Вы находитесь на странице: 1из 291

DEPARTMENT : RECOVERY & LAW DEPARTMENT

Circular No. HO/REC & LAW/ 16/ 2014-15/ 525

Date: 23-09-2014

TO : ALL BRANCHES/ OFFICES


REG : REVIEW / AMENDMENT IN RECOVERY POLICY OF THE BANK
The Recovery Policy of the Bank is reviewed and amended to the extent desirable every
year on the basis of feedback received from field functionaries as well as intricacies
came across while handling settlement proposals.
Also, wherever policy guidelines are received from RBI, Ministry of Finance or any other
regulatory body, the same are also incorporated in this policy with a view to updating it.
Accordingly, the Recovery Policy of the Bank has been thoroughly reviewed and
updated. Now, the same is being forwarded herewith as a booklet and applicable
contents of the same be followed by field Functionaries.
In nutshell changes brought in this Recovery Policy are:
1. Minimum indicative settlement amount in accounts covered under CGTMSE, should be
amount equal to more than the amount to be received from the Corporation.
2. Valuation of properties should be marked For Bank Purpose and not for General
Purpose.
3. All properties invariably be visited by specified authorities for verification and
assessment before settlement.
4. The authority to decline the settlement offer has been defined and no settlement
proposal be rejected without counter offer.
5. Action under SARFAESI Act, is to be initiated immediately after account/s turn NPA.
6. All NPA accounts without any cut off date and amount, are eligible for settlement under
Lok Adalat.
All field functionaries are advised to go through and follow relevant provisions of the
Recovery Policy of the Bank while handling recovery cases.
In case of doubt over any issue, matter may be referred to Recovery & Law Department,
Head Office for necessary clarification.

S.K. Sharma
General Manager (Rec. & Law)
1

CONFIDENTIAL
FOR USE OF BANK OFFICIALS ONLY

ORIENTAL BANK OF COMMERCE


RECOVERY & LAW DEPARTMENT
HEAD OFFICE: NEW DELHI

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

On the basis of feedback received from the field functionaries as well as


intricacies coming across while handling settlement proposals, the Banks
Recovery Policy is reviewed from time to time.

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.

September 23, 2014

(S.L. BANSAL)

Gurgaon

CHAIRMAN & MANAGING DIRECTOR

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.

September 23, 2014

(S.K. SHARMA)

Gurgaon

GENERAL MANAGER (REC. & LAW)

INDEX
S.NO.

CHAPTER

1.

PRUDENTIAL NORMS ON INCOME RECOGNITION,


ASSET
CLASSIFICATION
AND
PROVISIONING
PERTAINING TO ADVANCES

6-31

2.

MANAGEMENT OF NPAS AND GUIDELINES FOR


FOLLOW UP

32-43

3.

COLLECTION OF DUES AND REPOSSESSION OF


SECURITIES

44-49

4.

COMPROMISE & NEGOTIATED SETTLEMENTS IN NPA


ACCOUNTS

50-91

5.

LOK ADALAT

92-97

6.

THE SECURITISATION & RECONSTRUCTION OF


FINANCIAL ASSETS & ENFORCEMENT OF SECURITY
INTEREST ACT, 2002

7.

RECOVERY THROUGH LEGAL RECOURSE

144-182

REHABILITATION OF SICK ASSETS

183-189

9.

WILFUL DEFAULTERS

190-207

10.

POLICY FOR SALE OF FINANCIAL ASSETS TO:


1. SECURITISATION
COMPANY/
RECONSTRUCTION COMPANY CREATED
UNDER SARFAESI ACT, 2002 and
2. OTHER BANKS/FIs & NBFCS

208-222

11.

GUIDELINES / POLICY FOR FINAL CLOSURE OF


TECHNICALLY WRITTEN OFF (TWO) ACCOUNTS WITH
MEAGRE PRESENT OUTSTANDING OF RE.1/- OR
MORE

223-225

12.

POLICY ON EMPANELMENT / ENGAGEMENT OF


RECOVERY AGENTS FOR RECOVERY OF BANKS
DUES

226-249

13.

SETTLEMENT OF DECEASED DEPOSITOR CLAIM


CASE

250-291

PAGE NO.

98-143

CHAPTER - I

PRUDENTIAL NORMS ON INCOME RECOGNITION,


ASSET CLASSIFICATION AND PROVISIONING
1.

NPAs OF OUR BANK

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).

1 . 1 . Year-Wise Position of Asset Classification, Gross & Net NPAs and


Gross Advances
The NPA position of the Bank for the last 10 years from the year ended March 31,
2005, is given below:
(` in Crore)
YEAR

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

1.2 Background:- A non-performing asset (NPA) was defined as a credit facility in


respect of which the interest and/ or installment of principal has remained overdue for a
specified period of time. The specified period was reduced in a phased manner as
under:Year ending March 31
Specified period
1993
Four quarters
1994
Three quarters
1995
Two quarters (i.e. 180 days)
2004
One quarter (i.e. 90 days)
With a view to moving towards international best practices and to ensure greater
transparency, it was been decided to adopt the 90 days overdue norm for identification
of NPAs, from the year ended March 31, 2004.
1.3 PRUDENTIAL NORMS
For the guidance of the Branches / Regional Offices, we reproduce below the updated
guidelines on income recognition asset classification and provisioning as circulated by
Apex Bank vide master circular RBI/2014-15/74 DBOD.No.BP.BC.9/21.04.048/2014-15 dated
July 1, 2014

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.

3.4 Interest Application


On an account turning NPA, banks should reverse the interest already charged and not
collected by debiting Profit and Loss account, and stop further application of interest.
However, banks may continue to record such accrued interest in a Memorandum
account in their books. For the purpose of computing Gross Advances, interest recorded
in the Memorandum account should not be taken into account.
3.5 Computation of NPA Levels
Banks to compute their Gross Advances, Net Advances, Gross NPAs and Net NPAs, as
per the format in Annex-1.
4. ASSET CLASSIFICATION
4.1 Categories of NPAs
Banks are required to classify non performing assets further into the following three
categories based on the period for which the asset has remained non performing and the
realisability of the dues:
i. Sub standard Assets
ii. Doubtful Assets
iii. Loss Assets
4.1.1 Substandard Assets
With effect from March 31, 2005, a sub standard asset would be one, which has
remained NPA for a period less than or equal to 12 months. Such an asset will have well
defined credit weaknesses that jeopardise the liquidation of the debt and are
characterised by the distinct possibility that the banks will sustain some loss, if
deficiencies are not corrected.
4.1.2 Doubtful Assets
With effect from March 31, 2005, an asset would be classified as doubtful if it has
remained in the sub standard category for a period of 12 months. A loan classified as
doubtful has all the weaknesses inherent in assets that were classified as sub-standard,
with the added characteristic that the weaknesses make collection or liquidation in full,
on the basis of currently known facts, conditions and values highly questionable and
improbable.
4.1.3 Loss Assets
A loss asset is one where loss has been identified by the bank or internal or external
auditors or the RBI inspection but the amount has not been written off wholly. In other
words, such an asset is considered uncollectible and of such little value that its
continuance as a bankable asset is not warranted although there may be some salvage
or recovery value.

10

4.2 Guidelines for classification of assets


4.2.1 Broadly speaking, classification of assets into above categories should be done
taking into account the degree of well- defined credit weaknesses and the extent of
dependence on collateral security for realisation of dues.
4.2.2 Banks should establish appropriate internal systems (including technology enabled
processes) for proper and timely identification of NPAs, especially in respect of high
value accounts. The banks may fix a minimum cut off point to decide what would
constitute a high value account depending upon their respective business levels. The
cutoff point should be valid for the entire accounting year. Responsibility and validation
levels for ensuring proper asset classification may be fixed by the banks. The system
should ensure that doubts in asset classification due to any reason are settled through
specified internal channels within one month from the date on which the account would
have been classified as NPA as per extant guidelines. Our Bank has fixed ` 50.00 lacs
and above accounts as high value accounts.
4.2.3 Availability of security / net worth of borrower/ guarantor
The availability of security or net worth of borrower/ guarantor should not be taken into
account for the purpose of treating an advance as NPA or otherwise, except to the extent
provided in Para 4.2.9.
4.2.4 Accounts with temporary deficiencies
The classification of an asset as NPA should be based on the record of recovery. Bank
should not classify an advance account as NPA merely due to the existence of some
deficiencies which are temporary in nature such as non -availability of adequate drawing
power based on the latest available stock statement, balance outstanding exceeding the
limit temporarily, non -submission of stock statements and non -renewal of the limits on
the due date, etc. In the matter of classification of accounts with such deficiencies banks
may follow the following guidelines:
i) Banks should ensure that drawings in the working capital accounts are covered
by the adequacy of current assets, since current assets are first appropriated in
times of distress. Drawing power is required to be arrived at based on the stock
statement which is current. However, considering the difficulties of large
borrowers, stock statements relied upon by the banks for determining drawing
power should not be older than three months. The outstanding in the account
based on drawing power calculated from stock statements older than three
months, would be deemed as irregular.
A working capital borrowal account will become NPA if such irregular drawings are
permitted in the account for a continuous period of 90 days even though the unit
may be working or the borrower's financial position is satisfactory.
ii) Regular and ad hoc credit limits need to be reviewed/ regularised not later than
three months from the due date/date of ad hoc sanction. In case of constraints
such as non- availability of financial statements and other data from the
borrowers, the branch should furnish evidence to show that renewal/ review of

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

4.2.15 Restructuring/ Rescheduling of Loans Project under Implementaion


The restructuring / rescheduling of standard as well as NPA accounts and upgradation of
restructured / rescheduled NPA accounts are looked after by Credit Administration
Deptt., Corporate Office, Gurgaon.
4.2.16 Advances under rehabilitation approved by Board for Industrial and
Financial Reconstruction (BIFR) / Term Lending Institutions (TLI)
Banks are not permitted to upgrade the classification of any advance in respect of which
the terms have been renegotiated unless the package of renegotiated terms has worked
satisfactorily for a period of one year. While the existing credit facilities sanctioned to a
unit under rehabilitation packages approved by BIFR/term lending institutions will
continue to be classified as sub standard or doubtful as the case may be, in respect of
additional facilities sanctioned under the rehabilitation packages, the Income
Recognition, Asset Classification norms will become applicable after a period of one year
from the date of disbursement.
4.2.17 OUTSTANDING IN CREDIT CARD OPERATIONS
It will be treated by the branches as part of advances under the head-cash credits,
overdrafts and loans repayable on demand. It has been further clarified by RBI vide letter
No.BP.BC.25/21.04.048/2000-2001 dated 11.09.2001 that all dues from credit card
operations including dues from other Banks/Organizations should be classified under
advances. However, any item which is in the nature of revenue need not be included
under advances.
(i) In credit card accounts, the amount spent is billed to the card users through a monthly
statement with a definite due date for repayment. Banks give an option to the card users
to pay either the full amount or a fraction of it, i.e., minimum amount due, on the due date
and roll-over the balance amount to the subsequent months billing cycle.
(ii) A credit card account will be treated as non-performing asset if the minimum amount
due, as mentioned in the statement, is not paid fully within 90 days from the next
statement date. The gap between two statements should not be more than a month.
(iii) Banks should follow this uniform method of determining over-due status for credit
card accounts while reporting to credit information companies and for the purpose of
levying of penal charges, viz. late payment charges, etc., if any.
5 PROVISIONING NORMS
5.1 General
5.1.1 The primary responsibility for making adequate provisions for any diminution in the
value of loan assets, investment or other assets is that of the bank managements and
the statutory auditors. The assessment made by the inspecting officer of the RBI is
furnished to the bank to assist the bank management and the statutory auditors in taking

17

a decision in regard to making adequate and necessary provisions in terms of prudential


guidelines.
5.1.2 In conformity with the prudential norms, provisions should be made on the nonperforming assets on the basis of classification of assets into prescribed categories as
detailed in paragraphs 4 supra. Taking into account the time lag between an account
becoming doubtful of recovery, its recognition as such, the realisation of the security and
the erosion over time in the value of security charged to the bank, the banks should
make provision against substandard assets, doubtful assets and loss assets as below:
5.2 Loss assets
Loss assets should be written off. If loss assets are permitted to remain in the books for
any reason, 100 percent of the outstanding should be provided for.
5.3 Doubtful assets
i. 100 percent of the extent to which the advance is not covered by the realisable value of
the security to which the bank has a valid recourse and the realisable value is estimated
on a realistic basis.
ii. In regard to the secured portion, provision may be made on the following basis, at the
rates ranging from 25 percent to 100 percent of the secured portion depending upon the
period for which the asset has remained doubtful:
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

Illustrations :I. The outstanding amount as on 30th June 2011


Realisable value of security
Date of NPA

: Rs.10,00,000/: Rs. 8,00,000/: 31.03.2010

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

II. The outstanding amount as on 30th June 2011


: ` 10,00,000/Realisable value of security
: ` 8,00,000/Date of NPA
: 31.03.2008
Period for which the advance has remained in NPA category as on 30th June
2011: 3 years 3 months (i.e. A/c is doubtful for more than 2 years)
Provisioning requirement as the new rates of Provisioning:
As on
Asset
Provisions on
Provision on
Total
Classification secured portion
unsecured
(Rs.)
portion
%
Amt.
%
Amt.
th
30
June Doubtful
40
3,20,000 100
2,00,000 5,20,000
2011
1 to 3 years
(D-2)
III. The outstanding amount as on 30th June 2011: ` 10,00,000/Realisable value of security
: ` 8,00,000/Date of NPA
: 31.03.2007
Period for which the advance has remained in NPA category as on 30 th June
2011: 4 years 3 months(i.e. Doubtful > 3 years)
Provisioning requirement as per the rates of Provisioning:
As on
Asset
Provisions on
Provision on
Total (`)
Classification
secured portion
unsecured
portion
%
Amt.
%
Amt.
th
30
June Doubtful
100 8,00,000
100 2,00,000 10,00,000
2011
More than
3
years (D-3)
Note: Valuation of Security for provisioning purposes
With a view to bringing down divergence arising out of difference in assessment of the
value of security, in cases of NPAs with balance of ` 5 crore and above stock audit at
annual intervals by external agencies appointed as per the guidelines approved by the
Board would be mandatory in order to enhance the reliability on stock valuation.
Collaterals such as immovable properties charged in favour of the bank should be got
valued once in three years by valuers appointed as per the guidelines approved by the
Board of Directors.
However our Bank has decided to get the securities verified/ valuation obtained once
in two years as per RMD circular No. HO/RMD/77/2013-14/842 dated 17.12.2013.

5.4 Substandard assets


(i) A general provision of 15 percent on total outstanding should be made without making
any allowance for ECGC guarantee cover and securities available.
(ii) The unsecured exposures which are identified as substandard would attract
additional provision of 10 per cent, i.e., a total of 25 per cent on the outstanding balance.
However, in view of certain safeguards such as escrow accounts available in respect of
19

infrastructure lending, infrastructure loan accounts which are classified as sub-standard


will attract a provisioning of 20 per cent instead of the aforesaid prescription of 25 per
cent. To avail of this benefit of lower provisioning, the banks should have in place an
appropriate mechanism to escrow the cash flows and also have a clear and legal first
claim on these cash flows. The provisioning requirement for unsecured doubtful assets
is 100 per cent. Unsecured exposure is defined as an exposure where the realisable
value of the security, as assessed by the bank/approved valuers/Reserve Banks
inspecting officers, is not more than 10 percent, ab- initio, of the outstanding exposure.
Exposure shall include all funded and non- funded exposures (including underwriting
and similar commitments). Security will mean tangible security properly discharged to
the bank and will not include intangible securities like guarantees (including State
government guarantees), comfort letters etc.
(iii) In order to enhance transparency and ensure correct reflection of the unsecured
advances in Schedule 9 of the banks' balance sheet, it is advised that the following
would be applicable from the financial year 2009-10 onwards:
a) For determining the amount of unsecured advances for reflecting in schedule 9
of the published balance sheet, the rights, licenses, authorisations, etc., charged
to the banks as collateral in respect of projects (including infrastructure projects)
financed by them, should not be reckoned as tangible security. Hence such
advances shall be reckoned as unsecured.
b) However, banks may treat annuities under build-operate-transfer (BOT) model
in respect of road / highway projects and toll collection rights, where there are
provisions to compensate the project sponsor if a certain level of traffic is not
achieved, as tangible securities subject to the condition that banks' right to receive
annuities and toll collection rights is legally enforceable and irrevocable.
c) It is noticed that most of the infrastructure projects, especially road/highway
projects are user-charge based, for which the Planning Commission has
published Model Concession Agreements (MCAs). These have been adopted by
various Ministries and State Governments for their respective public-private
partnership (PPP) projects and they provide adequate comfort to the lenders
regarding security of their debt. In view of the above features, in case of PPP
projects, the debts due to the lenders may be considered as secured to the extent
assured by the project authority in terms of the Concession Agreement, subject to
the following conditions :
i) User charges / toll / tariff payments are kept in an escrow account where senior
lenders have priority over withdrawals by the concessionaire;
ii) There is sufficient risk mitigation, such as pre-determined increase in user
charges or increase in concession period, in case project revenues are lower than
anticipated;
iii) The lenders have a right of substitution in case of concessionaire default;
iv) The lenders have a right to trigger termination in case of default in debt service;
and

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.

21

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

iii) Loss assets


The entire asset should be written off. If for any reason, an asset is allowed to remain in
books, 100 percent of the sum of the net investment in the lease and the unrealised
portion of finance income net of finance charge component should be provided for.
5.9 Guidelines for Provisions under Special Circumstances
5.9.1 Advances granted under rehabilitation packages approved by BIFR/term
lending institutions
(i) In respect of advances under rehabilitation package approved by BIFR/term
lending institutions, the provision should continue to be made in respect of dues to
the bank on the existing credit facilities as per their classification as substandard
or doubtful asset.
(ii) As regards the additional facilities sanctioned as per package finalised by BIFR
and/or term lending institutions, provision on additional facilities sanctioned need
not be made for a period of one year from the date of disbursement.
(iii) In respect of additional credit facilities granted to SSI units which are identified
as
sick
[as
defined
in
Section
IV
(Para
4.7)
of
circular
RPCD.SME&NFS.BC.No.5/06.02.31/2013-14 dated July 1, 2013] and where
rehabilitation packages/nursing programmes have been drawn by the banks
themselves or under consortium arrangements, no provision need be made for a
period of one year.
5.9.2 Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs, gold
ornaments, government & other securities and life insurance policies would attract
provisioning requirements as applicable to their asset classification status.
5.9.3 Treatment of interest suspense account
Amounts held in Interest Suspense Account should not be reckoned as part of
provisions. Amounts lying in the Interest Suspense Account should be deducted from the
relative advances and thereafter, provisioning as per the norms, should be made on the
balances after such deduction.
5.9.4 Advances covered by ECGC guarantee
In the case of advances classified as doubtful and guaranteed by ECGC, provision
should be made only for the balance in excess of the amount guaranteed by the
Corporation. Further, while arriving at the provision required to be made for doubtful
assets, realisable value of the securities should first be deducted from the outstanding

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

Provision required to be made


Balance outstanding
Less: Value of security
Unsecured amount
Less: CGTMSE/CRGFTLIH cover (75%)
Net unsecured and uncovered portion:
Provision for Secured portion @ 40% of ` 1.50 lakh
Provision for Unsecured & uncovered portion @ 100% of ` 2.12 lakh
Total provision required

` 10.00 lakh
` 1.50 lakh
` 8.50 lakh
` 6.38 lakh
` 2.12 lakh
` 0.60 lakh
` 2.12 lakh
` 2.72 lakh

5.9.6 Take out finance


The lending institution should make provisions against a 'take out finance' turning into
NPA pending its take over by the taking over institution. As and when the asset is taken
over by the taking -over institution, the corresponding provisions could be reversed.
5.9.7 Reserve for Exchange Rate Fluctuations Account (RERFA)
When exchange rate movements of Indian rupee turn adverse, the outstanding amount
of foreign currency denominated loans (where actual disbursement was made in Indian
Rupee) which becomes overdue, goes up correspondingly, with its attendant implications
of provisioning requirements. Such assets should not normally be revalued. In case such
assets need to be revalued as per requirement of accounting practices or for any other
requirement, the following procedure may be adopted:

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.

5.9.8 Provisioning for country risk


Banks shall make provisions, with effect from the year ending March 31, 2003, on the net
funded country exposures on a graded scale ranging from 0.25 to 100 percent according
to the risk categories mentioned below. To begin with, banks shall make provisions as
per the following schedule:
Risk category ECGC Classification Provisioning Requirement (per cent)
Insignificant
A1
0.25
Low
A2
0.25
Moderate
B1
5
High
B2
20
Very high
C1
25
Restricted
C2
100
Off-credit
D
100

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)

Medium & long-term loans to farmers for agriculture (e.g. purchase of


agricultural implements and machinery, loans for irrigation and other
developmental activities undertaken in the farm).

(iii)

Loans to farmers for pre-harvest and post-harvest activities, viz., spraying,


weeding, harvesting, sorting, grading and transporting of their own farm
produce.

(iv)

Loans to farmers up to 50 lakh against pledge / hypothecation of agricultural


produce (including warehouse receipts) for a period not exceeding 12 months,
irrespective of whether the farmers were given crop loans for raising the
produce or not. (as amended by RPCD.CO.Plan.BC.72/04.09.01/2012-13 dt
03-05-13)

(v)

Loans to small and marginal farmers for purchase of land for agricultural
purposes.

(vi)

Loans to distressed farmers indebted to non-institutional lenders.

(vii)

(viii)

(vii) Bank loans to Primary Agricultural Credit Societies (PACS), Farmers'


Service
Societies (FSS) and Large-sized Adivasi Multi Purpose Societies
(LAMPS) ceded to or managed / controlled by such banks for on lending to
farmers for agricultural activities.
Loans to farmers under Kisan Credit Card Scheme.

(ix)

Export credit to farmers for exporting their own farm produce.

B. Loans to corporates including farmers' producer companies of individual farmers,


partnership firms and co-operatives of farmers directly engaged in Agriculture
Activities, up to an aggregate limit of ` 2 crore per borrower for the following purposes.
(i) Short-term loans for raising crops, i.e. for crop loans. This will include traditional / nontraditional plantations and horticulture.
(ii) Medium & long-term loans for agriculture (e.g. purchase of agricultural implements
and machinery, loans for irrigation and other developmental activities undertaken in
the farm).
(iii) Loans for pre-harvest and post-harvest activities, viz., spraying, weeding, harvesting,
grading and sorting.
(iv) Export credit for exporting their own farm produce.

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.

Doubtful Advances (a+b+c)


a

< 1 year

1-3 Years

>3 years

3.

Advances classified as Loss Assets

4.

Total

5.

Floating Provisions for Advances (only to


the extent they are not used as Tier II
Capital)

6.

DICGC / ECGC claims received and held


pending adjustment

7.

Part payment received and kept in


Suspense Account or any other similar
account

8.

Total (Sum of column 7 of Row 4+ Row 5


+ Row 6+ Row 7)

9.

Provision Coverage Ratio {(Row 8/Total


of Column 3 of Row 4)*100}

10.

If PCR < 70%, shortfall in provisioning to


achieve PCR of 70% ( 70% of Column 3 of
Row 4 Row 8)

11.a

Countercyclical Provisioning Buffer, if


bank has achieved PCR of 70% Floating Provisions for advances to the
extent not used as Tier II capital (Row 5)

11.b

Countercyclical Provisioning Buffer, if


bank has not achieved PCR of 70% Floating Provisions for advances to the
extent not used as Tier II capital (Row 5) +
Shortfall in provisioning to achieve PCR of
70%, if any (Row 10) which needs to be
built up at the earliest.

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

BASIS FOR CLASSIFICATION


Principal or interest payment not overdue for more than 30
days but account showing signs of incipient stress
Principal or interest payment overdue between 31 -60 days
Principal or interest payment overdue between 61-90 days

32

1.1.1 NPA Accounts


Despite taking all possible measures in terms of Banks guidelines to keep the accounts
in standard category, some accounts may slip to NPA category. It has been approved
that where realisable security is available, the Branch Head / Competent Authority will
initiate action under SARFAESI act, 2002 immediately after account/s turn NPA. In
other accounts which are not eligible for SARFAESI action, other recovery measures be
initiated.

2. Strategies for improving recovery


The following illustrative list of strategies/follow up measures may be adopted by the field
functionaries for improving recovery:
SARFAESI notice should be issued immediately in eligible accounts after the
account/s turn NPA apart from maintaining regular contact with the borrowers.
Help of Revenue Authorities should be sought in recovery of Priority Sector
Advances through State Recovery Acts.
SLBC forum, District Consultative Committee and BLBC forum should also be
effectively utilized. Further, the services of Farmers Club may also be utilized for
better recovery.
Regional Offices shall form a team of dedicated staff members having the special
aptitude for effecting recovery in not only NPA accounts but also in the weak &
irregular accounts.
Proper tempo should be built sufficiently in advance for launching of Recovery
Campaigns by holding Recovery Camps during Kharif and Rabi
harvesting/marketing seasons. Full involvement of branch staff should be
ensured in these Campaigns. While organizing Recovery Campaign, active
participation of Chronic & Identified Branches should be ensured for better
recovery from the borrowers.
Proper training to the field functionaries for improving their negotiation skill,
imparting good knowledge of recovery tools and recovery management.

3. Physical verification of securities:


On classifying an account as NPA, it is all the more important to immediately visit and
verify the primary and collateral securities and thereafter regularly at irregular
intervals so that the same are not diluted/ disposed off/ alienated by the obligants.
The following guidelines must be adhered to by the incumbents:
i) Incumbent incharge to ensure that title deeds of the charged securities are intact
and mortgage continues to be legally enforceable.
ii) All NPA accounts be distributed among branch officials as above for verification of
primary/collateral securities and proper record be maintained. The verification in
respect of securities charged to the Bank should be done through independent
discreet enquiries/market. At the time of verification of securities, the obligants

33

may also be followed up for regularization/ upgradation/ adjustment through


negotiated settlement.
iii) In case of any dilution/short fall in the securities is noticed, immediate action be
taken and efforts be made to strengthen the security aspect to safe guard Banks
interest.
iv) Details of other attachable assets of the obligants be ascertained/verified and
placed on Banks record and subsequently be got attached after filing of suit.
v) Cases of Fresh Slippage should be monitored meticulously in line with R&L Deptt
Circular No. HO:REC:20:2011-12:837 dated 01.03.2012 which includes
a) Recover the critical amount for upgradation.
b) Within 60 days of notice period under SARFAESI action, steps be initiated to
find a borrower by contacting nearby property dealers etc.
c) Social pressure be mounted on the borrower to bring him to the negotiating
table within 60 days mandatory notice period.
d) Efforts be made to ensure that the sale under SARFAESI does not fail as it
gives a wrong signal to the borrower as well as to the other prospective
bidders.
vi) Branch/R.O. shall insure that the limitation is kept live.

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.

4.2 Recovery through Securitization and Reconstruction of Financial Assets &


Enforcement of Securities Interest Act-2002 (SARFAESI Act-2002)
The SARFAESI ACT-2002 is a handy tool available with the secured creditors to deal
with the defaulters. Field functionaries should make effective use of the rights of
enforcement of security interest as provided in the Act for quicker resolution of NPAs.
The steps that are required to be taken for this purpose are given in detail in Chapter 6
on SARFAESI Act- 2002. Field functionaries are advised to meticulously follow the
procedure outlined in the Recovery Policy and the circulars issued from time to time.
The cases where enforcement of Banks security interest under the said Act is difficult
may be allotted to Enforcement Agents. The cases may be referred 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 be
specifically mentioned. The detailed guidelines for empanelment of Enforcement Agents

34

with Fee schedule, payment guidelines and ground rules to be observed by them have
been incorporated in Chapter 6 on SARFAESI Act- 2002.

4.3 Recovery through Legal Action:


Where SARFAESI Act-2002 is not applicable or where banks dues are not fully
recoverable through action under SARFAESI Act, legal action shall be initiated
immediately without loss of further time. In terms of Recovery of Debts due to Banks and
Financial Institutions Act 1993, Debt Recovery Tribunals have been established to
adjudicate claims involving an amount of ` 10 lakh and over in respect of amounts due to
Banks and FIs. Suit/Claim filed before Civil Courts/DRTs shall be pursued effectively. As
per the decision of Supreme Court in the matter of M/s Transcore Vs. Union of India &
Others SARFAESI action can continue/be proceeded with, without withdrawal of the DRT
application and that the remedies under SARFAESI Act and DRT Act are complimentary
to each other and can be taken up simultaneously.
While exercising the aforesaid powers, following guidelines shall be complied with
meticulously:
It should also be ensured that simultaneous action under SARFAESI Act has
already been initiated and vigorously followed up in all eligible cases,
irrespective of filing suit.
The Authorised Officer should ensure pursuance of the action under
SARFAESI Act 2002 in all the cases where no stay is granted by the Court on
borrowers appeal against such action. Further it is clarified that such cases
should not be misconstrued with filing of suit by the Bank for the recovery of
dues as both cases are different and hence limitation aspect should be taken
care of in all such cases.
While filing suit it should be ensured that Attachment Before Judgment affidavit
is invariably filed.
Before filing suit it should be ensured that staff accountability aspect has been
properly examined and placed before the authorities.

