc. and consent to this effect shall be
obtained before empanelment.
13.3
WHILE
Every Regional Office shall have senior panel and junior panel of advocates:
JUNIOR PANEL
The junior level advocate shall be empanelled for Civil Courts / Title Search /
Securitisation Act / Consumer Forum/ Central Government Industrial Tribunal /
Complaint under Sec. 138 of Negotiable Instruments Act (if amount involved is less
than ` 10 lac) etc.
The junior panel of advocate shall consist of advocates from amongst the energetic
and promising members of the bar preferably with excellent academic background as
well.
The advocate to be empanelled under this category shall have a minimum 5 years of
standing practice at the Bar or is ex banker having length of service or retired
executive of reputed PSU having experience as enumerated hereunder and shall
have attended different types of matters before the Courts / Forums / Tribunals. The
advocate shall have expertise in most of the following fields:
153
SENIOR PANEL
The senior level advocate shall be empanelled for High Court / State Commission /
DRT / DRAT / National Commission / Supreme Court / Criminal Complaint including
complaint under Section 138 of Negotiable Instruments Act (if amount involved is ` 10
lac & above) etc.
The senior panel advocates shall have very high eminence, reputation and standing
at the bar and not necessarily having the designation of senior advocate granted by
the court.
The advocates to be empanelled under this category shall have a minimum 10 years
of standing practice at the Bar or is ex banker having length of service or retired
executive of reputed PSU having experience as enumerated hereunder and shall
have attended different types of matters before the Courts/Forums/Tribunals. The
advocate shall have expertise in most of the following fields:
With a view to broaden the panel of advocates, firms and knowledgeable &
experienced ex-professionals in Banking and Personnel matters may be brought on
the panel of the advocates. The empanelment guidelines for such law firms and exBankers etc. are given hereunder:
1. Empanelment of firms of lawyers on the panel of advocates
Many good lawyers are forming law firms to have vide presence and expertise,
therefore, the provisions for empanelment of the firms of the advocates has been laid
down.
To empanel a law firm on the panel of the advocates following criterion should be
meet out :
A. The senior most partner of the firm shall have the minimum experience as
154
The following executives are authorized to relax the Bar experience of the
advocate(s) for their empanelment:Dy. General Manager
General Manager
(Rec. & Law)
(Rec. & Law)
Junior Level Panel
One Year
Two Years
Senior Level Panel
Two Year
Five Years
13.6 REVIEW OF ADVOCATES:
Every year the performance of the advocates on panel shall be reviewed and nonperforming advocates shall be removed from the panel on the basis of the parameters
like pace of disposal of cases, promptness with which Banks matters are attended to,
interest taken on recovery of Banks dues, adherence to Banks schedule of legal fees /
conditions of empanelment and nature of court orders obtained etc. The review shall be
done by the Committee as stated under the caption Selection Process and the review
note along with the action taken report shall be sent to Law Department at Head Office
annually in the 1st week of April of the year of review.
13.7
DEPANELMENT OF ADVOCATES
The matters of counsels whose legal investigation of title and search report proved
false or became a question raising doubts about the correctness of the opinion , be
gone through and such counsel shall not be entrusted with any more work of
156
investigation of title and providing search report. Further, besides depanelling of such
counsels, if found guilty of misconduct/wrong reporting, action shall be taken against
them by filing complaint before the respective bar council if strong documentary
evidence against the advocate is available with the Bank. However, if RO / HO is
satisfied that any advocate is guilty of misconduct / wrong reporting etc., he / she shall
be removed from the panel at once. Court cases / DRT matters dealt by him / her, as
far as practicable be re-allotted to other panel advocates.
Misconduct on the part of the Advocate shall mean and include any of the following:1. Handing over the brief to another advocate without prior written permission of the
bank or refusal of any legal assignment made by the Bank without any cogent reason.
2. Failing to attend the hearing of the case without sufficient reason.
3. Notwithstanding that the advocates fees has been paid or not:
4. Not acting as per banks instructions or going against specific instructions.
5. Not returning the brief when demanded or not allowing or evading to allow its
inspection on demand.
6. Misappropriation of banks money in the hands of the Advocates or earmarking the
same towards his fees without consent of the Bank.
7. Threatening, intimidating or abusing any of the Banks employees, officers, directors
or representatives.
8. Advocate himself appearing against bank or making any of his chamber mates,
associates or juniors to appear on behalf of any of the defendants in Banks
suit/petition without seeking written consent from the bank.
9. Giving of improper legal advice or wrong title opinion.
10. Committing an act tantamounting to contempt of court.
11. Conviction of the Advocate in any offense resulting into punishment of arrest or
detention or debarring by the Bar Council upon a complaint filed by his clients without
limiting to bank.
12. Giving false information in the application for empanelment.
13. Passing on information relating to Banks case on to adversaries or their advocate
which may cause damage to the banks interests and
14. Giving false or misleading information to the bank relating to the proceedings of the
case.
15. Any other professional misconduct.
13.7.1 Further Bank may seek explanation from advocates who wrongly certify as to clear
legal titles in respect of assets or valuers who overstate the security value, by
157
Particulars
1.
` 6,000/-
` 5,000/-
2.
` 1.00 lakhs to `
2.00 lakhs
3.
` 2.00 lakhs to `
10.00 lakhs
4.
` 6,000/- + 3% on the
amount exceeding ` 1.00
lakhs
(Maximum ` 6000/- + `
3000/- = ` 9,000/-)
As above
Plus 1% on the amount
exceeding ` 2 lakhs
(Maximum ` 6,000/- + `
3,000/- + ` 8000/- = `
17000/` 17000/- for the 1st ` 10
lakhs and ` 500/- for every
additional ` 1 lakhs or part
thereof.
(Subject to maximum `
40,000/-)
` 5,000/- + 3% on the
amount
exceeding
`
1.lakhs
` 5,000/- + ` 3000/- = `
8000/As above
+1% on the amount
exceeding ` 2 lakhs
(Maximum ` 5,000/- + `
3000/- + ` 8000/- = `
16,000/-)
` 16,000/- for the 1st ` 10
lakhs and ` 500/- for every
additional ` 1 lakhs or part
thereof.
(Subject to maximum `
35,000/-)
Other Cities
` 4,000/- + 10%
clerkage
` 2,500/- + 10%
clerkage
Note
No separate fee shall be payable to the advocate for obtaining interim orders /
orders on interlocutory applications or for defending interlocutory applications
moved by the defendants/ third parties during the course of the Suit / OA filed by
the bank.
To contest application of defendants to set aside ex-parte final order, the fee shall
be 10% of the total fee payable in the matter, calculated, as above. If the exparte
final order is set aside and trial is recommenced, the advocate shall be paid only
the balance amount payable i.e. remaining 50% of the total fee payable, as
above.
In the event of Suit / OA being dismissed on default or for whatever reason not
being on merits, no fee shall be payable for the restoration of the same to the
advocate who was contesting the case at the time of dismissal.
Compromise decree shall not be treated as decree on merits and the fee payable
shall be only 50% of the total fee payable. However, if the account is fully
adjusted at the final stage of the case i.e. at the stage of oral evidence or final
arguments, the advocate shall be entitled to the full fees.
If the account is adjusted / withdrawn, advocate fee shall be paid as per the stage
of the case and no further fee is payable.
14.1.V.EXECUTION APPLICATION
The existing rate of professional fee shall continue for pursuing execution application
without any change. The fee for execution of decree / recovery certificate in DRTs
shall be 50% of the fee payable on the original side, payable in the following manner:1.
2.
Other Cities
If there are more than one intervener application, the total fee besides 10% clerkage
payable for contesting all the intervenor applications shall be ` 8,500/- in major cities
and ` 7,000/- in other cities.
BEFORE PO, DRT/DRAT & HIGH COURT
Major Cities
Other Cities
If there are more than one intervener application, the total fee payable for contesting
all the intervenor applications shall be fixed at ` 12,000/- + 10% clerkage in major
cities and ` 10,000/- +10% clerkage in other cities.
14.1.VII. FOR OBTAINING RC FROM DRT ON THE BASIS OF CIVIL COURT
DECREE
Major Cities
` 5000/-+ 10%
clerkage
Other Cities
` 4000/-+ 10%
clerkage
161
The legal fee payable shall be same as the fee payable on the original side for filing
original Suit / OA as per existing policy. However, if the same advocate is contesting
original suit as well as appeal, 80% of the total fee will be given to the advocate.
Wherever there are cross appeals, multiple appeals etc. against the same final
orders, only single professional fee shall be payable to the advocate.
2.
3.
Same labour & time is involved as in contesting the original suit / OA except recording
of evidence. As such, 50% of the fee payable on the original side for filing original
Suit / OA shall be payable.
14.1.IX. REVIEW APPLICATION BEFORE THE DRTS / DRATS & DISTRICT
COURTS/ HIGH COURTS
As a lot of additional labour & energy of advocate is employed in getting an order of
the court reviewed, no advocate takes proper interest in filing & contesting the review
application without any fee. As such, ` 1,000/- in Civil / District Courts & ` 1,500/- only
in High Courts & DRTs/ DRATs as professional fee shall be payable for filing and
contesting an application for review of the order passed by the same Court.
14.1.X.WRIT PETITION/ APPLICATION U/SEC 482 Cr PC BEFORE HIGH COURT
For drafting, filing and contesting Writ Petition by the Bank / against the Bank before
High Courts, the maximum consolidated fee shall be payable as under keeping in
162
Other Cities
`10,000/- + 10% clerkage
14.1.XI. Bail Matters where legal and financial support is provided to the staff
as per Banks policy
For filing bail petition before For filing bail petition
District Courts
before High Courts
` 10,000.00
` 15,000.00
EXPLANATORY NOTE
1.
Fee is to be paid in two equal installments. One at the time of filing of W.P./
Counter affidavit by the advocate and the balance after disposal of the case and
on submission of certified copy of the final order. The Regional Heads to negotiate
the fee with the advocate on case to case basis and try to fix the same at
minimum level.
2.
If the writ is not admitted, then only one installment of fee shall be payable.
3.
4.
For any interim application / petition filed by the Bank, an additional fee upto `
3,000/- can be considered depending upon the nature, complexity, urgency etc. of
the application/ petition and the nature of reliefs sought with the prior approval of
Regional Head.
5.
6.
Where writs are of general nature without involving complicated facts and legal
issues, the advocates fee in such cases shall have to be negotiated and fixed at
reasonable amount, making efforts to fix the same at less than the amount
prescribed above.
7.
In group writ petitions, the fee has to be negotiated and fixed by the Regional
Head. However, if the fee exceeds the Regional Heads powers, the same shall
be sent to concerned department of Head Office for prior approval.
163
164
High Court
` 2,000/-(inclusive of clerkage)
Supreme Court
` 3000/-(inclusive of clerkage)
Major Cities
Other Cities
The above payment shall be made in two equal installments i.e. one at the time of
filing appeal / reply as the case may be and the balance after final disposal. In case
appeal is against existing DRT case, then the same advocate who is already handling
the case in DRT shall be engaged.
Major Cities
Other Cities
` 6,000/- to ` 10,000/- ` 5,000/- to ` 8,000/per property
per property
The fee shall be fixed in the above range depending upon the amount involved, value
of the property etc. The Regional Heads to negotiate the fee with the advocate on
case to case basis and try to fix the same at minimum level.
The fee shall be payable in two equal installments i.e. first at the time of filing of
application and next at the time of obtaining physical possession by the bank /
settlement of the account after obtaining order for physical possession. In case the
matter is settled before granting of order by CMM/DM, only 50% of the total fee will be
given to advocate.
165
The decision regarding engagement of counsel for filing application before CMM/DM
shall be taken by the concerned Regional Head only in those cases where
possession of secured assets is resisted by the Borrower / guarantor/mortgagor.
Other Cities
Up to ` 10 lakhs
10 lakhs to 50 lakhs
50 lakhs to 1 Crore
Above ` 1 Crore
`
`
`
`
6000/9000/12,000/15,000/-
166
`
`
`
`
5500/8000/11000/13000/-
In matters wherein complicated factual and legal issues are involved, the
Regional Head can engage competent advocates not on panel by fixing legal
fee up to ` 20,000/- at major cities and ` 15,000/- at the other places after
recording reasons thereof under intimation to Head Office. The Regional
Heads to negotiate the fee with the advocate on case to case basis and try to
fix the same at minimum level.
3.
Other Cities
` 2,000/-
14.1.XX.
FEE FOR CONSUMER FORUMS & COMMISSIONS BY BANK/
AGAINST BANK
Major Cities
Other Cities
Consolidated amount of ` Consolidated amount of `
5,000/- + 10% clerkage
4,000/- + 10% clerkage
State Commission
` 7,500/- consolidated + 10% clerkage in major as well as
other cities
National Commission ` 15,000/- consolidated + 10% clerkage shall be payable.
District Forum
EXPLANATORY NOTE
The above fee shall be payable in two installments i.e. 50% at the time of filing the
complaint/appeal/ Revision/ Written Statement and balance 50% after final orders and
submission of certified copy of the final orders to bank. When the matter is settled
between the parties and case is disposed of as settled, withdrawn or dismissed out of
Forum / Commission, only 50% of schedule fee shall be payable.
The General Manager (R&L) shall have power to negotiate and decide on the
quantum of fee in matters involving vexed and complicated issues, which are filed
before National Commission.
14.1.XXI. PREMISES MATTERS
The suits related to premises matters are related to prestige of the bank as such fee
may be revised so that the bank may get its case defended through a panel advocate
of good standing.
Major Cities
` 10,000/- to ` 20,000/-+10% clerkage
Other Cities
` 7,000/- to ` 15000/- + 10% clerkage
The above fee shall be payable in two instalments i.e. 50% at the time of filing the
pleading / Written Statement and balance 50% after final orders and submission of
certified copy of the final orders to bank. The Regional Heads to negotiate the fee with
the advocate on case to case basis and try to fix the same at minimum level
167
depending upon the complexity of matter, valuation of the case, court in which suit is
to be filed etc.
14.1.XXII.
There are instances, where the bank has to change the advocate and get the files of
the Suit/OA/Appeal transferred from the advocate to whom the original assignment
was given, to other advocate. In such circumstances, the legal fee to be paid to new
advocate, shall be determined as per stage of the case. However, the total fee paid
to both the advocates for a particular case should not exceed the total fee payable as
per schedule. However, if the case is decided exparte (or) compromised after the
transfer of case to the new advocate, he may be paid 50% of the balance fee, subject
to the minimum of 25% of the total sanctioned fee, as earlier.
DRAFTING
OF
PLAINTS/
OA
IN
SPECIAL
Sometime the plaint / OA has been drafted by the advocate after perusing all the
documents and by exhausting his labour and time but the Bank does not file suit / OA
because of several reasons like the borrower gives some settlement proposition /
adjust the account, in such circumstances, the professional fee without clerkage for
drafting the plaint/OA, which are not filed subsequently shall be paid @ 15% of the
total fee payable on the suit/OA without clerkage.
In the event of the suit in the account filed at later stage, the fee as above paid shall
be deducted from the regular fee to be paid at the time of suit filing.
14.1.XXV.
Professional fee
(inclusive of clerkage)
Upto ` 1 lakh
` 550/- consolidated.
Above ` 1 lakh & upto ` 5 lakhs
` 750/- consolidated.
Above ` 5 lakhs & upto ` 10 lakhs
` 900/- consolidated.
Above ` 10 lakhs & upto ` 50 lakhs
` 1200/- consolidated.
Above ` 50 lakhs
` 1500/- consolidated.
Actual expenses of typing and postage supported by receipts/bills shall be extra.
168
Major Cities
Other Cities
Urban & Semi
Rural
Urban
Upto ` 1 ` 2000/- per `
1000/per ` 500/- per property.
crore
property
property
Above ` 1 ` 3000/- per `
2000/per ` 1000/- per property
Crore
property
property
It will be settled at the minimum level by the branch incharge keeping in view the
complexities that exist in title documents. Beside the said professional fee, actual
expenses like search fee paid, typing charges etc. supported by receipts/ bills,
depending upon the amount involved will also be paid to the concerned advocate.
However, no conveyance expenses are allowed
Further, the fee for NEC in staff loan will remain same as earlier i.e ` 500/- in case the
amount involved is upto ` 5 lakhs & ` 1000/- in case the amount involved is above ` 5
lakhs besides the actual expenses incurred.
169
14.2
Deviation allowed
Dy.
General 50% of prescribed fee as per the fee schedule to all the
Manager
Regions headed by the Dy. General Managers as well as
Dy. General Manager at HO
General
100% of prescribed fee as per the fee schedule to all the
Manager
Regions headed by the General Managers as well as
General Manager at HO
ED
The Executive Directors will have power to sanction
advocate fee upto ` 5.00 lacs in the cases involving
important, complicated and vexed issues and high stake
CMD
The Chairman & Managing Director is empowered to
sanction advocate fee above ` 5.00 lacs in the cases
involving important, complicated and vexed issues and high
stake.
Note
The miscellaneous expenses for filing of Suit / OA and execution of decree / recovery
certificate shall be on actual basis on the strength of original bills submitted. The
branch shall approve miscellaneous expenses in each suit filed/ decreed account
upto an amount of ` 1,000/- per bill.
The amount in excess of it shall be got approved from the Regional Head by
submitting original bills / proof in support of the expenses. The branch shall maintain
proper records of the payment of miscellaneous expenses both within the Branch
power and Regional Office power and a statement to this effect shall be sent to R/O
yearly at the close of the financial year. The record so maintained shall be subject to
inspection during the visits of RO/HO officials.
Further we emphasize once more the need to ensure the following :1. Banks Counsels be advised to ensure to invariably file the bill of cost well in time so as
to ensure that the entire expenditure to the extent permissible under law is also included
in the decree eventually passed in favour of the Bank.
2. The performance of counsels of the Bank shall be reviewed annually and work shall be
assigned to the advocates on the basis of his/her performance subject to the maximum
number of cases that can be allotted to an advocate as per Banks norms as per Policy
approved by Board vide Item No.F-9 in the meeting held on 28.12.2002. The Regional
Offices/Branches are advised to ensure that the policy approved by the Board and
170
circulated vide our Circular No. HO/REC & LAW/22/200203/375 dated 07.01.2003 is
implemented in letter & spirit. (This circular has been amended by Board vide B.R. No.10
dated 03.11.2010, circulated vide Circular No. R&L/09/2010-11/548 dated 12.11.2010).
3. In shall be ensured that no adjournments are sought by the banks advocates except in
exceptional circumstances. However, the adjournments sought by the defendants shall
be opposed very strongly and if the court is inclined to grant it, heavy cost shall be
insisted upon.
