Allahabad Bank Recovery Management Policy

Instruction Circular No: 16440/Recovery/2019-20/02 Date: 01.04.
2019
RECOVERY MANAGEMENT POLICY

2019-20
ALLAHABAD BANK
HEAD OFFICE: RECOVERY DEPARTMENT
2, NETAJI SUBHAS ROAD, KOLKATA-700 001
ALLAHABAD BANK
RECOVERY DEPARTMENT
Head Office: 2, Netaji Subhas Road, Kolkata
Instruction Circular No: 16440/Recovery/2019-20/02 Date: 01.04.2019
To
All Offices & Branches
RECOVERY MANAGEMENT POLICY: 2019-20
After release of Recovery Management Policy 2018-19, certain important

developments/ communications from the Ministry of Finance/ lBAV RBl's observations in
the AFl and the need to align policy guidelines for efficient and effective management of
NPA accounts as enumerated in brief below have necessitated modifications in the
policy .
a) Vigilance section, Department of Financial Services, Ministry of Finance's
suggestions / guidelines in erespect of sale of NPA accounts to Assets
Reconstruction Company by PSBs & Financial Institutions.
b) RBl's suggestion in AFl of the Bank to devise norms for sacrifice in the
principal and waiver of uncharged interest in compromise proposals.
c) On account of increasing importance of exploring Private Treaty method of
sale of asset, requirement for standard operating procedure in this method.
d) Swiss Challenge Method under Private Treaty where the anchor bid value is
lower than the last reserve price fixed, has been introduced along with
standard operating procedures.
e) Guidelines for assessment of various security values for provisioning in NPA
accounts.
f) Revision in authority for permitting filing of petition with High Court seeking
direction to District Magistrate / Chief Metropolitan Magistrate for early
disposal of cases pertaining to physical possession towards speedy disposal
of cases under SARFAESI Act.
g) Guidelines for filing of suit against the promoter guarantors / personal
guarantors and initiation of insolvency proceedings against corporate
guarantors in NCLT referred accounts under moratorium.
h) Revision in the discretionary authority for according permission to file suit in
view of large number of NPA accounts under the category Rs.1 crore and
above.
i) Appointment of ProcessITransaction advisors for speedy resolution/recovery
in large value NPA accounts.
j) Amount-specific review mechanism of NPA accounts towards account-
specific action plan for recovery.
k) Empanelment of Seizure & Disposal Agents on pan-India basis by Head
Office.
L
Accordingly, modifications have been made in the chapters of Recovery Management
Policy on (i) Prudential Norms on Income Recognition, Asset classification and
Provisioning pertaining to Advances (Chapter-1), (ii) Bank's general guidelines on
compromise/ settlement & handling of compromise proposals (Chapter-5), (iii) Quasi-
Iegal / Legal & other measures of recovery (Chapter-9), (iv) Guidelines on empanelment
of third party agencies for deployment/ utilization of their services for effecting Bank's
recovery in NPA accounts (Chapter-10), (v) Seizure and Sale of Vehicles (Chapter-12),
(vi) Monitoring of NPA accounts (Chapter-14), (vii) Guidelines on Wilful Defaulters
(Chapter-15) and (viii) Guidelines on sale of financial assets to ARCs/ASCs (Chapter-
16).
The Recovery Management Policy 2019-20 with the above modifications has since
been approved by the Board of Directors in its meeting held on 26.03.2019.
Branches/ Offices are advised to carefully go through the Recovery Management Policy
2019-20 and note the changes/ modifications/ directions/ guidelines given therein for
strict compliance. This policy will be effective with immediate effect and it will remain in
vogue till the approval of the next policy.
The Annexures/ formats/ specimen/ drafts of various reports, working sheets,

compliance forms, legally vetted notices and memoranda have been furnished in
downloadable form on bank's intranet site (H0
Departments>>Recovery>>Formats/Annexures of Recovery Management Policy
2019-20) for use by field functionaries..
Hindi version of this circular will follow.
--.
( Banambar Sahoo )
General Manager (Recovery & Law)
RECOVERY MANAGEMENT POLICY – TABLE OF CONTENTS
TABLE OF CONTENTS/ PARTICULARS PAGE NO.