4.3.1 TRANSFER OF AMOUNT OUTSTANDING TO PROTESTED BILLS A/C


After grant of permission by the competent authority to file suit/ claim, the entire
amount outstanding in all the facilities be transferred to the PB/SF account after
seeking permission from the Regional Office/Head Office. As per RBI prudential
guidelines, interest debited in an account, which remained unrealized is to be
reversed not only for current year but also for the previous years upto the
date of transfer to PB Account.
The Protested Bills Account is opened in the Finacle system as per Job Card
circulated by CBS Cell. Before transferring the dues to Protested Bills Account (PB
account), self liquidating securities i.e. Bank Deposits/NSC/IVP/Units/LIC

35

Policy/Govt. Bonds/Units of Mutual Funds etc. should be encashed and credited to


the account to arrive at the net outstandings. All the operating accounts of the
borrower are to be closed by debit to one PB account and credit afforded to the
operating accounts i.e. Cash Credit/ Term Loan / Demand Loan / Bills etc. as the
case may be. No operations are allowed in PB account except credit of recovery
made from the borrower. Interest accrued on the total amount recoverable from
the borrower including other charges is to be calculated in the usual manner but
the same is recorded in the Memorandum. The credits received in the account are
adjusted to clear the outstandings in the PB account till the account shows a debit
balance of Re.1/-. Thereafter, the amount of recorded interest and other charges
are recovered.
4.3.2 Delegation of Pow ers for filing of Suit/Claim against Defaulting
Borrow ers before the Court/ DRT
The following delegation of powers of the field functionaries for permitting filing of
Suit/Claim against Defaulting Borrowers before the Court/ DRT have
been fixed :
Functionaries
Regional Head (other than GM)
Regional Head (GM)
GM (R&L) at H.O.

Amount
Upto ` 10.00 Crore
Full powers
Full powers

Note:-The above powers shall be exclusive of recorded interest and other


charges upto the date of filing of suit/ claim.
4.3.3 Ap p r o v a l o f D R AF T P L AI N T
The Regional Heads are empowered, as hitherto, to approve all draft plaints/
pleadings of suits/claims irrespective of the amount involved as the Regional
Offices are provided with Law Officer(s) & Legal Retainer(s) of adequate
competence & experience for speedy disposal of the same.
Once it is decided by the competent authority to initiate legal action against
borrower(s)/ guarantor(s), it should be ensured that the suit is filed in the
competent Court/ DRT within 30 days from the date of grant of permission
by the competent authority where after it should be followed up vigorously in
concerned Court/ DRT through the concerned counsel to get it decreed in the
shortest possible time to make it purposeful and to effect recovery of the banks
dues.
Regional Offices refer the cases to Head Office before filing of claim for declaring
the account as sticky and transfer the outstanding to P.B. Account. Regional
Offices are well aware that when account is classified as NPA, there is no purpose
to declare it again as sticky. As such, legal action can be initiated without
declaring the account sticky or transferring to PB account.

36

4.3.4 Power for waiver of Legal Action


In case the competent authority feels that no useful purpose would be served by
filing suit against a borrower due to non-availability of any security or whereabouts
of the borrower(s)/guarantor(s) are not known/traceable and /or the obligants do
not have means to repay the dues of the bank and initiating legal action will
amount to spending good money for bad money, the competent authority may
decide for waiver of legal action by taking the under noted points in mind.
Regional Head is empowered for waiver of legal action in case of advances under
Sponsored Schemes / Retail Product Schemes and in respect of accounts
classified as loss assets or where no tangible security is available to fall back upon
or whereabouts of borrower(s) / guarantor(s) are not traceable and also in cases
with principal outstanding upto ` 1.00 Lac, where Regional Head feels that it will
not be worthwhile to file suits against them.
While taking decision for waiver of legal action, full facts of the case, staff
accountability, availability of security & other circumstances be kept in view and
proper record thereof be maintained.
5. Accounts where viability is yet to be decided or Rehabilitation Scheme yet to
be implemented Cases referred to BIFR
As per the existing practice, the accounts where credit facilities have been granted
by the Branch Incumbent or Regional Head, all matters concerning conducting of
viability study and preparation of rehabilitation package etc. shall continue to be
dealt with at Regional Office. However, in accounts where the facilities have been
granted under Head Office powers, the matter shall be required to be reported to
the concerned sanctioning authority for taking timely remedial measures.
In respect of cases referred to BIFR, more efforts have to be made towards
improving controls and preventing further deterioration of assets charged to the
Bank because legal action for recovery/regularization cant be taken in isolation
without formulating a rehabilitative restructuring/one time settlement scheme as
common approach (in case of consortium advances) and without the approval of
BIFR.
However, in case of financing by more than one secured creditors/ joint financing,
BIFR permission is not required, if consent of secured creditors representing not
less than sixty percent in value of the amount outstanding against financial
assistance disbursed to the borrower is available, for initiating action under
SARFAESI Act-2002. Where a reference is pending before the BIFR, such
reference shall abate if the secured credirors, representing not less than threefourth in value of the amount outstanding against financial assistance disbursed to
the borrower of such secured creditors, have taken any measures to recovery their
secured debt u/s 13 (4) of SARFAESI Act.

37

Follow-up, therefore, in such accounts be directed towards:


a) Preventing borrowers from disposal of primary and collateral securities.
b) Avoiding further increase in credit exposure and minimizing funding dues to
the bank.
c) Obtaining additional securities (Primary and/or collateral) and personal
guarantees.
d) Strengthening existing securities by completing pending documentation
formalities, creation/registration of charges on movable and immovable assets
of the borrower(s)/ guarantor(s).
A sizable amount of NPA portfolio is not getting resolved due to proceedings
undergoing with BIFR/AAIFR. If the proceedings are unduly delayed, the bank
should immediately seek permission from BIFR for filing claim with DRT. In all
eligible/ appropriate cases, the bank may proceed under the provisions of the
SARFAESI Act, 2002. In case of consortium lending, the meeting of the consortium
members should be immediately called for approval of at least 60 % in value of the
secured creditors so as to proceed under the provision of SARFAESI Act, 2002.
For further guidance please refer to Chapter- 8 on Rehabilitation of Sick Units.

6. Recovery camps/ OBC Adalats


Holding of Recovery Camps / OBC Adalats is a basic tool in the hands of bank to
effect recovery in NPA accounts. Every year bank launches recovery drive by
organizing Recovery Camp/ OBC Adalats at Regional offices/ Branches, particularly
NPA prone branches and the system has proved very helpful in effecting recovery.
All out efforts at all levels of the bank are made to contact each and every borrower
and bring him to the negotiating table. Officials from Head Office including the
General Mangers also visit the Recovery Camps organized by the Branches/
Regional Offices to facilitate on the spot decision on OTS proposals received in the
camps. The number of camps organized by the Regions is called on quarterly basis
and region-wise consolidated position is placed before the authorities. The practice
of holding Recovery Camps/OBC Adalats shall be continued in future also,
especially in case of accounts under small segment.

7. Engagement of Recovery Agencies


The Bank has formulated a policy for engagement of Recovery. NPA accounts
(whether non-suit filed, suit filed or decreed) with outstanding upto ` 10 lac are
eligible under the scheme. Moreover, written off accounts can also be entrusted to
Recovery Agencies to effect recovery. There is a need to implement the scheme
with greater vigour and proper planning. For further guidance please refer to
Chapter- 12 on Empanelment/ Engagement of Recovery Agents.

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.

9. Engagement of Detective/ Investigating Agency


Regional Head may approve availment of services of the Detective Agencies/
Investigating Agencies on merits of the case and cost consideration.
10. Wilful Defaulter
RBI has issued detailed guidelines for declaring the borrower as wilful defaulter.
For further guidance please refer to Chapter- 9 on Wilful Defaulters.
11. Fraud/ Malfeasance:
Criminal action be initiated against the borrower/guarantor in consultation with
I & C/ Vigilance / R & L Deptt. at Head Office.
12. Negotiated Settlement for Recovery :
After analysis of the account, when it is found that the unit is not viable for
rehabilitation or restructuring then normal course of recovery procedure should be
immediately initiated. In case recovery is not forthcoming through normal process,
possibilities of settling the account through OTS are to be explored.
Resolution of Non Performing Assets through one-time settlement (OTS) has been
recognized as an effective non-legal remedy by the Bank due to twin advantages of
faster recovery of dues and income generation by recycling of funds otherwise likely
to be blocked for a long time. One time settlement of dues refers to a negotiated
settlement under which the bank endeavours to recover maximum amount within
least possible time, with least possible expenses. Detailed guidelines have been
given in Chapter No. 4 on Compromise and Negotiated Settlements.
13. Release of Security(ies)/ Property(ies) Charged/Mortgaged to the Bank
There have been instances where borrower(es)/guarantors/mortgagor(s) have
approached the bank for release of security(ies)/property(ies) charged/mortgaged
to the bank against payment of the amount equivalent to its/their present
market/realizable value instead of settling/liquidating upto date dues of the bank.
The bank may accede to such request of the obligants in accordance with the
provisions of Chapter-4 of this policy.

39

14. Lok Adalat:


The institution of Lok Adalat constituted under Legal Services Authorities Act 1987
helps in resolving the disputes between the parties by conciliation, mediation, OTS
or by amicable settlement. Every award of the Lok Adalat shall be deemed to be a
decree of a Civil Court and no appeal shall lie to any Court against the award made
by the Lok Adalat. Field functionaries should make best possible use of forum of Lok
Adalat for amicable and quick resolution of NPAs.

15. ECGC Cover


In case ECGC coverage is available, the same should continue to be reported to the
Head Office even after lodgment / settlement of claim and the same be appropriated
in the account as per instructions/guidelines issued by IBD department at Head
Office from time to time.
16.

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.

17. Appropriation of Recovery in NPA Accounts


To maintain uniform policy, the Board vide Item No. F-1 dated 19.05.2003 has
approved that the Bank should stick to the uniform policy of appropriating
recovery in all NPA accounts including restructured accounts i.e recovery
effected be appropriated first towards principal outstanding in the books of
the Bank and thereafter towards income of the Bank. The guidelines were
conveyed to Branches/ Regional Offices vide circular HO/REC/ 06/2003-04/ dated
26.06.2003.
The recovery effected in NPAs/Written-off accounts has to be appropriated in the
following manner: -

18.1 Sub-standard Accounts (C.C./O.D./LOANS/BILLS A/CS)


Recoveries shall be first appropriated to reduce outstanding (principal). After full
recovery of irregular portion, recoveries shall be appropriated towards recorded
interest, after which the account shall be upgraded to Standard Asset.

40

18.2 Doubtful/Loss Assets (Protested Bill/Suit Filed/Decreed Accounts)


The recoveries shall be directly credited to the concerned account i.e. recoveries
shall be first appropriated to reduce outstanding (principal). After full recovery of
principal, recoveries shall be appropriated towards income of the Bank. Courts /
DRTs are to be informed in the next hearing in case of Suit Filed/Decreed
Account(s). The detailed procedure is available in job card of DIT Deptt.
18.3

(except ` 1/- to keep the account alive):-

Written off Accounts Full / Partial

Proportionate remittance shall be made to DICGC/ECGC/CGTMSE, if need be.


After reducing the outstanding to ` 1/-, the remaining recovered amount will be taken
to Commission Received (Bad Debts Written off recovered) Account as per the Job
Card circulated by CBS Cell.
To finally close the account, ` 1/- will be adjusted at the end.

19. Reporting of Recovery


The progress made towards recovery of banks dues is to be informed to the
Regional/Head Office regularly and recommendations be sent for deciding the future
course of action.
20. SALE OF SECURITIES /SHARES/ DEBENTURES/ PLEDGED STOCK
The sale of security may be carried out according to due process of law. Shares and
debentures may be sold through brokers of stock exchanges at the best possible
price. Pledged stock may be sold after following the prescribed procedure. In all
cases, the security should be sold to the extent as would be sufficient to adjust
banks dues, except the cases where the security is indivisible. A proper record of
the transactions is to be maintained. The borrower should be advised from time to
time, in writing, about the sale of the securities. The sale by auction is to be well
advertised according to local practice. The place, date, time of the sale, and the
particulars of the goods should be clearly stated in the notice of sale by auction.
Apart from this, it must be clearly stated that the bank has the right of rejection of
any bid without assigning any reason.

21.

STAFF ACCOUNTABILITY REPORT


As per direction of Management Committee of Board/ Board of Directors, staff
accountability aspect be examined in all 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.

41

22. INSURANCE COVER FOR SECURITIES STANDING IN THE NAME(S) OF


DEFAULTING BORROWERS/GUARANTORS.
All assets charged to the Bank as security are to be kept fully insured even after
filing of civil suit for recovery of dues of the Bank. However, there is no need to
obtain insurance cover if the charged assets have been sold/ disposed of by the
obligants. As such, the branches should verify the existence of securities before
obtaining the insurance cover. Premium paid may be recorded in the Memorandum.

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

Interest & other charges


Calculated and payable upto
TOTAL

Besides future interest


and other charges

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.

The borrower would be contacted ordinarily at the place of his/her residence/


business/occupation or at the address/es / places furnished by borrower to the
Bank.
Identity and authority of persons authorized to represent bank for follow up and
recovery of dues would be made known to the borrowers at the first instance.
The bank staff or any person authorized to represent the bank in collection of
dues or/and security repossession will identify himself/ herself and display the
authority letter issued by the bank and upon request.
The bank would respect privacy of its borrowers at his residence.
The bank to ensure that all written and verbal communication with its
borrowers will be in simple business language.
Normally the banks representatives will contact the borrower between 0700
hrs and 1900 hrs, unless the special circumstances of his/her business or
occupation or nature of security and /or conduct of borrower requires the bank
to contact at a different time.
Borrowers requests to avoid calls at a particular time or at a particular place
would be honored as far as possible unless the request appears to be malafide
and wilful avoidance to pay dues.
The Bank will document the efforts made for the recovery of dues and gist of
interactions with the borrowers.
All efforts will be made to resolve bonafide and genuine disputes and/ or
differences regarding payment of dues in an orderly manner.
Inappropriate occasions, such as bereavement in the family or such other
calamitous occasions will be avoided for making calls/visits to collect dues.

Giving notice to borrowers


While telephonic reminders or visits by the banks representatives to the borrowers
place or residence will be used as loan/ recovery follow up measures, the bank will
not initiate any legal or other recovery measures including repossession of the
security without giving due notice in writing. Such notice will be sent upon default by
the borrower or when telephonic reminders or personal visits fail to yield result giving
10 days time to clear and/or regularize the entire dues and also recall the entire dues
and such notice will, as far as possible, will contain giving details of the amount and
security including power and authority to repossess security under the contract/
loaning document. Such notice shall be acknowledged by the Borrower / Noticee. In
the event of the failure of the borrower to acknowledge the notice and to respond by
way of payment of dues within the time period, i.e. 10 days from the date of notice, it
will be considered that the customer/ borrower/ noticee is deliberately avoiding
acknowledgement or establishing contact with the Bank and the Bank will be free to
initiate such recovery measures including repossession of security under the contract
/loan document as deemed fit. In case of exceptional circumstances/ nature of
security / conduct of borrower, the Bank will be at liberty to straightway take recourse
of repossession of security without any written notice. However, the Bank may also
consider the request of the borrower made in writing to Bank for settlement in
genuine and bonafide cases as per Banks Recovery Policy. Any further default to
45

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

Notice be sent on banks letter head to all borrowers, mortgagors,


guarantors and legal representatives etc., on their all addressees, in
banks records.
REGD. A.D.
Dated: __________
To,
Note:-

1. ____________________
____________________
____________________
2.

____________________
____________________
____________________

3.

____________________
____________________
____________________

4.

____________________
____________________
____________________

Sub: Recall notice under Banking Code of Conduct- Policy on collection of


dues & repossession of security, recalling facilities in your CC A/c No.
______/Term Loan A/c No. ________.
Dear Sir,
That undermentioned facilities were sanctioned to you on ______________ and were
availed by you from our branch:
(A). ____________________________________________________________,
(B). ____________________________________________________________,
(C). ____________________________________________________________,
(D). ____________________________________________________________,
(E). ____________________________________________________________.
The said facilities were enhanced and/or new/fresh facilities were sanctioned from time
to time in the year ________, ________ & ______. That on execution, signing, delivery
of relevant documents, agreements etc. to the bank you had availed the said sanctioned
facilities. That in terms of sanction/s, you the aforesaid addressee/s, in order to
guarantee the due repayment of outstanding dues, offered undermentioned securities;
a) Hypothecation of _______________________________________________,
b) Equitable Mortgage of undermentioned properties:
(i) ___________________________________ owned by ____________,
(ii) ___________________________________ owned by ___________ ,
c) Personal guarantees of addressee Nos. _________, ________ & _________
d) Corporate guarantee of __________________________________________.

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:

1. METHOD OF CALCULATION OF TOTAL RECOVERABLE DUES UNDER


MODULE INTEREST APPROACH
The Recoverable Dues will be calculated in the following manner:1.1 In case of suit filed or non-suit filed all NPA accounts, Recoverable Dues will
be equal to:A) Principal outstanding as on date of NPA plus
B) Intt. @ Base Rate p.a. simple or contracted rate of interest whichever is lower on
principal outstanding after giving due effect of recoveries, if any, after the date of
NPA till the last completed quarter plus

50

C) Intt. reversed at the time of NPA plus


D) Charges (Legal Charges, Charges paid to Enforcement Agent etc) less
E) Recoveries effected till date.
1.2 In case of all decreed NPA accounts, Recoverable Dues will be equal to
A) Suit amount plus
B) Intt. as per terms of decree or @ Base Rate p.a. simple or contracted rate of
interest thereon, whichever is lower, after giving due effect of recoveries, if any,
from date of filing suit upto last completed quarter plus
C) Cost as per terms of decree and other miscellaneous charges incurred after the
date of decree less
D) Recoveries effected till date.
1.3 In case of all agriculture loans, including decreed cases interest is to be
charged @
7% p.a. simple or
Contracted rate or
Rate of interest awarded by court (in decreed cases)
whichever is lower p.a. on principal outstanding/ suit amount (in decreed cases) plus
interest reversed at the time of NPA and legal and other charges as given in 1.1 and
1.2 (decreed cases).

2.

CALCULATION OF NET PRESENT VALUE OF REALIZABLE VALUE OF


CHARGED PRIMARY / COLLATERAL SECURITIES

In view of above stated reasons, NPVRV is to be calculated on the Realisable Value


(arrived by reducing the Market Value due to certain factors) by discounting with
number of years i.e. time taken for realisation of the security by applying the Base Rate
+ 2% simple interest.
In the sale process of secured assets, the bank may have to incur some expenses for
realization of sale proceeds and also the sale takes some time.
As such, the Net Present Value of the Realizable Value of Securities may be calculated
as under:
(a)

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

6. (c) Net Present


Value Of Realizable
Value of Charged
Securities= (a) (b)

` 84586.86

` 74864.69

` 66203.51

3. MINIMUM INDICATIVE SETTLEMENT AMOUNT:


The Settlement Amount shall be calculated in all NPA accounts as per guidelines given
below:
3.1 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 fact that these are being honoured or not.

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

Note :- The principal outstanding wherever mentioned above means book


outstanding plus amount technically written off (and remitted to the branch) plus
ECGC /DICGC claim appropriated.
Base Rate: Base Rate, wherever mentioned above, means prevailing Base Rate at
the time of settlement.
The officer/ authority sanctioning a Compromise/ One Time Settlement should
append a certificate stating that the Compromise Settlements are in conformity
with RBI guidelines.
Common Features for Settlement
The settlement amount to be recovered under the Module Approach as
indicated above, represent the minimum amount to be recovered. All efforts
should be made to obtain a better offer over and above the minimum amount
calculated as above.
It should be ensured that at least 10% to 25% of offer amount shall be
obtained as upfront amount before considering the proposal or forwarding any
proposal to the competent authority.
In case there is variation in the reasilable value of the securities now being
reported and as reported in the last sanction / renewal and the variation is
more than 10%, cogent reasons for the same, property-wise should be clearly
mentioned in the proposal by BM/RO.
4. VALUATION OF PROPERTIES/ SECURITIES
The value of the properties/securities be treated as market value as per the latest
certificate of valuation obtained from Govt. approved valuer/ Valuer on Banks Panel,
which should not be older than one year.
In case the Bank feels that the valuation of the properties submitted by a valuer is
grossly under/over valued, then in such cases, the Bank may obtain another
valuation report from Govt. approved valuer/ valuer on Banks Panel to safeguard
the interest of the Bank. It should be ensured that the valuer is appointed by the
Bank from its Panel.
Wide variation in the valuation of securities at the time of considering the OTS
proposal may negate our bargaining power/pressure on the borrower to reach at an
amount more favorable to the bank. Branches/ Regional Offices must exercise
prudence while accepting the valuation of the property(ies) at the time of sanction/
renewal/ enhancement of credit facility(ies) as well as at the time of considering
/submitting the settlement proposal(s). Specific reasons for large variations be
incorporated in the settlement proposal. In such cases Branch officials shall visit the
site of the property and shall enquire from the local resources the reasons for
variation in valuation.
Valuation report given by the approved valuer should have only two valuations one
Market Value and another Realisable Value.
The Valuation Report should be from the sellers point of view i.e. in case the property
55

is put to sale what amount the Bank is going to realize.


The Market Value (MV) of property should be based on ideal location, quality
construction and not any hindrance in selling the property. In other words the MV is
that value for which buyer is readily available in the market.
Valuation taken at the time of settlement of NPA should be close the prevailing Market
Value.
However, in reality this happens very rarely due to various factors associated with the
property. In case the property is to be sold, the actual Realisable Value may be less
than the Market Value due to various factors.. However, endeavour should be to
realize the maximum price so that the Realizable Value is as close to Market Value as
possible.
Realisable Value may be lesser due to following factors:
Residential property:
Property under disputed tenancy.
Tenancy covered under the Rent Control Act.
Long period tenancy or with tenants of the same locality, which may be difficult
for any one to get them vacated.
Agricultural Property:
Property cultivated in common without demarcation,
Difficulty in sale due to local laws
Natural factors like soil quality, irrigation facility and change in course of river
etc
High tension wire over the property
Industrial land:
Whether the land is Regularised Industrial Land or constructed on Agricultural
land with orders of competent authority on CLU (Conversion of Land use)
If constructed on Agricultural land, NOC from local body will be required to be
obtained by the owner followed by order for CLU
Constructed without CLU- then the value of the land should be taken as the
value for an Agricultural Land i.e., as per Agricultural circle rate, without taking
the construction into consideration.
Occupied by tenants for the purpose of establishing the tenants factory etc, it
will affect the saleability since the tenants will not be inclined to vacate in a
shorter duration.

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

5.1 Exercise of Powers


Now the Board of Directors, vide Agenda Item No. 71 dated 30.04.2012 have approved
constitution of committees at Regional Office and Head Office level for considering the
compromise settlement proposals. At Regional Office level, the committee has been
named Regional Office Level Credit Committee headed by Regional Head (RLCC-RH)
and Head Office level committees have been named as Head Office Level Credit
Committee headed by Executive Director (HLCC-ED) and Credit Approval Committee
Headed by Chairman and Managing Director (CAC).
The constitution, composition and functioning and reporting of RLCC-RH is given
hereunder:
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 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

Placing, Appraising &


Recommending
of
the Proposals to the
Committee
Reporting of Minutes
to
Reporting
of
Sanctions to
Reconstitution
of
HLCCED

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

Delegation of Powers for


Loan compromise / write
off proposals

Arranging
Meetings,
Recording of Minutes

Prior screening

Placing, Appraising &


Recommending of the
Proposals
to
the
Committee
Reconstitution of CAC

a) Chairman and Managing Director


b) Executive Director-1
c) Executive Director-2
d) General Manager in-charge of the Large Corporate Credit
e) General Manager in-charge of the Mid Corporate Credit
f) General Manager in-charge of the Priority Sector Credit
g) General Manager in-charge of Accounts/CFO
h) General Manager in-charge of Risk Management
a)
Chairman and Managing Director
b)
One Executive Director
c)
GM (Respective Credit Verticals) for Credit Proposal
d)
GM (Recovery) for Loan Compromise / Write-Off Proposal
The quorum of the Committee shall be the above mentioned three
mandatory members.
In respect of Loan compromise/ Write off proposals, the Credit
Approval Committee shall exercise powers for considering
compromise/write off with ceiling on amount of sacrifice of a
maximum of ` 4.00 crore subject to the condition that the Banks
exposure to such borrowers does not exceed ` 250 crore (Total
dues recoverable including Recorded Interest, Charges levied,
Partial/Full amount written off, etc.)
The Board Secretariat shall organise all necessary functions such as
arranging meeting of CAC, recording minutes of the meeting, placing
the minutes before Board etc. as applicable to MCB.
Prior screening by High Level Settlement Advisory Committee
(HLSAC)
The presentation of Loan Compromise & Write-Off Proposals to
CAC for approval shall be undertaken by convenor& member
secretary of HLSAC.

of

the

The CMD shall be empowered to constitute and reconstitute the


Credit Grid from time to time.

Note:- The decision of these Committees shall be unanimous. In case of


unanimous decision could not be arrived at, reasons of disagreement and the
basis of the decision shall be specifically mentioned in the minutes.
As regards prior screening of settlements/ compromise of loan and write- off proposals
falling under Head Offices powers, the same will be dealt with by High Level Settlement
Advisory Committee (HLSAC), consisting of the following members:
i) Dy. General Manager/ Asstt. General Manager (Recovery & Law) to act as
convener and member secretary of the committee.
ii) Dy. General Manager/ Asstt. General Manager (RMD)
iii) Dy. General Manager/ Asstt. General Manager (CMC)
iv) Dy. General Manager/ Asstt. General Manager (Large Corporate)
v) Retired High Court Judge
vi) Retired Senior Executive of a Nationalised Bank

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

Scale I as Branch Head

Amount
(` in Lacs)
NIL

Scale II as Branch Head

1.00

Scale III as Branch Head

2.00

Scale IV as Branch Head

5.00

AGM as Branch Head

10.00

DGM as Branch Head

15.00

Total relief is to be allowed only in Recorded


Interest and Miscellaneous Charges
Total relief inclusive of Principal + Recorded
Interest + Miscellaneous Charges (maximum
20% relief is to be allowed in the Principal
Outstanding)
Total relief inclusive of Principal + Recorded
Interest + Miscellaneous Charges
Total relief inclusive of Principal + Recorded
Interest + Miscellaneous Charges
Total relief inclusive of Principal + Recorded
Interest + Miscellaneous Charges

Regional Office Level Credit Committee


(RLCC-RH) headed by AGM
Regional Office Level Credit Committee
(RLCC-RH) headed by DGM
Regional Office Level Credit Committee
(RLCC-RH) headed by GM
Head Office Level Credit Committee
(HLCC-ED) headed by Executive Director
Credit Approval Committee, Head Office

25.00

Management Committee of Board, Head


Office

Full Power

35.00
75.00
100.00
400.00

No powers given for settlement/ relief.

Total relief inclusive of Principal +


Interest + Miscellaneous Charges
Total relief inclusive of Principal +
Interest + Miscellaneous Charges
Total relief inclusive of Principal +
Interest + Miscellaneous Charges
Total relief inclusive of Principal +
Interest + Miscellaneous Charges
Total relief inclusive of Principal +
Interest + Miscellaneous Charges

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

Re-Opening of Compromise/ Settlement approved earlier

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

Condonation of Delay in Repayment & Change / Modification / Amendment


in Terms and Conditions of Repayment

i) The condonation of delay in repayment of settlement amount and to change/ modify/


amend the terms and conditions of repayment can be made by the same Competent
Authority (which had originally approved the settlement) provided that total relief
including relief in the interest for the overdue period falls within their power.
Otherwise, the case shall be referred to the next higher authority/ appropriate competent
authority.
ii) In case of settlement proposal approved by HLCC-ED / CAC / MCB / Board or earlier
cases sanctioned by individual sanctioning authorities, the RLCC-RH shall have the
power to condone the delay of up to six months subject to payment of interest at the
Rate as per point No. 1.1/1.2/1.3 as applicable plus 2% penalty for the default period.
The Competent Authority (which had originally approved the settlement) will be informed
about the condonation of delay after recovery of entire settlement amount alongwith
interest for delayed period.
Further, in case of settlement proposal approved by HLCC-ED / CAC / MCB / Board or
earlier cases sanctioned by individual sanctioning authorities, the HLCC-ED shall have
the power to condone the delay of more than six months, but up to one year, subject to
payment of interest at the Rate as per point No. 1.1/1.2/1.3 as applicable plus 2%
penalty for the default period.
In all the cases of condoning beyond 12 months, the CAC shall have the power to
condone the delay / change / modify / relief in interest for the delayed period/ amend
terms and conditions of repayment.
The Competent Authority (which had originally approved the settlement) will be informed
about the condonation of delay after recovery of entire settlement amount alongwith
interest for delayed period.
5.6 Power to decline the settlement Proposal:- Settlement proposals received in NPA
accounts will not be declined without offering any counter offer from the Banks side.
Therefore, the declining authority should calculate amount as per the Recovery Policy of
the Bank and the borrower should be advised to improve the offer upto that amount and
period. Further the power to decline the settlement proposal will be based on NPA
amount (Principal and TWO) as on date of offer of settlement. Powers to decline the
settlement proposal received in NPA accounts will be as under:NPA amount (Principal and Authority to decline
TWO) as on date of offer of the offer
settlement.

Upto ` 1.00 lacs


Upto ` 25.00 lacs
Above ` 25.00 lacs

Branch incumbent
Regional Head
Head Office

63

6.

LINE OF COMPROMISE - BASIS OF SETTLEMENT/ COMPROMISE

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.

At the time of submitting settlement proposal, the borrower is required to submit an


undertaking that no other credit facilities have been obtained from any of the
branches of the Bank. If any facilities are outstanding details thereof must be
submitted alongwith the settlement proposal.

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.

Settlement shall be considered as per classification of NPA, i.e., Sub-Standard,


Doubtful and Loss as the case may be. There is no need to transfer the account to
Protested Bill at the time of settlement. However, it is to be ensured that all the
credit facilities in the name of the borrower have been taken into account at the time
of settlement.

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

While considering compromise/negotiated settlement/ waiver/sacrifice of dues, the


following factors are to be taken into account:

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.

Age/ status of the advance and outstanding in the account.

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.