4. It shall further be ensured that no long dates are fixed by Courts/Tribunals and if, sought
to be fixed, it should be vehemently opposed and detailed report along with reasons
explaining the fixation of long dates should be kept on record.
5. The Banks counsels shall send a detailed report of the proceedings immediately on
conclusion of proceedings preferably on e mail and invariably in hard copies to both the
Branch and the Regional Office/Head Office thereafter.
6. The bills of miscellaneous expenses above ` 1000/- submitted by the advocates on
account of typing, Photostat etc. are to be passed by the Regional Office and in this
context, such bills must be verified by the officer of the Branch/ARM Branch attending the
concerned case.
7. All miscellaneous Legal expenses shall be paid by appropriate authority on submission of
bills, receipts, cash memos duly verified by the officer attending the court proceedings.
The proper record shall be maintained of all legal expenditure incurred for each case.
The details of expenses approved by Branches shall be intimated to the respective
Regional Offices, for their records.
8. Where ever specific fixed legal fees is prescribed in the schedule, the payment of the
same shall be within the powers of the Branches & branches shall pay the same strictly
in accordance with the Fee Schedule and shall not forward the bills for approval to Head
Office/Regional Office. But the details of fee paid to the counsels shall be informed to the
respective Regional Office for their records. However where the schedule prescribes
discretion for fixing fee to the Regional Heads, branches shall submit the same to the
respective Regional Office, for fixing of fee by competent authority.
9. The payment of court fee actually paid at the time of filing of plaint/ OA/ Appeal on behalf
of bank shall be within the power of branch & branches shall pay the same strictly in
accordance with the Court Fee Schedule applicable in the state / as prescribed in the
Rules under RDDBFI Act and shall not forward the same for approval to Head
Office/Regional Office. But the details of court fee paid shall be informed to the
concerned Regional Office.
14.3
Since the professional fee in the present circular is categorized on the basis of Major
Cities and other Cities, the fee of Part-time Legal Retainer may also be based on the
same category instead of earlier categorization of Regional Office located in Metro
Cities and other Cities.
For Regional offices located in Major Cities viz. Delhi, New Delhi,
Mumbai(North), Mumbai(South), Chennai, Kolkata, Hyderabad, Ahmedabad &
Bangalore ` 10,000/-.
The legal fee payable to the legal advisors at Head Office will be ` 10,000.00 per
month.
The other policies in respect of Legal Retainers at Head Office as well as at Regional
Offices will remain same as approved by our Board of Directors, vide BR No F-3
dated 27-9-03 as under:-
14.3.1
The tenure of part time Legal Advisors/Legal Retainers shall be fixed as 1 year,
and this can be extended by the appointing authority, on yearly basis subject to
the maximum of 5 years at a stretch. Though the period of the Retainership
contract shall be for one year, at any time if their performance is found
unsatisfactory or not up to the mark, they shall be removed from retainership
with one month notice OR by paying one month retainership fee in lieu of notice
period and the power of removing the legal retainer shall be vested with General
Manager (Rec & Law).
In Regional Offices, the legal retainers who have completed a full tenure of five
years, can be re-appointed/ contracted as Legal Retainer, afresh, after a cool-in
period of two years.
For any deviation from this policy, the Chairman and Managing Director shall be
empowered to take such decision.
The powers for appointing the Legal Advisors/Retainers shall continue to be the
same as per the existing policy, i.e. in case of Legal Retainers for Regional
Offices, Dy. General Manager (Rec & Law) at Head Office, and in respect of
Legal Advisors at Head Office, General Manager (Rec & Law) at Head Office.
To render legal advice and legal opinion on all legal matters referred to him.
172
To render legal opinion on all miscellaneous matters as well as on the claims to the
accounts of the deceased depositors for releasing payment / allowing operation of
lockers to the heirs and legal representatives of the deceased.
To assist the authorized officers under SARFAESI Act by rendering legal opinion/
legal guidance, at all stages of the disposal of secured assets.
mentioned terms
Standing counsel will not be paid any fee monthly or otherwise for acting as
such.
The Registry of the concerned High Court will be informed about nomination. If
the High Court has any format for the purpose, the particulars will be given as
per that format and if required, the counsel selected will sign the same. In the
absence of any procedure, the nominated counsel will be given a letter of
confirmation to enable him to take up the matter with High Court Registry.
The standing counsel will receive the petition/summons from the concerned
High Court and inform Regional office to which the matter relates about the
receipt of the petition/summons alongwith details thereof.
The standing counsel will only receive the reference, petition/notices and seek
instructions, unless the matter is so urgent in which case, nominated
counsel/standing counsel will make first appearance in the matter and observe
the proceedings and outcome of the developments be informed to the
concerned Regional Office at once.
In such urgent matters, after first appearance, if matters are admitted for
further hearing, the concerned Regional Office will decide the name of the
counsel from Banks panel who has to be engaged for conducting the case on
behalf of bank. If bank decides to engage standing counsel as counsel to
contest the case, standing counsel will be paid only the fees as per schedule
and will not be paid separate fee for his first appearance.
Standing counsel will be paid actual amount of out of pocket expenses incurred
in respect of delivery of petition/notice of motion etc. received and also for
photocopy of papers etc. if made.
174
ANNEXURE A-1
REVISED MODEL LEGAL OPINION
The Manager,
Oriental Bank of Commerce,
_______________ Branch
_____________________.
Dear Sir,
Reg : Title Opinion on the property situated at ____________________
With reference to your letter No.____________ dated___________, I, on the basis of
the copies of title deeds forwarded to me pertaining to the said immovable property
and the other information submitted by you, have conducted a detailed search and
investigation and submit my report as under :
1.
2.
Location
Boundaries
No.
(in
sq.yds./
sq.mtrs/
sq.ft.
acres/ hectares)
North
East
South
West
175
unsound,
176
Annexure
A-2
attached
177
178
179
180
CERTIFICATE
I hereby certify that I have personally visited the Office of Registrar / Sub-Registrar /
Revenue Authorities and also search the records of Central Registry created under
Section 20 of the SARFAESI Act, 2002 and personally searched and verified the
information furnished in this report. I have compared the Sale Deed dated ________
given to me with the copy of it available in the Office of Sub-Registrar and have found
that both are tallying with each other. I also certify that the title deeds in respect of
the captioned properties are genuine, original and properly executed. The statement
and other information given in the report are correct and true. I certify that Mr. / Ms. /
M/s._________________________ have got a valid, clear, absolute and marketable
title
over
the
property
shown
above.
If
Mr.
Ms.
181
ANNEXURE A-2
Chain of Title Deed
Registered / Vendor / Vendee / Date Nature
Unregistered Transferor Transferee
(Original/Copy)
No.
Sale Deed/ Lease
Deed / GPA / SPA
/ Will /
Relinquishment
Deed
Sr.
Area / Floor
alongwith
site plan &
Boundaries
182
CHAPTER - 8
REHABILITATION OF SICK UNITS
1.
With a view to rehabilitate the Sick Industrial Units financed by the Bank, Industrial
Rehabilitation Department (formerly SIUC) has been created and is functioning within
Recovery & Law Department at Head Office under the overall charge of General
Manager (R&L). Similar Cells have also been set up at Regional Offices with a view
to timely identify & rehabilitate all categories of Sick Industrial units falling under their
purview. These Cells at Regional Offices are revitalized from time to time by sending
detailed guidelines and deputing officials from Head Office. In the industrial borrowal
accounts where the symptoms of sickness are noticed, immediate remedial steps are
taken by the IRD functioning within the Recovery Department for bringing the units
back to health. Sick Industrial Units are basically classified into following three
categories :-
2.
Sick non-SSI units where reference has been filed with the Board for Industrial &
Financial Reconstruction (BIFR) under Sick Industrial Companies (Special
Provision) Act, 1985.
3.
3.1.
3.2.
3.3.
'Schedule Industry' means any of the industries specified for the time being
in Schedule-1 to the Industries (Development and Regulation) Act, 1951.
183
'Factory' means any premises, including precincts thereof, if any part of which
a manufacturing process is being carried on or ordinarily so carried on:-
With the aid of power provided that fifty or more workers are working or were working
there on any day of preceding twelve months.
Without the aid of power, provided that one hundred or more workers are working or
were working there on any day of preceding twelve months and provided further that in
no part of such premises any manufacturing process is being carried on with the aid of
power.
4. SICK/WE AK NON-SSI, NON-BIFR UNITS
If the accumulated losses of an industrial company as at the end of any financial year
have resulted in erosion of fifty percent or more of its peak net worth during the
immediately preceding four financial years the company is termed as potentially sick
industrial company or weak industrial unit.
The above definition of weak unit will also apply to all forms of organizations including
limited companies, partnership firms and proprietory concerns. It will include other units
not covered by the definition of sick/weak units given in the SICA, 1985.
5. SICK SSIUNITS
A unit is considered Sick if
a) any of the borrowal accounts of the unit remains substandard for more than six months
i.e. principal or interest, in respect of any of its borrowal accounts has remained overdue
for a period exceeding one year. The requirement of overdue period exceeding one year
will remain unchanged even if the present period for classification of an account as substandard, is reduced in due course;
or
b) there is erosion in the net worth due to accumulated cash losses to the extent of 50
per cent of its net worth during the previous accounting year;
and
c) the unit has been in commercial production for at least two years.
6. SANCTIOING OF REHABILITATION PACKAGE OF SICK INDUSTRIAL UNITS
Whenever, an industrial unit, whether a SSI unit or Medium and Large industrial
undertaking, is identified as Sick or Potentially Sick/Weak as per definition given in the
foregoing paras, the branches are required to report the matter immediately to
Regional/Head Office depending upon the level of sanction. In case the borrowal account
has been granted credit facility under Branch Managers discretionary powers, the
account should be reported to the concerned Regional Office only. In all such cases
where the credit facilities are granted under either Branch Managers powers or Regional
Office powers, all matters concerning conducting of viability study and preparation of
184
rehabilitation package etc. are to be dealt with at Regional Office. However, in accounts
where the facilities have been granted under Head Office powers the matter is required
to be reported to concerned sanctioning authority for taking timely remedial measures.
7. VIABILITY STUDY
After identifying the unit as sick, the bank is to take a vital decision regarding the
rehabilitation thereof i.e. restoring the sick unit to health by giving additional funds and
concessions and other reliefs, if so needed.
Since a sick unit is basically a unit which fails to generate internal surplus on a continuing
basis and depends for its survival on frequent infusion of external funds, as such the
basic objective of formulation of any rehabilitation package is to restore the units
capacity to generate internal surplus to meet out the various liabilities and to reduce the
irregularities in the various accounts. However, before taking up the rehabilitation
exercise, it is to be clearly understood that there should not be any error in decision
making on the part of the bank or on the part of the borrower as these errors, if not
looked into, will ultimately force the unit to come to a stand still and funds of the various
institutions will be further blocked at an increased level. Therefore, all the decisions are to
be well calculated and supported by sound logic.
Further, as any sick unit has a considerable debt burden, the breakeven-point always go
up in these units and the circumstances thus require that the unit should work at a higher
level to enable it to generate the surplus and thus a proper technical and economic
feasibility-study is to be undertaken to assess the units capability to produce that much
of production and the markets capability to absorb the enhanced level of production of
the unit. Moreover, in the cases wherever managerial deficiencies were found to be one
of the reasons for turning the healthy unit into sick industrial unit, it is to be ensured that
either the management of the unit is changed or capable managerial personnel are
recruited or inducted into the Company for its smooth functioning. Further, the Govt.
policies in regard to the nature of the produce of the unit vis--vis the market trends are
also considered before initiation of process of rehabilitation package.
8.
VIABILITY CRITERIA
RBI guidelines: Banks may decide on the acceptable viability benchmark, consistent
with the unit becoming viable in 7 years and the repayment period for restructured debt
not exceeding 10 years.
The matter of restructuring of SME segment is being dealt by the Rural Development
and priority sector department and they have issued detailed guidelines vide circular No.
HO:RD&PS:68:2011-12:775 dated 31.01.2012.
9. REHABILITATION OF SICK INDUSTRI AL UNITS BIFR CASES
In order to tackle the problem of sickness in the medium & large industries, the Central
Govt. had enacted Sick Industrial Companies (Special Provision) Act 1985 and set up the
Board for Industrial & Financial Reconstruction (BIFR). All the cases, irrespective of the
sanctioning authority, wherein a reference has been filed with BIFR by any company are
dealt with at Industrial Rehabilitation Department (IRD) where the cases are centralized/
monitored. The Branches/Regional Offices are required to correspond with said
185
Department for any guidance in the matter. In no case, the Branch/R.O. are
supposed/allowed to correspond in regard to BIFR cases with BIFR/AAIFR (Appellate
Authority for Industrial & Financial Reconstruction) as well as the RBI. The Branch/R.O.
are also required to comply with the instructions of the Industrial Rehabilitation
Department meticulously as non-implementation of BIFR schemes as well as
BIFR/AAIFR direction may attract penal provision.
The BIFR/AAIFR hearings are attended invariably by Senior Officials of IRD and banks
view point is placed before the Bench by them.
In such accounts rehabilitation packages are sanctioned at the Head Office level
irrespective of discretionary powers under which the cases fall. In these accounts, the
Operating Agencies (OA) are constituted by the BIFR for conducting techno-economic
viability study of the unit and formulation of Draft Rehabilitation Scheme (DRS) which are
placed before the competent authority of the Bank for seeking necessary approval and
implementation of rehabilitation packages. It is pertinent to mention that competent
authorities are also being informed about the status of each account from time to time for
taking policy decision as per the report of the Operating Agency before any concurrence
or consent is given in the joint meeting, consortium meeting or BIFR hearing.
10.
Once a Company is registered with BIFR, no legal action can be initiated against the
Company. In case the legal action/civil suit has already been initiated/filed, the legal
proceedings remain suspended during the period the company remains within the
purview of BIFR/AAIFR. However, legal action/proceedings can be initiated/continued
after obtaining specific permission from BIFR/AAIFR in the desired cases or once the
cases are out of the BIFR purview.
The Sick Industrial Companies, which are found non-viable whose reference the BIFR is
rejected by the bank/BIFR, legal action/proceedings are initiated against the obligants for
recovery of dues.
11.
ROLE OF BIFR
It is observed that the existing institutional arrangement and procedures for revival &
rehabilitation of potentially viable sick industrial units through BIFR as per provision of
SICA 1985 are both inadequate and time consuming. A large number of companies are
indulging in unfair practices and are causing sickness on account of factors other than
the circumstances beyond their control to take benefits under SICA, 1985 as the Section
22 of the said Act provides protection to sick industries. The Section 22 provides that no
proceeding for the winding up of the industrial company or for execution, distress against
any of its properties on appointment of a receiver and suit for recovery can be initiated
under the law except with the consent of the BIFR. Such a protection is being misutilized and the BIFR has become a heaven for several companies avoiding payment of
dues to banks and other creditors. In some cases where rehabilitation schemes have
been sanctioned by BIFR, the promoters continue to indulge in unfair practices resulting
in continued losses to the companies and locking up of precious public funds invested by
the Banks/FIs.
186
Thus there is urgent need of effecting appropriate amendment & modifications of the
provision of SICA 1985 including abolition of BIFR to ensure that its objective is not
frustrated by dishonest promoters through unethical practices against public interest by
way of misuse of public funds.
Of late a number of companies have been making reference to BIFR for claiming
sickness with a view to seek reliefs & concessions and/or to avoid legal action as well as
to seek protection under the beneficial provisions of SICA 1985. In order to ensure that
the unscrupulous promoters do not avail benefits under the aforesaid Act, the bank has
been vigorously contesting the references made by such companies before BIFR for
being declared as Sick. While contesting the references filed by company before BIFR,
the malpractices, manipulation and other irregularities committed by companies/
promoters in its financial accounts are brought to the notice of BIFR by written objections
as well as oral submissions during the hearing. We are enumerating below some of the
main features/irregularities which we have practically observed are commonly/generally
adopted
by such unscrupulous companies/promoters in their financial
accounts/statements or Balance Sheet and P&L account items. These are required to be
scrutinized properly so that wilful intentions of unscrupulous companies are thwarted at
the initial stage only.
12.
12.1 The schedules referred to in the Balance Sheet are found missing or the figures differ.
12.2 Previous year figures as per last Audited Financial Accounts differ when printed in
subsequent years Audited Financial Accounts.
12.3 The Notes on Accounts, Directors Report and Auditors report requires
careful
study to find out any hidden/concealed items, otherwise not reported under main
accounts.
12.4 Raising of high cost unsecured loans/inter corporate deposits to reflect
higher losses.
12.5 Promoters own funds /unsecured loans are generally withdrawn out of the company
first.
12.6 Diversion of funds by investments in group companies/ sister concerns and/or in
unrelated activities.
12.7 Raising outside liabilities (Bank Loans/unsecured loans etc.) even when the unit is not
working.
12.8 Increase in Long Term finance without corresponding increase in fixed assets.
12.9 Making huge provision/write off for doubtful debts without having taken diligent
measures/legal action against the defaulters.
12.10 Verification of sales vis--vis sundry debtors and stocks etc.
12.11 Increase in creditors without corresponding increase in purchases/ stocks etc. and
increase in debtors without any rise in sales.
12.12 Maintaining disproportionate inventory as compared to sales.
12.13 Proper scrutiny of debtors list reveals diversion of funds to Group/Sister/Associate
concerns.
12.14 Change in method of charging depreciation without valid reasons against accounting
principles as per Companys law to book higher losses.
187
12.15 Change in method of valuation for the purpose of under valuation of inventory to
reflect higher losses.
12.16 Sale of assets to Group/sister concern/ close associates/family members at the disproportionally low rates.
12.17 Maintaining huge cash balances/cheques in hand particularly of Group/sister concern
without any valid reasons raising doubts about the genuineness of accounts.
13.
13.1 The various items of expenses show disproportionate increase when compared to
production & sales. The sales, consumption of raw material and various items of P&L
account etc. must be compared percentage wise for the last 5 years to ascertain the
cause of heavy losses intentionally reflected in Balance Sheet. An indicative check
list for such comparison is us under :13.1.1 Fuel consumption to production.
13.1.2 Raw material / stores & spares consumption to production.
13.1.3 Power charges to production.
13.1.4 Packing material to sales.
13.1.5 Wastage to raw material consumption/sales.
13.1.6 Other Profit & Loss items (Variable & fixed cost) to unit production cost.
13.2
Scrutiny of cartage / freight expenses & packing charges, as the subject items are
indicative of genuine level of operations.
13.3
Comparison of per unit sale price, purchase price, valuation of closing stock etc. with
earlier years to find out any major variation.
13.4
Wastage of raw material is shown on higher side and its valuation is done on lower
side to show higher losses.
13.5
Factory working in 3 shifts but capacity utilization is shown much lower may be due
to company not accounting entire production/sales.