Chapter - 1: Prudential Norms on Income Recognition, Asset Classification 1
and Provisioning Pertaining to Advances
Overdue 1
Out of Order status 1
Income Recognition 3
Rules of computation of uncharged interest in NPA accounts in CBS system 4
Asset Classification 5
Guidelines for classification of Assets: 7
1.Accounts regularized near about the balance sheet date
2. Upgradation of loan accounts classified as NPAs
3. Asset classification to be borrower-wise and not facility-wise 8
4. Availability of security/net worth of borrower/guarantor
5. Advances under consortium arrangement 9
6. Accounts with erosion in security value/ frauds committed by borrowers 10
7. Advances to Primary Agricultural Credit Societies/Farmers’ Service
Societies ceded to Commercial Banks
8. Advances against TDRs/NSCs/KVPs/IVPs
9. Loans with moratorium for payment of interest
10. Agricultural advances
11. Government guaranteed advances 11
12. Projects under implementation 12
- Project Loans
- Project Loans for Infrastructure Sector
- Project Loans for Non-Infrastructure Sector (other than CRE) 13
- Other Issues 14
- Income recognition 15
13. Change in ownership 16
14. Takeout Finance 17
15. Post shipment Supplier's Credit
16. Export Project Finance 18
17. Transactions involving transfer of assets through direct assignment of
cash flows and the underlying securities
Provisioning Norms 20
Loss assets
Doubtful assets
Substandard assets 21
Standard assets 22
Prudential norms on creation and utilization of floating provisions 23
Additional Provisions for NPAs at higher than prescribed rates 25
Provisions on Leased Assets
Guidelines for Provisions under Special Circumstances 26
Restructured Advances 29
RBI guidelines on Provisioning Coverage Ratio 30
RBI guidelines on Security Value in NPA Accounts 31
Chapter-2 : Policy on Holding on Operation in Potentially Viable/Viable Units 35
Eligible Accounts 36
Accounts Prohibited
Method of permitting holding on operation
Processing of Proposal of Holding on Operation 37
Authority of permitting holding on operation
Period for disposal
Extent of drawal
Non fund Facilities 38
Important Stipulations
Maximum permissible period for holding on operation
Communication to the Borrower 39
Non acceptance of proposal
Roll-over of operation
Adhoc Limit
Penal Interest
Deviations
Chapter-3 : Prudential Guidelines on Restructuring of Advances 40
Background 40
Prudential Norms for Restructured Advances
Prudential Norms for Conversion of Principal into Debt / Equity 43
Prudential Norms for Conversion of Unpaid Interest into 'Funded Interest Term 44
Loan' (FITL), Debt or Equity Instruments
Miscellaneous 45
Disclosures 46
Chapter-4 : Recovery/ Reduction of NPA 47
Up-gradation 47
Action points for upgradation
Cash Recovery in NPA accounts
Action points for cash recovery 48
Appropriation of Recovery in NPA Accounts
Steps to be Followed for Accounts to be marked NPA 49
Booking & Reporting of Recoveries in Written-Off Debts 51
Identification and treatment of recoveries and recovery cost for loss given default
(LGD)
Chapter-5 : Bank’s General Guidelines on Compromise/ Settlement & 53
Handling of Compromise Proposals
Conditions where generally compromise proposal should not be entertained 53
General conditions where compromise proposal can be entertained by the Bank
General guiding factor, basic principle for negotiation & settlement of compromise 54
offer
Procedure of handling compromise proposal at different levels 61
- Selection of module 61
- Request letter/compromise offer from 62
borrowers/guarantors/others
- Down payment for consideration of compromise proposal
- Repayment terms of compromise sum
- Processing of compromise proposal & submission to sanctioning 63
authority
- Various compromise committees 64
- Delegated authority for approval of compromise proposals 67
- Issuance of compromise sanction letter 69
- Submission of monthly statement of approved compromise
proposals to next higher authority
- Submission of progress report on sanction of compromise 70
- Acceptance of sanction terms & conditions by proposers
- Execution of agreement
- Submission of proposal for claim of write off of residual ledger
balance
- Issue of No Dues Certificate & release of charged securities 71
- Reporting / updation of record in database of Credit Information
Companies