Availability of primary and/or collateral securities and/ or other available securities of


the borrower(s)/ partner(s) guarantor(s) and realisability thereof in due time without
any lengthy/ costly court proceedings at the expense of the Bank.

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.

Circumstances beyond the control of the Borrower/ Guarantor.

Natural calamities e.g. Earth Quake, Floods, Drought, Tsunami etc.

Dispute amongst partners/ promoters/ Directors.

Labour problem/ Lock-out.

Change in Govt. Policy.

Losses suffered by the Unit/ Business.

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.

Reference pending before BIFR.

Statutory Liability towards the borrower(s).

Security not available either primary or collateral.

Cumbersome long drawn legal process of recovery.

Settlement better than pursuing the matter in the Court.

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

Possibility to explore the compromise / negotiated settlement in decreed accounts


would be advisable if (1) there are no assets available, (2)available assets may not
fetch more than the compromise offer, (3) there are complications in executing the
decree and realize the dues in short time at minimum expenses.

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.

Order of court for winding up of the company.

Insolvency of the borrower(s)/ guarantor(s).

6.2

Adjustment of Account from Sale of Collateral Securities

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

Govt. Sponsored Schemes

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.

In the cases where the amount is to be refunded before approval/ consideration of


settlement proposal, the decision to refund shall be taken by Regional Head,
irrespective of the fact that the case falls under the power of Head Office, as these
cases will not be treated as approved/settled.

As far as possible, the entire settlement amount may be recovered in lump-sum in


cash/draft within stipulated time under the terms of settlement.

In case the settlement amount is to be repaid in installments, post-dated cheques


may be obtained, wherever possible, from the obligants for repayment of dues of
the Bank. In such cases future interest as approved shall be charged.

67

8.

No interest will be paid on the amount kept in No Lien Account. However, in


case the settlement proposal is approved, the amount shall be deemed to have
been credited in the account on the date of deposit thereby giving the benefit of
interest.
DEVIATION IN SPECIAL CIRCUMSTANCES

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

Cases before Lok Adalat / DRT Lok Adalat

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

Cases before Civil Court/ DRTs in special circumstances

In respect of a specific case with special circumstances to be settled before Civil


Courts/DRTs, the GM (Rec. & Law)/ Executive Director/ Chairman and Managing
Director may delegate powers, if deemed fit, to the Regional Head or any other officer at
Head Office/ Regional Office for taking on the spot decision before the said court/ DRT.
Thereafter, such cases shall be placed before the HLCC-ED/ CAC for ratification of
action.
8.3

Important and Exceptional Cases

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.

PARTIAL LIQUIDATION / SETTLEMENTS/ RELEASE OF SECURITY(IES)

Generally, the charged security (ies), movable or immovable, continue to remain


charged to the Bank till full and final adjustment of the account as per the terms of
settlement. However, in cases where settlement amount has been agreed to be repaid
through sale of security(ies), the same may be/are being released in stages ensuring
that the balance dues of the Bank are fully secured and protected and there is no
dilution of security.
In the cases where the settlement proposal is proposed to be approved by release of
any of the properties charged to the bank, the settlement proposal shall expressly
contain the mode in which the borrower/ obligants intend to liquidate/ settle the
remaining dues of the Bank. In such cases, the Bank may issue conditional No
Objection Certificate to the obligants for sale of the charged security(ies) with the
condition that the entire sale proceeds shall be deposited directly with the Bank
towards liquidation of the account as per terms of approval.
In the event of partial settlement of an account by release of mortgaged property (ies),
the entire sale proceeds of mortgaged property (ies) shall be appropriated in the
account. For the recovery of remaining amount, if any, the bank shall continue / adopt
legal recourse. The property (ies) owned by the defaulting borrower(s)/ guarantor(s),
which are not charged to the bank shall be got attached through court after
ascertaining the detail of such property (ies). However, where there is no other
property(ies) available with the guarantor/ borrower, the bank may continue / adopt
legal recourse as provided in the law of the land.
9.1

Power to Release / Substitution of Security (Ies)

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

SETTLEMENT OF BANKS DUES BY PURCHASING THE PROPERTY OF


OBLIGANT(S)

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.

The Bank may settle NPA accounts by purchasing the property(ies)


charged/mortgaged to the bank in a particular account if the same is/ are
residential/commercial in nature.

The Bank will not purchase industrial/ agricultural property.

The Bank will not purchase tenanted/ disputed properties.

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

Total Recoverable dues including O/S, Authority


TWO,
RI,
ECGC/DICGC
claim
received/appropriated
and
misc.
expenses as on the date of decision.
RLCC-RH provided the account
Upto ` 1.00 crore
is fully secured.
Above ` 1.00 crore and less than ` 5.00 HLCC-ED
crore
CAC
` 5.00 crore and above

70

10.2

Settlement by Change of Management and takeover of the Business / Unit of


the Borrower
There may be instances where the borrower comes forward for settlement of an
account through change of Management and / or takeover of the business/unit by
third party. In such cases, the bank may consider and agree to the proposal for
change of management, change/transfer of ownership through transfer of shares
of the company (controlling rights), change in partnership and sale of the Industrial
Unit/ Shop provided acceptable settlement for repayment of banks dues is arrived
at with the consent of the defaulting borrower/ guarantors/ directors/ members/
partners.
In case of sale of the unit charged to the bank, the banks dues / settlement
amount shall be appropriated out of the sale proceeds of the unit. If the
prospective buyer intends to raise loan for purchase of unit, its loan proposal may
be considered by the Competent Authority on merits and as per Credit Policy of
the Bank subject to the condition that the bank dues shall be recovered from the
proceeds of loan sanctioned to such a buyer.

11.

DECLARATION (TAMASUK DEED)


APPROVAL OF SETTLEMENT

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.

COMPROMISE/ CONSENT DECREE


Reserve Bank of India vide circular No.DBOD.BP.BC.55/21.04.117/2007-08 dated
30.11.2007 has advised / directed for obtaining Compromise / Consent Decree.
The said directions were circulated vide Circular No.: HO/REC & LAW/03/2008-09
dated 06.06.2008. The said directions are as under:1. The cases where action has been initiated before the Courts/DRTs/BIFR, the
settlement under the guidelines should be subject to the consent decree being
obtained from the Courts/DRTs/BIFR.
2. The Debt Recovery Tribunal, Ernakulam has observed in a case that although the
bank and the defendant borrowers had reached a settlement under the
Compromise Settlement Scheme, the bank had not only failed to obtain the
consent decree from the DRT, but had also suppressed from the DRT the fact of

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

For Claims Pending Before Debts Recovery Tribunal

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.

12.4 Communicating the OTS approval to the borrowers:


On receipt of sanction of OTS or other relaxations or concessions or part release of
securities/ obligants, from the competent authority, the branch should immediately
send a communication to the borrower/ obligants conveying detailed terms and
conditions of OTS/approval of such relaxations/ concessions/ part release of
securities/ obligants including the terms relating to payment of interest.

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.

14.1 Settlement approved by Regional Office


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 Office by 7th of the succeeding month.

14.2 Settlement approved at Head Office


Minutes of the meetings of HLCC-ED shall be reported to CAC at Head Office and
that of the meetings of CAC shall be placed before the Management Committee of
the Board.
CIRCULATION OF DEFAULTERS LIST

15.

All settlements /compromises approved by the Head Office shall be circulated to


the Branches as a Caution List on half yearly basis. Generally, such defaulting
borrowers shall not be accommodated in future in any way what so ever. Proper
record shall be prepared and maintained for such settlements/ compromises by all
the branches.

16.

SETTLEMENT IN CASE OF BORROWAL ACCOUNTS RELATED TO


STAFF MEMBERS

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.

SANCTION OF FRESH CREDIT FACILITIES TO EX-CLIENTS OF OUR BANK /


CLIENTS OF OTHER BANKS WHO HAD ADJUSTED THEIR ACCOUNTS
UNDER COMPROMISE / NEGOTIATED SETTLEMENT

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

Ex-Clients of our Bank


The request of former clients of the bank for sanction of fresh credit facilities, while
settling their previous account(s), may be considered on merits on the following
terms and conditions :-

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

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.

SETTLEMENT OF CASES OF WILFUL DEFAULT, MALFEASANCE & FRAUD


Since the data of Wilful Defaulter involving principal outstanding of ` 25.00 lac and
above is submitted to RBI/CIBIL/EQUIFAX/EXPERIAN, such cases for settlement
are presently being placed before Management Committee of the Board for
approval. 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.

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.

FORMATS TO BE USED FOR SETTLEMENT OF NPA CASES

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

ORIENTAL BANK OF COMMERCE


PROFORMA FOR SETTLEMENT/ COMPROMISE IN NPA ACCOUNTS (REVISED)
BO/RO/HO ____________
Date: ________

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 )

1 Offered Settlement Amount:`


2 Recoverable dues as per module approach
3 NPVRV of charged securities
Market value Rs. -----------/Realisable Distress value Rs.---------------4 Minimum Indicative Settlement amount
5 Sacrifice (2-1)
6 Deviation (4-1)
7 Principal/ TWO Amount
8 Total dues as per Books/decree (as on last completed quarter)
9 Date and amount of NPA (Dt.------------)
10 Staff Accountability:

77

Part-I
(Amount in `)

A. Details of Proposal:
1.
2.

Name of the Account (Branch/Region)


Constitution
(Individual/Sole
Prop./
Partnership/Pvt. Ltd./Ltd.)
3.
Name of Prop./Partners/ Directors etc.
4.
Name of Guarantors
5.
Type of Activity
6.
Dealing with our Bank since
7.
Date of Last Sanction and Limits Sanctioned
8.
Date & amount of NPA
9.
Asset Classification
10. Provision as on _____________
11. Recoverable Dues as per policy as on
date __________
(Recoverable Dues will be calculated as per
Annexure I Part-IV )

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

13. Efficacy of Charged Security


(Whether the securities are effectively
charged and enforced in the Court of Law)
14. Charges to be Paid to the Enforcement
Agent (In case SARFAESI Action started in
the account and the account has been
assigned to an Enforcement Agent)
15. Minimum Indicative Settlement Amount as
per Policy (Basis ____________________)
16. Minimum Indicative Settlement Amount
(14+15)
17. Settlement Offer
18. Deviation, if any (16-17)
19. Sacrifice on Settlement
Item No. (11-17)
To be accounted for as under:
-Write-off in Principal Amount
-Sacrifice in T.W.O. Amount
-Waiver
of
Recorded
Interest
upto
(date)________& future Interest
- Waiver of legal & other charges
20. Impact on Profitability
21. Percentage of Settlement Amount to Book
outstanding (Based on Principal O/s)
22. Mode of Repayment
23. Manner of Appropriation

24. Source of Payment for Settlement amount


25. Status of SARFAESI Action
26. Status of Suit

27. Status of Decree

`
`
`
`
`
`

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)

Date of Amount of Next date of hearing


Suit
Suit (`)
with purpose
Date of Amount of Terms of Present
Decree
Decree
Decree
status

79

28. Total Dues as per Books as on last Principal O/s


Recorded Interest
completed quarter*
Other
Recoverable
Charges
Total Dues
29. Whether
RBI
reported
fraud/wilful
defaulter/criminal complaint case
(if yes, give reasons)
30. Adverse remarks of Internal/ External/ RBI
Inspectors/ Statutory Auditors of the period
when the account became NPA.
31. Staff Accountability
*In suit filed cases interest @ contractual rate be calculated
B. Back Ground/ History of Account:
(Indicate the original amount advanced/ facilities
sanctioned for ` ____on _____(date), for what activity, further enhancements. Indicate the
reasons as to how the account became irregular (non-payment of Interest and/or
instalments is not sufficient) / difficulty of recovery (specify Internal/External reasons). Steps
taken for regularization of account; details/dates of last visit to the unit/checking of
securities/ inventory etc. Latest developments in the account: Action taken under
SARFAESI/Latest Position. (Specify the reasons, if no action under SARFAESI Act, 2002)
C. Justification:
(Cases where the Settlement amount is below indicative Settlement amount, also give
justification for considering the proposal below the indicative Settlement amount).

D. Terms and Conditions ( Delete/amend whichever is not applicable)


1. Entire Settlement amount of ` _____________ shall be paid within ________

days/months from the date of conveying approval in writing to the party.


2. ` ____________ (______% of Settlement amount deposited as upfront shall be

appropriated / will be deposited before/ simultaneously at the time of conveying the


approval.
3. Balance amount of ` _______ will be paid in ____ equal monthly/ quarterly instalments

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

Bank. A tripartite agreement will be executed between the borrower, prospective


purchaser of the mortgaged property and the Bank and sale proceeds will be directly
deposited with the Bank. In case of more than one property, the request for release of
charge on specific property in stages may be considered to provide clear title to the buyer
for expeditious recovery of Settlement amount. However, it is to be ensured that at no
point of time, the value of the charged securities should fall short of amount recoverable in
terms of Settlement.
10. Compromise is being considered by the Bank as a commercial decision and shall have no

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

Bank/its officials immediately.


12. Default in payment as per sanction of Settlement shall render the Settlement as failed

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

amount alongwith interest, if any.


14. The Obligants shall not be allowed any credit facility in any shape in future.
15. In case borrower seeks no due certificate after depositing the entire Settlement amount,

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

F. Recommendations of the Regional Office:

MANAGER/ARM

CHIEF MANAGER

ASSTT. GEN. MANAGER/ DY. GEN. MANAGER

REGIONAL HEAD

81

ANNEXURE I

Part-II

ORIENTAL BANK OF COMMERCE


BO/RO/HO ________________
ACCOUNT
: Sh./Smt./Ms./M/s _______________________
CBS ACCOUNT No.: _____________________________________
ADDITIONAL INFORMATION:
1. a. Limits originally permitted at BO/RO/HO:
b. Sanctioning/Renewing/Reviewing Authority:
Particular

Date
of
sanction

Amount of
Sanction

Name

Designation

Present Place of
Posting

Original Sanction
Last
Renewal/
Enhancement
At Branch Level

2. Proposal/ Last communication received on (date):

At RO Level

3. Movement in the Account:


i)
ii)
iii)
iv)
v)
vi)
vii)

4. Details of Primary/ Collateral Securities:


Security

`
`
`
`
`
`
`

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

Primary Security (Description/detail as


under)
________________________________
________________________________
Collateral
Security
(Description/
Details as under)
1.______________________________
________________________________
2.______________________________
_____________________________
3.______________________________
_____________________________
BMs Valuation Certificate dated ____________ is enclosed.
**Calculation Sheet enclosed as Annexure A Part-III.

82

Market
Value

NPVRV**

Date
of
Valuation &
Name of the
Valuer

Comments on Valuation: (Large variation in value of Property at the time of Settlement as


against the value at the time of Sanction should be explained in detail)

5. Financial Net Worth(FNW) of Proprietor/Partners/Directors:


S. No.

Name (Sh./Smt./Ms.)

FNW at the time


of Sanction

FNW at the time


of Settlement

(Amount: ` in lac)
CR Date
(Latest)

FNW at the time


of Settlement

(Amount: ` in lac)
CR Date
(Latest)

6. Financial Net Worth(FNW) of Guarantor(s):


S. No.

Name (Sh./Smt./Ms.)

FNW at the time


of Sanction

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 _____________.

9. Details of Alllied/ Associate Concern(s): (Comments on the conduct of the account(s). If


Settlement approved, present status.)

MANAGER/ARM CHIEF MANAGER

ASSTT. GEN. MANAGER/ DY. GEN. MANAGER

REGIONAL HEAD

83

Annexure-I
Part-III

Calculation of NPVRV
Account: ____________________

(a) Reasilable Value of charged primary/


collateral securities / [1 + r / 100] n
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 for realization of securities taken should invariably be backed by
cogent reasons and justifications.
**The expenses deducted should invariably be backed by the documentary evidence.

NPVRV of the Charged Securities: _________

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.

iii) Total Interest (i + ii)


3.

Add: Legal Charges/ Charges paid to Enforcement Agent /Any


Other Charges incurred
Less: Total Recovery Effected After Account became NPA

4.

Total Recoverable Dues As per Amended Module Approach


(1 + 2 + 3 - 4)
*In case of all suit filed or non-suit filed agriculture loans, interest is to be charged @ 7%
p.a. simple or contracted rate, 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
(In Case of All Decreed NPA Accounts)
1.

Suit Amount

2.
i)

Add: Interest as per Amended Module Approach


(i.e. **Intt. as per terms of decree or Base Rate p.a. simple or
contracted rate of interest, whichever is lower, on suit amount after
giving due effect of recoveries, if any, from date of filing suit upto
the last completed quarter)

3.

Add: Cost as per terms of decree and other miscellaneous charges


incurred after the date of decree
4.
Less: Total Recovery Effected from the Date of NPA
Total Recoverable Dues As per Amended Module Approach
(1 + 2 + 3 - 4)
**In case of all decreed agriculture loans, interest is to be charged as per terms of decree
or 7% p.a. simple or contracted rate, whichever is lower, on suit amount after giving due
effect of recoveries, if any, after the date of filing suit upto the last completed quarter.

Note:- The Interest Calculation Sheet be attached separately.

85

ANNEXURE I
Part-V

BRANCH MANAGER VISIT REPORT -CUM CERTIFICATE OF ASSESSED VALUE


Name of the Account
Total
Liabilities Principal O/s
Outstanding as on T.W.O. Amount
date
Recorded Intt.
Other Expenses
Total Liability
Description of the Primary Security
Property
Visited
with
complete
Address
Collateral Security

Views from the aspect of Marketability

Value as per Latest Valuation Report by


Approved Valuer
Value at the time of Original Sanction
Date of Visit
Assessed Market Value by Branch
Incumbent
Sources
of
Assessment/
Persons
Contacted
Whether there is decline in the Value of
Property as compared to that at the time of
last sanction?
Reasons for the decline in the value of
property

Branch Incumbent
Name
:
Designation :

86

ANNEXURE-II

PROFORMA OF NO DUES CERTIFICATE TO BE ISSUED IN ACCOUNTS


ADJUSTED THROUGH COMPROMISE/ NEGOTIATED SETTLEMENTS

Dated :

TO WHOM IT MAY CONCERN

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.

Shri ______________________ s/o ______________________ aged ___


years R/o ___________________________________________.
Shri ______________________ s/o ______________________ aged ___
years R/o ___________________________________________.
Shri ______________________ s/o ______________________ aged ___
years R/o ___________________________________________.

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

_______________________________ as its proprietor/ partners/ director(s)/


guarantor(s) hereby agree to settle on verifying the security documents executed,
signed and delivered by us and statement of account and undertake as follows :We undertake to pay `________________ with/without the incidence of future interest
towards the full and final payment and clearance of the outstanding liability of firm/
company.
The said amount will be jointly paid by the firm/ company and by us, and if required,
through our personal sources in ___________ instalments of `_______________ p.m.
w.e.f. __________________ by the second week of every month.
In case of default on our part or on the part of the proprietor/ partners/ director(s) /
guarantor(s) for non-payment of one /two consecutive instalments, we and M/s
____________________________ shall be liable to pay the whole amount of
`_____________ or such amount as outstanding on the date of default alongwith
complete interest liability, due on full amount of `__________ w.e.f. _____________ and
litigation expenses incurred/to be incurred by the bank to recover the amount.
OR
Terms as approved by the Competent Authority be substituted in place of 1,2 & 3.
4. In case of any such default for non payment of one/ two instalments as aforesaid, all
the concessions 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
Securitisation Act 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 we shall not raise any
objection thereto and shall hand over the vacant and peaceful possession to the Bank
besides initiating legal recourse.
In witness whereof, we the executants have set our hands on these presents at
_______________ on the date, month and year first above written.
1.
2.
3.
4.

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.

Date Bran Borro


of
ch
wer
Appro
val

Prese T.W.O./DI R.I. & Total


Recovera Net
Amou
nt
CGC claim other Recovera ble dues Present nt
O/S appropriat Charge ble dues as
per realisea offere
in the ed if any s/
on
the Module ble
d
book
Expens date
of approach value of
s
es as settleme
security
per
nt
(NPRV)
docum (5+6+7)
ent rate

10

11

Amt. Amount Amt. Staff


Of
Recove to be Accountab
relief red as Writt ility , if any
as per upfront en
Modul amount off
e
(5approa
11)
ch
(9-11)

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

CHIEF MANAGER/ ASSTT. GENERAL MANAGER

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

GUIDELINES FOR COMPROMISE SETTLEMENT OF DUES OF BANKS AND FINANCIAL


INSTITUTIONS THROUGH LOK ADALATS

1.

DIRECTIONS OF THE APEX BANK


Reserve Bank of India vide letter DBOD NO.LEG.BC.114/09.06.002/2000-01 dated
2.5.2001 issued guidelines for compromise settlement of dues of Banks and Financial
Institutions through Lok Adalats. The Apex Bank informed that Indian Banks'
Association reviewed the position of the cases referred to Lok Adalats by the Banks
for the settlement of their NPAs. Since the settlement of cases through Lok Adalats is
inexpensive and there are other advantages also, it was decided by RBI to make
increasing use of the forum of Lok Adalats to settle banking disputes involving smaller
amounts.
Important guidelines regarding Lok Adalat are given below. Lok Adalat guidelines
should be correlated with guidelines contained in Chapter-4 for settlement of NPAs so
as to settle the maximum cases before the Lok Adalats.

2.

CEILING OF AMOUNT FOR COVERAGE UNDER LOK ADALATS


Ministry of Finance, Govt. of India vide their letter No. F 10/43/2000-BOA dated
12.07.2004 has enhanced the monetary ceiling of cases to be referred to the Lok
Adalats, organized by Civil Courts from ` 5.00 lac to ` 20.00 lac with immediate effect.

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.

SETTLEMENT FORMULA/ AMOUNT


The RBI directed that settlement formula would be flexible and left to the Board of
Directors of each institution. The bank has introduced an entirely new approach
towards settlement of NPAs in Chapter-4 of the Policy keeping in view the present
scenario. The existing settlement formula for both suit filed and non suit filed cases,
require reconsideration, as not many cases have been settled before Lok Adalats.
The settlement amount may be arrived at in NPAs in the cases before Lok Adalats in
accordance with the guideline on compromise & negotiated settlement in Chapter4
of this Recovery Policy.

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.

AWARD BY LOK ADALAT


The award given by the Lok Adalat is a deemed decree of the Court, which can be
executed in case of default by the borrower(s) /judgment debtor(s). through court of
competent jurisdiction. The court fee already paid in suit filed matters shall be
refunded in the manner provided under Court Fee Act, 1870. However, there is
no provision for refund of fee paid in the DRT.

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.

SYSTEM FOLLOWED BY THE BANK


In order to implement the guidelines for settlement through Lok Adalats, a Lok Adalat
94

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.

HOLDING OF LOK ADALATS BY DRTs


RBI vide letter DBOD NO. BC.36/09.06.002/2001-02 dated 24.10.2001 informed all
the scheduled commercial banks and FIs that some of DRTs/ DRATs decided to hold
Lok Adalat of pending matters on an experimental basis. In this connection a doubt
was raised by banks whether, in view of the limitation of ceiling of ` 5 lacs for disposal
by Lok Adalats, they should participate in the Lok Adalats convened by various
DRTs/DRATs for resolving cases involving ` 10 lacs and above. The issue was
examined in consultation with Government of India and it was advised that there is no
objection for DRTs/ DRATs organizing Lok Adalats to take up matters where
outstanding are ` 10 lacs and above. Accordingly, banks were permitted to
participate in the Lok Adalats organized by the DRTs/DRATs
The apex bank further advised the banks to derive benefit out of above arrangement
and reduce the stock of NPAs in view of advantages in using the forum of Lok Adalats
in compromise settlement.
All the Regional Heads have already been advised to take up matters pending before
DRTs of outstanding of ` 10.00 lacs and above for settlement through concerned
DRT.

15. POWER STRUCTURE


The decision on sacrifice amount during settlement shall be taken as per power
structure in chapter 4 on Compromise & Negotiated Settlement in NPA Accounts.

95

16.

REPORTING OF PROGRESS OF CASES SETTLED BEFORE DRT LOK


ADALATS
The progress of cases settled under the forum of Lok Adalats is being called on
quarterly basis on the prescribed format (enclosed as Annexure-I) from the Regions.
After consolidation the same is placed before the Top Management for the quarter
ending March, June, September and December every year.

17.

PARTICIPATION IN LOK ADALAT


All the Regional Offices have been requested on regular basis that the branches in their
region may be advised to approach the Distt Legal Services Authorities for holding of Lok
Adalats and participate in them in a big way so as to settle maximum number of banks
cases through this forum. They have also been requested to approach the concerned
DRT for holding of DRT Lok Adalats since the mechanism of Lok Adalat is a cost/ time
saving mode of effecting recoveries in NPA accounts. They have been advised to accord
due importance for settlement of NPA cases through Lok Adalat simultaneously with
other recourses. It is also advised to undertake proper ground work and adequate
exercise at RO as well as at Branch level before the date of Lok Adalat. All Regional
Heads have been requested to ensure that maximum number of NPA cases at litigative
as well as at pre-litigative stage are referred to Lok Adalats which will help in improving
the recovery position of the Bank, reducing the level of NPA and thereby increasing the
profitability of the Bank.

Encl.: Annexure I.

96

ANNEXURE-I

(Part-A)

ORIENTAL BANK OF COMMERCE


REGION : ______________________

PROGRESS MADE IN RECOVERY UNDER THE FORUM OF LOK ADALATS IN


RESPECT OF CASES WITH OUTSTANDING BALANCE UP TO ` 20.00 LACS FOR THE
QUARTER ENDED __________ *
(Amount: ` in lac)
PERIOD

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.

ELIGIBILITY OF ACCOUNT FOR TAKING ACTION UNDER THE ACT

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.

All non-suit filed / Suit Filed cases subject to availability of limitation.

It is pertinent to mention that in accordance to judgment of Supreme Court of India


dated 29.11.2006 in the case of M/s Transcore, the Banks/FIs can take simultaneous
action under SARFAESI Act and the Recovery of Debts due to Banks and Financial
Institutions Act, 1993 (RDDBF Act) for recovery of their dues. In this regard, the
details on the said judgment have already been sent to all the Regional Offices vide
98

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

The Act is not applicable to certain rights / security interest namely,


Lien on goods, money of security
Pledge of movables
Security interest over Aircraft or Ship / Vessel
Security interest under Conditional Sale, Hire Purchase or Lease and such
transactions.
Rights of Unpaid seller
Properties not liable to attachment under Code of Civil Procedure.
Security Interest in Agricultural land
Security Interest in Loans below ` 1 lac
Any case in which the amount due is less than 20% of the Principal amount and
interest thereon.
99

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.

3.3.1 PERMISSION BY COMPETENT AUTHORITY FOR INITIATING ACTION UNDER


SARFAESI ACT, 2002
It has been approved that in NPA accounts wherever realisable security is available,
the Branch Head will initiate action under SARFAESI Act, 2002 immediately after
account/s turn NPA.
In case the Branch is not headed by officer of atleast scale IV, the Branch Head will
refer it to the Regional Office for getting the notice issued.

3.3.2

APPOINTMENT OF AUTHORISED OFFICERS FOR TAKING ACTION UNDER


THE PROVISIONS OF SECURITISATION ACT, 2002
As per the Security Interest Enforcement Rules 2002, given under the SARFAESI Act,
100

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

3.4.1 Non-Suit Filed Cases


After identification of the account, notice will be issued on the prescribed format to the
borrower & guarantor u/s 13(2) as per Annexure-I & Annexure-II respectively.
3.4.2 Suit Filed Cases
In respect of suit field cases notice has to be served on the borrower/guarantor as per
Annexure-III. In such cases, the concerned court/DRT has to be informed as per
Annexure-IV. In case any restraint orders or attachment before judgement has been
obtained from the court/ DRT, the same shall be got modified for the purpose of taking
steps under the SARFAESI Act, 2002 by moving appropriate application before the
court/ DRT concerned through Banks advocate dealing with the matter.
Where the authorized officer has reason to believe that the borrower or his agent is
avoiding the service of the notice , the service shall be effected by affixing a copy of
demand notice on the outer door or some other conspicuous part of the house or
building in which borrower ordinarily resides or carries on business or personally works
for gain and also by publishing the contents of the demand notice in two leading
newspapers, one in vernacular language, having sufficient circulation in that locality.

Reply to the representation of borrower


If the borrower makes any representation or raises any objection to the notice served
by the bank under Sec 13(2), the authorized officer shall in consultant with the
competent authority, decide on the representation/ objection and shall communicate the
same to the borrower within 15 days of receipt of such representation /objection.
101

3.5

EXPIRY OF 60 DAYS NOTICE PERIOD


If the borrower(s) / guarantor(s) do not come forward for liquidation /settlement of their
account, after expiry of 60 days notice period, the Authorized Officer should take
possession of the secured assets as per the norms laid down in the Rules, 2002 and
obtain an undertaking as per Annexure V from borrower(s)/ guarantor(s)/ Director(s)/
Partner(s)/ mortgagor(s), as the case may be. Wherever the possession of the secured
assets is resisted by the borrowers / guarantors or otherwise deemed fit, the Authorized
Officers have to file an application under Section 14 of the Act before Chief
Metropolitan Magistrate /Distt. Magistrate, as the case may be, seeking his help for
physical possession of the assets, draft of the said application duly approved by the
Legal Advisor of the Bank is enclosed as Annexure-VI.
In respect of suit/claim filed cases, (i) where the Court/DRT has appointed a Receiver
for the assets (ii) where interim orders like injunction/attachment is in operation (iii)
where certificate has been issued by DRTs and steps have been taken to realize the
assets as per the certificate, application before CMM/DM may not be filed. However,
in other cases, the bank may simply inform the Court/DRT and file necessary
application before CMM/DM.