13.6
Sale of product at lower rate in the guise of inferior/sub-standard quality without any
valid reason to inflate losses to group/sister concern etc.
14
14.1
14.2 There have been instances when the borrowal company have themselves requested
the beneficiary of the Bank Guarantee to invoke the relative guarantee resulting in
crystallization of liability/ increase in fund based exposure. Such cases need to be
brought to the knowledge of higher authorities for suitable action.
188
14.3 Decrease in sundry debtors which are charged to the bank, is not reflected in Bank
account showing that the company is not routing all its transactions through the bank.
14.4
14.5
Inflated cost of plant & machinery to qualify as NON-SSI unit to seek protection under
SICA 1985/BIFR. Companies registered as SSI unit or availing any facility being SSI
must be brought to notice as these are not eligible under SICA 1985
15
189
CHAPTER-9
WILFUL DEFAULTERS
REF: RBI Circular RBI/2014-15/73 DBOD No.CID.BC.3/20.16.003/2014-15
July 1, 2014
1. Introduction
Pursuant to the instructions of the Central Vigilance Commission for collection of information
on wilful defaults of ` 25 lakhs and above by RBI and dissemination to the reporting banks
and FIs, a scheme was framed by RBI with effect from 1st April 1999 under which the banks
and notified All India Financial Institutions were required to submit to RBI the details of the
wilful defaulters. Wilful default broadly covered the following:
a) Deliberate non-payment of the dues despite adequate cash flow and good networth;
b) Siphoning off of funds to the detriment of the defaulting unit;
c) Assets financed either not been purchased or been sold and proceeds have
misutilised;
d) Misrepresentation / falsification of records;
e) Disposal / removal of securities without bank's knowledge;
f) Fraudulent transactions by the borrower.
Accordingly, banks and FIs started reporting all cases of wilful defaults, which occurred or
were detected after 31st March 1999 on a quarterly basis. It covered all non-performing
borrowal accounts with outstandings (funded facilities and such nonfunded facilities which
are converted into funded facilities) aggregating ` 25 lakhs and above identified as wilful
default by a Committee of higher functionaries headed by the Executive Director and
consisting of two GMs/DGMs. Banks/FIs were advised that they should examine all cases of
wilful defaults of ` 1.00 crore and above for filing of suits and also consider criminal action
wherever instances of cheating/fraud by the defaulting borrowers were detected. In case of
consortium/multiple lending, banks and FIs were advised that they report wilful defaults to
other participating/financing banks also. Cases of wilful defaults at overseas branches were
required be reported if such disclosure is permitted under the laws of the host country.
2. Guidelines issued on wilful defaulters
Further, considering the concerns expressed over the persistence of wilful default in the
financial system in the 8th Report of the Parliament's Standing Committee on Finance on
Financial Institutions, the Reserve Bank of India, in consultation with the Government of
India, constituted in May 2001 a Working Group on Wilful Defaulters (WGWD) under the
Chairmanship of Shri S. S. Kohli, the then Chairman of the Indian Banks' Association, for
examining some of the recommendations of the Committee. The Group submitted its report
in November 2001. The recommendations of the WGWD were further examined by an In
House Working Group constituted by the Reserve Bank. Accordingly, the Scheme was
further revised by RBI on May 30, 2002.
The above scheme was in addition to the Scheme of Disclosure of Information on
Defaulting Borrowers of banks and FIs introduced in April 1994, vide RBI Circular
DBOD.No.BC/CIS/47/20.16.002/94 dated 23 April 1994.
190
191
Penal measures
In order to prevent the access to the capital markets by the wilful defaulters, a copy of the list
of wilful defaulters (non-suit filed accounts) and list of wilful defaulters (suitfiled accounts) are
forwarded to SEBI by RBI and Credit Information Bureau (India) Ltd. (CIBIL) respectively.
The following measures should be initiated by the banks and FIs against the wilful defaulters
identified as per the definition indicated at paragraph 2.1 above:
a) No additional facilities should be granted by any bank / FI to the listed wilful defaulters.
In addition, the entrepreneurs / promoters of companies where banks / FIs have
identified siphoning / diversion of funds, misrepresentation, falsification of accounts and
fraudulent transactions should be debarred from institutional finance from the scheduled
commercial banks, Development Financial Institutions, Government owned NBFCs,
investment institutions etc. for floating new ventures for a period of 5 years from the date
the name of the wilful defaulter is published in the list of wilful defaulters by the RBI.
b) The legal process, wherever warranted, against the borrowers / guarantors and
foreclosure of recovery of dues should be initiated expeditiously. The lenders may
initiate criminal proceedings against wilful defaulters, wherever necessary.
c) Wherever possible, the banks and FIs should adopt a proactive approach for a change
of management of the wilfully defaulting borrower unit.
d) A covenant in the loan agreements, with the companies in which the banks / notified FIs
have significant stake, should be incorporated by the banks / FIs to the effect that the
borrowing company should not induct a person who is a promoter or director on the
Board of a company which has been identified as a wilful defaulter as per the definition
at paragraph 2.1 above and that in case, such a person is found to be on the Board of
the borrower company, it would take expeditious and effective steps for removal of the
person from its Board.
It would be imperative on the part of the banks and FIs to put in place a transparent
mechanism for the entire process so that the penal provisions are not misused and the
scope of such discretionary powers are kept to the barest minimum. It should also be
ensured that a solitary or isolated instance is not made the basis for imposing the penal
action.
2.6
Guarantees furnished by group companies (Amended vide RBI Circular RBI/201415/221 DBOD.No.CID. 41/20.16.003/ 2014-15 dated September 9, 2014)
a. While dealing with wilful default of a single borrowing company in a Group, the banks
193
/FIs should consider the track record of the individual company, with reference to its
repayment performance to its lenders. However, in cases where guarantees furnished
by the companies within the Group on behalf of the wilfully defaulting units are not
honoured when invoked by the banks /FIs, such Group companies should also be
reckoned as wilful defaulters.
b. In connection with the guarantors, banks have raised queries regarding inclusion of
names of guarantors who are either individuals (not being directors of the company)
or non-group corporates in the list of wilful defaulters. It is advised that in terms of
Section 128 of the Indian Contract Act, 1872, the liability of the surety is coextensive
with that of the principal debtor unless it is otherwise provided by the contract.
Therefore, when a default is made in making 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. It is
clarified that this would apply only prospectively and not to cases where guarantees
were taken prior to this circular. Banks/FIs may ensure that this position is made
known to all prospective guarantors at the time of accepting guarantees.
2.7
Role of auditors
In case any falsification of accounts on the part of the borrowers is observed by the banks /
FIs, and if it is observed that the auditors were negligent or deficient in conducting the audit,
they should lodge a formal complaint against the auditors of the borrowers with the Institute
of Chartered Accountants of India (ICAI) to enable the ICAI to examine and fix accountability
of the auditors. Pending disciplinary action by ICAI, the complaints may also be forwarded to
the RBI (Department of Banking Supervision, Central Office) and IBA for records. IBA would
circulate the names of the CA firms against whom many complaints have been received
amongst all banks who should consider this aspect before assigning any work to them. RBI
would also share such information with other financial sector regulators/Ministry of Corporate
Affairs (MCA)/Comptroller and Auditor General (CAG).
With a view to monitoring the end-use of funds, if the lenders desire a specific certification
from the borrowers auditors regarding diversion / siphoning of funds by the borrower, the
lender should award a separate mandate to the auditors for the purpose. To facilitate such
certification by the auditors the banks and FIs will also need to ensure that appropriate
covenants in the loan agreements are incorporated to enable award of such a mandate by
the lenders to the borrowers / auditors.
In addition to the above, banks are advised that with a view to ensuring proper end-use of
funds and preventing diversion/siphoning of funds by the borrowers, lenders could consider
engaging their own auditors for such specific certification purpose without relying on
certification given by borrowers auditors. However, this cannot substitute banks basic
minimum own diligence in the matter.
194
2.8
The aspect of diversion of funds by the borrowers should be adequately looked into while
conducting internal audit/ inspection of their offices/ branches and periodical reviews on
cases of wilful defaults should be submitted to the Audit Committee of the bank.
2.9
(a) Banks/FIs should submit the list of suit-filed accounts of wilful defaulters of ` 25 lakh and
above as at end-March, June, September and December every year to a credit
information company which has obtained certificate of registration from RBI in terms of
Section 5 of the Credit Information Companies (Regulation) Act, 2005 and of which it is a
member. Reserve Bank of India has, in exercise of the powers conferred by the Act and
the Rules and Regulations framed thereunder, granted Certificate of Registration to (i)
Experian Credit Information Company of India Private Limited, (ii) Equifax Credit
Information Services Private Limited, (iii) High Mark Credit Information Services Private
Limited and (iv) Credit Information Bureau (India) Limited (CIBIL) to commence/carry on
the business of credit information. Credit Information Companies (CICs) have also been
advised to disseminate the information pertaining to suit filed accounts of Wilful
Defaulters on their respective websites.
(b) Banks/FIs should, however, submit the quarterly list of wilful defaulters where suits have
not been filed only to RBI in the format given in Annex 1.
C)
In order to make the current system of banks/FIs reporting names of suit filed accounts
and non-suit filed accounts of Wilful Defaulters and its availability to the banks by
CICs/RBI as current as possible, banks/FIs are advised to forward data on wilful
defaulters to the CICs/Reserve Bank at the earliest but not later than a month from the
reporting date.
d) After examining the recommendations of the Committee to Recommend Data Format for
Furnishing of Credit Information to Credit Information Companies (Chairman: Shri.
Aditya Puri) it has been decided to implement the following measures with regard to
reporting and dissemination of information on wilful defaulters:
a. Banks/FIs may continue to furnish the data on wilful defaulters (non-suit filed
accounts) of ` 25 lakhs and above for the quarter ending June 30, 2014 and
September 30, 2014 to RBI in the existing format.
b. In terms of Credit Information Companies (Regulation) Act, 2005, banks/ FIs are
advised to furnish the aforementioned data in respect of wilful defaulters (non-suit
filed accounts) of ` 25 lakhs and above for the quarter ending December 31, 2014 to
CICs and not to RBI. Thereafter, banks/FIs may continue to furnish data in respect of
wilful defaulters to CICs on a monthly or a more frequent basis. This would enable
such information to be available to the banks/FIs on a near real time basis.
Explanation
In this connection, it is clarified that banks need not report cases where
(i) outstanding amount falls below ` 25 lakh and
195
(ii) in respect of cases where banks have agreed for a compromise settlement and
the borrower has fully paid the compromised amount.
3.
(ii)
(iii)
The borrower should thereafter be suitably advised about the proposal to classify
him as wilful defaulter along with the reasons therefor. The concerned borrower
should be provided reasonable time (say 15 days) for making representation
against such decision, if he so desires, to a Grievance Redressal Committee
headed by the Chairman and Managing Director and consisting of two other senior
officials.
(iv)
Further, the above Grievance Redressal Committee should also give a hearing to
the borrower if he represents that he has been wrongly classified as wilful
defaulter.
(v)
A final declaration as wilful defaulter should be made after a view is taken by the
Committee on the representation and the borrower should be suitably advised.
Keeping in view the above guidelines of the Apex Bank, the Board has approved vide Item
No. F-2 dated 26.08.2003 the screening committee to identify the cases of wilful default
headed by the Executive Director. The other members of the committee are General
Manager (R&L) General Manager (CREDIT) and Dy. General Manager (R&L).
All the Regional Office(s) must ensure that the recommendations for classification of any
borrowal account as wilful defaulters should be well documented and supported by requisite
evidence. The decision should clearly spell out the reasons for which the borrower has been
declared as wilful defaulter vis--vis RBI guidelines.
(ii)
CONSTITUTION OF GRIEVANCE REDRESSAL COMMITTEE
The Board has further approved setting up of Grievance Redressal Committee headed by
Chairman and Managing Director and includes General Manager (I&C) and General
196
Banks / FIs should closely monitor the end-use of funds and obtain certificates from
borrowers certifying that the funds are utilised for the purpose for which they were obtained.
In case of wrong certification by the borrowers, banks / FIs may consider appropriate legal
proceedings, including criminal action wherever necessary, against the borrowers.
4.3
It is essential to recognise that there is scope even under the existing legislations to initiate
criminal action against wilful defaulters depending upon the facts and circumstances of the
case under the provisions of Sections 403 and 415 of the Indian Penal Code (IPC) 1860.
Banks / FIs are, therefore, advised to seriously and promptly consider initiating criminal
action against wilful defaulters or wrong certification by borrowers, wherever considered
necessary, based on the facts and circumstances of each case under the above provisions
of the IPC to comply with our instructions and the recommendations of JPC.
It should also be ensured that the penal provisions are used effectively and determinedly but
after careful consideration and due caution. Towards this end, banks / FIs are advised to put
in place a transparent mechanism, with the approval of their Board, for initiating criminal
proceedings based on the facts of individual case.
5.
records and ensure that the names of current directors are reported. In addition to reporting
the names of current directors, it is necessary to furnish information about directors who
were associated with the company at the time the account was classified as defaulter, to put
the other banks and financial institutions on guard. Banks and FIs may also ensure the facts
about directors, wherever possible, by cross-checking with Registrar of Companies.
Government Undertakings
In the case of Government undertakings, it should be ensured that the names of directors
are not to be reported. Instead, a legend "Government of -------- undertaking" should be
added.
5.4
Ministry of Corporate Affairs had introduced the concept of a Director Identification Number
(DIN) with the insertion of Sections 266A to 266G of Companies (Amendment) Act, 2006. In
order to ensure that directors are correctly identified and in no case, persons whose names
appear to be similar to the names of directors appearing in the list of wilful defaulters, are
wrongfully denied credit facilities on such grounds, banks/FIs have been advised to include
the Director Identification Number (DIN) as one of the fields in the data submitted by them to
Reserve Bank of India / Credit Information Companies.
It is reiterated that while carrying out the credit appraisal, banks should verify as to whether
the names of any of the directors of the companies appear in the list of defaulters/ wilful
defaulters by way of reference to DIN/PAN etc. Further, in case of any doubt arising on
account of identical names, banks should use independent sources for confirmation of the
identity of directors rather than seeking declaration from the borrowing company.
Encls: Annex-1 to 4
198
ANNEX 1
Format for submission of data on cases of wilful default (non-suit filed accounts) of ` 25 lakh &
above to RBI on quarterly basis:
The banks/FIs are required to submit data of wilful defaulters (non-suit filed accounts) in Compact
Disks(CDs) to RBI on quarterly basis, using the following structure (with the same field names):
Field
1
Field Name
Type
SCTG
Numeric
Wi-dth
1
Description
Remarks
Category
bank/FI
Number
1/2/4/6/8
should be fed
of
1
SBI
and
associate banks
its
2 Nationalised banks
4 Foreign banks
6
Private
Banks
Sector
8
Financial
Institutions
2
BKNM
Character
40
Name
bank/FI
BKBR
Character
30
Branch name
STATE
Character
15
Name of state
Name of state
which
branch
situated
SRNO
Numeric
Serial No.
Serial No.
PRTY
Character
45
Name
Party
REGADDR
Character
96
Registered
address
OSAMT
Numeric
Outstanding
amount in `
lakhs
(Rounded off)
SUIT
Character
Suit filed or
not
10
OTHER_BK
Character
40
Name
other
banks/ FIs
199
of
of
Registered
address
of
in
is
Office
11
DIR1
Character
40
Name
director
of
12
DIN_DIR1
Numeric
13
DIR2
Character
40
14
DIN_DIR2
Numeric
15
DIR3
Character
40
16
DIN_DIR3
Numeric
17
DIR4
18
DIN_DIR4
Director
Identification
Number
of
DIR1
Name
of
director
(c)
Against
the
names of nominee
directors of banks/
FIs/ Central Govt./
State
Govt.,
abbreviation
'Nom'
should be indicated
in the brackets.
(d) Against the name
of
independent
directors,
abbreviation
'Ind'
should be indicated
in the brackets.
(e) In the case of
Directors who held
office at the time the
account
of
the
borrower entity was
classified
as
defaulter, but are no
longer on its Board,
the symbol @ should
be
indicated
in
brackets against their
names.
8
digit
Director
Identification Number
of the Director at
DIR1
As in DIR1
Director
Identification
Number
of
DIR2
Name
of
director
8
digit
Director
Identification Number
of the Director at
DIR2
As in DIR1
Director
Identification
Number
of
DIR3
8 digit Director
Identification Number
of the Director at
DIR3
Character
40
Name
director
As in DIR1
Numeric
Director
Identification
Number
of
DIR4
200
of
8
digit
Director
Identification Number
of the Director at
DIR4
19
DIR5
Character
40
Name
director
20
DIN_DIR5
Numeric
Director
Identification
Number
of
DIR5
8
digit
Director
Identification Number
of the Director at
DIR5
21
DIR6
Character
40
Name
director
As in DIR1
22
DIN_DIR6
Numeric
Director
Identification
Number
of
DIR6
8
digit
Director
Identification Number
of the Director at
DIR6
23
DIR7
Character
40
Name
director
As in DIR1
24
DIN_DIR7
Numeric
Director
Identification
Number
of
DIR7
8
digit
Director
Identification Number
of the Director at
DIR7
25
DIR8
Character
40
Name
director
As in DIR1
26
DIN_DIR8
Numeric
Director
Identification
Number
of
DIR8
8
digit
Director
Identification Number
of the Director at
DIR8
27
DIR9
Character
40
Name
director
As in DIR1
28
DIN_DIR9
Numeric
Director
Identification
Number
of
DIR9
8
digit
Director
Identification Number
of the Director at
DIR9
29
DIR10
Character
40
Name
director
As in DIR1
30
DIN_DIR10
Numeric
Director
Identification
Number
of
DIR10
8
digit
Director
Identification Number
of the Director at
DIR10
31
DIR11
Character
40
Name
director
As in DIR1
32
DIN_DIR11
Numeric
Director
Identification
Number
of
DIR11
8
digit
Director
Identification Number
of the Director at
DIR11
33
DIR12
Character
40
Name
director
As in DIR1
34
DIN_DIR12
Numeric
Director
Identification
Number
of
DIR12
8
digit
Director
Identification Number
of the Director at
DIR12
35
DIR13
Character
40
Name
director
As in DIR1
201
of
of
of
of
of
of
of
of
of
As in DIR1
36
DIN_DIR13
Numeric
Director
Identification
Number
of
DIR13
8
digit
Director
Identification Number
of the Director at
DIR13
37
DIR14
Character
40
Name
director
As in DIR1
38
DIN_DIR14
Numeric
Director
Identification
Number
of
DIR14
Total bytes
of
8
digit
Director
Identification Number
of the Director at
DIR14
953
(1) If total numbers of directors exceed 14, the name of additional directors may be entered in
blank spaces available in the other directors columns.