- Revival of failed OTS proposals
- Compromise proposals under certain specific conditions/
compromise related issues
- Source of payment of compromise payment
Compromise Modules /Schemes 72
Thumb Rule System Compromise Module 72
- OTS Module for tiny dues with COB upto Rs.1.00 lac
- Discretionary authority
- OTS Module for NPA accounts with COB of >Rs.1.00 lacs upto
Rs.15.00 lacs where full security is available
- OTS module for NPA accounts with COB of >Rs.1.00 lacs upto 73
Rs.15.00 lacs where full security is not available/ ab initio
unsecured advances
Bench Mark Score System Compromise Modules 74
- OTS module for NPA accounts under MSME sector 74
- OTS module for NPA accounts of other sectors with COB above
Rs.15.00 lacs upto Rs.25.00 lacs
- OTS module for NPA accounts with COB >Rs.25.00 lacs not
covered under any other modules including fraud declared
accounts
- Bench mark score sheet for assessment of bench mark sum
- Calculation of bench mark sum on the basis of total bench mark 76
score
- Minimum recoverable OTS amount 76
- Calculation of total sacrifice and its impact 77
- Discretionary authority under bench mark module
- Discretionary authority in fraud declared accounts 78
- Proposals below bench mark sum
- Exercise of discretionary authority at the time of recovery camp/
Lok Adalat
Chapter -6 : Compromise & other Recovery related Issues 79
Handling of Compromise Proposals with Special Conditions 79
- Payment of compromise sum by third party /investor /purchaser
of charged assets as part of OTS
- Refund of compromise amount received from third party/ 80
investor/ purchaser
- Release of Charged Securities 81
- Debt Asset Swap as part of OTS 86
- Assignment of Decree 87
- Compromise in Suit Filed Accounts 88
- Compromise in Decreed Accounts 89
- Compromise Settlements with Borrowers against whom Criminal 90
Cases have been filed by the Bank for Offences like Cheating.
Forgery etc..
- Compromise in Consortium Advances 91
- Compromise in Staff/Ex-Staff related loans 92
- Waiver of Uncharged Interest in deceased accounts during
compromise
- Examination of Staff Accountability Aspect During Compromise 93
- Revival of failed compromise proposal with delayed period
interest
Chapter- 7 : Waiver of Legal Action 95
Delegated authority granting permission for waiver of legal action in loss assets / 96
accounts with full provision
Delegated authority granting permission for waiver of legal action in other than
loss assets / accounts without full provision
Points to be Considered for Waiver of Legal Action by the Authority Approving the
Waivement of Legal Action
Action Points for Branches in Legal Action Waived Accounts 97
Chapter- 8 : Write Off of NPA/ Bad Debts 98
Compromise linked Write Off 98
Write Off of Bad Debts
Prudential Write Off 99
Recovery in Written Off Debts 100
Recovery of De-Recognized / Uncharged Interest 101
Recovery in Prudentially Written - Off Accounts
Chapter-9 : Quasi-Legal / Legal & Other Measures of Recovery 102
Action Under Securitization And Reconstruction of Financial Asset & Enforcement 102
of Security Interest Act 2002 (SARFAESI ACT, 2002)
Pre-conditions to be satisfied as specified in the SARFAESI Act 2002 102
Action points for taking recovery action under SARFAESI Act 103
Possession of Secured Assets 105
Filing of Caveat 108
Sale of the Secured Assets (both movable & immovable) 109
Valuation & Fixation of Reserve Price of secured assets under SARFAESI Act 110
Issue of notice for sale of secured assets 111
Facilitation Centre 112
Publication of short advertisement in newspapers
Uploading of sale notice in tender website of Govt of India
Search of prospective buyer 113
EMD, sale proceeds and confirmation of sale
Sale by private treaty 115
Swiss Challenge Method under Private Treaty 116
Standard Operating Procedure for Swiss Challenge Method
Distribution of sale proceeds of the assets of borrower company under liquidation 117
TDS on sale of Immovable Property
GST on Sale of Assets under SARFAESI 118
Action to be taken if SARFAESI Action is withheld as a/c is regularized 120
Completion of action under SARFAESI Act in a time bound manner
Precautions to be taken while taking action under SARFAESI ACT, 2002 121
Guidelines on Empanelment of Valuers by Bank’s Board for valuation of Movable 123
and Immovable Property/Plant & Machinery to be sold under SARFAESI Act, 2002