3.6

NORMS FOR TAKING OVER THE SECURED ASSETS


All the ROs/branches have been requested that out of all the securities / assets
available in the account, it must be specifically mentioned in the notice as to which
security /asset they intend to enforce against the defaulting borrowers e.g. if plant &
machinery, land & building, a plot, residential house, hypothecated assets are available
in an account, it must be specifically mentioned as to which asset the bank intends to
enforce.
In order to create further awareness at grass root level, we are giving below the order in
which the securities have to be enforced out of all the securities available in an account
after ensuring that the bank has a clear title and that they are validly charged to the
bank and do not come under the exceptions under Section 31 of the Act Bill i.e.
agricultural land etc.

Residential House(s).

Shops.

Plots.

Commercial Property.

Factory Land & Building.

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

PROCEDURE FOR TAKING POSSESSION OF MOVABLE / IMMOVABLE ASSETS


The Authorized Officer of the Bank shall take possession of the secured assets,
moveable/ immovable, in accordance with the rules specified in Rules 4 - 8 of the
Security Interest (Enforcement) Rules, 2002. As per Rule 8(1) & 8(2), possession of
immovable property can be taken by the Authorized Officer by
1)
2)
3)

delivering a possession notice to the borrower / guarantor as nearly as possible


in Appendix II to the Rules
affixing the possession notice on the outer door or at such conspicuous place
of the property.
publishing the possession notice within 7 days of taking possession in two
leading newspapers, one in vernacular language having sufficient circulation in
that locality.

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

SALE OF SECURED ASSETS


The Authorized Officers shall sell the property in accordance with the Rule 6 for
movable property and Rule 8 for immovable property of the Security Interest
(Enforcement) Rules, 2002 by any of the following modes by serving 30 days notice
for sale of the secured assets:
a. tenders from the public; or
b. by obtaining quotations from the persons dealing with similar secured assets or
otherwise interested in buying such assets; or
c. by inviting holding public auction; or
d. by private treaty*
* In all cases, where any assets are being disposed off through private treaty, the
assets are to be necessarily auctioned unless the amount being received from private
treaty is sufficient to pay dues of all banks. In case of private Treaty, Ministry of
Finance has suggested that the recourse of Private treaty should be generally
resorted to only if the other more transparent methods mentioned in a, b, or c above
are uncessful and further suggested that for accounts with value of ` 1.00 crores and
above, two attempts are made. However, the alternative of private treaty can be
considered without resorting to the other methods, if all the dues of the Banks/s are
being fully recovered.

3.10

APPROPRIATION OF SALE PROCEEDS


In the absence of any contract to the contrary, the sale proceeds shall be applied
firstly in payment of such costs, charges and expenses incurred by the secured
creditor in connection with the sale and secondly in discharge of the dues of the
Secured Creditor and the residue of the money so received shall be paid to the
person entitled thereto in accordance with his rights and interests.

3.11

RECOVERY OF BALANCE DUES


Where dues of the Bank are not fully satisfied with the sale proceeds of the secured
104

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.

SECURITIZATION CELLS AT HEAD OFFICE / REGIONAL OFFICES

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

TAKING POSSESSION OF ASSETS


We have to be very careful in choosing the borrowers on whom the notice has to be
issued under the Act. The aim of our bank is to effect maximum recovery in NPAs and
we may take possession of only those assets for which there are ready buyers so that
we may not incur undue expenditure on account of maintenance, safeguard, and
105

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.

CASES WHERE EXECUTION PROCEEDINGS HAVE NOT BEEN INITIATED


AFTER OBTAINING DECREE FROM THE CIVIL COURT
In certain instances, where execution proceedings by filing Execution Application
before the competent Court are yet to be initiated after obtaining decree from the
concerned Court, the Bank can take benefit of the Securitisation Act, 2002 by taking
action against such defaulters under the said Act. It is pertinent to mention that
recovery through filing of execution application in the decreed cases is a very long
drawn and cumbersome process unlike the recovery proceedings in the DRT cases
where Recovery Officer starts the recovery proceedings on the basis of recovery
certificate obtained by the Bank after passing of the final orders by the DRT.
As such, it was approved by the Board vide item No. F-3, dated 22.03.2003 that
Branches/ROs may be permitted to initiate action under the Securitisation Act, 2002
against those defaulting borrower(s) against whom civil Courts have awarded decree
but execution proceedings have not been initiated by the branch by filing of execution
application before the concerned Court and where there are sufficient securities to fall
back upon in the account.

7.

ISSUE OF FRESH NOTICE UNDER SARFAESI ACT, 2002 IN THE ACCOUNTS


WHERE BANK HAS ENTERED IN TO SETTLEMENT WITH A BORROWER WHO
HAS DEFAULTED
Instance has been brought to our notice where the bank has entered into settlement
with an NPA borrower after issuing notice under section 13(2) of the Securitisation
Act, 2002. But, the settlement has not been honored by the concerned borrower by
making regular payment of monthly installments. A pertinent query has been
raised as to whether it would be in order to take possession pursuant to the
notice under Act or notice would legally be deemed to have been waived after
the bank accepted repayment of partial dues under OTS. The matter was
deliberated, discussed and placed before the Legal Advisor of the Bank and it has
been opined as under:
An undertaking may be obtained from the borrower with whom the settlement has
106

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.

SALE OF SECURED ASSETS THROUGH TENDERS / PUBLIC AUCTION


All the Regional Offices are further requested to go through the provisions of the said
Act/ Rules carefully and the secured assets/ properties be sold through any of the
modes available under the Law and in consultation with the Legal Retainer at their
Office so as to avoid any scope for challenging the action of the Bank by the
borrower(s)/ guarantor(s) / mortgager(s) and only those securities will be sold in
respect of which notice was issued under the Act.
Government of India, Ministry of Finance has directed to upload all the auction
notices issued under SARFAESI Act immediately on website tender.gov.in
and to ensure that no auction take place without auction notice being put on
the Government web portal for at least 30 days.
As per direction of Ministry of Finance, all the concerned Authorized Officers in the
Bank have been directed to upload all auction notices issued under the said Act after
w.e.f. 11.11.2011 and ensure that the auction notice is displayed at least for 30 days
on the website tender.gov.in.
In this regard, Regional Offices are advised to submit required information i.e., soft
copy of auction notices (clearly visible auction notice) under SARFAESI Act-2002,
issued along with duly filled in Annexure XVI through mail at recovery@obc.co.in,
well in time, so that the auction notice is uploaded on the Government website
tender.gov.in, in time and it is retained on the site for at least for 30 days. For this
purpose, a Nodal Officer has been appointed at Recovery and Law Officer, Head
Office.
Apart from above, the information of properties (both commercial and residential),
which are on sale towards recovery under SARFEASI Act or otherwise, will continue
to be uploaded on the Banks website by the DIT Department, Head Office.
Further in case of sale of secured assets through tenders/public auction, the following
guidelines may be followed by the Authorized Officer:
1. The Authorized Officer at Regional Office shall invite OFFERS 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 giving detailed particulars of
immovable/movable property as per Annexure-XIII/XIV.
2. The properties shall not be sold below the reserve price.
3. The Authorized Officer shall serve to the borrowers notice of 30 days for the
sale of secured assets (Annexure XII) and shall also issue a public notice in
two leading news papers, one in vernacular language having sufficient
circulation in the locality by setting out the terms of sale.
4. Intending bidders will deposit the earnest money by way of pay order/ demand
draft payable
at ____________________________ (Name of Place) and
favouring
Oriental
Bank
of
Commerce
108

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.

6. Offers so received by the Authorized Officer will be opened and


considered
on _________________(Date) at Oriental Bank of Commerce,
________________________
(Address of Regional
Office)
at
_____________________ (time).
Offers received may be opened before the committee formed for the purpose
and proper records be maintained.
7. 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.
8.1Tenders from public:
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.
8.2 Public Auction:.
Successful bidder shall have to deposit 25% of the sale price, adjusting the
EMD paid already,
within 48 hours of the acceptance of bid price by the
Authorized officer in respect of the sale by
way
of
pay
order /
demand
draft
favouring
Oriental
Bank of
Commerce
A/C
_________________________________________________________
(Name of the Account) drawn on any nationalized or scheduled bank
immediately after the fall of hammer failing which the earnest deposit shall be
forfeited.
The purchaser shall deposit the balance 75% of the sale price 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 the balance amount within the
prescribed period, the amount deposited shall be forfeited.
109

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.

DELEGATION OF POWER FOR


EMPANELLED OUTSIDE AGENCIES

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)

Upto ` 5.00 crore


Upto ` 2.50 crore
Upto ` 1.00 crore
NIL
Upto ` 2.50 crore
Upto ` 5.00 crore
Full powers

The above powers shall be exclusive of recorded interest and other charges.
12.

FEE STRUCTURE FOR PAYMENT TO EMPANELLED / TO BE EMPANELLED


OUTSIDE AGENCIES FOR RECOVERY UNDER SARFAESI ACT 2002
The Board of Directors vide BR No. F-1 in its meeting held on 24.03.2008 has
approved the revision of fee structure for payment to the empanelled/ to be
empanelled agencies for recovery under SARFAESI Act 2002. Similarly, the revision
and ratioanlisation of legal fees was approved by the Board of Directors vide Agenda
Item No. 42 in its meeting held on 28.01.2011. The above noted revisions were
circulated vide Circulars No. HO/REC & LAW/ 01/2008-09/29 dated 07.04.2008 and
HO/R&L/ CIRCULAR No.11/2010-11/761 dated 07.02.2011 respectively. The salient
features of the same are as under:

12.1 VALUATION OF IMMOVABLE PROPERTY / MOVABLE ASSETS


For fixing the reserve price of immovable property (ies), moveable assets / machinery
etc., fee schedule for valuation of immovable property and movable assets /
machinery etc. shall be applicable as approved by the Board of Directors vide Item
No. RM - 2 dated 17.03.2007 and circulated by Risk Management Deptt. at Head
Office vide HO Circular No. HO/Risk Management / 42 /2006-07 dated 20.03.2007
which is reproduced hereunder:
Value of Immovable Property /movable assets

Amount of fee in Rupees

Ist ` 50000/- of property so valued @ % of the value

Maximum of ` 250/-

On the next ` 1 lac of the property so valued @ % of ` 250/the value


For property of ` 1.5 lac
` 500/On the balance of the value of properties so valued ` 125 per lac
@1/8%

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.

Fee schedule for valuation of immovable properties / movable assets shall be


changed in accordance to policy of Risk Management Deptt. from time to time.
As per clause 2 (d) of SARFAESI Rules, 2002, valuers are to be approved by the
Board of Directors for the purpose of valuation of properties to be auctioned under the
said act. The guidelines in this matter include that the valuers are to be registered as
valuer under the Wealth Tax Act, 1957 and should be Chartered Engineers/Members
of the Institute of Architects/ Members of the Institute of Valuers. In case of
Partnership Firms practicing as registered valuers, all the partners should be
registered as valuers under the Wealth Tax Act, 1957. Companies and Corporate
bodies are banned under section 34AD of the Wealth Tax Act, 1957 from
practicing/describing itself or held out as registered Valuers. The other guidelines in
this matter remain the same.
The list of approved valuers is to be reviewed on annual basis or earlier in case of
exigencies and General Manager (R&L) is empowered to empanel any valuer for a
short period, if any exigency arises. Further for empanelment on regular basis, the
same is to be approved from the Board.
In case, services of approved valuers are not found satisfactory, the Bank may de-list/
de-panel their names from the approved panel and General Manager (R&L) is
empowered to de-panel such valuers. Accordingly, the Board should be apprised of
such depanelment from time to time. Fee shall be paid to the approved valuers
strictly as per guidelines already approved by the Board vide Item No. RM-2 in its
meeting held on 17.03.2007.
Regional Offices are advised to assign the task of valuation under SARFAESI Act,
2002 to approved valuers, taking into consideration location of their offices/branches in
order to minimize the cost and no extra payment shall be made to the approved
valuers in addition to the fee schedule as approved by the Board.
12.2

SECURITY AGENCIES /AUCTIONEERS


The engagement of these agencies may be considered by Regional Office/ Head
Office, as the case may be, and the expenses may be paid on actual basis after
negotiating the same with the said agencies.

113

12.3

ENFORCEMENT/ SUPPORTING AGENTS

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

Upto ` 1.00 lac


10% i.e. ` 10,000/From ` 1.01 lac to ` 10% upto ` 1.00 lac + 7.5% of amt. recovered
25.00 lac
in excess of ` 1.00 lac with a maximum fee of `
1,90,000/- (10000/- + 1,80,000/-)
From ` 25.01 lacs to ` 10% upto ` 1.00 lac + 7.5% of amt. recovered
50.00 lac
in excess of ` 1.00 lac upto ` 25 lac + 5% in
excess of ` 25 lacs with a maximum fee of `
3,15,000/- (10,000/-+1,80,000/-+1,25,000/-)
From
`
50.01
lac 10% upto ` 1.00 lac + 7.5% of amt. recovered
onwards
in excess of ` 1.00 lac upto ` 25 lacs + 5% in
excess of ` 25 lacs + 2.5% in excess of ` 50
lacs

It is further informed that expenses for engaging counsel(s), valuers, insurance,


security/detective agencies and / or any other agency, legal/ statutory compliances
shall also be paid in addition to the above expenses.
In respect to payment of fee to Enforcement/Supporting Agents in case recovery is
effected in assigned NPA accounts after assignment but before sale of secured assets,
following additional provisions in the fee schedule are to be taken into consideration:
a)
In case the defaulting borrower
approaches the Bank for OTS or
adjustment of account after assignment of
the case to Enforcement/Supporting
Agent
but: Before
taking
physical
possession of secured assets
After taking physical possession of
secured assets but before sale of secured
assets

25% of fee schedule as above or as


agreed, whichever is less out of recovery.

50% of fee schedule as above or as


agreed, whichever is less out of recovery.

b) Full amount of fee as per schedule or as agreed, whichever is less, shall be


payable only if the recovery is effected due to sale of secured assets and out of
sale proceeds/recovery.
c) Service Tax as per rules and applicable from time to time shall be paid in
addition to the charges mentioned hereinabove.
d) In case of OTS, fee payable to Enforcement/ Supporting Agent shall be recovered
from the borrower in addition to OTS amount.

114

12.3.2 PAYMENT OF FEE


The Regional Heads shall exercise the power for payment of fee in respect of all
cases assigned to Agents without any deviation as per power chart mentioned
above.
Fee shall be payable to Enforcement/Supporting Agent in relation to amount of
recovery.
Fee payable may be negotiated and settled within the range of fee schedule for
different types of services while entrusting the work to the outside agencies.
12.3.2.1 Deferment/Discontinuation of Action
It is possible that during the course of enforcement action, the borrower may come
forward and make the payment to the Bank in full or in part. In case of part payment,
the decision to defer/ discontinue the SARFAESI action will be taken with the
approval of the General Manager- Rec. & Law by making reference through
Regional Head. If the enforcement action is to be deferred temporarily or
discontinued, the necessary intimation shall be given to the Enforcement/ Supporting
Agent. In case of discontinuation of enforcement action, no fee will be paid to the
Enforcement Agent on any further recovery in the account.
.
12.3.3 TRAVELING/ BOARDING/ LODGING
In addition to the expenses to be paid to Valuers/ Security and the Enforcement
Agents as above, if the Bank assigns the job for valuation/ security and sale of assets
at a place other than where these agents normally carry out their work, they may be
reimbursed on actual basis the expenses incurred for traveling/ boarding / lodging etc.
However, no traveling /boarding / lodging will be paid if the job is carried out within
local municipal limits of Metros and/or area of functioning of such agencies. It is
suggested that for Delhi, National Capital Territory region may be taken as the
Municipal limits. In case of other Metros i.e. Chennai, Kolkata & Mumbai and Other
Centres, Municipal limits of the concerned Metro/City may be taken into consideration
for payment of such expenses.
12.3.4 CLASSIFICATION OF ENFORCEMENT AGENTS
The enforcement agents have been classified into three broad groups as under:
S.No. Category
1.
2.
3.

Value of Asset which can be


assigned (O/S in the a/c)
Enforcement
agents
having No limit
International / All India presence
Partnership
Firms
and
Local ` 25.01 lacs to ` 1.00 crore
Corporates
Individuals
Upto ` 25.00 lacs

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

detective agencies, valuers and auctioneers etc.


12.3.5 DEVIATION
Chairman & Managing Director / Executive Director has been vested with the power
of engaging any agency without any ceiling depending upon peculiar circumstances
and merits of the case and taking into account degree of difficulty involved in
realization of assets.
12.3.6 EMPANELMENT OF ENFORCEMENT / SUPPORTING AGENTS
The guidelines for empanelment / depanelment of enforcement / supporting agents
for recovery of bank dues under SARFAESI Act 2002, duly approved by the Board of
Directors vide BR No. F-8 dated 14.09.2004, have been circulated to all Regional
Offices vide our circular letter dated 02.12.2004. However, for ready reference of the
Field Functionaries, the salient features of the same are enumerated hereunder:
To facilitate faster decision making at the Regional Office/ Head Office level, the
Regional Heads and the General Manager (R&L) has been empowered to
empanel/depanel any agency for enforcing the rights of the Bank. Empanelment of
enforcement agents by the Regional Heads will also ensure availability of sufficient
number of agencies offering each type of service to all the branches situated in the
Region. Such a list of Enforcement/Supporting Agents be sent to us for perusal and
record. The Regional Heads have been empowered to de-panel any agency
empanelled by them. All other cases shall be referred by Regional Offices to Head
Office for necessary consideration.
12.3.7.1 GROUND RULES TO BE APPLICABLE TO / OBSERVED BY ENFORCEMENT
AGENTS / OUTSIDE AGENCIES
1. The term referred to as 'Enforcement Agent' shall apply to the agencies engaged for
facilitating Bank in activities like seizure of securities/ taking possession of movable
and/or immovable assets; obtaining assistance of District Magistrate/ Metropolitan
Magistrate for taking over possession of securities; to act as custodian of secured assets;
to provide security for preservation and protection of assets taken in possession;
assisting Bank for sale of acquired assets through auction or otherwise.
2. The term 'Enforcement Agent' shall apply to the agencies that approach the Bank and
evince interest in providing service of 'Enforcement Agent' and the Bank agrees to
engage the services of the 'Enforcement Agent' in the required matters.
3. The 'Enforcement Agent' shall hold all requisite Government and other licenses,
approvals and consents as required for providing the services to the Bank and shall
undertake to maintain the same valid and subsisting during the period of arrangement
with the Bank.
4. The 'Enforcement Agent' shall agree to provide its services in the matter referred at the
fee to be decided on case-to-case basis while entrusting the work as per fee / payment
schedule duly approved by the Bank.
5. Payment of fees will be made by the respective branches after getting the approval from
concerned Regional Offices subject to statutory deduction of Income Tax and Service
116

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

12.3.7.2 CRITERIA FOR APPORVAL OF ENFORCEMENT AGENTS


The following points be considered while empanelling the Enforcement Agents :

Constitution of agency, viz. individuals, partnership firm or corporate,


Geographical presence,
Expertise, knowledge and experience in dealing with the impaired assets,
Consideration of antecedents of promoters and availability of infrastructure,
Ability and Utility in enforcing the rights of the secured assets,
Already listed with the other Banks / FIs as enforcement agents,
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.

12.3.7.3 ISSUANCE OF EMPANELMENT LETTERS TO ENFORCEMENT AGENTS


The Bank shall issue the empanelment letter as per the Annexure-XV to the approved
enforcement agents containing terms and conditions mentioned as above which should
be duly accepted by the Enforcement Agents and thereafter concerned Regional
Offices will assign the job /work to the Enforcement Agents.
13.2: PARTICIPATION BY THE BANK IN THE AUCTIONS HELD UNDER THE
SARFAESI ACT
To take advantage of the recent amendment in SARFAESI Act, the Bank may
participate in the auction to acquire immovable properties and following should be the
power structure to accord sanction for the same
The Recovery & Law Department at Corporate Office in consultation with Services
Department will, after evaluating the proposal on merit, place the proposal for acquiring
immovable property by participating in the auction being conducted by the Authorized
Officer of the Bank under the SARFAESI Act before1. The HLCC if the cost of acquisition of such Residential Property is up to ` 5.00
crores
2. The CAC if the cost of acquisition of such immovable property is above ` 5.00 crores
but upto ` 10.00 crores. In case of acquisition of property having acquisition cost over `
10.00 crores, the same will be acquired with the approval of the Management
Committee of the Board.
Any official in Scale IV and above posted in the Regional Office under whose
jurisdiction the said Property is situated will participate in auction and if the Bank is
declared as successful auction purchaser, he / she will carry out all other formality in
connection with such acquisition. The Recovery & Law Department in consultation with
the Services Department will prepare operational guidelines which would be duly vetted
by the Legal Advisor of the Bank.

118

Suggestion / Advice for Improvement of Progress under the Act.


1. Non- identification of the mortgaged immovable property or delay in taking steps
under SARFAESI Act may provide an opportunity to the defaulting borrower to create
third party rights or to create the tenancy rights in favour of his friends and relatives,
thereby reducing the value of the property and jeopardizing banks interest. It is,
therefore, advised to speed up the process of identification of the cases under the
Act.
2. The request of the Authorised Officers for permission for issuance of notice under
the Act must be disposed of in a time bound manner, but not exceeding a week in
any case. It is desired that pendency of such request must be placed on daily basis
for information and necessary action to the Regional Head.
3. Suitable instructions must be issued to Authorised Officer to personally ensure that
notices under the Act are issued and dispatched within two working days of receiving
the permission .
4. It is reiterated that symbolic possession must be obtained immediately after
completion of notice period by completing all the required formalities and as per
guidelines already circulated.
5. It is a common knowledge that the property can be sold at a higher rate only when the
bank is in physical possession of the same. It is, therefore, once again emphasized
that all out efforts must be made to obtain physical possession of the charged assets
after obtaining the symbolic possession without delay. The Regions / Authorised
Officer may take the assistance of Enforcement Agents for this purpose, if required,
as already circulated. It is advised that applications for physical possession before
CMM / DM must be vigorously pursued and Authorised officer should be present at
the time of hearing of the said application before CMM / DM. The progress of all such
application filed and still pending should be reviewed by the Regional Head every
month.
6. It is needless to say that the whole exercise will bear fruit only when the banks dues
are repaid. Therefore, it is once again emphasized that all out efforts for sale of
charged assets as per SARFAESI Act, 2002 after completing all the legal formalities
must be made by R.O. / Authorised Officer in consultation with the Legal Retainer /
dealing Advocate, wherever deemed fit.
7. If any unnecessary delay is observed on the part of Authorised Officer, the competent
authority will call for the explanation / comments of the concerned Authorised Officer
for not acting promptly in the best interest of the bank as it delays recovery process
unnecessarily.
It is one of the fastest recourse of recovery to resort to SARFAESI Act, 2002 provided
quick and timely actions are initiated as per the Act and followed up vigorously and
taken to logical conclusion. It is felt that Regional Offices may organize Meetings /
Seminars for Branch Incumbents / Branch Recovery Officers to emphasise the above
points, to clear their doubts and to discuss the legal problems, if any, faced by them.
Encls.: Annexure I - XII
119

TIPS
FOR BRANCHES/REGIONAL OFFICES TO BE FOLLOWED WHILE TAKING ACTION
UNDER THE ACT
1.

PROCEDURE

Borrower commits default and the account is classified as NPA.


Secured Creditor (Bank) issues notice in writing to the borrower/guarantor in the format
circulated to discharge the liabilities in full within 60 days from the date of notice.
Borrower makes payment of Banks dues - No further action required.
Copy of notice served / returned alongwith remarks and other documents may be kept
alongwith the loaning documents / file of the concerned account for future reference.
Non payment of Banks Dues
Taking possession of movable secured assets by A.O.

(Appendix I)*

Preparation of inventory

(Appendix II)*

Sale of movable secured assets


Issue of Certificate of sale for movable secured assets

(Appendix III)*

Taking possession of immovable secured assets


(Appendix IV)*
Issue of possession notice, affixing of possession notice and its publication in two leading
newspaper - 30 days notice for sale of immovable secured asset.
Time of sale, issue of certificate of sale and delivery of
possession Immovable secured assets

(Appendix V)*

Procedure for recovery of shortfall of secured debt


Application to DRT

(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

2.2 Excluded transactions


The Act is not applicable to certain rights / security interest
namely,

Lien on goods, money of security


Pledges of movables
Security interest over Aircraft or Ship / Vessel
Security interest under Conditional Sale, Hire Purchase or
Lease and such transactions.
Rights of Unpaid seller
Properties not liable to attachment under Code of Civil
Procedure.
Security Interest in Agricultural land
Security Interest in Loans below ` 1 lac
Any case in which the amount due is less than 20% of the
Principal amount and interest thereon.

2.3 JOINT FINANCING


No secured creditor shall exercise any such right, unless exercise of such right is
agreed upon by the secured creditors representing not less than 60% in value of the
amount outstanding. Reference before BIFR abates when the 3/4 TH secured creditors
have taken any measures u/s13(4) of the Act.
The bank can independently going 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.

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

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 BORROWER(S) / PARTNER(S) / DIRECTOR (S)
M/S /Shri _________________
_____________________
_____________________

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,

Name & Address of Mortgagor / Hypothecator

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

Name & Address of Mortgagor /


Hypothecator

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:

NOTICE UNDER SECTION 13(2) of SECURITISATION AND RECONSTRUCTION


OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST Act
2002.

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.

Name of the mortgagor: addressee No._____ (Give name)


Mortgagee:
____________________
Sum secured:
sanctioned/loan documents amount(s)
Rate of interest:
..
Details of the property mortgage: Give details/property number
Details of the title deed(s)
Deposited:
Give details of the title deed/sale deed/ any
other document(s)

a. Property bounded as:

b. Present sum due:

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.

The aforesaid original application is pending before your Lordship.

b.

That in pursuance of the enforcement of Securitisation and Reconstruction of


Financial Assets and Enforcement of Security Interest Act, 2002, the applicant/bank
has issued the notice U/s 13 (2) of the said Act to the defendant (s)/ opposite party.

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)

I/We/the proprietor/Partners/Directors and the Guarantors undertake to give, vacant


and peaceful physical possession of the said property to you, the Authorised Officer
in case of non-payment of the aforesaid amount and in that case, you may sell the
said property at your discretion and to appropriate the sale proceeds thereof towards
the said loan account without having my/our any kind of right to resist or object in any
manner whatsoever.

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

APPLICATION ON BEHALF OF SECURED CREDITOR, BANK FOR TAKING ACTION IN


TERMS OF SECTION 14 OF THE SECURITISATION AND RECONSTRUCTION OF
FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002.
The Applicant most respectfully and humbly submits as under:1.
The applicant is a secured creditor and the respondent/s are its borrower/s, who are
under a liability to repay the outstanding *______________________________________to
the applicant. That the borrower/s at the time of making the borrowings had entered into a
security agreement and created security interest over the following scheduled property(s),
which is valid and subsisting:
**_______________________________________________________________________
________________________________________________________________________._
______________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
However, the respondent/s are in default in respect to repayment of the aforesaid secured
debt/ any instalment thereof and his/ their account in respect of such debt has been
classified by the applicant as a non performing asset on _________ and the claim of the
Bank is within limitation period.
2.
The applicant in order to enforce the said security interest created in its favour by
respondent/s in accordance with the provisions of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002, herein after referred to as
the Act, had issued to respondent/s, a notice, referred to in sub-section 13(2) of the said
Act, in writing to discharge in full his/its/their liabilities giving details of the amount payable by
the respondent within 60 days from the date of the said notice. In addition to the aforesaid,
the said notice also gives details of the secured assets intended to be enforced by the
secured creditor in the event of non payment of secured debts, as stated herein above, by
respondent/s. The copy of the said notice is annexed hereto as Annexure A.
*Here the total amount of financial assistance granted and total claim shall be stated.
** Here the details of the property(s) to be mentioned.

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

BEFORE THE CHIEF METROPOLITAN MAGISTRATE/DISTRICT


MAGISTRATE, ___________________,_________________________
______________________________
In the matter of:
Oriental Bank of Commerce
_________________________
_________________________

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.

Shri ______________________ s/o ______________________ aged ___ years


R/o ___________________________________________.
Shri ______________________ s/o ______________________ aged ___ years
R/o ___________________________________________.
Shri ______________________ s/o ______________________ aged ___ years
R/o ___________________________________________.

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

___________________ in our personal capacity as well as on behalf of M/s


_______________________________ as its proprietor/ partners/ director(s)/ guarantor(s)
hereby agree to settle on verifying the security documents executed, signed and delivered
by us and statement of account and undertake as follows :We undertake to pay `________________ with/without the incidence of future interest
towards the full and final payment and clearance of the outstanding liability of firm/
company.
The said amount will be jointly paid by the firm/ company and by us, and if required,
through our personal sources in ___________ instalments of `_______________ p.m.
w.e.f. __________________ by the second week of every month.
In case of default on our part or on the part of the proprietor/ partners/ director(s)
/guarantor(s) for non-payment of one /two consecutive instalments, we and M/s
____________________________ shall be liable to pay the whole amount of
`_____________ or such amount as outstanding on the date of default alongwith
complete interest liability, due on full amount of `__________ w.e.f. _____________ and
litigation expenses incurred/to be incurred by the bank to recover the amount.
OR
Terms as approved by the Competent Authority be substituted in place of 1,2 & 3.
4. In case of any such default for non payment of one/ two instalments as aforesaid, all the
concessions 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 Securitisation Act
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 we shall not raise any objection thereto and shall hand over
the vacant and peaceful possession to the Bank besides initiating legal recourse.
In witness whereof, we the executants have set our hands on these presents at
_______________ on the date, month and year first above written.
1.
2.
3.
4.