(2) The data / information should be submitted in the above format in Compact disks as .dbf
file only. While submitting the CD, the banks/FIs should ensure that:
the CD is readable and is not corrupted / virus-affected.
the CD is labelled properly indicating name of the bank, name of the list and period to
which the list belongs, and the name of list indicated on label and in the letter are
same.
the name and width of each of the fields and order of the fields is strictly as per the
above format.
records with outstanding amount of less than ` 25 lakh have not been included.
no suit-filed account has been included.
use of following types of words have been avoided (as the fields can not be properly
indexed): M/s, Mr, Shri etc.
the words Mrs, Smt, Dr etc. have been fed at the end of name of the person, if
applicable.
Except for field "SUIT" and some of the fields from DIR1 To DIR 14, as applicable,
information is completely filled in and columns are not kept blank.
(3)In case of 'Nil' data, there is no need to send any CD and the position can be conveyed
through a letter/fax.
(4) A certificate signed by a sufficiently senior official stating that the list of wilful defaulters
has been correctly compiled after duly verifying the details thereof and RBIs instructions
in this regard have been strictly followed is sent along with the CD.
202
Annex-2
The Branch will identify the wilful defaulters as per above definition and submit
the same on the format enclosed as Annex-3 to respective Regional Offices,
alongwith documentary proof of their wilful default.
The Regional Offices shall submit the details of the NPA borrowers identified as
Wilful Defaulters alongwith documentary proof of their wilful default, to Recovery
& Law Department, Head Office alongwith their recommendations. The decision
of Regional Offices submitting their recommendations for classification of any
borrowal account as Wilful Defaulter should be well documented and supported
by requisite evidence. The decision should clearly spell out the reasons for which
the borrower has been identified to be declared as wilful defaulter vis-a-vis RBI
guidelines.
The Recovery & Law Department, Head Office shall put the consolidated position
of NPA borrowers identified as Wilful Defaulters before The Screening
Committee to approve the identified cases of Wilful Default, headed by the
Executive Director.
203
The decision of Screening Committee to identify the cases of Wilful Default shall
be conveyed to the concerned Regional Offices, with the directions to advise the
borrowers suitably about the decision to classify them as Wilful Defaulters
alongwith the reasons thereof (specimen enclosed as Annex-4) with endorsing a
copy to Recovery & Law Department, Head Office.
The concerned borrowers should be provided reasonable time (say 15 days) for
making representation against such decision, if they so desire, to the Grievances
Redressal Committee headed by the Chairman & Managing Director.
The consolidated position shall be put up by Recovery & Law Department, Head
Office before Grievance Redressal Committee headed by the Chairman and
Managing Director.
A final declaration as wilful defaulter shall be made after a view is taken by the
Grievances Redressal Committee on the representation and the borrower shall
be advised suitably.
After approval of the Grievances Redressal Committee, the names of the Wilful
Defaulter identified borrowers shall be reported to RBI/ CIBIL/ Experian and
Equifax by Recovery & Law Department, Head Office.
204
Annex-3
9
10
11
12
13
14
15
16
17
REGION
BRANCH
BORROWERS NAME
DATE OF NPA
PRESENT ASSET CLASSIFICATION
SINCE
OUTSTANDING (` IN LACS)
Fund Based*
(*including non fund based facilities
which have been converted to funded
facilities)
Non Fund Based
Recorded Interest
TWO Amount
Total Recoverable Dues
DATE OF SUIT
SUIT AMOUNT
REGISTERED ADDRESS OF THE
BORROWER
CONSTITUTION
(Proprietorship/ Partnership / Pvt. Ltd.
Co. / Public Ltd. Co.,/ Govt. of
________ Undertaking)
NAMES OF CURRENT CHAIRMAN /
EX.
DIRECTOR/
DIRECTORS
/
PARTNERS / PROPERTOR ETC
(i.e. who were holding such position as
on date of quarter ended reporting
above)
(a) Full name of Director should be
indicated.
(b) Against the names of nominee
directors of banks/ FIs/ Central Govt./
State Govt., abbreviation Nom should
be indicated in the brackets.
Against the name of independent
directors, abbreviation Ind should be
indicated in the brackets.
(d) In the case of Directors who held
office at the time the account of the
borrower entity was classified as
defaulter, but are no longer on its
Board, the symbol @ should be
indicated in brackets against their
names.
205
Name
of
Proprietors/ 8 digit Director
Partners/ Directors etc.
Identification
Number (DIN)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
18
19
a) Deliberate non-payment of
the dues despite adequate
cash
flow
and
good
networth;
b) Siphoning off of funds to
the
detriment
of
the
defaulting unit;
c) Assets financed either not
been purchased or been
sold and proceeds have
misutilised;
d) Misrepresentation
/
falsification of records;
e) Disposal / removal of
securities without banks
knowledge;
f)
20
Fraudulent transactions by
the borrower.
The decision taken on classification
of wilful defaulters should be well
documented and supported by
requisite evidence. The decision
should clearly spell out the reasons
for which the borrower has been
declared as wilful defaulter vis--vis
RBI guidelines.
Enclosures
1.
2.
3.
4.
5.
AUTHORISED SIGNATORY
206
Annex-4
REGD. A.D. / SPEED POST
M/s_________________
____________________
____________________
Date:
Dear Sir,
Yours faithfully,
BRANCH MANAGER
Copy to: The Guarantors
207
CHAPTER-10
POLICY FOR SALE OF FINANCIAL ASSETS TO:
1. SECURITISATION
COMPANY/
RECONSTRUCTION
COMPANY CREATED UNDER SARFAESI ACT, 2002 and
2. OTHER BANKS/FIs & NBFCS
The Securitisation & Reconstruction of Financial Assets and Enforcement of Security
Interest Act 2002, provides U/S 13, among other measures, sale of financial asset by
Banks/FIs to Securitisation Company / Reconstruction Company. A set of guidelines to be
followed by Banks/ FIs has been formulated and furnished by Reserve Bank of India vide
their Circular No. DBOD No.BP.BC.96/21.04.048/2002-03 dated 23.04.03.
Reserve Bank of India vide their Circular No. DBOD.NO.BP. BC.16/ 21.04.048/ 2005-06
dated 13 July 2005 has issued Guidelines for Purchase /Sale of Non-Performing Assets in
order to increase the options available to banks for resolving their non performing assets
and to develop a healthy secondary market for non-performing assets, where Securitisation
Companies and Reconstruction Companies are not involved.
On the basis of the contents of said RBI Circulars, a policy on sale/ purchase of NonPerforming Assets and sale of financial asset to SC/SR was approved by the Board of
Directors vide BR-F-7 in its meeting held on 21-06-08. The said guidelines were circulated
vide Circular no. HO / Rec & LAW / 06 /2008-09 / 194 dated 15-07-08.
The Board of Directors vide Agenda Item No. 76 in its meeting held on 03.11.2010, have
approved to merge both the policies i.e
A) Policy for Sale of Financial Assets to Securitization Companies/Reconstruction
Companies created under SARFAESI Act,2002. and
B) Policy for Sale and Purchase of Non performing Assets to Banks/FIs/NBFCs.
The amended guidelines was circulated vide Circular No. HO/REC & LAW/08/2010-11/553
dated 15.11.2010. Further RBI has issued master circular on Prudential norms on
Income Recognition, Asset Classification and Provisioning pertaining to Advances
vide Circular RBI/2014-15/74 DBOD.No.BP.BC.9/21.04.048/2014-15 dated July 1, 2014
which containes guidelines on subject at para-6. The salient features of the same are
given hereunder:A. Guidelines on sale of financial assets to Securitisation Company (SC)/
Reconstruction Company (RC) (created under the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002) and related issues
1.
SCOPE
2. STRUCTURE
The guidelines to be followed by banks/ FIs while selling their financial assets to SC/RC
under the Act ibid and investing in bonds/ debentures/ security receipts offered by the
SC/RC are given below. The prudential guidelines have been grouped under the following
headings:
i)
Financial assets which can be sold.
ii)
Procedure for sale of banks/ FIs financial assets to SC/ RC, including
valuation and pricing aspects.
iii) Prudential norms, in the following areas, for banks/ FIs for sale of their financial
assets to SC/ RC and for investing in bonds/ debentures/ security receipts and any other
securities offered by the SC/RC as compensation consequent upon sale of financial assets:
a) Provisioning / Valuation norms
b) Capital adequacy norms
c) Exposure norms
iv) Disclosure requirements
3. Financial assets which can be sold
A financial asset may be sold to the SC/RC by any bank/ FI where the asset is:
i) A NPA, including a non-performing bond/ debenture.
ii) A Standard Asset where:
(a) the asset is under consortium/ multiple banking arrangements,
(b) at least 75% by value of the asset is classified as nonperforming asset in
the books of other banks/FIs, and
(c) at least 75% (by value) of the banks / FIs who are under the consortium /
multiple banking arrangements agree to the sale of the asset to SC/RC.
and
iii) An asset reported as SMA-2 by the bank / FI to Central Repository for Information
on Large Credit (CRILC) in terms of DBOD.BP.BC.No.98/21.04.132/2013-14 February 26,
2014.
4. Procedure for sale of banks/ FIs financial assets to SC/ RC, including valuation
and pricing aspects
(a) The Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (SARFAESI Act) allows acquisition of financial assets by SC/RC from any
bank/ FI on such terms and conditions as may be agreed upon between them. This provides
for sale of the financial assets on without recourse basis, i.e., with the entire credit risk
associated with the financial assets being transferred to SC/ RC, as well as on with
recourse basis, i.e., subject to unrealized part of the asset reverting to the seller bank/ FI.
Banks/ FIs are, however, directed to ensure that the effect of the sale of the financial assets
should be such that the asset is taken off the books of the bank/ FI and after the sale there
should not be any known liability devolving on the banks/ FIs.
(b) Banks/ FIs, which propose to sell to SC/RC their financial assets should ensure that the
209
sale is conducted in a prudent manner in accordance with a policy approved by the Board.
The Board shall lay down policies and guidelines covering,
inter alia,
i. Financial assets to be sold;
ii. Norms and procedure for sale of such financial assets;
iii. Valuation procedure to be followed to ensure that the realisable value of financial
assets is reasonably estimated;
iv. Delegation of powers of various functionaries for taking decision on the sale of the
financial assets; etc.
(c)
Banks/ FIs should ensure that subsequent to sale of the financial assets to SC/RC,
they do not assume any operational, legal or any other type of risks relating to the
financial assets sold.
(d) (i) Each bank / FI will make its own assessment of the value offered by the SC / RC for
the financial asset and decide whether to accept or reject the offer.
(iii)
In the case of consortium / multiple banking arrangements, if 75% (by value) of the
banks / FIs decide to accept the offer, the remaining banks / FIs will be obligated
to accept the offer.
(iv)
(v)
Banks using auction process for sale of NPAs to SCs / RCs should be more
transparent, including disclosure of the Reserve Price, specifying clauses for nonacceptance of bids, etc. If a bid received is above the Reserve Price and a
minimum of 50 per cent of sale proceeds is in cash, and also fulfills the other
conditions specified in the Offer Document, acceptance of that bid would be
mandatory.
(d) Banks/ FIs may receive cash or bonds or debentures as sale consideration for the
financial assets sold to SC/RC.
(e) Bonds/ debentures received by banks/ FIs as sale consideration towards sale of
financial assets to SC/RC will be classified as investments in the books of banks/ FIs.
(g) Banks may also invest in security receipts, Pass-through certificates (PTC), or other
bonds/ debentures issued by SC/RC. These securities will also be classified as
investments in the books of banks/ FIs.
(h) In cases of specific financial assets, where it is considered necessary, banks/ FIs may
enter into agreement with SC/RC to share, in an agreed proportion, any surplus
210
realised by SC/RC on the eventual realisation of the concerned asset. In such cases
the terms of sale should provide for a report from the SC/RC to the bank/ FI on the
value realised from the asset. No credit for the expected profit will be taken by banks/
FIs until the profit materializes on actual sale.
5. Prudential norms for banks/ FIs for the sale transactions
(A) Provisioning/ valuation norms
(a)
(i) When a bank / FI sells its financial assets to SC/ RC, on transfer the same will be
removed from its books.
(ii) If the sale to SC/ RC is at a price below the net book value (NBV) (i.e., book value less
provisions held), the shortfall should be debited to the profit and loss account of that year.
Banks can also use countercyclical / floating provisions for meeting any shortfall on sale of
NPAs i.e., when the sale is at a price below the net book value (NBV). However, for assets
sold on or after February 26, 2014 and upto March 31, 2015, as an incentive for early sale of
NPAs, banks can spread over any shortfall, if the sale value is lower than the NBV, over a
period of two years. This facility of spreading over the shortfall will be subject to necessary
disclosures in the Notes to Account in Annual Financial Statements of the banks.
(iii) For assets sold on or after February 26, 2014, banks can reverse the excess provision
on sale of NPAs, if the sale value is for a value higher than the NBV, to its profit and loss
account in the year the amounts are received. However, banks can reverse excess provision
arising out of sale of NPAs only when the cash received (by way of initial consideration and /
or redemption of SRs / PTCs) is higher than the net book value (NBV) of the asset. Further,
reversal of excess provision will be limited to the extent to which cash received exceeds
the NBV of the asset. With regard to assets sold before February 26, 2014, excess
provision, on account of sale value being higher than NBV, should not be reversed but
should be utilized to meet the shortfall/ loss on account of sale of other financial assets to
SC/RC.
(iv) When banks/ FIs invest in the security receipts/ pass-through certificates issued by
SC/RC in respect of the financial assets sold by them to the SC/RC, the sale shall be
recognised in books of the banks / FIs at the lower of:
the redemption value of the security receipts/ pass-through certificates, and
the NBV of the financial asset.
The above investment should be carried in the books of the bank / FI at the price as
determined above until its sale or realization, and on such sale or realization, the loss or gain
must be dealt with in the same manner as at (ii) and (iii) above.
(b) The securities (bonds and debentures) offered by SC / RC should satisfy the following
conditions:
(i) The securities must not have a term in excess of six years.
(ii) The securities must carry a rate of interest which is not lower than 1.5% above the
211
212
7. Related Issues
(a) SC/ RC will also take over financial assets which cannot be revived and which, therefore,
will have to be disposed of on a realisation basis. Normally the SC/ RC will not take over
these assets but act as an agent for recovery for which it will charge a fee.
(b) Where the assets fall in the above category, the assets will not be removed from the
books of the bank/ FI but realisations as and when received will be credited to the asset
account. Provisioning for the asset will continue to be made by the bank / FI in the normal
course.
B. Guidelines on purchase/ sale of Non - Performing Financial Assets (other than to
SC/RC)
In order to increase the options available to banks for resolving their non performing assets
and to develop a healthy secondary market for nonperforming assets, where securitisation
companies and reconstruction companies are not involved, guidelines have been issued to
banks on purchase / sale of Non Performing Assets. Since the sale/purchase of
nonperforming financial assets under this option would be conducted within the financial
system the whole process of resolving the non performing assets and matters related thereto
has to be initiated with due diligence and care warranting the existence of a set of clear
guidelines which shall be complied with by all entities so that the process of resolving
nonperforming assets by sale and purchase of NPAs proceeds on smooth and sound lines.
Accordingly guidelines on sale/purchase of nonperforming assets have been formulated and
furnished below.
Scope
1 These guidelines would be applicable to banks, FIs and NBFCs purchasing/ selling non
performing financial assets, from/ to other banks/FIs/NBFCs (excluding securitisation
companies/ reconstruction companies).
A financial asset, including assets under multiple/consortium banking arrangements, would
be eligible for purchase/sale in terms of these guidelines if it is a nonperforming asset/non
performing investment in the books of the selling bank.
The reference to bank in the guidelines on purchase/sale of nonperforming financial assets
would include financial institutions and NBFCs.
Structure
2 The guidelines to be followed by banks purchasing/ selling nonperforming financial assets
from / to other banks are given below. The guidelines have been grouped under the
following headings:
i) Procedure for purchase/ sale of non performing financial assets by banks,
including valuation and pricing aspects.
ii) Prudential norms, in the following areas, for banks for purchase/ sale of non
performing financial assets:
213
of the bank and after the sale there should not be any known liability devolving on the selling
bank.
vi) Banks should ensure that subsequent to sale of the non performing financial assets to
other banks, they do not have any involvement with reference to assets sold and do not
assume operational, legal or any other type of risks relating to the financial assets sold.
Consequently, the specific financial asset should not enjoy the support of credit
enhancements / liquidity facilities in any form or manner.
vii) Each bank will make its own assessment of the value offered by the purchasing bank for
the financial asset and decide whether to accept or reject the offer.
viii) Under no circumstances can a sale to other banks be made at a contingent price
whereby in the event of shortfall in the realization by the purchasing banks, the selling banks
would have to bear a part of the shortfall.
ix) Banks shall sell nonperforming financial assets to other banks only on cash basis. The
entire sale consideration should be received upfront and the asset can be taken out of the
books of the selling bank only on receipt of the entire sale consideration.
x) A nonperforming financial asset should be held by the purchasing bank in its books at
least for a period of 12 months before it is sold to other banks. Banks should not sell such
assets back to the bank, which had sold the NPFA.
(xi) Banks are also permitted to sell/buy homogeneous pool within retail nonperforming
financial assets, on a portfolio basis provided each of the nonperforming financial assets of
the pool has remained as nonperforming financial asset for at least 2 years in the books of
the selling bank. The pool of assets would be treated as a single asset in the books of the
purchasing bank.
xii) The selling bank shall pursue the staff accountability aspects as per the existing
instructions in respect of the nonperforming assets sold to other banks.
4. Prudential norms for banks for the purchase/ sale transactions
(A) Asset classification norms
(i) The nonperforming financial asset purchased, may be classified as standard in the books
of the purchasing bank for a period of 90 days from the date of purchase. Thereafter, the
asset classification status of the financial asset purchased, shall be determined by the record
of recovery in the books of the purchasing bank with reference to cash flows estimated while
purchasing the asset which should be in compliance with requirements in Para 3 (iv).
(ii) The asset classification status of an existing exposure (other than purchased financial
215
asset) to the same obligor in the books of the purchasing bank will continue to be governed
by the record of recovery of that exposure and hence may be different.
(iii) Where the purchase/sale does not satisfy any of the prudential requirements prescribed
in these guidelines the asset classification status of the financial asset in the books of the
purchasing bank at the time of purchase shall be the same as in the books of the selling
bank. Thereafter, the asset classification status will continue to be determined with reference
to the date of NPA in the selling bank.
(IV) Any restructure/reschedule/rephrase of the repayment schedule or the estimated
cash flow of the nonperforming financial asset by the purchasing bank shall render the
account as a nonperforming asset.