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

PUBLIC NOTICE FOR SALE OF ASSETS OF


Sh./ M/s____________________________
(In terms of the Securitisation and Reconstruction of Financial Assets and
Enforcement of
Security Interest (SARFAESI) Act, 2002

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)

Earnest Money Deposit (`)

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

(Address of Regional Office) on or before ___________________________ (date) by 5.00


PM.

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)

Note : The above notice shall also contain the following:


i)
The description of the movable/immovable property to be sold, including the details of the
encumberances known to the secured creditors.
ii)
The secured debt for recovery of which the property is to be sold.
iii)
Reserve price, below which the property may not be sold.
iv)
Time and place of public auction or the time after which sale by any other mode shall be
completed.
v)
Depositing earnest money as may be stipulated by the Bank.
vi)
Any other thing which the Authorised Officer considers it material for a purchaser to know
in order to judge the nature and value of the property.

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

DESCRIPTION OF IMMOVABLE / MOVABLE PROPERTIES


Description & owner of
Demand Notice
EMD
Reserve Price
property
Date
REMITTANCE
ACCOUNT
EMD
DETAILS
Outstanding
Bid Increase
Amount
Amount
(Secured debt)

Date/ Time
of e-Auction

TERMS & CONDITIONS:


1. The e-Auction is being held on AS IS WHERE IS and AS IS WHAT IS BASIS.
2. LAST DATE & TIME OF SUBMISSION OF EMD AND DOCUMENTS ..UPTO P.M.
3. To the best of knowledge and information of the Authorised Officer, there is no encumbrance on the
property. However, the intending bidders should make their own independent inquiries regarding the
encumbrances, title of property/ ies & to inspect & satisfy themselves.
4. The intended bidders who have deposited the EMD and require assistance in creating Login ID & Password,
uploading data, submitting bid, training on e-bidding process etc., may contact M/s.., Help
Line No. .., Help Line e-mail ID: and for any property related query may contact Branch
Manager/Authorised Officer of (Name of Branch with contact No.) during the office hours on any working days.
5. The Bank has designated its Branch Office at as facilitation centre to help the intending
bidders in putting the bid on line. ******
(FOR DETAILED TERM AND CONDITIONS PLEASE REFER TO OUR WEBSITE www.obcindia.co.in and
.. (Name of e-auction site)
Date:
..

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)

9 First announcement date


10 Last date of document collection
(date & Time)
11 Last date of submission (date & time)
12 Bid opening date (date & time)
13 Description (Description of property
with complete address)

14 Pre-qualification
15 Pre-Bid meet date
16
1. Name
2. E-mail
3. Phone Office
4. Fax No.
5. Address

For further information contacts.

143

CHAPTER 7
RECOVERY THROUGH LEGAL RECOURSE
1.

RECOVERY THROUGH STATE DEBT RECOVERY ACT


In certain States small borrowers, engaged in agriculture/allied activities or coming
under notified State sponsored schemes, are covered under the State Agriculture
Recovery Act or State Public Moneys Recovery Act. The recovery in respect of
these accounts is dealt with by filing of Recovery Application before the Local
Revenue Authorities which issue Recovery Certificate (RC) after ascertaining that
the application has been filed within limitation. On receipt of Recovery Certificate,
the concerned Authority proceeds against the defaulting borrower(s) to recover
the Bank's dues as arrears of land revenue. In such cases, bank is not required to
pay any court fee etc. However, some charges of collecting authority as approved by
the State Govt. are deducted out of recoveries effected from the defaulting borrowers.
As per our experience, filing of RC is quite effective in the States of UP, Haryana, MP
& Rajasthan where we have main chunk of business in such type of advances. The
Recovery Certificate is very effective in Madhya Pradesh as the State Govt. has fixed
personal responsibilities on the District Collectors for its implementation.
Filing of civil suit against the small borrowers in Civil Courts is not a viable
proposition. However, the bank files suit against the defaulting borrowers, where
limitation is expiring and the recovery is also not forthcoming and there are sufficient
assets that can be proceeded against in execution in the event of a decree being
passed in Banks favour keeping in view the relevant provisions of the respective
State Debt Recovery Acts.

1.1

FILING OF RECOVERY CERTIFICATE


It is very cost effective way of recovering Banks dues and will be preferred than filing
of suit. It is very effective in the state of U.P. M.P, and Haryana. It is clarified that filing
of RC does not extend limitation and as such limitation aspect has to be taken care of
while filing Recovery Certificate.
In a judgment pronounced on 13.02.2003 by Madhya Pradesh High Court Bench at
Indore in the Writ Petition No.851/2002 titled Santosh Vs Central Bank of India &
Others, it has been held that in respect of cases above ` 10.00 lacs, the DRT is the
appropriate forum for recovery of Banks dues. The above judgment is based on the
judgment pronounced earlier by Honble Supreme Court of India in the case of M/S
Unique Butyle Tube Industries Pvt. Ltd. vs U .P. Financial Corporation and others.
Therefore, the Branches in the State of MP, UP, Haryana should take cognizance of
the same and take appropriate steps for recovery of amount above `10.00 lacs by
filing the claim before the competent DRT instead of filing RC.

1.2

Reporting of R.C. Filed Accounts:


R.C. Filed accounts shall be treated as Suit Filed accounts and reported accordingly
144

under the head SUIT FILED ACCOUNTS in the periodical statements.


2.

RECOVERY THROUGH LEG AL RECOURSE (CIVIL COURTS/DRTS)


Against chronic and wilful defaulters, recovery is pursued through legal action as a
last resort. In respect of cases upto `10.00 lac, recovery suit is filed against the
obligants before Court of competent jurisdiction while claim is filed before concerned
DRT for recovery of dues amounting to `10.00 lacs & above.

2.1

RECOVERY THROUGH LEGAL RECOURSE (CIVIL COURTS) NON DRT CASES


LESS THAN ` 10.00 LACS
There are large number of cases pending in Civil Courts for recovery of banks dues.
But the amount involved is quite small. The Bank is contesting these cases
vigorously. As far as follow up of decreed accounts is concerned, it is suggested that
cases upto ` 50,000/- where there is no security to fall back upon or either the
whereabouts of Judgment Debtors are not known or the detail of attachable assets
owned by them, could not be ascertained even after strenuous efforts are made by
the branch to find out the same, in such cases execution may not be pursued in
courts as it will tantamount to spending good money on bad money. Under such
circumstances, the branches should take up with their respective Regional Offices for
final closure of such accounts by sending specific recommendations for such action
by enumerating details of efforts made by them for recovery of decretal amount from
the judgment debtors, visit reports etc. and required justification for final closure of
such accounts. However, persuasive efforts will be continued to recover as much as
possible.

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.

2.2.1 e-AUCTION BY DRTs/ Bank


As per the direction of the Ministry of Finance, Govt. of India, it has been decided by
the Ministry of Finance that henceforth all auctions will be conducted electronically by
DRT and concerned Banks shall arrange e-auction Platform and pay for it as they are
paying for the advertisement. Similarly auctions under SARFAESI Act also needs to
145

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

C-104, Sector-2, Noida, UP201301,


Phone-0120-4888884,
4746800
Cell- 9810029923/33
Web: www.c1india.com
email:akshaya.rath@c1india.co
m
samir.chakraborty@c1india.com
e-Procurement Technologies
Limited, 801, Wall Street - II
Opp. Orient Club, Nr. Gujarat
College,
Ellis
Bridge
Ahmadabad - 380 006 Gujarat
(India)
Phone- 079- 4023 0800-72,
Fax -079- 4023 0847
Cell-09978591888/
09879996111
Web:www.AuctionTiger.net
email: sales@AuctionTiger.net
M/s
Atishya
Technologies
Private Limited
309/509, ATMA House, Opp.
Old RBI, Ashram Road,
Ahmadabad 380 009
Phone- 079 40088680
Mob09725347755,
9427622242
Web:www.npasource.com
Emailatishya@npasource.com
karan@npasource.com

Maximum Fee Agreement


Schedule
/Approval
valid upto
` 4850/- +
Service tax as
applicable per
eauction/event

31st
August,
2015

` 5500/- +
Service tax as
applicable per
property /per
e-auction
/event

30th
January,
2015

` 3500/- per eauction


per
event
plus
service tax as
applicable. In
case
of
multiple
assets,
the
charges would
be ` 3500/per asset.

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

RECOVERY THROUGH LEGAL RECOURSE (DRTs.)


CASES ` 10.00 LACS & ABOVE
In order to reduce the cost of litigation and speed up the recovery process in respect
of big borrowal accounts, the Govt. of India started establishing Debts Recovery
Tribunals (DRTs) under Recovery of Debts Due To Banks and Financial Institution
Act, 1993 for recovery of dues of Banks and Financial Institutions, wherein claims of
banks/FIs involving dues of `10.00 lacs and above are filed. Since then, DRTs are
being established at different places from time to time. At present 33 DRTs are
functioning at different centers. 5 DRATs are also functioning for adjudicating appeal
matters.

2.4

DETAILS OF DEBTS RECOVERY TRIBUNALS VIZ--VIZ ASSET RECOVERY


MANAGEMENT BRANCHES/DRT CELLS
For effective monitoring and control of cases filed/pending before various DRTs, the
bank has also opened Asset Recovery Management Branches/DRT Cells at various
centers.

2.4.1 FUNCTIONING OF ARM BRANCHES


1. All the NPA accounts older than 12 months (Doubtful and Loss accounts) and having
outstanding more than ` 10.00 lacs and above shall be transferred in Finacle to the
ARM Branches by the parent branch.
2. During these 12 months, the Branch, where the account had slipped into NPA is
required to take appropriate steps to get the recoveries made in the account and get
the account upgraded by way of recovery/ restructuring. Further the staff
accountability aspect and action under SARFAESI Act 2002 will be initiated and
concluded in all such eligible accounts during this 12 month period. In case the
limitation is about to expire within these 12 months the parent Branch will initiate all
steps and get the suit/ claim filed.
3. Likewise all the Technically Written Off accounts where the amount written off is `
10.00 lacs and above shall be transferred to the ARM Branch by the parent branch.
4. ARM Branches shall have functions as mentioned hereunder:
i) To continue/ Initiate/ peruse /take action under the SARFAESI Act till its final disposal,
alongwith filing and follow up of claim in the DRTs/ DRATs in respect of all NPA
accounts transferred to it.
ii) To defend Securitization Applications / appeals etc.
iii) To handle/enter into compromise settlements in NPA Accounts transferred to it.
5. Eligible accounts shall get transferred to ARM Branches only once in a year, i.e. after
147

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

Regional Office concerned.


2.4.3 DELEGATED AUTHORITY
Assets Recovery Management Branches shall function as an independent entity.
The branch should obtain a CN Code Number for each of these branches for
independent functioning except cash transactions for start of functioning of these
branches.
These ARM branches shall be attached to the respective Regional Offices and shall
function under the overall control of the Regional Head concerned.
Regional Head concerned shall ensure smooth functioning and transfer of eligible
cases every year.
2.5 Followup
The ARMBs and DRT Cells have been attending day-to-day functions before DRTs
and thus saving manpower and invisible cost, reporting the latest legal
trends/important decisions and other legal inputs to keep abreast of the latest
decisions affecting the Banks thereby enabling the Bank to evolve better policies.
It is also our experience that recovery through Courts/DRTs is meager but at the
same time, the suit / claims filed before Courts / DRTs are vigorously pursued
which pressurize the borrower(s) to come forward for negotiated settlement.
Further, obtention of decree in claims filed before DRTs is comparatively quicker and
if respondents prefer appeal before Appellate Court against the orders of DRT, they
have to deposit *75% of the decretal amount which acts as deterrent and
pressurises the borrowers for settlement. However, all suit filed cases shall be
contested vigorously for which Head Office as well as Regional Offices are well
equipped. The cases are to be allotted to Advocates having sufficient experience in
the field. The services of senior counsels can also be utilized in complicated matters
involving large amounts.
* DRAT may reduce or waive this amount for reasons to be recorded.
3.

FILING OF SUIT AG AINST SMALL BORROWERS


RC is filed before Revenue Authorities against small borrowers to recover the dues of
the Bank. Where recourse to RC is not available, Bank is not filing suit against small
borrowers upto ` 25000/- and in case of Agriculture Advances upto ` 50000/because recovery through legal recourse is lengthy cumbersome, expensive &
uncertain affair and the Bank has to spend good money on bad money without
effecting any recovery. However, suits in such cases may be filed where the Branch
Manager is certain that the defaulting borrower is having sufficient assets which can
be got attached through court by moving appropriate application(s) under Section 38
& 39 of Civil Procedure Code to recover the dues of the bank.
However, persuasive efforts shall be continued to recover the dues of Bank even if
149

the decision to waive legal action has been taken in such cases.

ATTACHMENT
COURT

OF

ASSETS

OF

BORROWERS/GUARANTORS

THROUGH

4.1

At the time of filing claim/suit before DRTs/Courts, applications supported by affidavit


for attachment of assets of defendants (borrower / Guarantor) both movable and
immovable and for injunction restraining them from disposing of the same before
judgement shall be invariably filed under relevant provisions of Recovery of Debts
Due to Banks & Financial Institutions Act, 1993 and Civil Procedure Code, 1908.

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.

SUIT AGAINST SUNDRY DEBTORS


In cases where credit facilities are sanctioned against assignment of book debts,
Sundry Debtors shall also be impleaded as necessary parties to the suit to safeguard
the interest of the Bank.

6.

CRIMINAL ACTION FOR DISHONOUR OF CHEQUE


Where a borrower/guarantor has issued a cheque towards adjustment of the loan
account and the cheque is dishonored due to insufficient funds/exceeds arrangement,
the Bank to file criminal complaint U/s 138 & 142 of Negotiable Instruments Act,
1881.

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.

SETTLEMENT OF BANKS DUES BY HONOURING THE DECREE(S) AWARDED


BY THE COURTS/DRTS
RBI vide its letter No. DBOD/BP.SC.472/21.040.117/99 dated 17.8.1999 clarified
that the Banks should honour decree awarded by the courts for settlement of their
dues. On the basis of above clarification, the Board of Directors vide B/R No. F-4
dated 30.5.2000 approved to consider an account as fully satisfied if the judgement
debtors repay the decretal amount as per the terms of decree awarded by the
150

competent court unless it is decided by the competent authority to prefer an


appeal against the judgement of the concerned court. For this purpose, the branches
are empowered to accept the decretal amount with cost & interest as awarded by the
Court/ DRT towards full and final settlement of Bank's dues.
9.

REPORTING OF RECOVERY/SETTLEMENT TO COURTS/DRTs


The amount recovered in suit filed/decreed accounts shall be informed immediately to
the concerned Court/DRT. Likewise, settlement entered into in a particular case with
the obligants will also be informed to the concerned Court/DRT.

10.

After adjustment/liquidation of suit filed/decreed account, the suit/claim shall be


withdrawn as satisfied.
RECOVERY THROUGH P ARTICIP ATION IN AUCTION S ALE OF THE
MORTG AGED PROPERTY
As the bank is generally not succeeding to auction/sell the mortgaged property/(ies)
even in the decreed accounts due to non availability of prospective bidders at the
public auction because of social/local/economic & other external factors, it was
approved by the Board of Directors while approving the last Recovery Policy that
the Bank may purchase the property at Reserved Price fixed by the court and the
Bank can sell these properties at a later date. However, the guidelines circulated by
GAD, Head Office shall be kept in view for purchase of property. The amount at which
the bank has purchased the property shall go towards liquidation of the outstanding
dues with upto date interest. However, if the amount at which the property has been
purchased is not sufficient to cover the outstandings (with up-to-date interest) the
remaining dues may be written-off if no further security is available in the account.
However, the power to write-off shall be exercised by the competent authority. The
excess amount, if any, may be paid to the mortgagor.

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.

12. RELEASE OF SECURITY TO THIRD PARTY WITH THE INTERVENTION OF THE


COURT.
In case any third party occupant of the property approaches the Bank for release of the
security/ property/ies mortgaged to the Bank through the court, Bank may consider the
offer for accepting the market value as per the latest valuation, subject to the approval
151

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.

13. THE SYSTEM OF EMPANELMENT OF ADVOCATES


The Board of Directors vide Board Resolution No.37 dated 23.05.2012 has reviewed
and approved the policy of empanelment of advocates which was later amended vide
BR no. A-20 dated 12.06.2013.
13.1 SELECTION PROCESS:
Selection of Advocates on the Banks panel shall be done by a Committee comprising
of Regional Head, 2nd Man, Departmental Head (Recovery & Law), Departmental
Head (Credit) and Law Officer posted at Regional Offices. On approval, the same be
conveyed to Recovery & Law department at HO.
Apart from the selection of advocates by the above Committee, Departmental Head
(Rec. & Law) and General Manager (Rec. & Law) at Head Office shall also exercise
the power to empanel more advocates for all the Regions as per the eligibility criteria
given in the succeeding para.
Proper record of the panel of advocates be maintained at Regional Offices and the
same shall be sent to Head Office annually in the 1st week of April every year.

13.2 CRITERIA FOR EMPANELMENT


It must be ensured that the advocate to be empanelled shall have the following:i)

High standard of integrity, acumen and competency.

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)

Annual income-tax return filed with the Tax Authorities.

v)

If the advocate is also empanelled by other bank/ PSU/ FI then opinion of that bank /
PSU/ FI may be obtained.

vi)

Advocates exclusively practicing in criminal courts having minimum experience of 5


years can be empanelled for attending to criminal work. In complicated urgent
criminal matters, advocates having expertise in any particular matter shall also be
assigned the work, though not on panel.

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

COPIES OF DOCUMENTS TO BE OBTAINED FROM THE ADVOCATE


SUBMITTING BIO DATA

WHILE

1. High School Certificate in support of age.


2. Registration with Bar Council.
3. Identity Card issued by Bar Association / Bar Council.
4. Letter of empanelment with other bank /Govt. organizations.
5. Certificates in support of educational qualifications.
6. Annual income-tax return filed with the Tax Authorities
7. An undertaking from the advocate to the effect that all information furnished by him/
her is correct and he/ she shall not demand / charge legal fee in excess of banks
schedule of legal fee should also be obtained.
13.4

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:

Documentation, title search, Banking laws.

Recovery litigation before Courts and Securitisation Act.

District Consumer Forum

Criminal Complaints, Complaints u/s 138 N.I. Act.

Labour Cases / CGIT

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:

Documentation, title search, Banking laws.

Recovery litigation before Courts, including DRT / DRAT and Securitisation


Act.

Consumer Matters, MRTP and related economic legislation matters

Company law, Debenture Trustee matters, BIFR & AAIFR,FEMA, Security


Laws and SEBI

Service laws, cases before labour Court/Tribunal ,CGIT

Writ jurisdiction and other matters before High Court

Advocate on Record for matters before Honble Supreme Court

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

stipulated for empanelling an individual advocate, either in senior panel or


junior panel.
B. Power to relax criterion for minimum experience will be the same as in case
of an individual advocate.
C. Depanelment of the firm shall be done in case of any breach of any terms &
conditions of engagement by any of the partners / associates of the firm.
D. The fee will be paid to the firm as per the schedule of the fee of the Bank.
E. In case of any deficiency in service or professional misconduct on part of the
empanelled firm the Bank may, at its sole discretion, take action against the
firm as well as against any of erring partner / associate.
F. No partner / associates of law firm will appear against the Bank in any legal
proceedings so long as they remain associated with the law firm.
G. The legal work will be assigned to the firm and all the correspondence will be
made with the firm through the senior partner / associates of the firm.
H. Any change in the constitution of the firm must be reported to the Bank and
the Bank shall have sole discretion and authority to depanel the firm if the
change is of the nature which will render the firm unsuitable to be on the
panel of the Bank.
2. Criterion for empanelment of advocates who are ex-banker or former
executive of reputed PSUs
Many bright and outstanding bankers and executives of public sector undertakings
get themselves enrolled with the Bar as advocate after leaving their career. The Bank
may be benefited enormously by their vast experience as banker / executive in public
sector undertakings coupled with their legal expertise if such advocates are brought
on the panel of the Bank. In such cases the experience in number of years as
advocate is to be relaxed because ex bankers / executives of public sector
undertakings (PSU) get themselves enrolled with the Bar after putting in many years
of service at various levels. The following is the criterion for empanelling such
advocates on the panel of the Bank :
A. The ex banker / ex executive of PSU is enrolled as an advocate with the Bar
Council of respective state.
B. The ex banker was in the scale IV or equivalent at the time of his leaving the
service.
C. The ex banker must have been in banking services for at least 20 years
continuously and his services were not put to an end by the employer bank due
to any misconduct on his part.
D. If the ex banker was the law officer (specialist category) than the criterion may
be relaxed by the Dy. General Manager (Rec & Law) by five years and by the
155

General Manager (Rec & Law) by ten years.


E. The ex executive of PSU was in the minimum of E-3 category or equivalent at
the time of his/ her leaving the service.
F. The ex executive of PSU must have been in services of PSU for at least 30
years continuously and has been enrolled with the Bar Council as advocate for
two years and his / her services were not put to an end by the employer PSU
due to any misconduct on his part.
G. If the ex executive of PSU was the law officer (specialist category) than the
criterion of length of service may be relaxed by the Dy. General Manager (Rec
& Law) by five years and by the General Manager (Rec & Law) by ten years.
H. Ex-Banker should also hold minimum experience of 3 years practice at
Bar either before joining the bank or after retirement
Note:- The guidelines for submission of Non Encumbrance Certificate (NEC) in the model
format as prescribed by the Head Office circulated vide HO/RMD/10/73/2011-12
dated 09.05.2011 be followed meticulously by the field functionaries. Therefore, all
the field functionaries are advised to adhere to the guidelines issued by the Head
Office in connection with obtaining the NEC on the prescribed format as per
enclosed Annexure A-1 & A-2.
13.5

DISCRETIONERY POWER OF OFFICIALS AT HEAD OFFICE TO RELAX THE


ADVOCATES EXPERIENCE FOR EMPANELMENT

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

negligence or connivance, and if no reply/ satisfactory clarification is received from


them within one month, they may report their names to IBA.
13.7.2 A register of advocates empanelled and depanelled shall be maintained at Regional
office level containing details of enrolment number, address etc.
13.8 NUMBER OF CASES PER ADVOCATE
The Regional Head shall ensure that the litigation work and the legal matters are fairly
distributed among the advocates on panel as far as practicable. Before entrusting the
matter to the advocate nature of work and specialization of advocate shall also be
considered. Junior Advocates may be encouraged by entrusting execution matters to
them. Branches shall maintain a record/file of the advocates and the same is to be
updated at the beginning of every year to enable the successor manager to deal with
advocates effectively and efficiently.
Further an advocate shall not be entrusted with more than 20 matters at any point of
time.
13.9 NUMBER OF ADVOCATES
The Regional Head shall ensure that in each district of ROs jurisdiction a minimum of
two advocates shall be on Banks panel. Maximum number would depend on
branches in the district. If branches are spread over various sub-divisions of the same
district then at least one local advocate shall be empanelled for each sub division
where our branches are situated. If the distance between the two sub divisions is
more than 30 km then the Competent Authority may consider empanelment of more
than one advocate for each sub-division. However, the maximum number of
advocates at each District / Tehsil Headquarter shall be need based.
13.10. RE-EMPANELMENT OF ADVOCATES
The authority to re-empanel such advocate shall be vested with the executive higher
than the level at which the advocate was depanelled.

13. REVISION AND RATIONALISATION OF LEGAL FEE PAYABLE TO ADVOCATES


CONDUCTING BANKS CASES & POLICY REGARDING APPOINTMENT OF LEGAL
RETAINERS/LEGAL ADVISORS & STANDING COUNSEL IN HIGH COURTS
Keeping in view of the increased complications in banks litigations, time and energy
spent by the banks advocate for contesting banks cases, the revision and
rationalization of Schedule of Fee has been approved by Board vide B.R. No.A-18
dated 23.05.2012 and the same has been circulated to field functionaries vide circular
No. HO/R&L/CIRCULAR No. 04/2012-13/151 dated 06.06.2012, which is being
reproduced hereunder.
This circular supersedes the earlier circular no
HO/R&L/11/2010-11/761 dated 07.02.2011 and shall be applicable to the matters
mentioned herein with prospective effect. It is further clarified that for all cases which
have already been assigned to the advocates prior to this circular, the fee payable
shall be as per the fee schedule in vogue at the time of assignment/ entrustment of
the case.
158

14.1 SCHEDULE OF FEES


13.1.I. WHEN BANK FILES / CONTESTS ORIGINAL SUITS FOR RECOVERY IN
CIVIL COURTs, DRTs & HIGH COURTs HAVING ORIGINAL JURISDICTION
Sr.
No.

Particulars

Legal Fees besides 10% Clerkage


Major Cities
Other Places

1.

Upto ` 1.00 lakhs

` 6,000/-

` 5,000/-

2.

` 1.00 lakhs to `
2.00 lakhs

3.

` 2.00 lakhs to `
10.00 lakhs

4.

` 10.00 lakhs &


above

` 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/-)

Major Cities Delhi, Mumbai, Chennai, Kolkata, Hyderabad, Ahmedabad &


Bangalore.
Other Places All cities which have not been categorized as major cities as above.
The legal fee as per the above schedule shall be payable in three installments as
under:1.
2.
3.

25% at the time of filing of plaint/OA/Written Statement by the bank


25% on completion of evidence and exhibition of documents by both the
parties.
50% after obtaining final orders and submitting certified copy to the Bank.

14.1.II. EXPARTE PROCEEDINGS


As earlier, if the Suit or Original Application is decreed ex-parte either on account of
non-appearance or non-filing of written statement or not pursuing the matter by the
defendants after filing the written statement or for whatsoever reason, 50% of total fee
shall be payable in two stages i.e. (i) As per Stage 1 above i.e. 25% and balance
25% after obtaining final orders.
159

14.1.III. COUNTER CLAIM / SET OFF


In case the defendants file counter claim / right to set off and the bank has filed WS /
Reply, in that event, the advocate shall be paid additional legal fee @ 25% of the total
fee payable in single installment with 10% clerkage, as it requires extra time and
professional attention to contest the matters by the advocate engaged.

14.1.IV.FEE FOR REPRESENTING THE BANK WHERE IT IS A PROFORMA


DEFENDANT
Particulars
Major Cities
IN DRT / DRAT/ ` 5,000/- + 10%
HIGH COURT
clerkage
IN CIVIL COURTS
` 3,000/- + 10%
clerkage

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.

At the time of filing execution 50% + 10% clerkage


At the time of final recovery - 50% + 10% clerkage
160

IF EXECUTION APPLICATION IS ADJOURNED SINE DIE & REVIVED LATER


The advocate shall be paid only the balance amount of the fee payable to him as
above.

14.1.VI. INTERVENER APPLICATION / OBJECTIONS FILED BY THIRD PARTY


ETC.
A separate fee shall be payable in two equal installments for opposing intervener
applications/ objections filed by third parties during the course of execution
proceedings of the bank / in High Court, DRT & Civil Courts under SARFAESI Act
2002 / in other proceedings as the case may be as these are to be contested very
strongly to safeguard Banks interest. First installment of fee will be paid at the time of
filing reply on banks behalf second installment of fee after final disposal of the
application / objection calculated as under :BEFORE RECOVERY OFFICER, DRT & CIVIL COURT
Major Cities

Other Cities

` 5000/-+ 10% clerkage

` 4000/-+ 10% clerkage

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

` 7000/-+ 10% clerkage

` 5000/-+ 10% clerkage

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

14.1.VIII. APPEALS BY BANK/ AGAINST BANK


Payment of advocate fee shall be made in two installments i.e. 50% at the time of
filing appeal / filing objection (in case of appeals against the bank) with 10% clerkage
and balance at the time of final disposal of appeal with 10% clerkage .
1.

APPEALS IN DRATS & DISTRICT COURTS AGAINST FINAL ORDERS

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.

APPEALS FROM ORDERS OF RECOVERY OFFICER BEFORE DRT &


DRAT
Major Cities
Other Cities
Maximum ` 7,500/- + Maximum ` 6,000/- +
10% clerkage
10% clerkage

3.

FEE FOR FILING/ CONTESTING APPEAL BEFORE DRAT AGAINST


INTERLOCUTORY ORDERS OF DRT (MISC APPEALS)

Same as earlier, a consolidated amount of 50% of the sanctioned professional fee be


payable before DRT
4.

REVISION/ SECOND APPEAL

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

view of the complexity of the matter:Major Cities


` 15,000/- + 10% clerkage

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.

In exceptional cases the maximum Fee for drafting WP / counter affidavit /


rejoinder affidavit in complicated matters before high court, if drafted by an
advocate who is not on the Banks panel shall be ` 4,000/- consolidated (without
clerkage) in major cities & ` 3000/ consolidated (without clerkage) in other cities
after prior approval of concerned Regional Head.

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.

If any conference is required with senior advocate (not necessarily designated), a


maximum consolidated fee of ` 4,500/- in major cities & ` 3000/- in other cities
shall be payable as one time fee after getting prior approval from Regional Head
and no further fee shall be payable for subsequent conferences, if any.

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

14.1.XII. FEE FOR VARIOUS APPLICATIONS UNDER THE COMPANIES ACT


The fee for various applications moved under the Companies Act shall range between
` 5,000/- & `10,000/- in High Courts located in major cities as well as in other cities.
The Regional Heads to negotiate the fee with the advocate on case to case basis and
try to fix the same at minimum level keeping in view of the complexity of the matter /
valuation involved. Fee is to be paid in two equal installments i.e. first at the time of
filing of appropriate application/ objection by the advocate and the balance after
disposal of the case and on submission of certified copy of the final order to the bank.