(B) Provisioning norms
Books of selling bank
i) When a bank sells its nonperforming financial assets to other banks, the same will be
removed from its books on transfer.
ii) If the sale is at a price below the net book value (NBV) (i.e., book value less provisions
held), the shortfall should be debited to the profit and loss account of that year.
iii) If the sale is for a value higher than the NBV, the excess provision shall not be reversed
but will be utilised to meet the shortfall/ loss on account of sale of other nonperforming
financial assets.
Books of purchasing bank
The asset shall attract provisioning requirement appropriate to its asset classification status
in the books of the purchasing bank.
(C) Accounting of recoveries
Any recovery in respect of a nonperforming 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.
(D) Capital Adequacy
For the purpose of capital adequacy, banks should assign 100% risk weights to the
nonperforming financial assets purchased from other banks. In case the nonperforming
asset purchased is an investment, then it would attract capital charge for market risks also.
For NBFCs the relevant instructions on capital adequacy would be applicable.
(E) Exposure Norms
The purchasing bank will reckon exposure on the obligor of the specific financial asset.
216
Hence these banks should ensure compliance with the prudential credit exposure ceilings
(both single and group) after reckoning the exposures to the obligors arising on account of
the purchase. For NBFCs the relevant instructions on exposure norms would be applicable.
5. Disclosure Requirements
Banks which purchase nonperforming financial assets from other banks shall be required to
make the following disclosures in the Notes on Accounts to their Balance sheets:
A. Details of nonperforming financial assets purchased:
1.
2.
ii)
iii)
Outstanding towards workmens dues and/ or government taxes etc. are either
large or cannot be estimated reasonably/ accurately.
iv)
v)
given time of 15 days to adjust his account or to come forward with an acceptable OTS
proposal.
1.
The power will be vested with Management Committee of Board irrespective of amount
outstanding /sale price. A case-to-case study should be made for effecting sale of financial
assets and negotiations on case-to-case basis should be held with SC/RCs in regard to sale
price and terms of sale of financial assets.
2.
The Branch Incumbent, if he is of the rank of Asstt. General Manager, or any official from the
concerned Regional Office not below the rank of Asstt. General Manager is authorized to
enter into agreement with SC/RC after approval of sale proposal.
3.
At present, the existing Recovery Policy does not have provisions for such Committee.
However, for ensuring smooth conduct of the entire process of sale of financial assets to
Assets Securitization and Reconstruction Companies / Other Banks and Financial
Institutions, it is necessary to form such committee. It is now approved that Asset Sale
Committee will be approved to be constituted by CMD/ ED, comprising of General Manager
(R&L), DGM (R&L) (convener of the Committee) & at least two other General Managers. The
function of the said Committee will be as under:
To oversee and approve the fixation of Reserve Price as per approved guidelines as
above.
Evaluation of Bids will be made by Asset Sale Committee in each of the three
categories viz. cash payment offers, cash plus Security Receipt offers and total sale
consideration offers and declaration of highest bidder in each category.
To conduct negotiation with the highest bidder and / or to conduct inter-se bidding
process so as to secure maximum price of financial assets, being sold.
4. Methodology for sale of NPAs
The existing Recovery Policy does not provide exhaustive methodology / steps for sale of
NPAs. For conducting the entire process for sale of NPAs in an objective, transparent
manner and with the purpose to realize maximum purchase consideration, the approved
provisions for methodology / steps for sale of NPAs are given as under:In case any Intending Purchaser approaches the Bank for the acquisition of specific
account/ cluster of accounts, particularly in the case of multiple banking or consortium
219
finance, under portfolio on bilateral basis that may be considered with the approval of
CMD/ ED subject to payment of Reserve Price. Further, the acceptance of their offer shall
be vested with the Management Committee.
In case of absence of such specific offer, the following methodology / steps will be followed:
a) It is approved that financial assets will generally be sold on WITHOUT RECOURSE
basis i.e. with the entire credit risk associated with the financial assets, being
transferred to SC/RC/ Bank/FI/ NBFC.
b) Inviting expression of interest :-After the identification of the accounts to be sold
to Intending Purchasers , expression of interest will be invited within a specified time
by the Bank by putting up a suitable message on its external web site in tender
section. An advertisement in the national financial newspaper may also be given for
wider coverage.
c) As per the requirement of CVC, offers shall be invited under two separate sealed
covers namely Technical Bid (TB) and Price Bid (PB). Technical Bid consists of
terms and conditions of Bank for sale of NPAs to be accepted unconditionally by the
Intending Purchasers. Price Bid covers the offers of the Intending Purchasers for
the acquisition of NPAs on individual basis and/ or on portfolio basis.
d) After receipt of expression of interest from the intending purchasers and execution
of Non Disclosure Agreement, Technical Bid will be called and opened within a
period not exceeding 10 working days from the last date of receiving the bids. The
same will be entered in the register and duly authenticated by the convener of the
committee DGM (R&L).
e) Bank will prepare and make available a personal information memorandum or
status note of each of the account to be sold, to intending purchasers which has
signed Non- Disclosure Agreement with the bank.
f) A non disclosure agreement will be signed between the Bank and all intending
purchasers whose expression of interest are found valid. The draft of such non
disclosure agreement will be pre-approved by Law Deptt., Head Office in
consultation with the legal retainer to the Head Office before execution. Chief
Manager (Recovery) will execute / sign the Non-Disclosure Agreement on banks
behalf.
g) A 30 days period will be given to each intending purchasers for legal and financial
due diligence exercise. The exercise may be conducted either at Head Office or at
concerned Regional Office depending upon the convenience of the intending
purchasers and expenses incurred on such exercise will be borne by the concerned
intending purchaser.
h) In case obligant(s) and co obligant(s) come forward for OTS before submission of
price bid by the proposed buyer(s), the concerned account be withdrawn from sale
process provided the obligants offer to pay more than the reserve price fixed and
the proposal is approved by Competent Authority and such withdrawal of the
account from sale process is permitted by CMD.
220
i)
After the due diligence exercise, last date will be fixed for receipt of price bids in
sealed envelope. The bids will be handed over by each intending purchasers to
General Manager (R&L) / or his authorized representative in sealed envelope before
or on the last date.
s) Despite prolonged negotiations with the highest bidder / inter-se bidding, if the
highest bid is still lower than the Reserve Price, Asset Sale Committee may make
its recommendations for rejection / consideration of the offers / bids, giving detailed
reasons.
t) The High Level Settlement Advisory committee shall scrutinize the offers / bids vis-vis Reserve price of financial assets to be sold and will make its final
recommendations to the Competent Authority with detailed reasons.
u) The approval of sale of NPAs shall be considered by the Management Committee
irrespective of amount outstanding / sale price.
v) After the approval of the sale by the Competent Authorities i.e. MCB, letter of
acceptance to the proposed buyer will be given and sale transaction including
payment of purchase consideration be executed within 15 days.
w) 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.
x) The Branch Incumbent, if he is of the rank of Asstt. General Manager, or any official
from the concerned Regional Office not below the rank of Asstt. General Manager is
authorized to enter into assignment agreement with SC/ RC after approval of sale
proposal.
222
CHAPTER-11
GUIDELINES / POLICY FOR FINAL CLOSURE OF TECHNICALLY
WRITTEN OFF (TWO) ACCOUNTS WITH MEAGRE PRESENT
OUTSTANDING OF RE.1/- OR MORE
The Board of Directors had delegated the powers to the Chairman and Managing Director /
Executive Director , vide BR-F-9 in its meeting held on 18-08-2008, to approve technical
write off in NPA accounts in which the bank has made 100 % provision in doubtful and loss
category. All TWO cases shall be placed before the Board of Directors on annual basis.
Each TWO account shall be vigorously persued for recovery of bank's dues.
However, It has been observed that recovery in technically written off accounts is very slow/
absent and bank has to spend good amount of money for follow up in such chronic cases.
There is no security to fall back upon in majority of the cases.
The Board of Directors, vide BR No. F- 4 in their meeting held on 24.01.2007, had
approved, the guidelines /Policy for final closure of Technically Written Off (TWO)
accounts with meagre present outstanding of Re.1/- or more. After approval of the
Board, The said guidelines were circulated vide Circular No. HO/REC & LAW/12/200607 dated 12.02.2007
All the branches & Regional Offices
are advised to follow the guidelines
meticulously on the subject enumerated as under :
1. Final closure of technically written off accounts with meager present outstanding
of Re.1/- or more
The Borrowal Accounts outstanding in the books of the Bank, where bank has technically
written off, may be considered for full write off. The Regional Office shall scrutinize the
cases and shall place before the competent authority, if the following conditions are
satisfied:
The account should have been classified as Doubtful / Loss Asset.
No security is available with the Bank to fall back upon.
There is no recovery during the last three years.
There are no chances of recovery in such account(s).
Permission for waiver of legal action has been granted by the Competent Authority in
Non-Suit/ RC filed cases.
The whereabouts of the borrower(s)/ guarantor(s) are not known/traceable
or
The borrower(s)/ guarantor(s) are available but they do not have means to repay the
dues of the Bank.
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The borrower has expired and legal heirs are not in a position to repay the Banks
dues.
In suit filed/decreed cases with TWO amount of ` 10.00 lacs and more, opinion of the
concerned Advocate be obtained regarding present status and recovery prospects in
the account.
Branch Incumbent shall visit personally and shall submit the report for the cases of
TWO and present meager outstanding is upto ` 10.00 lac (excluding Recorded
Interest).
Branch Incumbent alongwith official from Regional Office (not below the rank of Asstt.
Regional Manager) shall visit and submit the report for the cases of TWO and present
meager outstanding is upto ` 1.00 crore (excluding Recorded Interest).
Regional Head alongwith Branch Incumbent shall visit the cases where TWO and
present meager outstanding is more than `1.00 crore (excluding Recorded Interest).
2.
Provisions:
It is to be ensured that all such accounts have been fully provided for and the
profitability of the Bank, during the year in which the exercise is undertaken, shall not
be effected.
3.
Cut off period for fully write off and closure of accounts
S.No.
Particulars
Period (from the date of TWO)
1
TWO + Present meagre O/S is upto 3 years
`10.00 lac
2
TWO + Present meagre O/S is more 5 years
than ` 10.00 lac & upto ` 1.00 crore
3
TWO + Present meagre O/S is more 7 years
than ` 1.00 crore
4.
Functionaries
Regional Office Level
Credit Committee (RLCCRH) headed by AGM
Regional Office Level
Credit Committee (RLCCRH) headed by DGM
Regional Office Level
Credit Committee (RLCCRH) headed by GM
Amount
` 25.00 lac (TWO + present meager O/S +
Recorded interest and other charges)
` 35.00 lac (TWO + present meager O/S +
Recorded interest and other charges)
` 75.00 lac (TWO + present meager O/S+
Recorded interest and other charges)
224
S.No
4
5
6
7
Functionaries
Amount
Note 1
Regional Office shall vouch the entry at their level by debiting to Charges General (
Bad Debt Written Off).
The cases falling under Head Office power shall be submitted by Regional Office
alongwith the recommendations to Recovery & Law Deptt. at Head Office.
The cases of wilful default (referred to RBI/ CIBIL), fraud and malfeasance shall be
placed for approval before MCB irrespective of amount involved.
Proper record of such written off accounts shall invariably be kept at the Branch and
Regional Office level and in future, advances shall not be made to such borrowers.
225
CHAPTER-12
POLICY FOR ENGAGEMENT / EMPANELMENT OF RECOVERY AGENTS/
OUTSIDE AGENCIES FOR SUPPLEMENTING THE EFFORTS OF BANKS
OFFICIALS FOR RECOVERY OF BANKS DUES
Reserve Bank of India, vide its circular no. DBOD. No. Leg.BC.75/09.07.005/2007-08 dated
24-04-2008 has advised the banks to take into account the guidelines for engagement of
recovery agents. In compliance of the circular, the Board of Directors vide BR-F-2 approved
the policy for engagement of recovery agents in its meeting held on 06-09-08. The same was
circulated Vide Circular No. HO / Rec & LAW / 12 / 2008-09 / 338 dated 22-09-08 and HO /
Rec & LAW / 13 / 2008-09 / 351 dated 30-09-08. The said guidelines are given as under:NEED & IMPORTANCE OF THE POLICY
1. In the emerging scenario of the need for expeditious recovery of chronic NPAs,
utilizing services of outside professionals for recovery is considered a practical option.
Some of the Banks and NBFCs have been utilizing services of outside professionals
for recovery of chronic NPAs. The results are reportedly encouraging. It is, therefore,
decided
to introduce a scheme in our Bank for engaging services of outside
professionals for recovery of chronic NPAs, particularly cases where decrees have
already been passed but has not been executed for want of information about the
attachable assets of the obligants / judgement debtors.
2. It is clarified that the scheme, hereby circulated, would not, in any way, dilute the laiddown responsibilities of Branch / R.O. Officials, with regard to follow-up of NPAs. The
Recovery Agents would only supplement the efforts of the Branch / R.O. officials for
expediting NPA recoveries. It is clarified that the primary responsibility of recovery of
NPAs shall continue to lie on Branch / R.O. officials.
3. It is to be noted that that the scheme is to be implemented outside the scope of the
special statutory rights available under the SARFAESI Act, 2002, for which separate
guidelines for engagement and empanelment of Enforcement / Supporting Agents
have already been issued and amended from time to time subsequently.
4. However, it must be ensured at all levels that the Recovery Agent follows legally
permissible means / procedure and that their recovery efforts should not result in
adverse publicity to the Bank. The letter of empanelment, to be given to the
empanelled Recovery Agent must specifically advise them to take lawful action and
that the bank or its officials shall, in no way, be responsible for any unlawful action of
the Authorised Recovery Agent.
DETAILS OF THE POLICY
(A) ELIGIBLE ACCOUNTS
All NPA accounts in doubtful or loss category (whether non-suit filed, suit filed or decreed
accounts) with Principal outstanding not exceeding ` 10.00 Lacs (including amount
technically written off, ECGC/ DICGC claim received) shall be eligible for allotment to
Recovery Agents for recovery of Banks dues except where the settlement has been
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Geographical presence,
Agents who are One Stop Shop providing all the services under one roof, i.e., the
advocate, security agencies, detective agencies, valuers/auctioneers and enforcement
of security interest may be considered favourably.
227
(E)
At the time of empanelment and allotment of the NPA account, it will be ensured that the
recovery agents are properly trained to handle with care and sensitivity, their responsibilities,
in particular aspects like hours of calling, privacy of customer information etc.
Further, Reserve Bank of India has requested the Indian Banks Association to formulate, in
consultation with Indian Institute of Banking and Finance (IIBF), a certificate course for Direct
Recovery Agents with minimum 100 hours of training. The above course has been
introduced by IIBF / ARCIL / Bank of India. The concerned Regional Office shall ensure
that over a period of one year all the empanelled Recovery Agents undergo the above
training and obtain the certificate from the above institutes. Further, the empanelled
Recovery Agents should also employ only such personnel who have undergone the above
training and obtained the certificate from the IIBF or its affiliated institutes. Keeping in view
the fact that a large number of agents throughout the country may have to be trained, other
institutes/ banks own training colleges may provide the training to the recovery agents by
having a tie-up arrangement with Indian Institute of Banking and Finance so that there is
uniformity in the standards of training. However, every agent will have to pass the
examination conducted by IIBF all over India.
228
withdraw the said NPA account from the Recovery Agent at any stage without assigning
any reason. No commission will be payable on the amount recovered in the withdrawn
account after the date of such withdrawal.
3. The age of NPA account will be counted from the date of NPA to date of Allotment of
Account to Recovery Agent.
4. The Regional Head shall be the competent authority to sanction bills commission of
Recovery Agents. The amount of sanctioned commission be debited to the Charges
General (Law) A/c of the concerned Branch and proper accountwise record of such
commission paid shall be kept at the branch.
5.The commission would be payable on the amounts recovered from the borrowers and
credited to their Loan Accounts after the allotment of the accounts to the Recovery Agent, by
the Bank. If the recovery is effected by cheque, the commission will be paid after the
clearance / realization of the said cheque.
6.In case of any dispute regarding payment of commission or any other matter with
Recovery Agent, the matter may be resolved by the Regional Head. However, if the matter
still remains unresolved, the same may be referred to Dy. General Manager (R&L) / General
Manager (Recovery & Law) at Head Office, whose decision shall be final and acceptable to
Recovery Agent.
(J) GENERAL GUIDELINES
(a) Monthly progress report is to be obtained from the Recovery Agent in respect of
each account allotted separately in writing.
(b) Performance of each Recovery Agent will be reviewed quarterly
by each
Regional Office on case to case basis.
(c) It is advised to extend full cooperation at all levels to recovery agents and provide
them the requisite information without delay to facilitate them in the process of
affecting recovery to the maximum level in the interest of the Bank.
(d) To ensure due notice and appropriate authorization, Regional Office will inform the
borrower the details of recovery agency firms / companies while forwarding default
cases to the recovery agency. Further, since in some of the cases, the borrower
might not have received the details about the recovery agency due to refusal /
non-availability / avoidance and to ensure identification, it would be appropriate
that the agent must carry a copy of the notice and the authorization letter from the
bank along with the identity card issued to him by the agency firm / company.
Further, where the recovery agency is changed by the bank during the recovery
process due to any reason, in addition to the bank notifying the borrower of the
change, the new agent should carry the notice and the authorization letter along
with his identity card.
(e) The notice and the authorization letter should, among other details, also include
the telephone numbers of the relevant recovery agency. It should be ensured that
there is a tape recording of the content / text of the calls made by recovery
agents to the customers, and vice-versa. Banks may take reasonable precaution
such as intimating the customer that the conversation is being recorded, etc.
(f) Where a grievance/ complaint has been lodged, Regional Offices should not
forward cases to recovery agencies till they have finally disposed off any
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14. The 'Recovery Agent' shall not use any force or any pressure or commit any wrongful
act or offence against person/ property of the borrower, guarantor or any liable party.
The guidelines issued by the Government and/or RBI / Supreme Court in this regard if
any, shall be scrupulously followed by the Recovery Agent. It will be ensured that
the Recovery Agent follows legally permissible means/ procedure and that their
recovery efforts should not result in adverse publicity to the Bank. The letter of
empanelment, to be given to the empanelled Recovery Agent must specifically
advise them to take lawful action and that the bank or its officials shall, in no way, be
responsible for any unlawful action of the Authorised Recovery Agent.
15. The 'Recovery Agent' shall not further delegate the job assigned to it by the Bank to
any other agency without obtaining prior written consent of the Bank.
16. The Recovery Agent shall not do any act which shall be prejudicial to the interest of
the Bank or which shall adversely affect image of the Bank.