14.1.XIII. CASES BEFORE SUPREME COURT


Maximum consolidated fee of ` 20000/- + 10% clerkage shall be payable and the
same shall be payable in two equal installments - one at the time of filing of SLP /
Counter affidavit by the advocate and the balance after disposal of the case and on
submission of certified copy of the final order. Wherever senior advocates are to be
engaged, separate fee shall be negotiated and settled by G.M. (R&L) at HO / other
Departmental Heads deviating to the extent as mentioned in this circular and Top
management i.e. Chairman & Managing Director / Executive Director without any limit
and in that case, the fee payable to the advocate on record shall only be ` 15,000/- +
10% clerkage. In case the SLP is disposed of / dismissed at the initial stage itself / or
admission, then only 50% of consolidated fee, stated above, shall be payable to
advocate on record.
Where the Bank is only a proforma defendant, maximum fee shall be ` 10000/inclusive of clerkage is payable.
Fee for holding conference with Senior Advocate shall be ` 5000/- and no further fee
shall be payable for subsequent conferences, if any.
As far as possible the matters before Supreme Court shall be filed / contested through
an advocate-on-record on Banks panel.

FEE FOR DRAFTING SLP / COUNTER AFFIDAVIT / REJOINDER AFFIDAVIT IN


COMPLICATED MATTERS BEFORE SUPREME COURT
In exceptional cases the maximum fee for the above matters, if drafted by an
advocate who is not on the Banks panel and has not been engaged for contesting
the matter shall be ` 5,000/- consolidated (without clerkage).

164

14.1.XIV. FOR FILING CAVEAT APPLICATION


DRT / DRAT / Civil Court

` 1,500/- (inclusive of clerkage)

High Court

` 2,000/-(inclusive of clerkage)

Supreme Court

` 3000/-(inclusive of clerkage)

14.1.XV. APPLICATION/ APPEAL UNDER SECURITISATION ACT


When the borrower or Bank files application / Appeal under Section 17(1) or 18(1) in
DRT/ DRAT respectively the professional fee besides 10% clerkage payable to
advocate shall be as under :Particulars
Upto ` 10 lakhs
Above ` 10 lakhs upto ` 50 lakhs
Above ` 50 lakhs upto ` 100 lakhs
Above ` 100 lakhs

Major Cities

Other Cities

` 6000/` 9000/` 12000/` 15000/-

` 5000/` 7500/` 10000/` 12500/-

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.

14.1.XVI. APPLICATION/ APPEAL UNDER SECURITISATION ACT FOR FILING


APPLICATION & OBTAINING ORDER FOR PHYSICAL POSSESSION UNDER
SARFAESI ACT 2002 BEFORE CHIEF METROPOLITAN MAGISTRATE OR
DISTRICT MAGISTRATE THROUGH ADVOCATES

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.

14.1.XVII. APPLICATION/ APPEAL IN MATTERS REFERRED TO COMPETITION


COMMISSION
The matters referred to Competition Commission are generally related to Banks
policy and are to be contested with utmost care and with the help of senior counsel.
As such, the amount of fee will range from ` 5,000/- to ` 10000/- + 10% clerkage
payable in two equal installments, negotiable depending upon the complexity of
matter.
14.1.XVIII. APPLICATION/ APPEAL BEFORE BIFR / AAIFR
` 10,000/- to ` 20,000/- + 10% clerkage, depending upon the complexity of the
matter.
The fee shall be payable in three stages i.e. 25% at the time of initial stage and 25%
at the time of arguments 50% after disposal.
If there are more than one appeal filed by the Sick Company before AAIFR and the
Bank has to defend all these appeals, then the same shall be defended as far as
possible through the same advocate and fee shall be negotiated and fixed by
G.M.(R&L) at a reasonable level, clubbing all the cases so defended.
14.1. XIX. APPLICATION/ APPEAL IN CRIMINAL MATTERS
1. Filing of Application under CrPC including Sec 200 / Complaint under
Section 138 of Negotiable Instruments Act / any other application filed
under the provisions of CrPC
Major Cities

Other Cities

Maximum amount of ` 7,000/- Maximum amount of ` 5,000/+ 10% clerkage


+ 10% clerkage
Regional Head to negotiate with the advocate and try to fix fee at the minimum.
2. Where criminal case is to be instituted / contested by the Bank, the fee be
paid as follows:Amount involved

Major Cities 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.

Drafting and filing of Criminal Complaint before Police Authorities


Major Cities
` 3,000/-

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.

FEE PAYABLE FOR TRANSFERRED CASES

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.

14.1.XXIII. FOR DRAFTING/EXECUTION OF LEASE DEED / SALE DEED ETC.


OF BANKS PREMISES & IMMOVABLE PROPERTIES
The maximum advocate fee shall be ` 5,000/- plus 10% clerkage depending upon the
nature of work and quantum involved besides actual miscellaneous expenses
incurred in registering the document & obtaining registered document from the
authority. The Regional Heads to negotiate the fee with the advocate on case to case
basis and try to fix the same at minimum level.

14.1.XXIV. FEE FOR


CIRCUMSTANCES

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.

LEGAL NOTICE IN NPA ACCOUNTS DEMANDING REPAYMENT


Amount involved

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

LEGAL NOTICES / REPLY NOTICES IN OTHER MATTERS


Efforts shall be made to get the notice served/ reply to the notices of borrower or third
party given through Legal Retainer of the Region. In case the legal notice/ reply of
notice has been sent by other panel advocate, the fee will be ` 1000/- to ` 1500/(inclusive of clerkage) + typing & postage charges etc. depending upon nature &
complexity of the issues involved.
14.1.XXVI. FEE FOR NON-ENCUMBRANCE CERTIFICATE AND LEGAL
OPINION ON TITLE AFTER CONDUCTING SEARCH OF ALL RELEVANT
RECORDS
Since the same labour is involved for issuing NEC and Legal Opinion in respect of
some property to be mortgaged with the Bank irrespective of the loan amount to be
sanctioned, the professional fee shall relate to the property and not to the amount to
be sanctioned.
Amount
Involved

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.

14.1.XXVII. FEE FOR DRAFTING OF NEW DOCUMENTS


The maximum fee payable for drafting new documents will be in the range of `
5,500.00 to ` 11,000.00 (without clerkage) depending upon the nature of the work.
The competent authority for approving such bills shall be the General Manager of the
respective department at Head Office.

169

14.2

DISCRETIONARY POWERS OF REGIONAL HEAD TO DEVIATE FROM THE


BANKS SCHEDULE OF FEE
The policy has been revised to the extent that the deviation in the fee as per banks
schedule shall be allowed by the functionaries at Regional Office as well as Head
Office as follows:Functionaries

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

POLICY REGARDING PART TIME LEGAL RETAINER


Every Regional Office shall have one part-time Legal Retainer. In case more than
one part-time Legal Retainer is required in the Region depending upon the quantum
of work / territorial jurisdiction etc., the same shall be approved by ED as a very
special case.
171

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/-.

For Regional Offices located in other Cities ` 8,000/-

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.

DUTIES OF LEGAL RETAINERS


The following duties are assigned to the legal retainers-

To render legal advice and legal opinion on all legal matters referred to him.

172

To scrutinize the Title Deeds of properties to be deposited / deposited as collateral


security with the Bank.

To serve notice of renewal / termination of leased premises or reply notices received


from the land lords and also drafting / approval of lease deeds of premises of the
bank.

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.

Scrutiny of loaning documents, agreements etc.

Pre-disbursal / post-disbursal vetting of loaning documents and to give certificate on


the prescribed proforma.

To assist the authorized officers under SARFAESI Act by rendering legal opinion/
legal guidance, at all stages of the disposal of secured assets.

14.4 POLICY FOR STANDING COUNSEL TO FACILITATE SERVICE OF SUMMONS IN


HIGH COURT MATTERS
It has been observed since long that the borrowers / third parties file writ petitions
against the Bank and obtain stay order ex-parte before issuing notice to the Bank. It
takes a long time for the Bank to get the stay vacated. As such, all the Regional
Offices, under whose jurisdiction the High Court or its Bench is located may nominate
one advocate from the list of banks Senior level panel as standing counsel initially for
one year which shall be renewed annually by the Regional Head, keeping in view his
performance, for receiving summons / notices on banks behalf and if need be, for
appearance, to avoid granting of ex-parte stay orders. Such a nomination shall purely
be on temporary basis and can be discontinued at any time without assigning any
reason what so ever. The name of nominated counsel shall be sent to Head Office for
records.
If one or more Regional Offices are coming under the jurisdiction of same High Court,
the Regional Office nearer to the seat of High Court in consultation with other
Regional Office/s will nominate the standing counsel and take other necessary steps
and keep the other Regional Office/s informed about the arrangement made.
Accordingly, Chandigarh Regional Office shall make the nomination for Chandigarh
High Court, Regional Office Varanasi for Allahabad High Court & Regional Office
Lucknow for bench at Lucknow. In Delhi, New Delhi Regional Office will make the
nomination for Standing Counsel for Delhi High Court in consultation with Delhi
Regional Office.
14.4.1 TERMS FOR NOMINATION OF ADVOCATE AS STANDING COUNSEL IN HIGH
COURT
The consent shall be obtained from the nominated counsel regarding the below
173

mentioned terms

Standing counsel will not be paid any fee monthly or otherwise for acting as
such.

On approval as standing counsel, it would not be necessary that all or any of


the cases will be handed over to nominated counsel/standing counsel for
contesting before the High Court. The cases can be allotted to any of the
advocates on the panel of the bank as well.

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.

If nominated counsel / standing counsel is not engaged for further conduct of


the case, nominated counsel / standing counsel will be paid ` 2500/- for first
appearance if made before any instruction on the matter from the bank and
other counsel will be engaged on the remaining fee.

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.

Name(s) and Address(es) of the Mortgagor(s) / Title holder(s):

2.

Description of immovable property:

Plot No. / Property Area

Location

Boundaries

No.
(in

sq.yds./

sq.mtrs/

sq.ft.

acres/ hectares)
North
East
South
West

175

3. The Chain of title deeds scrutinized by As per


me
herewith
i) Search in Sub-Registrars Office
(Location of property of the sub-district within
which the property is located and the address
of the registering officer. In case the property
is situated in more than one subdistricts/districts, the particulars of all the
concerned sub-districts/districts and address
of the registering offices to be given)
ii) Search and Investigation
(The search in the records such as index No.1, Index
No.2, Book No.1/Supplementary Book No.1 should be
made atleast for the past 13 years to trace any
encumbrance is created on the property. A brief
narration may be given on the route and chain of title to
the extent of complete chain and how the title is
conferred on the mortgagor.
The details of the
books/indexes searched by Advocate to be stated. In
the event of any break in the chain of title, the details
thereof specifying how the break in the chain of title
took place to be stated and opinion as to whether it
would vitiate Banks creation of mortgage over the
property be given. In case of any mortgage, charge
or encumbrance subsists over the property, the same
may be highlighted so that the Bank shall avoid the
said property. Confirm and state that the original title
deeds submitted are originals registered before the
Registrar of Assurance) and proper stamp duty has
been paid.

III) Whether the property is ancestral


and/or under joint ownership. If so, details
of the co-parceners /Karta and/or the coowners. The respective shares should be
incorporated specifically
IV)
Minors delinquent,
untraced persons interest

unsound,

(Any minors interest if involved in the


property proposed to be mortgaged or any
other claims. If minors interest is involved
what precautions are to be taken to protect
Banks interest as a mortgagee to be stated.
Please note that if the property belongs to a
minor, permission of Court is generally
required to create the mortgage over the
property).

176

Annexure

A-2

attached

V) Documents pending for registration


(The enquiry is to be made whether any
document creating mortgage, charge or
encumbrance is pending for registration in the
concerned Sub-Registrars/Registrars office
are to be stated. If so, full details of such
charge etc. of charge holders should be
specified)
4.
Whether Urban Land (Ceiling and
Regulation) Act 1976 is applicable in State
where the property is located. If applicable
whether the immovable property(ies) fall(s)
within the purview of the Act, verification and
investigation should be made under Section
26, 27 and 28 of the Act to ensure that
mortgagor(s) has / have obtained necessary
permission from the competent authority
under the Act.
Documentary evidence
showing such permission is obtained has to
be attached with the report.
5.
Whether the property is acquired
under the Land Acquisition Act, 1894 and
applicability of other State Legislations.
6. Leasehold immovable Property (where
land / building is leasehold, please verify the
terms of lease, whether any permission/NOC
from the lessors / competent authority is
required for creation of mortgage of such
leasehold property and advice the precautions
to be taken obtaining such property in
mortgage)
7. Investigation under Income Tax Act
1961(Any permission of the concerned
Assessing Officer under any of the provisions
of Act is required for creating mortgage or any
Certificate to be submitted to the Bank to
show that no dues are outstanding to Income
Tax Deptt.

177

8. Investigation in regard to agricultural


land (Investigate and search the necessary
records etc. with specific reference to the land
if it is surplus, self-cultivated, if consolidation
of holdings / acquisition proceedings etc. is in
progress in the area, whether Government
loan / any loan raised against the land and
details about the charges / encumbrances
may be specified, specifically with reference
to the Agricultural Land Laws.
9. The details of the certified copies of the
revenue records obtained to confirm that the
property in question has been mutated and no
dues are outstanding against the Mortgagor.
10. Any other special enactment which is
applicable to the property proposed to be
mortgaged and affects the title.
11. If it is a property owned by the
Company the additional safeguards like
search before the Registrar of Companies to
be obtained be stated.
12. Whether documents given as chain of
title deeds inspire any doubt / suspicion. Is
it curable how?

13. Reason as to why equitable mortgage is


not being created with the branch, where the
property is situated?
14. Whether any bar to create mortgage as in
case of agricultural land in Delhi? Any CLU /
house tax / notification of land vesting in
municipal authority?

178

15. Whether any restriction on sale of


property? e.g. J & K, Uttaranchal & HP etc.
16. Whether any approvals / clearances
required or obtained, detail?

The following documents in addition to documents mentioned in Chain of documents


in original as well as copies as the case may be alongwith additional documents
mentioned above, varying from case to case may also be obtained for creation of
valid equitable mortgage by deposit of the title deeds (varying from case to case).
Particulars
Comments of Advocate
1. House Tax assessment order pertaining to
property to be mortgaged.
2. Site Plan (sanctioned)
3. House Tax receipt pertaining to property to
be mortgaged
4. Self assessment return form
5. Electricity / Water Bill
6.
Copy of PAN Card / Driving License /
Passport etc.
7. Income Tax returns
8. Affidavit of mortgagor as to how he/she is
connected with the account in which he / she
is furnishing his / her property as security.
9. In case of property of Builders, in addition to
the GPA / SPA, Collaboration / Builders
Agreement, the PAN No. & ITCC of Builder,
his history, copy of some regd. Documents
and endorsement on the original sale deed (if
retained by original owner / builder) be made,
if possible, so that previous document even if
retained by the Owner / Builder cannot be
misused.
10. In case the property to be mortgaged is
related to the company, then relevant
Resolutions along with copy of the minutes,
MOA / AOA and ROC record may be obtained
11. . In any case where ever the previous original
title deed is missing or retained by earlier
owner, the original title deed be seen &
endorsed or an affidavit be obtained from the
person retaining the original title deeds, that
he will not misuse it.

179

12. Affidavit that mortgagor deposited title deeds


with intention, has deposited all documents,
would not misuse any document to detriment
of bank etc., may also be obtained.
13. The stamp duty payable on Oral Assent (if
applicable)
14. NOC / No Dues certificate from lessor / land
authority.
15. In case of leasehold property, the remaining
period of lease, any provision for further
renewal of lease etc. shall be sepecifically
mentioned. The receipt for upto date payment
of lease rent shall be obtained.
16. In case of HUF / Trust, appropriate affidavit
be obtained & further necessary documents
be also obtained. In case of Trust properties,
it should also be mentioned whether
permission from Charity Commissioner or any
other competent authority is required to be
obtained.
17. In case of flat belonging to Cooperative
Housing
Society,
necessary
further
documents i.e. Share Certificate, No
Objection Certificate from Society after
verifying the related records and receipt for
the payment of upto date dues to the Society
be obtained.
18. Since Central Registry u/s 20 of the
SARFAESI Act has been created and
notification No.F-56/5/2007-BO-11 dated 31st
March 2011 has been issued, inspection of
records of central register through the website
of the Central Registry shall also be made by
the advocate concerned and the same shall
be stated in the opinion.

Signature of the Empanelled Advocate

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.

M/s______________________________ personally present (alongwith identity proof)


and deposits the title deeds in original or as mentioned in Schedule I along with
documents mentioned hereunder, with intention to create equitable mortgage, it will
satisfy the requirements of creation of equitable mortgage. The following person/s
should be present personally (alongwith identity proof) to deposit the original title
deeds with your Bank / Branch for creation of equitable mortgage.
..

The following documents shall be obtained at the time of creation of mortgage.


1.
2.
Yours faithfully
Signature of the Empanelled Advocate
Place : _______________
Date : _________________

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

Signature of the Empanelled Advocate

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.

Sick/Weak Non-SSI, Non-BIFR units.


Sick SSI Units (now under SME Sector)

GUIDELINES FOR CLASSIFICATION OF SICK INDUSTRIAL UNIT


The guidelines for correct classification of Sick Industrial Units under the above
categories are as under:-

3.

SICK NON-SSI UNIT (BIFR CASES)


An industrial undertaking is defined as Sick Industrial Company if

3.1.
3.2.
3.3.

it has been in existence for at least 5 years and


has incurred losses and the accumulated losses are more than its net worth.
Definitions:
'Net Worth' means the sum total of Paid up Capital and Free Reserves. Free
Reserves means all reserves credited out of profits and share premium but do
not include reserves credited out of revaluation of assets, write back of
depreciation provisions and amalgamation.

'Industrial Undertaking' means any undertaking pertaining to a Scheduled


Industry carried on in one or more factories by any person or authority
including Government but does not include SSI undertaking or ancilliary
industrial undertaking.

'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.

LEGAL IMPLICATIONS OF FILING REFERENCE TO BIFR

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.

BALANCE SHEET IRREGULARITIES

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.

PROFIT & LOSS ACCOUNT IRREGULARITIES

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

OPERATIVE / OTHER IRREGULARITIES

14.1

Bank guidelines require a borrower to periodically submit statements under QIS,


stock statement, provisional/projected financial results. When the data under said
statements is compared with audited financial accounts, huge differences are
revealed which shows manipulations being undertaken by the company to book
higher losses.

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

Complaints/action taken against the company/promoters by the Govt.


bodies/CBI/Police/other secured/unsecured creditors should be brought to the notice
of higher authorities for necessary action.

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

ABATEMENT OF REFERENCE BEFORE BIFR


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 of such secured creditors, have taken any measures to recover their
secured debt u/s 13(4) of the SARFAESI Act, 2002.

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

2.1 Definition of wilful default


The term "wilful default" has been redefined in supersession of the earlier definition as
under:
A "wilful default" would be deemed to have occurred if any of the following events is noted :(a) The unit has defaulted in meeting its payment / repayment obligations to the lender
even when it has the capacity to honour the said obligations.
(b) The unit has defaulted in meeting its payment / repayment obligations to the lender
and has not utilised the finance from the lender for the specific purposes for which
finance was availed of but has diverted the funds for other purposes.
(c) The unit has defaulted in meeting its payment / repayment obligations to the lender
and has siphoned off the funds so that the funds have not been utilised for the
specific purpose for which finance was availed of, nor are the funds available with the
unit in the form of other assets.
(d) The unit has defaulted in meeting its payment / repayment obligations to the lender
and has also disposed off or removed the movable fixed assets or immovable
property given by him or it for the purpose of securing a term loan without the
knowledge of the bank/lender.
Clarification
The term lender appearing in the this Chapter covers all banks/FIs to which any amount is
due, provided it is arising on account of any banking transaction, including off balance sheet
transactions such as derivatives, guarantee and Letter of Credit and The term unit
appearing therein has to be taken to include individuals, juristic persons and all other forms
of business enterprises, whether incorporated or not. In case of business enterprises (other
than companies), banks/FIs may also report (in the Director column) the names of those
persons who are in charge and responsible for the management of the affairs of the
business enterprise. (Vide RBI Circular RBI/2014-15/221 DBOD.No.CID. 41/20.16.003/
2014-15 dated September 9, 2014)
2.2 Diversion and siphoning of funds
The terms diversion of funds and siphoning of funds should construe to mean the
following:2.2.1 Diversion of funds, referred to at para 2.1(b) above, would be construed to include any
one of the undernoted occurrences:
(a) utilisation of short-term working capital funds for long-term purposes not in conformity
with the terms of sanction;
(b) deploying borrowed funds for purposes / activities or creation of assets other than
those for which the loan was sanctioned;

191

(c) transferring funds to the subsidiaries / Group companies or other corporates by


whatever modalities;
(d) routing of funds through any bank other than the lender bank or members of
consortium without prior permission of the lender;
(e) investment in other companies by way of acquiring equities / debt instruments without
approval of lenders;
(f) shortfall in deployment of funds vis--vis the amounts disbursed / drawn and the
difference not being accounted for.
2.2.2 Siphoning of funds, referred to at para 2.1(c) above, should be construed to occur if
any funds borrowed from banks / FIs are utilised for purposes un-related to the operations of
the borrower, to the detriment of the financial health of the entity or of the lender. The
decision as to whether a particular instance amounts to siphoning of funds would have to be
a judgement of the lenders based on objective facts and circumstances of the case.
The identification of the wilful default should be made keeping in view the track record of the
borrowers and should not be decided on the basis of isolated transactions/incidents. The
default to be categorised as wilful must be intentional, deliberate and calculated.
2.3 Cut-off limits
While the penal measures indicated at para 2.5 below would normally be attracted by all the
borrowers identified as wilful defaulters or the promoters involved in diversion / siphoning of
funds, keeping in view the present limit of ` 25 lakh fixed by the Central Vigilance
Commission for reporting of cases of wilful default by the banks/FIs to RBI, any wilful
defaulter with an outstanding balance of ` 25 lakh or more, would attract the penal measures
stipulated at para 2.5 below. This limit of ` 25 lakh may also be applied for the purpose of
taking cognisance of the instances of 'siphoning' / 'diversion' of funds.
2.4 End-use of Funds
In cases of project financing, the banks / FIs seek to ensure end use of funds by, inter alia,
obtaining certification from the Chartered Accountants for the purpose. In case of short-term
corporate / clean loans, such an approach ought to be supplemented by 'due diligence' on
the part of lenders themselves, and to the extent possible, such loans should be limited to
only those borrowers whose integrity and reliability are above board. The banks and FIs,
therefore, should not depend entirely on the certificates issued by the Chartered
Accountants but strengthen their internal controls and the credit risk management system to
enhance the quality of their loan portfolio.
Needless to say, ensuring end-use of funds by the banks and the FIs should form a part of
their loan policy document for which appropriate measures should be put in place. The
following are some of the illustrative measures that could be taken by the lenders for
monitoring and ensuring end-use of funds:
(a) Meaningful scrutiny of quarterly progress reports / operating statements / balance
sheets of the borrowers;
(b) Regular inspection of borrowers assets charged to the lenders as security;
(c) Periodical scrutiny of borrowers books of accounts and the no-lien accounts
maintained with other banks;
192

(d) Periodical visits to the assisted units;


(e) System of periodical stock audit, in case of working capital finance;
(f) Periodical comprehensive management audit of the Credit function of the lenders, so
as to identify the systemic-weaknesses in the credit-administration.
(It may be kept in mind that this list of measures is only illustrative and by no means
exhaustive.)
2.5

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

Role of Internal Audit / Inspection

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

Reporting to RBI / CIBIL

(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.

Grievances Redressal Mechanism


Banks/FIs should take the following measures in identifying and reporting instances of
wilful default:
(i)

With a view to imparting more objectivity in identifying cases of wilful default,


decisions to classify the borrower as wilful defaulter should be entrusted to a
Committee of higher functionaries headed by the Executive Director and
consisting of two GMs/DGMs as decided by the Board of the concerned bank/FI.

(ii)

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.

(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.

ACTION TAKEN BY THE BANK:


(i)

CONSTITUTION OF SCREENING COMMITTEE

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

Manager (Acctt.) as members.


4.

Criminal Action against Wilful Defaulters

4.1 J.P.C. Recommendations


Reserve Bank examined, the issues relating to restraining wilful defaults in consultation with
the Standing Technical Advisory Committee on Financial Regulation in the context of the
following recommendations of the JPC and in particular, on the need for initiating criminal
action against concerned borrowers, viz.
a. It is essential that offences of breach of trust or cheating construed to have been
committed in the case of loans should be clearly defined under the existing statutes
governing the banks, providing for criminal action in all cases where the borrowers
divert the funds with malafide intentions.
b. It is essential that banks closely monitor the end-use of funds and obtain certificates
from the borrowers certifying that the funds have been used for the purpose for which
these were obtained.
c. Wrong certification should attract criminal action against the borrower.
4.2

Monitoring of End Use

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

Criminal Action by Banks / FIs

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.

Reporting names of Directors

5.1 Need for Ensuring Accuracy


RBI / CIBIL disseminate information on non-suit filed and suit filed accounts respectively, as
reported to them by the banks / FIs and responsibility for reporting correct information and
also accuracy of facts and figures rests with the concerned banks and financial institutions.
Therefore, banks and financial institutions should take immediate steps to up-date their
197

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.

5.2 Position regarding Independent and Nominee directors


Professional Directors who associate with companies for their expert knowledge act as
independent directors. Such independent directors apart from receiving director's
remuneration do not have any material pecuniary relationship or transactions with the
company, its promoters, its management or its subsidiaries, which in the judgment of Board
may affect their independent judgment. As a guiding principle of disclosure, no material fact
should be suppressed while disclosing the names of a company that is a defaulter and the
names of all directors should be published. However, while doing so, a suitable
distinguishing remark should be made clarifying that the concerned person was an
independent director. Similarly the names of directors who are nominees of government or
financial institutions should also be reported but a suitable remark 'nominee director' should
be incorporated.
Therefore, against the names of Independent Directors and Nominee Directors, they should
indicate the abbreviations Ind" and "Nom" respectively in brackets to distinguish them from
other directors.
5.3

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

Inclusion of Director Identification Number (DIN)

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

Name of the branch

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

Type SUIT in case


suit is filed. For other
cases
this
field
should be kept blank.

10

OTHER_BK

Character

40

Name
other

The names of other


banks/FIs from whom
the party has availed
credit facility should
be indicated. The
names may be fed in
abbreviated form e.g.
BOB for Bank of
Baroda, SBI for State
Bank of India etc.

banks/ FIs

199

of

of

Name of the bank/FI

The legal name

Registered
address

of

in
is

Office

11

DIR1

Character

40

Name
director

of

(a) Full name of


Director should be
indicated.
(b)
In
case
of
Government
companies
the
legend
Govt.
of
____undertaking
alone
should
be
mentioned.

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

Procedure to Be Adopted by Branches for Declaring a Borrower as


Wilful Defaulter
DEFINITION OF WILFUL DEFAULTER
As per latest RBI Circular RBI/2014-15/73DBOD No.CID.BC.3/20.16.003/2014-15
dated July 1, 2014, Wilful default broadly covered the following:
a) Deliberate non-payment of the dues despite adequate cash flow and good net worth;
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.

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.

If any representation is received from the party at Branch or Regional Office, it


will be forwarded immediately to Recovery & Law Department, Head Office,
Gurgaon for placing the same before Grievances Redressal Committee.

If any borrower represents that he has been wrongly classified as Wilful


Defaulter, he should be given a hearing before the Grievances Redressal
Committee.

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

ORIENTAL BANK OF COMMERCE


FORMAT FOR SUBMISSION OF INFORMATION REGARDING IDENTIFIED CASES OF WILFUL
DEFAULT OF ` 25.00 LAC & ABOVE FOR THE QUARTER ENDED __________
(` In Lacs)
1
2
3
4
5
6
7
8

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

NAMES OF OTHER BANKS/ FIS


FROM WHOM THE BORROWER HAS
AVAILED CREDIT FACILITIES

19

SPECIFIC REASONS UNDER THE


PARAMETERS OF RBI ON THE
BASIS OF WHICH ACCOUNT IS
BEING REPORTED AS WILFUL
DEFAULT.
As per Reserve Bank of Indias latest
circular No. RBI/2010-11/57, DBOD No.
DL.BC. 20 /20.16.003/2010-11 July 1,
2010, on the subject matter, 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 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.

(Enclosed documents in support of


the decision)

AUTHORISED SIGNATORY

206

Annex-4
REGD. A.D. / SPEED POST

M/s_________________
____________________
____________________

Date:

Dear Sir,

REG: NOTICE FOR DECLARING THE ACCOUNT M/S ________________________


AS WILFUL DEFAULTER
Your account balance shows an outstanding of `____________ inclusive of interest upto
___________ The branch has observed certain irregularities in your account and found that
your account is not being operated in proper banking norms and the following are the
observations for declaring your account in the category of wilful defaulters, as per the norms
of the RBI as well as Bank guidelines.
1.
2.
3.
In case, if you have any grievance in regard to declaring you as Wilful Defaulter, against
such decision you may represent within 15 days of receipt of this letter / personal hearing, to
the Grievances Redressal Committee, Recovery & Law Department, Oriental Bank of
Commerce, Head Office, Plot No.5, Sector-32, Institutional Area, Gurgaon-122001.

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

These guidelines would be applicable to sale of financial assets enumerated in paragraph


6.3 below, by banks/ FIs, for asset reconstruction/ securitisation under the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
208

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)

Under no circumstances can a transfer to the SC/ RC be made at a contingent


price whereby in the event of shortfall in the realization by the SC/RC, the banks/
FIs would have to bear a part of the shortfall.

(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

Bank Rate in force at the time of issue.


(iii)
The securities must be secured by an appropriate charge on the assets
transferred.
(iv) The securities must provide for part or full prepayment in the event the SC / RC
sells the asset securing the security before the maturity date of the security.
(v). The commitment of the SC / RC to redeem the securities must be unconditional
and not linked to the realization of the assets.
(vi) Whenever the security is transferred to any other party, notice of transfer should
be issued to the SC/ RC.
(c) Investment in debentures/ bonds/ security receipts/ Pass-through certificates
issued by SC/ RC
All instruments received by banks/FIs from SC/RC as sale consideration for financial assets
sold to them and also other instruments issued by SC/ RC in which banks/ FIs invest will be
in the nature of non SLR securities. Accordingly, the valuation, classification and other
norms applicable to investment in non-SLR instruments prescribed by RBI from time to time
would be applicable to banks/ FIs investment in debentures/ bonds/ security receipts/PTCs
issued by SC/ RC. However, if any of the above instruments issued by SC/RC is limited to
the actual realisation of the financial assets assigned to the instruments in the concerned
scheme the bank/ FI shall reckon the Net Asset Value (NAV), obtained from SC/RC from
time to time, for valuation of such investments.
(B) Exposure Norms
Banks/ FIs investments in debentures/ bonds/ security receipts/PTCs issued by a SC/RC
will constitute exposure on the SC/RC. As only a few SC/RC are being set up now, banks/
FIs exposure on SC/RC through their investments in debentures/ bonds/security
receipts/PTCs issued by the SC/ RC may go beyond their prudential exposure ceiling. In
view of the extra ordinary nature of event, banks/ FIs will be allowed, in the initial years, to
exceed prudential exposure ceiling on a case-to-case basis.
6. Disclosure Requirements
Banks/ FIs, which sell their financial assets to an SC/ RC, shall be required to make the
following disclosures in the Notes on Accounts to their Balance sheets:
Details of financial assets sold during the year to SC/RC for Asset Reconstruction
a. No. of accounts
b. Aggregate value (net of provisions) of accounts sold to SC / RC
c. Aggregate consideration
d. Additional consideration realized in respect of accounts transferred in earlier years
e. Aggregate gain / loss over net book value.

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

a) Asset classification norms


b) Provisioning norms
c) Accounting of recoveries
d) Capital adequacy norms
e) Exposure norms
iii) Disclosure requirements
3 Procedure for purchase/ sale of non performing financial assets, including valuation
and pricing aspects
i) A bank which is purchasing/ selling nonperforming financial assets should ensure that the
purchase/ sale is conducted in accordance with a policy approved by the Board. The Board
shall lay down policies and guidelines covering, inter alia,
a) Non performing financial assets that may be purchased/ sold;
b) Norms and procedure for purchase/ sale of such financial assets;
c) Valuation procedure to be followed to ensure that the economic value of financial
assets is reasonably estimated based on the estimated cash flows arising out of
repayments and recovery prospects;
d)Delegation of powers of various functionaries for taking decision on the purchase/
sale of the financial assets; etc.
e) Accounting policy
ii) While laying down the policy, the Board shall satisfy itself that the bank has adequate
skills to purchase non performing financial assets and deal with them in an efficient manner
which will result in value addition to the bank. The Board should also ensure that appropriate
systems and procedures are in place to effectively address the risks that a purchasing bank
would assume while engaging in this activity.
iii) Banks should, while selling NPAs, work out the net present value of the estimated cash
flows associated with the realisable value of the available securities net of the cost of
realisation. The sale price should generally not be lower than the net present value arrived at
in the manner described above. (same principle should be used in compromise settlements.
As the payment of the compromise amount may be in instalments, 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 realisable value of securities.)
iv) The estimated cash flows are normally expected to be realised within a period of three
years and at least 10% of the estimated cash flows should be realized in the first year and at
least 5% in each half year thereafter, subject to full recovery within three years.
v) A bank may purchase/sell nonperforming financial assets from/to other banks only on
without recourse basis, i.e., the entire credit risk associated with the nonperforming financial
assets should be transferred to the purchasing bank. Selling bank shall ensure that the
effect of the sale of the financial assets should be such that the asset is taken off the books
214

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.

(Amounts in Rupees crore)


(a) No. of accounts purchased during the year
(b) Aggregate outstanding
(a) Of these, number of accounts restructured during the year
(b) Aggregate outstanding

B. Details of nonperforming financial assets sold:


(Amounts in Rupees crore)
1. No. of accounts sold
2. Aggregate outstanding
3. Aggregate consideration received
C. The purchasing bank shall furnish all relevant reports to RBI, credit information company
which has obtained Certificate of Registration from RBI and of which the bank is a member
etc. in respect of the nonperforming financial assets purchased by it.
Therefore it has further been approved that:
a) All NPAs including acounts under multiple/ consortium banking arrangement, classified
as NPAs in terms of RBI guidelines, including bonds/ debentures, devolved letters of
credit and guarantees would be eligible for sale.
b) Eligible NPAs may be sold under Specific Account Approach and/ or under Portfolio
Approach depending upon the decision of the Asset Sale Committee.
c) Before considering sale of NPAs, pros and cons of realization of securities vis a vis sale
of NPAs be analysed. The factors which influence the decision in favour of sale of the
NPAs are as under :i)

Realization of assets in normal course is expected over a longer period.

ii)

Multiple litigations are involved.

iii)

Outstanding towards workmens dues and/ or government taxes etc. are either
large or cannot be estimated reasonably/ accurately.

iv)

Other contingent liabilities are existing.


217

v)

Sale is in the larger interest of the Bank.

d) Non Performing Investments are also eligible for sale.


e) All the financial assets due from a single debtor be considered for sale. Similarly,
financial assets having linkages to the same collateral be considered for sale
simultaneously. Both fund and non-fund based financial assets may be included in the
list of assets for sale.
f) While considering sale of NPAs relating to loan accounts, the investments made by the
Bank in equity shares /preference shares/ bonds/ debentures and others be taken into
consideration for a suitable decision regarding their recovery.
g) The financial asset including the underlying secured assets, if any, shall be sold on as is
where is basis.
h) NPA in respect of which any case is pending before a Court/ DRT/ BIFR may also be
considered for sale.
i) Retail NPAs of homogeneous nature may also be sold on portfolio basis.
j) The cases of wilful defaulters can also be sold.
k) 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.
l) GM(R&L) shall identify the financial assets (NPAs) coming within the frame work of the
sale policy. However, the powers for permitting for initiation of sale of identified financial
assets will be vested with CMD/ED. A Head Office 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.
However, the following NPA accounts will not generally be sold:1. Where One Time Settlement has already been approved by the bank and the same is
being honoured by the obligants.
2. Where restructuring of the account has already been approved by the bank and the
terms of the approved restructuring package are being honoured by the obligants.
Further, Bank may ensure that while packaging and selling performing or nonperforming assets it is properly ascertained that the pool of assets being sold
does not contain any loan originated fraudulently or has been classified as fraud
on the date of sale- RBI Circular RBI/2009-10/ DBS.CO.FrMC No
13877/23.04.001/2010-11 dated 5th April, 2011.
Notice to borrower :The borrower will be given a notice, informing about the intention of the
bank to sell his NPA account to SC /ARC / Banks / FI / NBFC as the case may be.He will be
218

given time of 15 days to adjust his account or to come forward with an acceptable OTS
proposal.

1.

DELEGATION OF POWERS FOR SALE OF FINANCIAL ASSETS TO SC/ RC

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.

AUTHORITY TO ENTER INTO AGREEMENT WITH SC/RC

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.

Formation of Asset Sale Committee at Head Office

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 scrutinize the NPA accounts, to be identified by GM(R&L) for sale and


recommend to CMD for approval.

To oversee and approve the fixation of Reserve Price as per approved guidelines as
above.

To oversee the entire process of invitation of Expression of Interest, submission of


technical and Price Bids etc. to ensure natural justice, objectivity and transparency.

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.

j) Each price bids will be accompanied by a demand draft of ` 5.00 Lacs in


favour of our Bank. In case intending purchaser is finally declared as
successful bidder, this amount will be adjusted from the cash component of
purchase consideration receivable from the said intending purchaser. The
said amount will be refunded in case intending purchaser is not declared as
successful bidder. In the event, an intending purchaser is finally declared as
successful bidder, but does not come forward to pay balance purchase
consideration or to complete other formalities, the said amount of ` 5.00 Lacs
will be forfeited after the final notice of 15 days.
k) Price bid offers shall be opened within a period not exceeding 10 working days from
the last date of receiving the Bid offers.
l) Each intending purchasers, which has submitted the bids as above, shall be
informed of date and time of opening of bids by fastest available means (e-mail / fax
etc.).
m) On the schedule time and date of opening of price bids, the Asset Sale Committee
will open the bids in the presence of representative of intending purchasers.
n) Price Bids of identified purchaser as stated above will be opened and offers will be
numbered as per their price status say highest one (H1), highest second (H2) and
so on. Comparative statement of all the Price Bids be prepared and signed by all
the committee members.
o) Bank may adopt the procedure of selection of highest offer among the offers
received or follow the system of inter-se bidding depending upon circumstance
warranted. In case inter-se bidding process is adopted, the bids are to be opened in
the presence of all bidders so that highest one is known to everyone and inter-se
bidding be allowed amongst top three bidders in each category, e.g. cash
component category, SR component category and total purchase consideration
category.
p) Bank may further negotiate with the highest bidder in each category for
improvement of the purchase consideration. Intending purchaser will confirm the
revised offer as agreed within 5 days after negotiation.
q) Considering the Reserve Price, highest offer received and recoverable dues as per
general guidelines of compromise, the Committee will take a view whether to
proceed further for sale of specific financial asset/ assets.
r) The Bank has a right to reject even the highest offer without assigning any reason.
Further, in case highest bid is lower than the Reserve Price the bank may scrap the
process for said individual asset/ asset under portfolio. However, in exception
cases negotiation with the highest bidder may be considered in view of CVC
guidelines.
221

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.

223

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.

Powers for Write-Off


It is proposed that the authority for approval for fully write off shall be as under
S.No
1

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

Head Office Level Credit


Committee
(HLCC-ED)
headed
by
Executive
Director
Chairman and Managing
Director
Credit
Approval
Committee, Head Office
Managing Committee of
Board

` 100.00 lac (TWO + present meager O/S +


Recorded interest and other charges)
` 150.00 lac (TWO + present meager O/S +
Recorded interest and other charges)
` 400.00 lac(TWO + present meager O/S +
Recorded interest and other charges)
FULL POWER

Note 1

The Regional Head shall not be empowered to approve write off in


TWO account in which the credit facilities were sanctioned by
him (by name)
Note 2
Accounting system in vogue shall be followed /complied with
meticulously
Note 3
The Second man at the Regional Office is not empowered to approve
write off in TWO account
Note 4
Power to approve write off in TWO accounts shall be vested with the
Regional Head and at Head Office through the committees as per
system in vogue.
5.
Other Terms and Conditions
The accounts under this exercise shall be closed for all practical purposes.
Pending cases with the courts (Suit Filed and Decreed Accounts) and Revenue
Authorities shall be withdrawn from the Courts /Revenue Authorities to avoid
spending good money and man power, which can be utilized for other productive
purposes.
Closure of TWO accounts, in the above stated manner/exercise, would ensure
greater attention of the Branch/ Regional Office officials towards large borrowal
accounts, which constitute substantial portion of NPAs and accelerate the Recovery
Process to reduce the level of NPAs.

Regional Offices shall ensure total transparency in the exercise.

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
226

approved and the same has not been treated as failed.


(B) CRITERIA FOR EMPANELMENT OF RECOVERY AGENTS
The following points be considered while empanelling the Recovery Agents:

Geographical presence,

Constitution of Agency, viz. individuals, partnership firm or corporate.

Expertise, knowledge and experience in dealing with the impaired assets,

Consideration of antecedents of promoters and availability of infrastructure,

Already listed with the other Banks / FIs as Recovery agents,

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.

( C ) PROCEDURE FOR EMPANELMENT OF RECOVERY AGENTS


An advertisement in local newspaper, having good circulation in the area, shall be got
published by each Regional Office, inviting applications for empanelment as Recovery
Agent with the bank, clearly giving eligibility criterion.
A three member Committee at Regional Office level shall be constituted for shortlisting the
applications received as per guidelines.
To facilitate faster decision making at the Regional Office level, the Regional Heads are
hereby empowered to empanel any shortlisted agency as Recovery Agent.
The Dy. General Manager (R&L) / The General Manager (R&L) at H.O. are empowered to
empanel any agency as Recovery Agent in respect of applications, directly received at
Head Office, for empanelment as Recovery Agent and found eligible to meet the criterion.
The empanelment will be initially for a maximum period of two years.
(D) DUE DILIGENCE PROCESS
In compliance of RBI guidelines, a due diligence process is required for engagement of
recovery agents, which should be so structured to cover, among others, individuals involved
in the recovery process. The due diligence process should generally conform to the
guidelines issued by RBI on outsourcing of financial services vide circular DBOD.No.BP.40/
21.04.158/ 2006-07 dated November 3, 2006.
Further, Regional Office should ensure that the agents engaged by them in the recovery
process carry out verification of the antecedents of employees of Recovery Agency, which
may include pre-employment police verification, as a matter of abundant caution. It is
proposed that reverification of antecedents should be resorted to after every two years at the
time of renewal, if any. Identity cards and copy of banks authorization letter may be provided
to each employee who contacts the borrower personally.

227

(E)

TRAINING FOR RECOVERY AGENTS

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.

(F) ISSUANCE OF EMPANELMENT LETTERS TO RECOVERY AGENTS


The Competent Authority shall issue the empanelment letter in duplicate as per the
Annexure-IV to the approved Recovery Agents containing terms and conditions mentioned as
above which should be duly accepted by the Recovery Agents.
However, the said empanelment will take effect only after completion of following two
formalities on the part of empanelled Recovery Agent. The allotment of the NPA accounts to
Recovery Agent for recovery of banks dues will be made only after completion of following
formalities: The empanelled Recovery Agent shall furnish to the Banks Regional Office, a
Bank guarantee for an amount of ` 1,00,000/-. The said Bank Guarantee should
be issued by some other bank. Alternatively, the Agent shall make a security
deposit (by way of term deposit in our bank) for equivalent amount, which shall
be duly discharged by the Recovery Agent and on which banks lien shall be
duly recorded. The said Bank Guarantee / discharged CDR shall coincide with the
tenure of Recovery Agent i.e. two years and will be kept in safe custody at
Regional Office. Regional Head will be empowered to invoke the said Bank
Guarantee / encash the said CDR in case of any loss, monetary or otherwise,
caused to the bank due to the acts of omission and commission by the Recovery
Agent, as decided by Regional Head on case to case basis.
The empanelled Recovery Agent will enter into an agreement with the bank,
specifying the terms and conditions of empanelment as contained in the letter of
empanelment. The letter of empanelment, issued by Bank to Recovery Agent,
shall be as per Annexure-IV. The said agreement will be executed on non-judicial
stamp paper of requisite value. The same must conform to RBI circular no.
DBOD.No.BP.40/ 21.04.158/ 2006-07 dated November 3, 2006 and shall be vetted
by the legal retainer.

228

(G) PUTTING UP THE NAMES OF RECOVERY AGENTS ON BANKS EXTERNAL


WEBSITE
Reserve bank of India vide the said circular dated 24-04-08 and Indian Banks Association,
vide letter no. RB-I / RA / 775 dated 28-07-08 has advised to put up the names and details of
Recovery Agents on banks website. It is, therefore, decided that soon after empanelment of
Recovery Agent, the concerned Regional Office shall forward the names and other details like
address, Telephone no., names of Proprietor / Partners / Directors / Senior Executives (with
Mobile nos.) etc. of the empanelled Recovery Agent to Department of Information Technology,
Head Office, New Delhi, who will put up the said details Regionwise on Banks external
Website. Similarly, the banks website shall be updated with fresh empanelment /
depanelment or changes in the details of empanelled Recovery Agents on an ongoing basis.
(H)
DELEGATION OF POWER FOR EMPANELMENT / DEPANNELMENT OF
RECOVERY
AGENTS/OUTSIDE AGENCIES TO REGIONAL HEADS/ GENERAL
MANAGER(R&L)
To facilitate faster decision making at the Regional Office/ Head Office level, the Regional
Heads and the Dy. General Manager (R&L) / General Manager (R&L) have been
empowered to empanel/depanel any agency for enforcing the rights of the Bank for recovery
of banks dues. Empanelment of Recovery agents by the Regional Heads will also ensure
availability of sufficient number of agencies offering each type of service to all the Regions.
The Regional Head may engage Recovery agents out of their panel. The Regional Heads
are empowered to de-panel any agency under the power delegated to them.
(I) PAYMENT OF COMMISSION TO RECOVERY AGENTS
The payment of commission will be made to Recovery Agents on success basis with proof
at the following rates and subject to following terms and conditions as under :For All NPA Accounts ( Non Suit Filed / Suit Filed / Decreed )
Age Of NPA Commission Payable on amount of Recovery
Account
For Accounts with O/s. For Accounts with O/s.
upto ` 1.00 Lacs
Above ` 1.00 Lacs
Up to 3 Years
6%
4%
Above 3 Years 8%
7%
upto 5 Years
Beyond 5 Years 10%
10%
Note: - 1.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 wherever applicable.
2. In case, the borrower approaches the bank for settlement of the account after the
allotment of the account to the Recovery Agent, the normal Commission will be paid to
Recovery Agent on each amount deposited by the borrower under the settlement on the
condition Recovery Agent will continue to pursue the borrower for deposit of entire
settlement amount.
However, If the Branch Incumbent / Regional Head is of the view that the efforts of the
Recovery Agent in the allotted NPA account are not satisfactory, Regional Head can
229

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
230

grievance / complaint lodged by the concerned borrower. However, where the


Regional Head is convinced, with appropriate proof, that the borrower is
continuously making frivolous / vexatious complaints, he may continue with the
recovery proceedings through the Recovery Agents even if a grievance /
complaint is pending with them. In cases where the subject matter of the
borrowers dues might be sub judice, bank should exercise utmost caution, as
appropriate, in referring the matter to the recovery agencies, depending on the
circumstances.
(g) Each Regional Office must have a mechanism whereby the borrowers' grievances
with regard to the recovery process can be addressed. The details of the
mechanism should also be furnished to the borrower while advising the details of
the recovery agency as at item (e) above. It is desired that all the complaints must
be dealt with personally by the Regional Head or the Second Man at RO and
personal hearing may preferably be given to the complainant and suitable action
be taken to redress the genuine complaints.
(h) While allotting any NPA account to the recovery agent, it will again be advised to
them not to adopt any uncivilized, unlawful and questionable behavior with the
NPA borrowers or their family members.
(i) The visits to the borrower by the Recovery Agent should be made during the
business hours only and not otherwise. Recovery Agents, who represent
our bank in collection or/and security repossession would follow the
guidelines contained in HO Circular no. HO/Rec & Law / 03/2007-08 dated
12-09-2007, and other guidelines issued from time to time by RBI.

(K) TAKING POSSESSION OF PROPERTY MORTGAGED / HYPOTHECATED BY


BANKS
In a case which came up before the Honorable Supreme Court, the Honorable Court
observed that we are governed by rule of law in the country and the recovery of
loans or seizure of vehicles could be done only through legal means. In this
connection it may be mentioned that the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act,2002 (SARFAESI Act) and
the Security Interest (Enforcement) Rules, 2002 framed thereunder have laid down
well defined procedures not only for enforcing security interest but also for auctioning
the movable and immovable property after enforcing the security interest. It is,
therefore, desirable that the recovery agents engaged rely only on legal remedies
available under the relevant statutes while enforcing security interest without
intervention of the Courts.

(L) GROUND RULES TO BE APPLICABLE TO/ OBSERVED BY

RECOVERY AGENTS / OUTSIDE AGENCIES


1. The term referred to as 'Recovery Agent' shall include the agencies engaged by the
bank and the agents / employees of the concerned agencies.
2. The term 'Recovery Agent' shall apply to the agencies that approach the Bank and
evince interest in providing service of Recovery Agent' and the Bank agrees to
231

engage the services of the 'Recovery Agent' in the required matters.


3. If a company is engaged as a Recovery Agency, it shall be ensured that its
Memorandum of Association (MOA) permits it to act as a Recovery Agent , if not, the
MOA shall be got suitably amended.
4. Supreme Court has cautioned the Banks against use of coercive methods for
recovery of loans and in the other case on the same issue State Consumer
Forum of New Delhi has given stern warning to Banks that if any complaint is
received against any Bank alleging use of force by recovery agents, the
punishment of minimum one month imprisonment shall be imposed under
section 27 of the Consumer Protection Act 1986. Therefore, Regional Office
will ensure that the guidelines of RBI/ IBA along with Bank guidelines on the
subject be adhered to meticulously.
5. The 'Recovery Agent' shall agree to provide its services in the matter referred at the
Commission, payable after recovery effected, as per commission payment schedule
duly approved by the Bank.
6. Payment of commission will be made by the respective branches after getting
the approval from concerned Regional Offices subject to statutory deduction of
Income Tax and Service Tax as applicable.
7. The 'Recovery Agent' shall agree to carry out its functions at its risks and
liabilities.
8. The 'Recovery Agent' shall agree and declare that it 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.
9. The 'Recovery Agent' shall agree and undertake that it 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.
10. All information/ documents provided by the Bank to the 'Recovery 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 'Recovery Agent' or any
third party.
11. The obligation of the Recovery Agent to keep the information confidential shall
continue and survive even after termination of the arrangement.
12. The 'Recovery 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 Recovery Agent shall
certify in writing to the Bank such return or destruction.
13. In case services of 'Recovery 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.
232

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.

The Agencys Representatives, Undertakings and Covenants.


The Agency represents that it is sufficiently experienced and has experienced
personnel, who understand the requirements of Bank as well as law/legal procedures
to be deployed for carrying out each work assigned to it by the Bank.

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.

Shall upon termination of agreement, promptly return all copies of


information/documents in whatsoever form or media, to the bank or any
person authorized by the Bank or at the discretion of the bank destroy the
same without retaining any copies thereof and will certify the bank in writing
to that effect.
Shall contact the borrower between 0700 hours and 1900 hours.
Shall agree to Banks decision in regard to the Agencys compliance in this
236

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

For account with O/s.


above ` 1.00 lac

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.

8. Non Exclusive Agreement.


It is expressly agreed and understood between the parties hereto that this agreement
is on non exclusive basis and the Agency does not have any exclusive right to provide
the said service set out herein to the Bank and that the Bank is free to engage as
many companies/firms to provide such services and enter into agreements with any
other person, firm or company as may be deemed fit by the Bank. The Agency shall
also be at liberty to secure assignments from any other body corporate or bank.

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

For Recovery Agency

Signature & name


Proprietor/Partner/Director

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.

This guarantee shall remain in full force up to ________inclusive of the date


hereinafter referred to or till the expiry of the extended period, if any and/or till the
Branch Incumbent/ Regional Head of the Beneficiary issues a NOC or certifies in
writing that the terms and conditions of the said Agreement have been fully &
properly carried out by the Agency.

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.

NOTWITHSTANDING ANYTHING CONTAINING THEREIN.


1.

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.

Dated the ________ day of _________ for ______


Signature
Designation with Banks stamp.

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.

coercive methods for recovery of loans as also laid in decision of State


Consumer Forum of New Delhi.
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.
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.
Shall not accept any account/charged property, wherein it has any
direct/indirect interest.
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.
Shall not divulge the information received from the Bank/ gathered during the
course of performing its assigned functions to any one else except as required
for the specific assignment or in accordance of law.
Shall upon termination of agreement, promptly return all copies of
information/documents in whatsoever form or media, to the bank or any person
authorized by the Bank or at the discretion of the bank destroy the same
without retaining any copies thereof and will certify the bank in writing to that
effect.
Shall contact the borrower between 0700 hours and 1900 hours.
Shall agree to Banks decision in regard to the Agencys compliance in this
respect, which shall unconditionally agree and which shall be treated as final
and binding.

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

SETTLEMENT OF DECEASED DEPOSITOR CLAIM CASE


The policy on settlement of deceased depositor claim cases has been reviewed by the
Board of Directors vide B R No A-17 dated 23.05.2012 and Board memorandum A-24 dated
19.06.2014, some changes in the policy regarding settlement of deceased depositor claim
have been made to make the policy more customer friendly and to enable the field
functionaries to dispose of the claim cases of deceased depositor.
The Documentation aspect, Time Norms as well as Treatment of pipeline flows in the name
of deceased depositor(s) towards simplification of the process for the settlement of claims in
deceased depositors accounts are appended hereunder:(A) Documentation- Documents which are required to be submitted along with the claim
form are as under:
(i) Proof of death of depositor(s) or heir(s).
(ii) Proof of identification of nominee(s) wherever applicable such as Ration Card,
Election ID Card, PAN Card or Passport or any other satisfactory proof of
identification acceptable to the bank or proof of authority of legal heir(s) wherever
applicable.
(a) The Branch should exercise due care and caution in ascertaining the identity of the
survivor(s)/nominee and the fact of death of the account holder, through appropriate
documentary evidence;
(b) It should be made clear to the survivor(s)/nominee that he / they would be receiving the
payment from the bank as a trustee of the legal heirs of the deceased depositor, i.e., such
payment to him / them shall not affect the right or claim which any person may have against
the survivor(s)/nominee to whom the payment is made.
(c) It may be noted that since payment made to the survivor(s) / nominee, subject to the
foregoing conditions, would constitute a full discharge of the bank's liability, insistence on
production of legal representation in such cases is superfluous and unwarranted and it
would only serve to cause avoidable inconvenience to the survivor(s)/nominee. In such
case, therefore, while making payment to the survivor(s)/nominee of the deceased depositor,
the bank should not insist on production of succession certificate, letter of administration or
probate, etc., or obtain any bond of indemnity or surety from the survivor(s)/nominee,
irrespective of the amount standing to the credit of the deceased account holder.
(d) In case where the deceased depositor had not made any nomination or for the accounts
other than those styled as "either or survivor" (such as single or jointly operated accounts), a
simplified procedure for repayment to legal heir(s) of the depositor be adopted, keeping in
view the imperative need to avoid inconvenience and undue hardship to the common
250

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.

Claims by nominees in respect of the accounts where a valid nomination is registered


as per Branch records, shall be disposed of at Branch level, in accordance with
nomination; 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

Thresh hold limit/powers for settlement of


deceased claim cases
Upto ` 5.00 lacs
Upto ` 10.00 lacs
Upto ` 25.00 lacs
Upto ` 50.00 Lacs
Upto ` 1.00 Crores
Above ` 50.00 Lacs and upto ` 1.00 Crores
Above ` 1.00 Crores and upto `4.00 Crores
Above ` 4.00 Crores

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

SETTLEMENT OF CLAIMS IN VARIOUS TYPES OF ACCOUNTS / FACILITIES


DEPOSIT ACCOUNTS
(j) Nomination facility is intended only for individuals including a sole proprietary
concern.
(ii) There cannot be more than one nominee in respect of single / joint deposit
account.
(iii) Banks may allow variation/cancellation of a subsisting nomination by all the
surviving depositor(s) acting together. This is also applicable to deposits having
operating instructions "Either or Survivor".
(iv) It may be noted that in the case of a joint deposit account the nominee's right
arises only after the death of all the depositors.
Claim specific actions / steps to be taken for settlement in respect of different
accounts / facilities are illustrated in the tabulated form as under:
1. With Nomination
Sr. Nature of Single
Joint A/c
No. Account
Depositor (operated
jointly)
A

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 -

- do (As per terms


of contract)

3. Illustrations on joint accounts


A. Joint Deposit Accounts (without nomination)
Deposit Account of
With survivor clause
A+B
A dies
Both A + B die

Without survivor clause

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

Legal heirs of all

255

B + C+ Legal heirs of A
C + Legal heirs of A + Legal
heirs of B
Legal heirs of all

B. Joint Deposit Accounts (with nomination)


Deposit Account of
With survivor clause
A+B

Without survivor clause

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)

Accounts with survivor clause:

(ii) Copy of Death Certificate


(iii) Affidavit (as per Annexure-I)
(iv) Letter of Authority (as per Annexure J) if amount to be
paid to one legal heir on behalf of others
(v) Letter of Indemnity signed by claimant(s) (Annexure F)
(vi) Office note as per annexure K (if the claim is to be
approved by RO/HO)
3. B.
For cases other than Nomination/Joint Accounts with survivor clause:
(For amounts up to sub-threshold limit i.e., for cases of ` 25000/- and below)
(i) Application for Deceased Claim (Annexure E)
(ii) Copy of Death Certificate
(iii) Undertaking on plain paper (as per Annexure-H)
4. RECEIPT (Annexure G)
To be obtained in all cases

257

Annexure D (Revised- 2012)


Application for Deceased claim
(To be used when account has nomination or is a joint account with survivor clause)
From
___________________
___________________
To
The Branch Incumbent,
Oriental Bank of Commerce
___________________ Branch
Dear Sir,
Deceased Account Late Shri/ Smt. Account No(s)
I/We inform the demise of Shri/Smt. _______________________ on __________________.
He/She holds the above account(s) at your branch. The account is in the name(s)
of:_____________________________________
A. In case of Nomination
I,son/daughter of Shri..
..residing at .
am
(i)
the registered nominee in the above account(s).
(ii)
the person authorized to receive payment on behalf of Master / Miss
.. who is the nominee in the above account(s) and is
a minor as on the date of this claim.
Please settle the balance in the account in the name of the nominee. I/we shall receive the
payment as trustee(s) of the legal heirs of the deceased.
B. In the case of joint account.
I/We Request you to delete the name of deceased person and continue the account in my
/our name(s) with same mode of operations.
I/We submit photocopy of the following document(s) together with originals. Please return
the original to us after verification.
Death Certificate issued by
______________________
Identity proof (required in nomination cases)
________________
Place:
Date:

Yours faithfully,
(Claimant(s))

258

Annexure E (Revised- 2012)


Application for Deceased claim
(To be used for cases other than Nomination / joint account with survivor clause)
From
___________________
___________________
___________________
To
The Branch Incumbent
Oriental Bank of Commerce
___________________ Branch
Dear Sir,
Re: Deceased Account
Late Shri/Smt..
Account No(s)
I/We advise the demise of Shri/Smt. _______________________ on __________________.
He/She holds the above account(s) at your branch. The account(s) is/are in the name
of:_____________________________________.
I/We lodge my/our claim for the balances with accrued interest lying to the credit of the
above named deceased who died intestate. I / we am / are the legal heirs of the above
named deceased and lodge my/our claim for payment as per the banks rules and discretion.
The relevant information about the deceased and the legal heirs are as under.
1.