17. The Recovery Agent shall expressly indemnify and keep the Bank and its personnel
indemnified against all loss, liability or obligations arising out of its conduct or that of
any of its personnel.
18. In cases of any contravention of any obligation on the part of Recovery Agent, the
Recovery Agent shall be liable for the damages including special damages as
demanded by the Bank.
19. The Recovery Agent shall not be assigned/ shall not accept any account / charged
property in which that 'Recovery Agent' is having direct/ indirect interest.
20. The field staff of Recovery Agency shall not himself accept cash recoveries from the
borrowers.
21. Cash recoveries, if any, shall be directly deposited by the borrower or his
representative in the same branch or the nearest branch through CBS.
22. The field staff of Recovery Agency shall not receive any cheque/ draft in his name or
in the name of the Agency. The cheques / drafts should be drawn in favour of OBC
A/c ___________ (title of the account for which collection is made) and crossed A/c
Payee only. Such cheques / drafts shall be tendered at the concerned branch latest
by the next working day.
Further, while deliberating and perusing the note, the Board of Directors directed as under: Recovery agents appointed by the bank should be well equipped and must be
aware of the legal implications.
Regional Heads must review their performance on quarterly interval.
Necessary precautions must be outlined such as not handing over cash to the
Recovery Agent etc.
233
In continuation of Circular No. HO / REC & LAW / 12 / 2008-09 / 338 dated 22-09-08, following
drafts, were circulated vide HO Circular No. HO / REC & LAW / 13 / 2008-09 / 351 dated 3009-08:1. The format of Agreement, to be entered into between the empanelled Recovery
Agent and the bank containing all terms and condition of empanelment
(Annexure-1).
2. The Format of Request cum Authority letter, to be submitted by the empanelled
Recovery Agent on his / her letter head along with the CDR / FDR for ` 1.00 Lacs
(Annexure-2).
3. The format of Bank Guarantee, to be issued by some other bank at the request of
the empanelled Recovery Agent in favour of our bank (Annexure-3).
Please ensure that the documents executed / obtained are as per drafts annexed. In case
any further clarification on any point is required, the same may be referred to this office for
necessary guidance.
234
ANNEXURE-1
(To be Executed on Non-Judicial Stamp Paper of Requisite Value)
AGREEMENT
This agreement is made at ______________on the ____________day of ____________
BETWEEN
Oriental Bank of Commerce, a body corporate, constituted under the Banking Companies
(Acquisition and Transfer of Undertakings) Act No 40 of 1980, having its Corporate Office at
Plot No. 5. Sector 32, Gurgaon, Haryana-122001 and amongst other Regional Offices a
Regional Office at _________________________________________________________
(hereinafter referred to as the Bank which expression shall unless repugnant to the context
or meaning thereof shall include its directors, officers, successors representatives and
assigns).
AND
M/s.
________________________________,
Individual/
Proprietorship
concern
/Partnership firm/ Private Limited Company/ Public Limited Company having its
residence/office/registered office at ____________________________ (herein after referred
to as the Agency which expression shall unless repugnant to the context or meaning
thereof shall include its directors, officers, successors and representatives and assigns).
WHEREAS the Bank is engaged in the business of banking and is desirous of strengthening
the process of collection of amounts that became due from its borrowers in the course of its
business by utilizing services of external agencies.
AND WHEREAS the Agency is engaged and experienced in the business of assisting banks
and others in such recovery and collections and wishes to offer its services to the bank.
IT IS THEREFORE NOW AGREED BETWEEN THE PARTIES HERETO AS FOLLOWS:
1.
Period of Agreement:
This agreement shall come into effect from ________ and continue to be in force for
a period upto and inclusive of _____________or its sooner determination in terms
hereof.
2.
The Service.
The Agency agree to provide to the Bank its service for the collection of amounts due
to and receivable by the Bank in the course of its business and any other service
relating to recovery of amount due as may be requested and authorized by the Bank,
in writing.
3.
235
The Agency represents that it will comply with all legal requirements and obtain such
licenses, approvals, and consents, if any as prescribed / required under any law/ regulations
under time being in force, and keep them valid.
The Agency represents that it is adequately equipped, in terms of infrastructure, manpower
and expertise to provide the service and undertakes to provide the service all the time during
the period of the agreement.
The Agency represents that it alone will look after its needs as to insurance of its
representatives, its assets including vehicles, and such other needs and shall make no extra
claim for any charge on account of any payment in any respect, other than that agreed.
The Agency and their employees shall, in the course of the service:
I.
Shall carry out its function at own risks and liabilities.
II.
Shall submit monthly progress report separately in writing in respect of each
account allotted to it.
III.
Shall obtain an undertaking on request stamp paper from each of its
employee/associate and submit a copy with the Bank.
IV.
Shall employ its best efforts to collect the amount(s) for which it was
authorized.
V.
Shall observe highest professional and ethical standards and will not adopt
any uncivilized, unlawful and questionable behavior with the NPA borrowers
or their family members and shall not use any force or any pressure or
commit any wrongful act against person /property of any defaulter.
VI.
Shall adhere to the instruction and guidelines provided by the Bank from time
to time.
VII. Shall not adopt or resort to any method, conduct or procedure in
contraventions of any law.
VIII. Shall not further delegate the job assigned to it by the Bank to any other
Agency without obtaining prior written consent of the Bank.
IX.
Shall observe the principles enumerated in the judgment passed by Honble
Supreme Court in the matter viz., ICICI Bank Limited Vs. Prakash Kaur &
Others {JT 2007(4)SC39; 138(2007) DLT248 (SC)}, lying inter-alia not to use
coercive methods for recovery of loans as also laid in decision of State
Consumer Forum of New Delhi.
X.
Shall comply with future decision of the various courts in this regard and
Banks decision will be final and binding in regard to Agencys compliance in
this respect.
XI.
Shall not to do any act which shall be prejudicial to the interest of the Bank or
which shall adversely affect image of the Bank.
XII. Shall not accept any account/charged property, wherein it has any
direct/indirect interest.
XIII.
XIV.
XV.
respect, which shall unconditionally agree and which shall be treated as final
and binding.
The Agency hereby undertakes to abide by IBAs model code for collections of dues and
repossession of security (CDRS Code) and other guidelines framed by Bank based on RBI
guidelines issued from time to time.
The Agency agrees that all information documents provided by the Bank to it, shall remain
the property of the Bank and nothing therein shall be construed as granting of conferring any
rights in/on such information/documents to the Agency or any third party.
The Agency agrees that the personnel {including its owner(s), director(s), partner(s),
employee(s) and sub- agent(s)} engaged by the Agency in relation to the service will be the
sole responsibility of the Agency as the their costs and consequences arising out of their
engagement or conduct. It is understood that the Bank shall not be liable to pay any
remuneration or compensation to the Agency or any of the personnel (including its owner(s),
director(s), partner(s), employee(s) and representatives) engaged by the Agency in relation
to the service except the fee payable to the agencies as mentioned under clause 7.1 below.
It is further understood that any tax/fee or levy etc., that may be payable to any authority or
department of government in respect of payment made to Agency shall be borne by Agency,
if not otherwise specified in this Agreement or agreed to, in writing by the Bank.
The Agency shall:
I.
Follow empanelment conditions as annexed as Annexure I.
II.
Treat all information (whether verbal, written or otherwise) and materials (whether
in hard form such as papers, documents or soft form such as electronic data,
floppies or cassettes) received from the Bank in relation to the service as
confidential;
III.
Exercise utmost care in preserving the confidentiality of such information and
material;
IV.
Not disclose or pass on or cause to be disclosed or pass on such information or
material to any others except in accordance of law;
V.
Return or destroy such information and material to the bank as and when and in
the manner required by the Bank.
4.
5.
Relationship.
It is agreed and understood by the parties that neither the Agency nor any of the
personnel engaged by the Agency for the purpose of service {including its owner(s),
director(s), partner(s), employee(s) or representative(s)} or any other person claming
on its behalf shall have employee employer or any other sort of relationship with the
Bank other than as agreed herein.
Procedure for Collection
The Agency shall inform the banks Regional Office/Head Office the name, bio-data,
and other details (as may be required by the bank) of the personnel who will
represent the Agency or collection of the amount(s) due and also submit attested (by
Agency itself) photographs of such representatives to the Bank so that same can be
updated on Banks website and I cards be issued to such as Agencys personnel,
limited for identifying them to Banks customers for recovery process.
237
The Bank shall as and when it desires to avail the service of the Agency, advise and
authorize it in writing to collect the amount due by issuing a job-card stating amount(s)
to be collected and the name and address of liable parties.
The Agency shall not engage any person other then whose name(s) are informed to
the bank as aforesaid in clause 5.2 for collection.
In the event of any person whose name is previously informed by the Agency to the
Bank as aforesaid in relation to collection of an amount(s) ceasing to be connected
with Agency. The Agency shall inform the bank forthwith details of such cessation.
The representatives of the Agency shall not accept payment in cash. Whenever the
party desires to make payment in cash, the party shall be advised to directly deposit
the cash in the Banks branch.
The representative of the Agency shall, under the service, collect the amount(s) only
by cheque /draft drawn in favor of OBC A/c (title of the account for which the
collection is made) and crossed A/c Payee only and in no other manner. The
instruments so collected shall be tendered at the concerned branch latest by the next
working day. The Agency/its personnel under no circumstances shall receive any
cheque /draft in their own name.
I.
II.
III.
The representative of the Agency shall upon collection of any amount, promptly
record the amount(s) collected by preparing a collection slip in triplicate and issue the
same, under its signature as follows:
First to the person from whom such amount is collected as temporary
acknowledgement, simultaneously with the collection of cheque/draft.
Second to the Bank (alongwith the relevant cheque/draft) as record of collection and
remittance, not later than at the end of the day succeeding the day of collection of the
amount; and
Third for the retention by the Agency for its own record.
The Agency shall submit to the Bank on the 15 th and the last day of every month (or
at such periodicity as may be required by the Bank), a report indicating the status of
collections, investigations and follow up in relation to all amount(s) requested and
authorized to be collected by the Bank under the service.
The Bank shall also have a right to withdraw and cancel its authorization to collect the
amount(s) (or not to pay the agreed fees), without assigning any reason therefore at
any time after issuing notices and it will come into effect as stated in the notice. No
commission shall be payable after such depanelment/delisting.
The Bank shall issue identity cards to the representatives of Agency. On termination/
cancellation of this agreement, the identity cards of all the representatives issued to
them shall be forthwith returned to the Bank.
In the event of termination of agreement with the Agency due to non observance of
terms & conditions or any other default of Agency, the Agency hereby agrees and
gives its consent to Bank to exchange information with other Banks, Financial
Institutions, NBFCs directly or through the medium of RBI, IBA or any other institution
238
or association about its particulars i.e. name, address and other details including
causes for delisting, depanelling and also briefing the description of the incident.
In addition to the termination of the Agency, the Bank may file suit or claim, damages,
and take recourse to any legal remedy against Agency or Agencys default or non
adherence of agreed terms.
6. The Agencys Indemnity and Assurance.
The Agency hereby expressly agrees to indemnify the Bank, its officers and keep the
Bank indemnified against all loss, liability or obligation arising out of its conduct or that
of any of the personnel {including its owner(s), director(s), partner(s), employee(s) and
representative(s)} in connection with the service and this agreement.
The Agency further agrees to provide a Bank Guarantee /Fixed Deposit for an amount
of ` 1,00,000/- (Rupees one lac only) for any Agency for one Regional Office.. The
security shall be returned to the Agency on expiry of this agreement, however, incase
of termination the security may be forfeited.
The Agency desirous for getting empanelled with more than one Regional Office of the
Bank agrees to provide additional Bank Guarantee /FDR deposit of ` 1 lac in such
Regional Office of the Bank.
The Agency agrees that in case of any loss monetary or otherwise, caused to the
Bank due to any act of omission and commission on the part of the Agency and or any
of its personnel {including its owner(s), director(s), partner(s), employee(s) and
representative(s)}, the Bank shall have authority to invoke the said Bank Guarantee/
encash the said FDR without giving any notice in this regard, in any manner
whatsoever.
The Agency further agrees and undertakes that he/she/it has fully understood all the
terms and conditions of this agreement as well as letter of empanelment and agrees to
comply with them.
7. The Banks Covenants.
The bank shall in consideration of the services, pay to the Agency, fee as indicated
below at monthly intervals in relation to recovery on amounts recovered from
borrowers of identified accounts and credited in the borrowal accounts at the branch:
For all NPA accounts (Suit filed/Non suit filed/Decreed)
Age of NPA Account
Commission payable on amount of recovery
For account with O/s.
upto ` 1.00 lac.
Upto 3 years
Above 3 years upto 5
years
Beyond 5 years
6%
8%
4%
7%
10%
10%
239
The service tax as per rules and applicable from time to time shall be paid in addition
to the charges mentioned above. Income Tax will be deducted at source whenever
applicable.
In case of settlement of the account between the bank and the borrower, the normal
commission will be paid to the Agency on each amount deposited by the borrower
under the settlement on the condition that Agency will continue to pursue the
borrower for deposit of entire settlement amount.
If the Bank is of the view that the efforts of the Agency in the allotted NPA account are
not satisfactory, the Bank can withdraw the said NPA account from the Agency at any
stage without assigning any reason. In such as case the Agency will not be paid any
commission on the amount recovered after the date of such withdrawal.
The fee payable will be all inclusive and no operational expense would be reimbursed
to the Agency. However, expenses which are to be normally incurred by the Bank
such as newspaper advertising on any other expenses for bringing the assets to sale,
if incurred by the Agency after proper authorization by the Bank, shall be reimbursed
to the Agency by the branch on merits of each case.
The decision of the concerned Regional Head of the Bank shall be final and binding
on the Agency, in relation to any dispute arising out of this agreement whether any
amount or amounts is/are realized or not.
The Bank shall not be liable to pay to the Agency any amount (whether by way of
compensation, remuneration reimbursement or otherwise) other than the fee as
aforesaid, in relation to the service.
9. Publicity.
The Agency, its employees, representatives etc., shall not use the name, trademark
and/or logo of the Bank in any sales or marketing publication or advertisement or in
any other manner.
10. Miscellaneous.
The bank may amend this agreement by giving a notice of such amendment to the
Agency, on the address first stated above.
This agreement shall be subject to any amendment, modification that bank has to
carry out in terms of RBI guidelines or of any similar authority or due to directions of
240
a court. However, in case any term or agreed condition is declared illegal or a nullity,
the rest of the agreement, incase remains performable/executable shall be
performed unless the Bank decides to recall the said arrangement in such
circumstances.
The bank shall have a right to terminate this agreement any time without assigning
any reason whatsoever.
This agreement shall stand terminated in the event of:
I. Any of the Agencys representations and undertakings being or becoming
incorrect or untrue.
II. Breach of the Agency to observe any of the terms and conditions contained
herein or under any of the letters of request and authorization issued by the bank
in pursuance hereof or under any other agreement entered by the Agency or any
of its personnel.
III. Insolvency or bankruptcy of the Agency or any of its personnel.
IV. Any specific instruction from RBI of from any competent authority.
The Agency shall not assign the rights or obligations hereunder, unless permitted by
the Bank in writing.
The bank may assign its rights and obligations hereunder in its sole discretion.
IN WITNESS WHEREOF the parties hereto have executed these presents the day
any year fist hereinabove written.
For Oriental Bank of Commerce(RO)
Signature
Name
Designation
241
ANNEXURE-2
Draft of Request cum Authority Letter, which may be obtained from Recovery
Agent/Agency (FDR of OBC).
Place
Date
The Regional Manager,
Oriental Bank of Commerce
_______________________________
_______________________________
_______________________________
Sub:
Request
cum
Authority
Letter
for
_________dated____________for ` __________.
Encashment
of
FDR
No.
Dear Sir/Madam,
This has reference to your letter dated ____________ informing me/us about accepting
my/our request for appointing as a Recovery Agent/Agency. I/we thank you for having
afforded me/us with the said opportunity. Pursuant thereto an agreement dated _____ was
executed by me/us and the bank. In terms of the said agreement I/we deposit a FDR/TDR
duly discharged in favour of the bank with you as security, details whereof are mentioned
hereunder:1. FDR/TDR for a sum of ` ________ (Rupees __________only) dated ______ bearing
No. _______drawn on Oriental Bank of Commerce, _________Branch.
In consideration of the aforesaid agreement, I/We hereby further agree and undertake with
the bank as under:1. I/We shall abide by the terms and conditions contained in the letter of Empanelment
dated --------- and the agreement dated --------- .
2. I/We shall indemnify the bank, its officers and keep the bank indemnified against all
losses, liabilities or obligations arising out of my/our conduct in connection with the
service of the said agreement.
3. Further in case of any loss monetary or otherwise, caused to the bank due to any act
of omission and commission and breach of any term and condition contained in the
letter of Empanelment dated --------- and the agreement dated --------- on my/our part
of any nature whatsoever, the bank or its authorized representative are duly
authorized and
empowered to encash the said FDR/TDR without giving any
prior notice in this regard. I/We shall have no right to any
claim of any nature whatsoever against such encashment of
said FDR/TDR, with out any notice tome/us/agency.
4. I/We jointly or severally shall be responsible for any balance/sum that may become
due to bank on account of the dues and claims under the said agreement and/or for
any ultimate balance/sum that may become due to the bank in other account
whatsoever from time to time during the period of said agreement.
242
5. I/We shall abide by the rule, regulation and policies of the bank and RBI guidelines,
issued/to be issued from time in respect of said agreement as well as for recovery of
outstanding dues of the Bank/s in the NPA accounts.
6. I/We further undertake to execute at any time, all documents and do all things, which
the bank may require from time to time during the period of said agreement.
7. I/we also undertake that any change of condition/term/take over of bank etc., shall be
sole and absolute discretion of bank and banks right to encash said FDR/TDR shall
not be affected by any such change in the constitution either of bank and of agency.
Yours faithfully
Authorized signatory
Name and seal of the Agency
Address of the Agency
243
ANNEXURE-3
Draft of bank guarantee, which may be obtained from a
bank other than OBC on stamp paper of requisite value.
BANK GUARANTEE
Bank Guarantee No.
Date of issuance:
Valid up to _______________.
The Oriental Bank of Commerce
_______________________________
_______________________________
_______________________________
In consideration of Oriental Bank of Commerce, a body corporate, constituted under the
Banking Companies (Acquisition and Transfer of Undertakings) Act No 40 of 1980, having its
Corporate Office at Plot No. 5, Sector 32, Gurgaon, Haryana 122001 and
______________________________________________________________________
(hereinafter referred to as the Beneficiary) having agreed to engage the
___________________________ having his/her/its residence/office/registered office at
___________________ (hereinafter called the Agency) under the terms and conditions of
an Agreement dated ______ (hereinafter called the Agreement) executed between
Beneficiary and the Agency.