2.

Names in full of the parents of the deceased:


Father:________________________________________whether alive yes/no
Mother:_______________________________________ whether alive yes/no
Religion of the deceased: _________________

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
___________
___________
___________
___________
___________
___________

4. Name or Names of the


Guardian/s of the minor
Children of the Depositor
(a) Whether Natural
Guardian
(b) Whether Guardian
appointed by a Court
of Law in India. If so,
attach a certified copy
or duly attested copy of
such Order
(c) In whose custody the
Minor/Minors is / are?
5. Claimant/s name/s
and address in full
(i)
(ii)
(iii)

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.

Death Certificate (Original + 1 photocopy) issued by: ______________


Indemnity Bond
Affidavit
Letter of Authority

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.)

ANNEXURE F (Revised- 2012)

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.

Shri__________________________, son of _______________________________,

resident

of

_________________________________________________________________
2.

Shri__________________________,

of_________________________________,

son
resident

of

__________________________________________________________ (hereinafter called


the Sureties which expression shall unless repugnant to the context include their heirs,
executors, administrators, successors and assigns) of the Second Part in favour of Oriental
Bank of Commerce, a body corporate with perpetual Succession constituted under the
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, having its Head
Office at Harsha Bhawan, E-Block, Connaught Place, New Delhi and having amongst other
places a branch of the Bank at _______________________________ (hereinafter called the
Bank which expression shall unless repugnant to the context include its successors and
assigns of the Third Part.
WHEREAS the Principal Party/Parties and the Sureties have represented to the Bank that
Shri/Smt.__________________________________
at_______________________ on

262

had

died

ANNEXURE F (Revised- 2012)


_____________________ and that he/she at the time of his/her death had following
account/s with the Bank
Sr. no.

Account No./s

Type of Account/s

Credit Balance (In `.)

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.

Name of Legal Heirs

Age (in years)

Relation with the Deceased

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

________________________ (Rupees..) to Mr/Mrs


________________________________________________________or

to

themselves

jointly with interest as per the policy of the Bank as applicable from time to time, receipt

263

ANNEXURE F (Revised- 2012)


whereof will be furnished by the recipient at the time of receiving the payment which will be
binding and acceptable upon / to all the parties concerned and will be read as part of this
Indemnity Bond.
The Principal Party/Parties and the Sureties do hereby jointly and severally undertake and
keep the Bank harmless and indemnified against any loss, damage, cost, claim, interest or
expenses for which the Bank may be held liable to suffer, pay or incur in consequence of its
having paid the amount to the Principal Party/ Parties. The sureties also guarantee the
payment of the said amounts and agrees to pay the same after demand in writing for which
the Bank is made liable to pay or suffer.
IN WITNESS WHEREOF the parties hereby have set their respective hands hereunder the
day, the month and the year first above written in the presence of :
WITNESSES :

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

Annexure G (Revised- 2012)


RECEIPT
Received with thanks from Oriental Bank of Commerce, _________________ branch, a sum
of ` _______________ (Rupees _____________________________ only) by Bankers
Cheque

No.________________

dated

____________

in

favour

of

____________________________________________________ in full and final settlement


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 all the legal heirs


over a revenue stamp)

DECLARATION in case funds are settled in favour of a Minor


I,-------------------------- father/ mother and natural guardian of -------------------- hereby certify
that the proceeds of your Bankers Cheque No.--------- dated---------- favoring ------------issued by you in settlement of the balance in account number ----------------- of Late-------------------will be utilized for the benefit of the minor only.

(Signature of father/mother)

265

(To be obtained from all legal heirs on Plain paper with photos of legal heirs affixed thereon)

Annexure H (Revised- 2012)


Undertaking format
(for cases under Sub-Threshold limit. i.e., for cases of ` 25000/- and below)
UNDERTAKING WITH RESPECT TO PAYMENT OF BALANCE IN THE DECEASED
CONSTITUENTS ACCOUNT WITHOUT PRODUCTION OF LEGAL REPRESENTATION
To
The Branch Incumbent
Oriental Bank of Commerce
.Branch
In consideration of your paying or agreeing to pay me/us,
Insert here the 1) __________________________________________
Name(s)
2) __________________________________________
Claimants
3) __________________________________________
4) __________________________________________
5)___________________________________________
The sum of Rupees_________________________________________________ standing
to the credit of Savings Bank/Current/R.D. Account No. etc. __________ with your bank in
the name of Shri/Smt./Kum. ____________________________
since deceased, without production of Letters of Administration or a Succession Certificate,
I/We jointly and severally undertake to refund the said amount with applicable rate of interest
to Oriental Bank of Commerce or its successors or assigns, in the event of there being any
other claimant/s to the above amount and the bank is made to pay such rival claims.
Place:
Date:
1. ____________________
2. ____________________
3. ______________________
4. ______________________
5. ______________________
(Signatures of heirs /claimants of the deceased)
Witness: 1

2.

266

ANNEXURE I (Revised- 2012)


AFFIDAVIT
I/We ____________________________________________, *son/daughter/widow/mother
of Shri_________________________, aged about ______ years, resident of
____________________________________________________ do hereby solemnly affirm
and declare as under :1.
That
my
*father/mother/husband/wife/daughter,
*Shri/Smt./Km.
______________________,
died
at
__________________________
on
_________________ (Copy of death certificate is enclosed).
2.
That Late *Shri/Smt./Km.________________________________ during his/her life
time had the undernoted account/s with ________________________ branch of
Oriental Bank of Commerce :Nature of Account
No. of Account
Credit Balance
`
P.
_________________________________________________________________
___________________________________________________________
3.

That *Shri/Smt./Km.___________________________ has left being the following


persons as *his/her only legal heirs entitled to succeed.
Name of Legal Heir
Relationship with
Age
the deceased
(In case any one of claimants
is minor, his/her date of birth be
mentioned specifically)

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 :-

Verified at_________________ on this ________ day of ________________ that the


contents of Para 1 to 7 of the above affidavit are true to my knowledge and nothing
material has been concealed.

DEPONENT/S
N.S.
1.
2.

3.
4.
5.
6.

*Strike out whichever is not applicable.


The affidavit is to be typed on the non-judicial stamp paper of the value to be
verified locally and should be properly attested by Notary Public or by a Magistrate
(1st Class).
Any cutting etc. in the affidavit should be initialed by the deponent and the
attesting authority.
The affidavit/s in original executed by all the legal heirs should be obtained
alongwith other claim papers.
Photograph of the deponents (Legal heirs shall be affixed thereon)
In case of Hindu/ sikh/ Buddhist /Jain male deceased, the mother will also be class
I legal heir.

268

(on plain paper)

ANNEXURE J (Revised- 2012)

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 : _____________________

Names of the claimant/legal heirs

269

ANNEXURE K (Revised- 2012)


Claim Case No._________ of __________
OFFICE NOTE
DATED___________________
UNDER THE POWERS OF HEAD OFFICE/REGIONAL OFFICE/BRANCH INCUMBENT
REG : CLAIM CASE OF LATE _______________________________
B/O ___________________________
REGION ________________________

1. Name of the deceased depositor


2. Date and place of death of the deceased
Depositor as per Death Certificate submitted
by claimants
3. Details of accounts with the subject branch
with credit balances
4. Whether any nominee has been made by
the deceased depositor during his life time,
if so, name of the nominee
5. Whether any Succession Certificate/ Probate
of Will or any other orders of the court have
been obtained by the claimants, if so, details
thereof
6. Details of legal heirs/ representatives left
by the deceased depositor as per claim form
7. Whether the legal heirs have submitted
Affidavits/ Relinquishment Deed/Power of
Attorney, if so, details thereof
8. Mode of payment whether the claimants
requested payment jointly or singly to one
of the legal heirs or representatives

9. Terms of payment :-

Indemnity Bond with two


a. Financially sound sureties to the
b. Satisfaction of Branch Manager.

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.

The payment of the balances lying in the aforesaid account/s be paid to


_________________________ on the basis of Letter of Authority/ Power of
Attorney executed by other legal heirs of the deceased depositor and on the
execution of an indemnity bond by all the legal heirs as mentioned above on a
non-judicial stamp paper to be verified locally with two financially sound and
respectable sureties to the satisfaction of the Branch Manager. The person
___________________________________ authorized by virtue of Letter of
Authority/ Affidavit/ Power of Attorney shall receive payment for self and on behalf
of all the legal heirs of the deceased depositor.

Branch Incumbent
B/O__________________
*Strike whichever is not applicable.

271

SETTLEMENT OF DECEASED DEPOSITOR CLAIM CASE- SIMPLIFICATION OF


PROCEDURE - POLICY REGARDING OPERATION OF LOCKERS AND
RELEASE OF SAFE CUSTODY ARTICLES IN CASE OF DEATH OF THE
LOCKER HIRER
In order to bring uniformity in the disposal of claims relating to the locker lessees by the
branches, the branches / Regional Offices, in cases of claims to the Safe Deposit Locker /
Safe Custody Articles, Board of Directors of Bank has approved the policy vide BR no. 46
dated 23.06.2010, which are also circulated vide HO/Rec & Law/Circular No. 03/201011/342 dated 16 August 2010. The salient features of the same are given hereunder:
1.

Safe Deposit Lockers

With Nomination/ Survivor Clause


The nominee/survivor will be allowed to access the locker and remove the contents on
proper identification (such as Election ID Card, Passport, PAN Card etc.) and verification of
proof of death of locker hirer and after satisfying that the nomination has been made under
Section 45 ZE of the Banking Regulation Act on the form prescribed there under, is complete
in all respects or safe deposit locker was accessible under the survivor clause. Before
permitting the nominee to remove contents of the Safe Deposit Locker, the bank would
prepare an inventory in duplicate of the articles in the presence of nominee(s) and two
independent witnesses which will be signed by all concerned. One copy of the same will
remain on branch records and the other will be handed over to the nominee after obtaining
receipt/acknowledgement. The photograph of the Nominee shall also be obtained along with
photographs of the articles while releasing the articles.
Without Nomination
Where a locker rented out to one lessee or jointly to more than one lessee without specific
provision as to the operation of locker after the death of any of the lessees, then the claim
will be settled in following two stages.
First stage - Ascertain Legal Heirs, obtain all prescribed papers and value the contents to
decide the authority, in the presence of these Legal Heirs/Legal Representatives and two
independent witnesses
Second stage Approval by the competent authority by submitting the documents / papers
as prescribed.
Documents to be taken at First stage:
1. Application (as applicable in other claim cases and circulated vide circular dated
26.03.2007).
2. Documents to establish Identity as Legal Heirs (such as Election I D Card / Passport /
PAN Card etc.).
3. Death Certificate
The locker will be allowed to be opened in the presence of all the Legal heir(s)/person/s
mandated by the Legal Heir(s) of the deceased locker hirer alongwith two independent
witnesses and an inventory of the contents of the Safe Deposit Locker will be prepared in
272

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.

Safe Custody Articles

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

Description Of Articles In Safe Custody

custody with____________________
(deceased) under an agreement/
day of
20
.

Other Identifying Particulars, if any

The above inventory was taken in the presence of:


1. Shri/ Smt.
2. Shri/ Smt.
(Appointed on behalf of minor legal heirs)

(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)

(Appointed on behalf of minor Nominee)

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)

deceased in his/ her sole name.


(deceased)
Jointly
.
day of
20
.

(ii)
(iii)
was taken on this
Sr.No.

located in
Branch at

Description of Articles in Safety Locker

Other Identifying Particulars, if any

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)

2.Witness(es) with name, address and signature:


1.

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

and Shri/ Smt.


the survivors of the joint hirers, hereby acknowledge
the receipt of the contents of the safety locker comprised in and set out in the above inventory
together with a copy of the said inventory.

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

Notwithstanding anything contained in sub section (1)


a) Any property inherited by a female Hindu from
her father or mother shall devolve, in the
absence of any son or daughter of the
deceased (including the children of any
predeceased son or daughter), not upon the
other heirs referred to in sub-section (1) in the
order specified herein, but upon the heirs of
father; and
b) Any property inherited by a female Hindu from
her husband or father in law shall devolve, in
the absence of any son or daughter of the
deceased (including the children of any
predeceased son or daughter), not upon the
other heirs referred to in sub-section (1) in the
order specified herein, but upon the heirs of
the husband
(Section 15(2)
If an Hindu intestate has left no heir qualified to succeed to his or her property in accordance
with the provisions of this Act, such property shall devolve on the Government; and the
Government shall take the property subject to all obligations and liabilities to which an heir
would have been subject (Sec. 29)

279

Legal heirs of Mohammedan


(Sunni Law)
The following five heirs are always entitled to some shares of inheritance and they cannot be
excluded:
1 The child (son or daughter): and in their absence the child of a son, how lowsoever.
2 Father: and in his absence True grandfather, how highsoever
3 Mother: and in her absence true grandmother, how highsoever
4 Husband and
5 Wife
1 Mohammedan 1
i
Father : 1/6 Share, when there is a child or child of a son
Sunni
Law
h.I.s
(Shares)
ii
When there is no child or child of a son, h.I.s, the father will
Father
inherit as a residuary
TRUE GRAND 2
i
True Grand Father : 1/6 Share, when there is a child or child
FATHER
of a son, h.I.s, and no father or nearer true grand father
ii
When there is no child or child of a son, h.I.s, the True
grandfather will inherit as a residuary provided there is no
father or nearer True Grand Father
Husband
3
i
Husband: share, when there is a child or child of a son,
h.I.s.
ii
share, when there is no child or child of a son, h.I.s.
Wife
4
i
Wife 1/8 share, when there is a child or child of a son h.I.s
ii
share when there is no child or child of a son, h.I.s.
If there are more than one wife, the respective share will be
divided among them.
Mother
5
i
Mother 1/6 share
(a) when there is a child or child of a son h.I.s. or
(b) when there are two or more brothers or sisters, or even
one brother and one sister, whether full, consanguine or
uterine.
ii
1/3 share when no child or child of a son, and not more than
one brother or sister (if any); but if there is also wife or
husband and the father, then only 1/3rd of what remains after
deducting the wifes or husband share.
TRUE GRAND 6
i
True Grand Mother : 1/6 Share,
MOTHER
Maternal : When no mother and no nearer true grandmother
paternal or maternal
Paternal: When no mother, no father, no nearer true
grandmother either paternal or maternal, and no intermediate
true grandmother
Daughter

ii
Sons
Daughter

Daughter; share: When there is no son


2/3 share if there are more than one daughters and this 2/3
share will be divided among all the daughters
If there is a son then the daughter become residuary instead
of sharer
Sons Daughter, h.I.s: share where there is 1) no son, 2)
no daughter, 3) no higher sons son 4) no higher sons
daughter, or 5) no equal sons son
280

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

When there is only one daughter or higher sons daughter but


1) No son
2) No higher sons son
3) No equal sons son, The daughter or higher sons
daughter will take share and sons daughter h.I.s.
(whether one or more) will take 1/6 (i.e. 2/3 ) with
an equal sons son she becomes a residuary)
ii
Sons Daughter : share when there is 1) no son, 2) no
daughter or 3) no sons son
2/3 share if there are more than one sons daughter and this
2/3 share will be divided among all the daughter of the son.
Where there is only one daughter the sons daughter
(whether one or more) will take 1/6 share, if there be no son
or sons son.
With the sons son she becomes residuary
iii Sons sons Daughter : share when there is 1) no son, 2)
no daughter 3) no sons son 4) no sons daughter, or 5) no
sons sons son
2/3 share if there are more than one sons sons daughters
and this 2/3 share will be divided among all of them.
When there is only one daughter or sons daughter, the sons
sons daughter (whether one or more) will take 1/6 , if there
be i) no son 2) No sons son, or 3) no sons sons son (With
the sons sons son she becomes a residuary
Uterine Brother
Uterine Sister 1/6 share : When there is 1) no child, 2) No child of
a son h.I.s. 3) no father, or 4) no true grandfather
1/3 share if more than one uterine brother and sister and this 1/3 rd
share will be divided among them equally.
Full Sister: share; When there is 1) no child, 2) no child of a
son. h.I.s. 3) no father 4) no true grandfather or 5) no full brother.
With full brother she becomes a residuary
Consanguine sister: share; When there is 1) no child, 2) no
child of a son. h.I.s. 3) no father 4) no true grandfather or 5) no full
brother 6) no full sister or 7) no Consanguine brother.
2/3 share if more than Consanguine sisters and this 2/3 will be
divided among all the Consanguine sisters.
With Consanguine brother she becomes a residuary. But if there
is only one full sister and she succeeds as a sharer, the
consanguine sister, (whether one or more) will take 1/6 share
provided she is not otherwise excluded from inheritance.
Descendants
Ascendants
Descendants of father
Descendants of true grandfather how high so ever
281

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

Acknowledge kinsman is a person of unknown descent in whose favour


the deceased has made an acknowledgement of kinship or relationship
no through himself, but through another e.g. if he acknowledges a
person as his uncle, that is the brother of his father, the
acknowledgement will be through father and hence will be valid. But
supposing he acknowledges a person as own son, such person will not
be an acknowledged kinsman because the kinship is direct and not
through another.
6 Universal
Universal legatee is a person to whom the deceased has left the whole
legatee
of his property by will, which can be made only when there are neither
any heir of the first kind nor the above mentioned i.e. successor by
contract and acknowledged kinsman.
7 Government
In India in the absence of all heirs, the property goes to the
Government. This is known as law of Escheat.
1. If only one class of heirs is left by the deceased, which generally does not happen, in
this case the heirs of that very class take the whole heritable property ( i.e. shares,
residuaries, distant kindred etc.)
2. If more than one class of heirs(i) sharers and residuaries: The claim of sharers is
satisfied first and if after them there remains anything, it is distributed among
residuaries. (ii) Sharers and Distant kindred: In the presence of sharer nothing goes to
distant kindred. It is only when there are neither any sharer nor any residuary that the
distant kindred are entitled to inherit. However, there is one exception, when a sunni
muslim dies leaving a husband or wife and there are no residuaries( son, sons son,
father, true grandfather, full brother, full sister, consanguine brother, consanguine
sister, full brothers son, consanguine brothers son etc.) the husband or the wife, as
the case may be take their full share and the residue is divided among the distant
kindred. (iii) Residuaries and distant kindred: In the presence of residuaries distant
kindred get nothing.
3. Principles of succession among sharers and residuaries:
(i)
Whoever is related to the deceased through any person shall not inherit while
that person is living. ( Father excludes brother and sister because they are
related to deceased through their father)
(ii)
The nearer in degree excludes the more remote. ( Father excludes
grandfather, Mother excludes grandmother, son excludes sons son)
(iii)
A person excluded may exclude other.
4. When there is a female residuary taking with the male, the male takes a double of a
females share, e.g. a son and daughter will take 2/3 and 1/3.
5. Doctrine of Increase: In cases where total shares of the sharers exceed the
heritable property, then the denominator is increased to make the shares equal to
unity i.e it more than one in this case the denominator is increased to 7 and the share
will be 3/7 +4/7 = 7/7=I this is in case of husband and two sisters)
6. Doctrine of Return: In cases where the total share of all the shares is less than the
heritable property, the fractional shares are reduced to a common denominator by
decreasing the denominator. In the case of wife or husband as shares the residue will
not return to them on the failure of residuaries but will go to the distant kindred.
Similarly, if there is any other sharer too with the wife and husband, he will take the
residue and nothing will return to the wife or husband. However, if there are no other
heirs ( belonging to any of the three classes i.e. sharers, residuaries and distant
kindred
283

Legal Heirs: Mohammedan (Shia)


(i)
(ii)

Parents, Husband/Wife, Children and other lineal descendants how low-soever.


Grandparents(True and False) how highsoever, Brothers and sisters and their
descendants how lowsoever.
(iii)
Paternal and Maternal uncles and aunts of the deceased, and of his parents and
grandparents how high soever, and their descendants how lowsoever
{The (I) group excludes the (II) Group and (II) Group excludes the (III)}
1

Mohammedan 1. Husband: (i) share when there is a lineal descendant.


Shia law
(ii) share when there is no such descendant.
(Sharers)
2. Wife: (i) 1/8 share when there is a lineal descendant.
(ii) share when there is no such descendant.
If there are more than one wives the 1/8 share will be divided
among them.
3. Father: (i) 1/6 share when there is a lineal descendant.
(ii) If there is no lineal descendant, the father inherits
as a residuary.
4. Mother: (i) 1/6 share (a) When there is a lineal descendant.
Or (b) When there are two or more full or
consanguine brothers or one such brother and two such sisters,
or four such sisters with the father.
(ii) 1/3 share in other cases.
5. Daughter: (i) share when there is no son.
(ii) 2/3 if there are more than one daughter and
this 2/3
share will be divided among all the daughters.
(iii) With the son she takes as a residuary.
6. Uterine Brother: 1/6 share when there is no parent or lineal
descendant.
1/3 share when there are more than one uterine brothers and
this 1/3 share will be divided among all the uterine brothers.
7. Uterine Sister: 1/6 when there is no parent or lineal
descendant
1/3 share when there are more than one uterine sisters and
this 1/3 share will divided among all of them.
8. Full sister: (i) share when there is no parent, no lineal
descendant, or full brother, or father's father.
2/3 share if there are more than one full sister and this 2/3
share will be divided among all the sisters.
The full sister takes as a residuary with the full brother and also
with the father's father.

284

9. Consanguine sister: (i) share when there is no parent, or


no lineal descendant, or full brother or sister, or consanguine
brother or father's father
2/3 share if there are more than one consanguine sisters and
this 2/3 share will be divided among all of them.
The consanguine sister takes as a residuary with the
consanguine brother and also with the father's father.
Legal heirs of Christians and Jews.
(Indian Succession Act. 1925)
1
Child
Where the intestate has left surviving him child or children but no
more remote lineal descendant through a deceased child, the
property, after deducting widow's share, if any, shall belong to
his surviving children in equal shares, if he has left children and
grand children, then the grand children shall get the share of
their parents, which the parents would have taken had they
survived the intestate.
Where the intestate has left no child but has left grand children
and no more remote descendants though a deceased grand
child, the property s shall be divided in equal shares (sec.
36,37,38, 40)
2
Widow
(i)
If the intestate has left only widow and no lineal
descendants and none who are kindred to him, then
whole of his property shall belong to window. {sec.33(c)}
(ii)
If he has left widow and lineal descendants then the
widow shall get 1/3 and the remaining 2/3 shall go to his
lineal descendants.
(iii)
If he has left widow and no lineal descendants but has left
persons who are kindred to him, then of his property
shall belong to his widow and the other half shall to those
who are kindred to him. (sec.33)
(iv)
If the property does not exceed. ` 5000/- and the
deceased dies intestate in respect of all his property the
whole property shall go to the widow and if the property is
more than ` 5000/- then this amount is deducted for
widow and residue is divided among the legal heirs
including the widow (as per sec. 33A)
3
Widower
A husband surviving his wife has the same rights in
respect of her property , if she dies intestate , as a widow
has in respect of her husbands property , if he dies
intestate (Sec 35)
4
Father
If the intestates father is living and there is no Lineal
descendants , he shall succeed to the property (after
deducting the widows share , if he has left a widow) (sec
42)
5
Mother
If the intestates father is dead but intestates mother is living
and there is no lineal descendants and no brother , sister ,
nephew or niece then the property shall belong to mother
(after deducting widows share if any) (Sec 46)
285

If the intestates father is dead and there is no lineal


descendants, but the intestates Mother, brothers, sisters
and children of any deceased brother or sister then the
mother and each living brother or sister shall be entitled to
the property in equal shares and child/children of the
predeceased brother or sister shall take equal shares which
their respective parents would have taken if living at the
intestates death. (after deducting widows share if any)(Sec
44)
Brothers and Where the intestate has left neither lineal descendant, nor
Sisters
father, nor the mother, the property shall be divided equally
between his brothers and sisters and the child or children
of such of them as may be have died before him, such
children taking in equal shares only the shares which their
respective parents would have taken if living at the time of
intestates death.(Sec 47)
Where the intestate has left no widow, neither lineal
descendant, nor parent, nor brother, nor sister, his property
shall be divided equally among those of his relatives who
are in the nearest degree of kindred to him.
Mother,
brothers,
sisters
and
children
of
any
deceased
brother
or
sister.

286

287

Legal Heirs of Parsis:


(Indian Succession Act 1925)
1

Widow/
Widower/
Children/
Parents

i) Where a Parsi dies leaving a widow or widower and


children, the property shall be divided equally among the
widow/widower and children. (sec. 51)
If the Parsi dies leaving children, but no widow or widower,
the property shall be divided in equal shares among the
children.
If the Parsi dies having one or both parents in addition to
children or widow or widower and children, the property of
such Parsi shall be so divided that the parent or each of the
parents shall receive a share equal to half the share of each
child. (sec. 51)
ii) If the intestate leaves a widow or widower but no widow or
widower of a lineal descendant, the widow or widower as
the case may be shall take half of the property. (sec. 54.a)
iii) If the intestate leaves a widow or widower and also a widow
or widower of any lineal descendant, his widow or her
widower shall receive one third of said property and the
widow or widower of any lineal descendant shall receive
another one third or if there is more than one such widow or
widower of the lineal descendants, the last mentioned one
third shall be divided equally among them. (sec 54.b)
iv) If the intestate leaves no widow or widower, bur one widow
or widower or widower or a lineal descendant, such widow
or widower of the lineal descendant shall receive one third
of the said property, or, if the intestate leaves no widow or
widower but more than one widow or widower of the lineal
descendant, than two third of the said property shall be
divided among such widows or widowers of the lineal
descendants in equal shares:
And the residue after the division as specified in ii), iii) and iv)
above shall be distributed among the relatives of the intestate in
the order specified in Part I of the schedule II: and the next of kin
standing first in Part I of the schedule shall be preferred to those
standing second, the second to the third and so on in succession,
provided that the property shall be so distributed that each male
and female standing the same degree of propinquity shall receive
equal shares. And if there are no relatives entitle to the residue,
the whole of residue shall be distributed in proportion to the
shares specified among the persons entitled to receive the
shares.

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

SETTLEMENT OF CLAIMS IN RESPECT OF MISSING PERSONS.


The Reserve Bank India has vide its Circular No. DBOD.Leg.BC.80/09.07.005/2007-08
dated 02.05.2008 informed that the settlement of claims in respect of missing persons would
be governed by the provisions of Sec 107/108 of the Indian Evidence Act, 1872, Section 107
deals with presumption of continuance and section 108 deals with presumption of death. As
per the provisions of section 108 of the Indian Evidence Act, presumption of death can be
raised only after lapse of seven years from the date of his/her being reported missing. As
such, the nominee/legal heirs have to raise an express presumption of death of the
subscriber under Section 107/108 of the Indian Evidence Act before a competent court. If
the court presumed that he/she is dead, then the claim in respect of a missing person can be
settled on the basis of the same.
As such, the Reserve Bank of India, vide circular referred to above, advised the banks to
formulate a policy which would enable them to settle the claims of missing person after
considering the legal opinion and taking into account the facts and circumstances of the
each case. RBI, has, keeping in view the imperative need to avoid inconvenience and undue
hardship to the common person, further advised, banks, keeping in view their risk
management systems, to fix a threshold limit, upto which claims of missing persons could be
settled without insisting on production of any documentation other than copy of FIR and non
traceable report issued by police authorities and Letter of Indemnity.
In view of the directions of RBI the Board of Directors has resolved vide BR no. F-1 dated
21.06.2008 that the Regional Heads be empowered to approve the claims upto a limit of `
25000/- for settling the claims to the accounts of missing persons by nominees/legal heirs
without insisting on production of any documents other than the following documents:
1. Copy of FIR & the non-traceable report issued by Police Authorities.
2. Letter of Indemnity.
In respect of claim by nominees/legal heirs exceeding the amount of ` 25000/- branches
shall insist upon an order from the competent court under Section 107/108 of the Indian
Evidence Act and upon receipt of the said order, the claim shall be processed like any other
claim case to the account of deceased depositor, as per circular no. HO/REC &
LAW/CIRCULAR/NO. 14/2006-07 dated 26.03.2007.

SETTLEMENT OF HUF CASES


HUF deposit accounts: Death of Karta:
In the event of death of a karta, HUF deposit account may be settled as under:1. Obtaining affidavit cum indemnity from surviving members and legal heirs with two
guarantor confirming their acceptance to one of the members as a new karta. New Karta
may continue to operate the existing account on the basis of such documentation, in HUF
accounts having small balance ie., up to ` 0.25 Lacs
2. In other cases, similar procedure to be followed in cases where the account is to be
closed and balance in the account is to be paid to the new karta.

290

Annexure 4
CONSOLIDATED STATEMENT OF DECEASED CLAIM CASES SETTLED BY HEAD OFFICE / BRANCH / REGIONAL OFFICE UNDER THEIR POWERS
REGION :
PERIOD:
CASES
WITHIN

No. of settlement case


pending at the start of
the half year
Nomi Succe Legal
natio ssion
Docu
n
Certif ment
icate
s

No. of settlement case


received during the
half year
Nomi Succe Legal
natio ssion
Docu
n
Certif ment
icate
s

Branch
power
R/o
Power
Head
Office
Power

291

No. of settlement cases


disposed of within 15
days
Nomin
Succe Legal
ation
ssion
Docu
Certif ment
icate
s

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

No. of cases pending at


the close of the half
year
Nomi Succe Legal
natio ssion
Docum
n
Certif ents
icate

Reason for
delay
in
each cases