Towards the security for the due fulfillment of the terms and conditions of the said
Agreement, it has been agreed by the said Agency that he/she/it shall provide a bank
guarantee for a sum of ` 100000.00(Rupees One Lac only) to the Beneficiary.
We ____________ (indicate the name of the Bank other than OBC) (hereinafter called the
Obligant Bank) at the request of the said Agency, do hereby agree, undertake and
guarantee to pay or indemnify the Beneficiary an amount not exceeding ` 1,00,000/(Rupees one lac only) in term of fulfillment of terms & conditions of the said Agreement and
if any loss or damage is caused to or suffered or would be caused to or be suffered or in the
event of any breach of any term or condition of said Agreement the Beneficiary will be
entitled to invoke this guarantee, without any recourse to the Agency.
Unless repugnant to the context or meaning thereof, expressions, Agency and Obligant
Bank shall mean and include their proprietor, partners, directors, officials, heirs,
representatives, successors, executors, administrators, and assigns, etc.
The Obligant Bank further agrees and undertakes that:
1.
The decision of the Beneficiary shall be final with respect to commission of breach
by the Agency or in respect of any other term and condition of the said Agreement.
2.
The guarantee herein contained shall not be affected by any change in the
constitution either of the Agency or of the Obligant Bank.
The Obligant Bank shall not be released from its liability under this guarantee by
3.
244
reasons of the either time being given to the Agency and/or any forbearance act or
any omission by or on behalf of the Beneficiary (whether with or without) the
consent and knowledge of the Obligant Bank in respect of or in relation to the
several obligations and conditions to be performed or discharged by the Agency
under the said Agreement.
4.
The Beneficiary at its option shall be entitled to enforce this guarantee without
proceeding against the Agency, as this guarantee constitutes a separate, distinct
and independent contract between the Beneficiary and Obligant Bank.
5.
6.
The Obligant Bank shall be released and discharged from all its liabilities
hereunder unless a demand for renewal under this guarantee is made by the
Beneficiary to it in writing on or before ______.
7.
The Obligant Bank shall make extension for the same period for which the initial
guarantee is issued, subject to any request for a shorter period made by the
Beneficiary in writing and that on each renewal it shall issue a fresh bank
guarantee to the Beneficiary.
8.
The Obligant Bank also undertake that the Beneficiary shall have the fullest liberty
without prior consent of Obligant Bank and affecting its obligation in any manner
whatsoever, to vary and enforce any term and condition of the said Agreement.
The Obligant Bank also undertake that it shall not be relieved from its liability due
to any reason if any manner whatsoever including any variation or extension of
any term and condition of the said Agreement.
9.
The Obligant Bank shall not revoke this guarantee during the currency of the said
Agreement except with the previous consent of the Beneficiary in writing.
The liability of the Obligant Bank under this guarantee shall not exceed `
100000.00 (Rupees One Lacs only).
2.
This bank guarantee shall be valid up to _________or till the Beneficiary certifies
in writing that the terms and conditions of the said Agreement have been fully and
properly carried out by the said Agency and accordingly the Agency discharges
from this guarantee and/or by returning the original guarantee bond. However,
Obligant Bank would be under an obligation to renew and extend this guarantee at
the request of the Agency, if a demand for renewal is made on the Obligant Bank
in writing by the Agency on or before __________; and
3.
The Obligant Bank is liable to pay the aforesaid guaranteed amount i.e
245
`100000.00 or any part thereof under this bank guarantee to the Beneficiary only
and only if the Obligant Bank receives a written claim or demand by the
Beneficiary on or before ___________ and/ or before the expiry of the extended
period of the guarantee, as the case may be on each occasion, when the
guarantee is sought to be invoked.
246
Annexure-IV
ORIENTAL BANK OF COMMERCE
(Address of Regional Office)
Date: _____________
M/s __________________
_____________________
_____________________
Dear Sirs,
REG: EMPANELMENT OF RECOVERY AGENT
This has reference to your application for approval of Recovery Agent. We are pleased to
empanel you as Recovery Agent of our Bank to assist in collection of amounts due to and
receivable by the Bank in the course of its business and any other service relating to
recovery of amount due, as may be requested and authorized by the Bank (in writing), on
the following terms & conditions:
1. You shall hold all requisite Government and other licenses, approvals and consents
as required for providing to the Bank the service and shall undertake to maintain the
same valid and subsisting during the period of arrangement with the Bank.
2. Empanelment does not carry assured assignment of the cases. It is open to the Bank
to engage the services of the Recovery Agent'.
3. You will carry out its functions as per your agreement dated _______ with the Bank.
4. You will agree to provide its services in the matter referred at the fee to be decided on
case-to-case basis as per fee/payment schedule duly approved by the Bank.
5. The Agency and their employees, in the course of the service:
a. Shall carry out its function at own risks and liabilities.
b. Shall submit monthly progress report separately in writing in respect of each
account allotted to it.
c. Shall obtain an undertaking on request stamp paper from each of its
employee/associate and submit a copy with the Bank.
d. Shall employ its best efforts to collect the amount(s) for which it was
authorized.
e. Shall observe highest professional and ethical standards and will not adopt any
uncivilized, unlawful and questionable behavior with the NPA borrowers or their
family members and shall not use any force or any pressure or commit any
wrongful act against person /property of any defaulter.
f. Shall adhere to the instruction and guidelines provided by the Bank from time
to time.
g. Shall not adopt or resort to any method, conduct or procedure in
contraventions of any law.
h. Shall not further delegate the job assigned to it by the Bank to any other
Agency without obtaining prior written consent of the Bank.
i. Shall observe the principles enumerated in the judgment passed by Honble
Supreme Court in the matter viz., ICICI Bank Limited Vs. Prakash Kaur &
Others {JT 2007(4)SC39; 138(2007) DLT248 (SC)}, lying inter-alia not to use
247
j.
k.
l.
m.
n.
o.
p.
q.
6. All information/documents provided by the Bank to you shall remain the property of
the Bank and nothing therein shall be construed as granting or conferring any rights
in/ on such information/ documents to you or any third party.
7. The obligation of the Recovery Agent' to keep the information undisclosed to others
shall continue and survive even after termination of the arrangement.
8. The Agency shall submit to the Bank on the 15 th and the last day of every month (or
at such periodicity as may be required by the Bank), a report indicating the status of
collections, investigations and follow up in relation to all amount(s) requested and
authorized to be collected by the Bank under the service.
9. The Bank shall also have a right to withdraw and cancel its authorization to collect the
amount(s) (or not to pay the agreed fees), without assigning any reason therefore at
any time after issuing notices and it will come into effect as stated in the notice. No
commission shall be payable after such depanelment/delisting.
10. The representatives of the Agency shall not accept payment in cash. Whenever the
party desires to make payment in cash, the party shall be advised to directly deposit
the cash in the Banks branch.The representative of the Agency shall, under the
service, collect the amount(s) only by cheque /draft drawn in favor of OBC A/c (title of
the account for which the collection is made) and crossed A/c Payee only and in no
other manner. The instruments so collected shall be tendered at the concerned
branch latest by the next working day. The Agency/its personnel under no
circumstances shall receive any cheque /draft in their own name and follow the
248
guidelines for collection as per your Agreement dated ________ with the Bank.
11. You will not use any force or any pressure or commit any wrongful act or offence
against person/property of the borrower, guarantor or any liable party. The guidelines
issued by the Government and/or RBI in this regard, if any, shall be scrupulously
followed by the 'Recovery Agent'.
12. You will abide by IBAs model code for collections of dues and repossession of
security (CDRS Code) and other guidelines framed by Bank based on RBI guidelines
issued from time to time.
13. You will not further delegate the job assigned to it by the Bank to any other agency
without obtaining prior written consent of the Bank.
14. You will not do any act which shall be prejudicial to the interest of the Bank or which
shall adversely affect image of the Bank.
15. The Recovery Agent' hereby expressly indemnifies and keeps the Bank and its
personnel indemnified against all loss, liability or obligations arising out of its conduct
or that of any of its personnel.
16. In cases of any contravention of any obligation on your part, you will be liable for the
damages including special damages as demanded by the Bank.
17. That the Bank reserves the right to take appropriate legal action including filing/
lodging complaint to the professional body, if there is any misconduct on the part of
the 'Recovery Agent' or information submitted by you to the Bank is incorrect or false.
This shall be without prejudice to Bank's right to de-list / de-panel you from its panel.
18. That in case constitution of 'Recovery Agent' undergoes any change the same shall
be informed to the Bank immediately.
If the above terms & conditions are acceptable to you, the duplicate of this letter may be
returned duly signed in token of having accepted the same.
Yours faithfully,
Regional Head
Note: This letter should be typed/ printed on the Regional Office letter head.
249
CHAPTER 13
person. In this context, keeping in view its risk management systems, we have fixed a
minimum threshold limit, for the balance in the account of the deceased depositors, up to
which claims in respect of the deceased depositors would be settled without insisting on
production of any documentation other than a letter of indemnity. The threshold limit so fixed
is given in relevant para.
The Check List of Documents to be obtained is given as per Annexure C.
(B) Time Norms for Settlement of Claims
Settlement of claims in favour of Survivor(s)/Nominees:
In terms of RBIs earlier guidelines of June 2005, the Time Limit for settlement of Claims in
respect of deceased depositors and release of payments to Survivor(s)/Nominees was
advised to be fixed for 15 days from the date of receipt of the Claim subject to the production
of proof of death of the depositor and suitable identification of the claim(s), to the bank
satisfaction. These guidelines already stand approved by the Board vide BR No.D-3 dated
23.09.2005.
Settlement of Deceased depositors Claim cases without survivor / nominee clause
In case of accounts without survivor / nominee clause, the claim should be settled within 1
month from the date on which the requisite documents have been submitted.
The requisite data in respect of the Claims pertaining to Deceased Depositors/ Lockerhirers/Depositors of Safe Custody Article Accounts pending beyond the stipulated period
giving reasons thereof is being reported to the Recovery & Law Department, Head Office, on
quarterly basis as already advised vide P & D Circular 08/2005-06/298 dated 14-10-2005
and HO/LAW/ Circular letter 12/2006-07 dated 29-9-2006. Since the same is required to be
placed before the Customer Service Committee of the Board, the Regional Office should
compile and send the desired information to Recovery & Law Department in the first week of
succeeding month on the format Annexue-4.
Premature termination of Term Deposit Accounts and payment of interest &
Treatment of pipeline flows
As regards Premature termination of Term Deposit Accounts and payment of interest &
Treatment of pipeline flows in the name of the deceased depositor, the policy has already
been conveyed by P & D Dept, vide their circular HO/P&D/08/2005-06/298 dated 14.10.2005
and Banks Deposit policy as per Circular HO/CSP/39/2014-15/382 dated 14.08.2014.
Further, following clarifications are being given for settling the deceased depositors claim
cases
251
In respect of claims on the basis of court orders viz. Probate/ Succession Certificate,
the same can be settled by branch Incumbents irrespective of the amount involved.
It is clarified that the branch incumbents are vested with the powers to settle the
cases of class I legal heirs of male deceased depositor as well as legal heirs as per
Section 15 (a) in case of female deceased depositors in accordance with Hindu
Succession Act 1956, whether they are Hindu, Sikh, Jain or Buddhist.. The claims
other than above and other claims relating to Muslim & other communities and claims
by guardian other than natural guardian shall be dealt at Regional office level even
when the claim amount falls within Branch powers. Further claims in respect of Either
or Survivor & Former or Survivor accounts shall be disposed of at branch level as
per instruction
The indemnity bond is to be obtained from all the legal heirs of the deceased
depositor with two sureties
Before processing the deceased claim case, all the claim papers submitted by
claimants to the branch, be got vetted by the legal retainer, if the concerned branch is
situated in the city where Regional office is situated and by the panel advocate if the
concerned branch is situated in other cities on a lump sum fee of ` 500.00 only
Threshold Limit (for cases other than nomination/joint accounts with survivorship
clause) and its Designated Authorities
The RBI had advised the Banks to fix minimum threshold limits upto which claims by
legal heirs could be settled against indemnity letter from claimants, without insisting on
legal representations, sureties etc. In the absence of nomination and when there are no
disputes among the claimants, the bank will pay the amount outstanding in the account
of deceased person against joint application and indemnity by all legal heirs or the
person mandated by the legal heirs to receive the payment on their behalf without
insisting on legal documents upto the limit which may be approved by the Banks
Board. This is to ensure that the common depositors are not put to hardship on account
of delays in completing legal formalities.
In view of the foregoing, the undernoted Threshhold limits for approval of deceased
depositor claim cases (other than nomination / joint accounts with survivorship clause)
and its designated authorities are as under:-
252
Functionaries
Branch Incumbents in Scale-I & II
Branch Incumbents in Scale III and IV
Branch Incumbents in Scale V and above
RLCC-RH headed by DGM
RLCC-RH headed by GM
GM Committee at Head Office
HLCC-ED at Head Office
CAC at Head Office
For the settlement of the above threshold limit, all papers mentioned against Sr No 3A of
Annexure C shall be obtained.
In order to further simplify the settlement of claims and to help the legal heirs of the
deceased account holders with credit balance of ` 25000/- and below, the following subthreshold limit has been approved
Functionary
Sub- Threshold limit
Branch Incumbent/ Incumbent Incharge ` 25000/- and below
(in all scales)
For the settlement of the Sub-threshold limit ie ` 25000/- and below, papers mentioned
against Sr No 3B of Annexure C shall be obtained.
253
Savings / Nominee
Current
A/c
Joint A/c
(Either or
Survivor)
Joint A/c
(Former /
Latter or
Survivor)
I. On death I. On death I. On death
of
``one of
one of Former /
depositor depositor Latter
Legal
Survivor
Survivor
Heirs
of
deceased
+
II.
On II.
On
survivors
death
of death
of
both
both
II.
On depositors depositors
death of all - Nominee Nominee
depositors
- Nominee
- do - do - do -
Joint A/c
(Anyone or
Survivors)
1. On death of
one or more
depositor/s
Survivor/s
II. On death of
all depositors
Nominee
B.
Term
Deposit
Account
- do - do (on
maturity of (on
(on
(on
(on maturity of
deposit)
maturity of maturity of maturity of deposit)
deposit)
deposit)
deposit)
C.
Premature
- do - do - do - do - do withdrawal (As
per (As
per (As
per (As
per (As per terms
of FD
terms of terms
of terms
of terms
of of contract)
contract)
contract)
contract)
contract)
254
2. Without Nomination
Sr. Nature of Single
Joint A/c
No. Account
Depositor (operated
jointly)
A
Savings / Legal
Current
Heirs or
A/c
person
mandated
by them
B.
C.
Term
Deposit
Account
Joint A/c
(Either or
Survivor)
Joint A/c
(Former /
Latter or
Survivor)
Survivor
JJoint A/c
(Anyone or
Survivors)
I. On death Survivor
of
one
depositor
Legal
Heirs
of
deceased
+
II.
On II.
On
survivors
death
of death
of
both
the both
the
II.
On depositors depositors
death of all
Legal
Legal
depositors heirs of all heirs of all
Legal the
the
heirs of all depositors depositors
the
depositors
- do - do - do -
I. On death of
one or more
depositor/s
Legal Heirs
of deceased
+ survivors
(on
maturity of
deposit)
- do (As
per
terms
of
contract)
(on maturity
of deposit)
- do (on
maturity of (on
deposit)
maturity of
deposit)
Premature
- do - do withdrawal (As
per (As
per
of FD
terms of terms
of
contract)
contract)
(on
maturity of
deposit)
- do (As
per
terms
of
contract)
II. On death
of
all
depositors
Legal heirs
of all the
depositors
- do -
B can operate
B + Legal heirs of A
Legal heirs of A + Legal heirs Legal heirs of A + Legal heirs
of B
of B
A+B+C
A dies
A + B die
B + C can operate
C can operate
A + B + C die
255
B + C+ Legal heirs of A
C + Legal heirs of A + Legal
heirs of B
Legal heirs of all
A dies
Both A + B die
B can operate
Nominee
B + Legal heirs of A
Nominee
B + C can operate
C can operate
B + C+ Legal heirs of A
C + Legal heirs of A + Legal
heirs of B
A+B+C
A dies
A + B die
A + B + C die
Nominee
256
Nominee
Annexure-C
Settlement of Claims in respect of Deceased Depositors
Check-list of Documents
Document obtained :
Claims
Yes/No
1. Accounts with Nomination clause:
(i) Application for Deceased Claim from Nominee/
Guardian of nominee (Annexure-D)
(ii) Copy of Death Certificate (Verified with original)
(iii) Identify proof (as defined at point A (ii), under
Documentation)
2. Joint Accounts with Either or Survivor clause:
(i) Application for Deceased Claim from Survivor(s)
(Annexure-D)
(ii) Copy of Death Certificate (Verified with original)
3. A.
For cases other than Nomination/Joint
(For amounts up to threshold limit)
(i) Application for Deceased Claim (Annexure E)
257
Yours faithfully,
(Claimant(s))
258
2.
3. Details of living (i) Husband (ii) Wife (iii) Children (iv) Father (v) Mother (vi) children and
spouse of predeceased children (vii) Brothers (viii) Sisters. If Hindu Joint Family, the
name and address of the Karta and Co-parceners with their respective ages.
259
(Annexure E: Page2)
Full Name/Address
(i) _________________
(ii) _________________
(iii) _________________
(iv) _________________
(v) _________________
(vi)_________________
Occupation
___________
___________
___________
___________
___________
___________
Relationship with
Deceased
_______________
_______________
_______________
_______________
_______________
_______________
Age
________
________
________
________
________
________
: ____________________________________
:_____________________________________
:_____________________________________
:_____________________________________
________________________________________________
________________________________________________
________________________________________________
6. Whether the deceased has left any will, if so, name of executor
7. Liabilities in the name of deceased depositor in any branch of OBC.
260
(Annexure E: Page 3)
I/We submit the following documents. Please return the original death certificate to us after
verification:
1.
2.
3.
4.
We request you to pay the balance amount lying to the credit of the above named deceased
after deducting the liability, if any to .on my/our behalf.
I/We hereby solemnly affirm that the above statements are true and correct to the best of
my/our knowledge and belief.
Place:
Yours faithfully,
Date :
Signature of Claimant(s)
(i) Name of Claimant
Address
261
Signature
(The draft of the Indemnity Bond after completing the blanks be got typed on a non-judicial stamp paper of the
value to be verified locally. Every cutting should be initialed by all the executants.)
INDEMNITY BOND
THIS
INDEMNITY
BOND
made
at______________
on
_________
__________________
day
of
by
______________________________________________________
_________________________________________________________________________
_____R/O_________________________________________________________________
_________________________________________________________________________
_______ (hereinafter called the Principal Party/Parties which expression shall unless
repugnant to the context include his/her/their heirs, executors, administrators, successors
and assigns) of the First Part and
1.
resident
of
_________________________________________________________________
2.
Shri__________________________,
of_________________________________,
son
resident
of
262
had
died
Account No./s
Type of Account/s
1
2
3
AND WHEREAS the Principal Party/Parties and the Sureties have represented and assured
to the Bank that Shri/Smt._____________________________ has left behind the following
as his/her only legal heirs
Sr. No.
1
2
3
and they have requested the Bank to make payment of the balance in the abovementioned
account/s to Smt./Shri________________________ on their behalf as per the Authority
Letter dated __________________ / Affidavits submitted by other legal heirs of the
deceased or to themselves jointly.
AND WHEREAS the Bank has agreed to the request of the Principal Party/Parties and the
sureties and on their agreeing to indemnify and furnish guarantee to the Bank in the event to
their being any other claims to the aforesaid amount or in the event of their being any loss or
damage caused to the Bank as hereinafter mentioned, to make payment of the balance in
the abovementioned account/s aggregate amount of ` _____
NOW WHEREOF THIS INDEMNITY BOND witnesseth that in pursuance of the said
agreement
and
in
consideration
of
the
Bank
paying
amount
of
to
themselves
jointly with interest as per the policy of the Bank as applicable from time to time, receipt
263
1.
2.
1. Address____________________________
3.
_____________________________________
4.
2. Address_____________________________
(Principal Party/Parties)
1. ________________________
2. ________________________
(SURETIES)
MANAGER
ORIENTAL BANK OF COMMERCE
(A GOVT. OF INDIA UNDERTAKING)
N.B. :
Each page of the Indemnity Bond should be got signed by all the legal heirs of deceased depositor &
surities at the time of release of amount.
264
No.________________
dated
____________
in
favour
of
my/our
claim
as
No(s).______________
successor
standing
on
in
the
the
balance
name
of
in
the
___________
deceased
Account(s)
Shri/Smt/Kum.
________________________________. I/We do not have any other claim from the Bank
henceforth.
Place:
Date:
(Signature of father/mother)
265
(To be obtained from all legal heirs on Plain paper with photos of legal heirs affixed thereon)
2.
266
4.
5.
a)
b)
c)
d)
e)
That there are no other legal heirs of Late *Shri/Smt./Km. ____________________
except the persons mentioned in the above para.
That the deceased depositor has/has not left a Will.
267
ANNEXURE I (Page 2)
That no dispute or proceedings are pending any Court of Law with respect to the
amount lying in the account/s of *Late Shri/Smt./Km.________________________
mentioned in Para No.2 above.
That the balance lying in the aforementioned account/s of deceased
*Shri/Smt./Km._________________________
be
paid
to
Shri/Smt./Km.________________________ his/her legal heirs on our behalf and the
deponent shall execute the indemnity bond along with other claimants indemnifying
the Bank for the said payment being made jointly to all the legal heirs and
representatives.
6.
7.
DEPONENT/S
VERIFICATION :-
DEPONENT/S
N.S.
1.
2.
3.
4.
5.
6.
268
LETTER OF AUTHORITY
I/We_______________________________,
S/O|W/O|D/O________________________
aged about ___________ years, R/O____________________________________________
the legal heirs of the deceased Late Shri/Smt._________________________,
S/O________________________,
do
hereby
authorize
Shri/Smt.______________________,
S/O|W/O________________________,
aged
about___________
years,
R/O_____________________________________________________________, to accept
payment
of
`_______________________________________
lying
in
____________________A/c with ___________________________________ branch of
Oriental Bank of Commerce in the name of
Late _________ ___ ___ ______
_____________ _______________.
I/We hereby solemnly declare that I/We shall make no claim on the Bank in respect of the
amount above mentioned and I/We hereby surrender my/our right, title and interest in the
said money in favour of Shri/Smt._____________________________, the recipient of the
amount.
Dated : _____________________
269
9. Terms of payment :-
RECOMMENDATIONS :We have scrutinized and verified the entire claim papers including affidavits/ undertaking/
relinquishment deed/ power of attorney and found that the same are in order. We have also
placed all the said papers/ documents before Sh______________________, Legal
Retainer/Panel advocate. He has also opined that the same are in order and amount lying in
270
the accounts of deceased depositor may be released to claimants on the basis of said
papers. It is accordingly recommended as under:1)
OR
2)
The payment of the balances lying in the aforesaid account/s be paid jointly to all
the aforesaid legal heirs on proper identification and on their executing an
indemnity bond on a non-judicial stamp paper of the value to be verified locally
with two financially sound and respectable sureties to the satisfaction of the
Branch Incumbent.
Branch Incumbent
B/O__________________
*Strike whichever is not applicable.
271
duplicate which should be got signed by all the legal heirs / person(s) mandated by the legal
heirs and two independent witnesses and the estimated value of the articles be estimated.
One copy of inventory prepared as above will be kept on branch record and the other will be
given to the Legal Heirs after obtaining receipt/acknowledgement. After ascertaining the
valuation of the contents the same should be sealed and kept back in the locker and locker
shall be sealed in the presence of all concerned. The sanction will be given by the
functionary in whose powers the value of the articles so ascertained will fall. However,
before the locker is opened the legal heirs shall clear all the arrears of locker rent and a copy
of the same shall be attached to the claim papers.
Documents to be taken at Second stage (already circulated vide circular dated 26.03.2007)
for getting the approval by competent authority:
1. Copy of death certificate duly verified by Branch Incumbent after comparing it with the
original.
2. Affidavit
3. Indemnity Bond.
4. Report and recommendations of Branch Incumbent on the office note
5. If the matter falls within Head Office Powers, all the papers obtained at 1 st stage & 2nd
stage shall be sent to Head Office alongwith the recommendations of Regional Head
and opinion of Legal Retainer.
2.
With Nomination
Safe custody article/s will be delivered to the nominee on identification (such as Election ID
card, PAN card, Passport, etc) and verification of proof of death of depositor and after
satisfying that the nomination has been made under Section 45 ZC of the Banking
Regulation Act and on the form prescribed there under is complete in all respects. Before
permitting the nominee to collect the articles under safe custody, the bank would prepare an
inventory in duplicate of the articles in the presence of nominee(s) and two independent
witnesses and will be got signed by them. One copy of the same will remain on the branch
records and the other will be given to the nominee after obtaining receipt/acknowledgement.
Without Nomination
The safe custody articles will be taken out in the presence of all the Legal heir(s)/person/s
mandated by the Legal Heirs of the deceased depositor of articles alongwith two
independent witnesses and an inventory of the Articles under safe custody will be prepared
in duplicate which should be got signed by all the legal heirs/person(s) mandated by the
Legal Heirs and two independent witnesses. One copy of inventory prepared as above will
be kept in branch record and the other will be given to the Legal Heirs after obtaining
receipt/acknowledgement. The value of the inventory so prepared shall be estimated by the
branch incumbent. After ascertaining the valuation of the contents the same shall be sealed
and be kept in the safe custody. The sanction will be given by the functionary in whose
powers the amount so ascertained will fall.
The following documents be obtained at the time of handing over the safe custody articles to
the claimants:
273
1. Copy of death certificate duly verified by Branch Incumbent after comparing it with the
original.
2. Application
3. Proof to establish Identity as Legal Heirs.
4. Affidavit
5. Indemnity Bond.
6. Report of Branch Incumbent on the office note.
The discretionary powers for the Branch Incumbent is restricted to claims by Legal heirs of
Class-I in respect of Hindus Male & Female only (which includes Buddist, Jaina & Sikh by
religion, as per Hindu Succession Act 1956), whereas the different functionaries at Regional
Offices / Head Office are empowered to deal with all types of claims. The other legal heirs
shall obtain and submit Legal Representation / Court orders for collecting the amount /
articles of the deceased depositor / operation of locker. The list of Legal Heirs of different
religions in whose favour the claims to the deposits / Safe Deposit Locker / Safe Custody
Articles can be settled is enclosed along with guidelines (Annexure 3). The claims relating
to Muslim & other communities and claims by guardian other than natural guardian and all
other claims shall be dealt with at Regional office level even when the claim amount falls
within Branch powers. However, the claims on the basis of court orders, viz. probate on
will/succession certificate/Letter of Administration can be settled by the Branch Incumbent
irrespective of the amount involved. Further claims in respect of Either or Survivor / Former
or Survivor accounts or with nomination clause shall be disposed of at branch level as per
mandate of depositor/Locker hirer.
Precautions to be exercised before handing over the contents of the Lockers/safe custody
articles:
a) Branch should exercise due care and caution in establishing the identity of the
survivor(s)/nominee(s) and the fact of death of the locker hirer by obtaining
appropriate documentary evidence (copy of death certificate).
b) Branch should make diligent efforts to find out if there is any order from a
competent court restraining the bank from giving access to the locker of the
deceased.
c) Branch should make it clear to the survivor(s)/nominee(s) that access to
locker/safe custody articles is given to them only as trustee of the legal heirs of
the deceased locker hirer i.e. such access given to him / her shall not affect the
right or claim which any person may have against the survivor(s)/nominee(s) to
whom access is given.
d) Branches are not required to open sealed/closed packets left with them for
safe custody or found in the locker while releasing them to the nominee(s) and
surviving locker hirers/depositor of safe custody articles.
e) The inventory shall be on the prescribed form which is annexed herewith
(Annexure 1 & 2). The inventory regarding the safe deposit locker/safe
custody articles with nomination facility will be prepared as per the format
prescribed in the directions related to nomination facility.
The above procedure shall supplement the directions in this regard formulated and
circulated by O&M Department and other instructions contained in the earlier circulars in
respect of locker hirer/deceased depositor of articles/deceased depositor which are not
inconsistent with the present guidelines shall also survive and continue to be in force.
274
ANNEXURE 1
Form of Inventory of articles left in safe custody with banking company
The following inventory of articles left
branch, by Shri/ Smt.
receipt dated
was taken on this
Sr.
No.
in
safe
custody with____________________
(deceased) under an agreement/
day of
20
.
(legal heirs)
.
Address
OR
Address
Signature ____________________
Signature ____________________
I, Shri/ Smt.
, legal heirs/ appointed on behalf of minor legal heirs
hereby acknowledge receipt of the articles comprised and set out in the above inventory together
with a copy of the said inventory.
Shri/ Smt.
Shri/ Smt.
(legal heirs)
Signature
Date & Place
Signature
Date & Place
275
ANNEXURE 2
Form of Inventory of Contents of Safety Locker Hired from the Banking Company
The following inventory of contents of Safety Locker No.
the Safe Deposit Vault of
,
.
*hired by Shri/ Smt.
*hired by Shri/ Smt. (i)
(ii)
(iii)
was taken on this
Sr.No.
located in
Branch at
For the purpose of inventory, access to the locker was given to the legal heirs
Who produced the key to the locker.
By breaking open the locker under his/ her/ their instructions.
The above inventory was taken in the presence of :
1. Shri/ Smt.
(legal heirs)
Address
.
.
(Signature)
OR
2. Shri/ Smt.
Address
(legal heirs)
.
.
(Signature)
AND
Shri/ Smt.
Address
.
Survivors of
(Signature) Joint hirers
OR
Shri/ Smt.
Address
(legal heirs)
.
.
(Signature)
Shri/ Smt.
Address
(legal heirs)
.
.
(Signature)
2.
Shri/ Smt.
Address
(legal heirs)
.
.
(Signature)
I, Shri/ Smt.
We, Shri/ Smt.
(legal heirs)
(legal heires) , Shri / Smt.
276
Shri/ Smt.
Signature
Date & Place
(legal heirs)
Shri/ Smt.
Signature
(Survivor)
.
.
Shri/Smt.
Signature
Date & Place
277
(Survivor)
.
.
Annexure 3
LEGAL HEIRS
Legal Heirs of Hindu
1(i) Hindu Male (Class -1 Legal Mother, Widow, Sons, Daughters, Sons of
Heirs)
predeceased son, widow of predeceased son,
(Will inherit simultaneously)
daughter of predeceased son, widow of a
predeceased son of a predeceased son, Sons of
predeceased son of predeceased son, daughter of
predeceased son of predeceased son, sons of
predeceased daughter, daughter of predeceased
daughter, Sons of predeceased daughter of
predeceased a daughter, daughter of predeceased
daughter of a predeceased daughter, Daughter of
predeceased son of a predeceased daughter,
Daughter of predeceased daughter of a predeceased
son.
If there is no Class-1, Legal Heirs of a Hindu Male then the property goes to Class-II
Legal Heirs (Preference-wise)
Class-II Legal Heirs
I
Father
II
1 Sons daughters son
2 Sons Daughters Daughter
3 Brother
4 Sister
III
1 Daughters sons son
2 Daughters sons daughter
3 Daughters daughters son
IV
1 Brothers son
2 Sisters son
3 Brothers Daughter
4 Sisters Daughter
V
Fathers father, Fathers Mother
VI
Fathers Widow, Brothers Widow
VII
Fathers Brother, Fathers Sister
VIII
Mothers Father, Mothers Mother
IX
Mothers Brother, Mothers Sister
If there are no heir of any of the two classes (I & II) then upon the agnates of the deceased,
AND
If there is no agnate then upon the cognate of deceased
1(ii) Hindu
Female
(preference Firstly: Sons, Daughters, Husband, Sons of
wise)
predeceased son, daughters of predeceased son,
sons of predeceased daughter, daughters of
predeceased daughter.
Secondly: Heirs of her husband
Thirdly: Mother and father
Fourthly: Heirs of father
Lastly: Heirs of mother.
{Sec.15(i)}
278
279
ii
Sons
Daughter
2/3 share if there are more than one sons daughter and this
2/3 share will be divided among all the sons daughters.
Uterine
Brother/ Sister
9
10
Full Sister
11
Consanguine
sister
12
2 RESIDUARIES 1
2
3
4
Descendants
Son (if there is a daughter she will take as residuary with the son,
the son taking a double portion)
2
Sons son h.I.s. The nearer in degree excluding the more remote.
Two or more sons inherit in equal shares.
Ascendants
1
Father
2
True grandfather h.I.s. The nearer in degree excluding the more
remote
Descendants
1
Full brother (Full sister takes as residuary with full brother, the
of father
brother taking a double portion)
2
Full sister (In default of full brother and the other residuaries
above names, the full sister takes the residue if any, if there be
1. A daughter or daughters, or 2. A sons daughter or daughters
h.l.s or even if there be 3. One daughter and a sons daughter or
daughters h.l.s.
3
Consanguine brother,(Consanguine sister takes a residuary with a
consanguine brother, the brother, taking a double portion.)
4
Consanguine sister: in default of consanguine brother and the
other residuaries above named, the consanguine sister takes the
residue, if any. If there be 1. A daughter or daughters, or 2. A
sons daughters h.l.s or even if there be 3. One daughter and a
sons daughter or daughters h.l.s.
5
Full brothers son
6
Consanguine brothers son
7
Full brothers sons son
8
Consanguine brothers sons son
Then come remoter male descendants of No. 7 and No. 8 i.e. the son of
No. 7, then the son of No. 8, then the sons son of No. 7, then the sons
son of No. 8 and so on like order.
Descendants
1
Full paternal uncle
of
true 2
Consanguine paternal uncle
grandfather
3
Full paternal uncles son
h.l.s.
4
Consanguine paternal uncles son.
5
Full paternal uncles sons son
6
Consanguine paternal uncles sons son.
Then come remoter male descendants of No. 5 and No. 6 in like
order and manner as descendants of No. 7 & 8 as descendants of
father.
7
Male descendants of more remote true grandfather in like order
and manner as deceased paternal uncles and their sons and
sons sons.
3 Distant
These are those relations by blood who neither shares nor residuaries.
kindered
1
Daughters children
2
Sons daughters children
3
Daughters grand children
4
Sons sons daughters children
5
Daughters great grand children, so on and so forth.
Of the above group each in turn must be exhausted before any member
of the next group can succeed.
4 Successor by
Successor by contract is a person who derives his right of succession
contract
under a special kind of contract with the deceased.
282
5 Acknowledged
kinsman
284
286
287
Widow/
Widower/
Children/
Parents
288
Pre-deceased
son/ daughter
If the Parsi dies intestate and has a pre-deceased son then the
share of the pre-deceased son shall go the widow and children of
the pre-deceased son.
The share of the pre-deceased daughter shall be divided equally
among her children.
Schedule
II
1. Father and Mother.
(Part I)
2. Brother and Sisters (other than half brother and sisters)
(Sec. 54.d)
and lineal descendants of such of them as shall have predeceased the intestate.
3. Paternal and maternal grandparents.
4. Children of paternal and maternal grandparents and the
lineal descendants of such of them as have pre-deceased
the intestate.
5. Paternal and maternal grandparents parents.
6. Paternal maternal grandparents parents children and the
lineal descendants of such of them as have pre-deceased
the intestate.
When a parsi dies leaving neither a lineal descendants nor a widow or widower nor
a widow or widower of any lineal descendants, his or her next of kin, in the order
set forth in Part II of Schedule II, shall be entitle to succeed to whole of the
property and first in the schedule shall be preferred to those standing second,
second to the third, and so on in succession and each male and female standing in
the same degree of propinquity shall receive equal shares. (as per sec. 55)
Schedule II Part II (sec 55)
1. Father and Mother.
2. Brother and Sisters (other than half brother and sisters) and lineal
descendants of such of them as shall have pre-deceased the intestate.
3. Paternal and maternal grandparents.
4. Children of paternal and maternal grandparents and the lineal descendants
of such of them as have pre-deceased the intestate.
5. Paternal and maternal grandparents parents.
6. Paternal and maternal grandparents parents children and the lineal
descendants of such of them as have pre-deceased the intestate.
7. Half brothers and sisters and the lineal descendants of such of them as
have pre-deceased the intestate.
8. Widows of brothers or half brothers and widowers of sister or half sisters.
9. Paternal or maternal grand parents childrens widows or widowers
10. Widows or widowers of the deceased lineal descendants of the intestate
who have not married again before the death of the intestate.
289
290
Annexure 4
CONSOLIDATED STATEMENT OF DECEASED CLAIM CASES SETTLED BY HEAD OFFICE / BRANCH / REGIONAL OFFICE UNDER THEIR POWERS
REGION :
PERIOD:
CASES
WITHIN
Branch
power
R/o
Power
Head
Office
Power
291
No. of settlement
cases disposed of
within 1 month
Nomi Succe Leg
natio ssion
al
n
Certif Doc
icate
um
ents
No. of settlement
cases disposed of
beyond 1 month
Nomi Succe Leg
natio ssion
al
n
Certif Doc
icate
um
ents
Reason for
delay
in
each cases