Filing of Suit & Execution of Decree/ Recovery Certificate 124
Delegated Authority for according permission for filing of suit 126
Filing of suit in Debt Recovery Tribunals (DRT) 127
Filing of suit in Civil-Court 131
Execution of Recovery Certificate (RC) IN DRT 132
Execution of decreed cases in Civil-Court
Recovery Certificate Case
Policy on Adjournment of ongoing Recovery Proceedings (RC/EP) sine-die 133
Action under Insolvency and Bankruptcy Code - 2016 135
Chapter-10: Guidelines on Empanelment of Third Party Agencies for 136
deployment / utilization of their services for effecting Bank’s recovery in
NPA accounts
Eligibility criteria for empanelment 136
Authority for appointment / engagement and procedure 137
Identification of NPA accounts for appointment/ engagement of Recovery Agent/ 141
BC/ RERO/ REA for recovery of Bank’s dues
Fee Structure 143
Procedure for payment of fee 147
Common Guidelines 148
Disposal of grievances/ complaints lodged by the borrower/ guarantor regarding 153
recovery agents/ recovery process of the bank
Code of conduct/ guidelines to be followed by third party agencies engaged for 154
recovery
Chapter 11 : Guidelines for Empanelment of Detective Agencies and 159
Utilization of their services for supplementing Recovery Actions
Scope of Work for Detective Agencies 159
Authority for empanelment & engagement of Detective Agency 160
Eligibility criteria for Detective Agencies
Procedure for empanelment 161
Assignment of work to Detective Aencies empanelled by other FGMOs 162
Submission of Reports by Detective Agencies
Authority for payment of fees & settlement of disputes 163
Code of Commitment for Detective Agencies
Fees payable to the Detective Agencies
Monitoring/ Review of Performance 164
Updation of All India list of Detective Agencies
Chapter -12: Seizure and Sale of Vehicles 165
Elligibility of Seizure and Disposal Agents 166
Selection Committee
Collection of application
Scrutiny and final selection 167
Circulation of Panel
Validity
Chapter-13 :Holding of Rin Muktl Shivir (Recovery Camp) & Lok Adalat 168
Holding of Rin Muktl Shivir (Recovery Camp) 168
Holding of Lok Adalats 169
- Nature of cases to be referred to Lok Adalat
- Levels and composition of Lok Adalats 170
- Action points 171
- Submission of progress report on cases settled in Lok Adalats 172
Chapter-14 : Monitoring of NPA Accounts 173
Review of NPA accounts 173
Establishment of Stressed Asset Management Vertical 175
Implementation of PARTH 177
Performance Review – Reduction/Recovery of NPA
Chapter -15: Guidelines on Willful Defaulters 179
Introduction 179
Guidelines of Wilful Defaulter
Mechanism for identification of Wilful Defaulter 183
Criminal Action against Wilful Defaulter 185
Reporting 189
Operational guidelines for identification and declaration of Wilful Defaulter
Chapter-16: Guidelines on Sale of Financial Assets to ARCS/ASCS 194
Assets Eligible For Sale to ARC/ASC 194
Identification of assets for sale to ARCs / Valuation procedure to be followed 195
Fixation of Reserve Price of Security Receipts issued by ARC 197
Fixation of Reserve Price for Sale of Financial Assets to ARC/ASC 198
Norms and Procedures for sale of Assets 201
Types of Asset Sale Process 204
- Invitation of Bids for specific accounts through Open Public Offer 204
Process
- Swiss Challenge Method where offer have been received for 206
purchase of specific asset on cash basis or cash cum security
receipt basis
- Through Bilateral Negotiation for specific stressed assets for
sale in cash as well as cash cum SR basis
Accounting Procedure 207
Terms & Conditions of sale/assignment of financial assets against securities 208
(bonds and debentures) offered by ASC/ARC
Terms & Conditions of sale/assignment of financial assets against Security
Receipts (SR) offered by ASC/ARC
Other terms of Transfer/Sale of Asset 211
Investment in debentures/ bonds/ security receipts/ Pass-through certificates 212
issued by ASC/ ARC
Exposure Norms
Disclosure Requirements 213
Related Issues
Guidelines on Sale of Non Performing Assets to Banks/ FIs/ NBFCs
Identification of Eligible NPAs for Sale to Banks/FIs/NBFCs 215
Guidelines on Purchase of Non Performing Financial Assets (NPFAS) From 216
Banks/FIs/NBFCs
Prudential norms for Purchase Transactions 219
Guidelines on sale/assignment of borrowal accounts of Hong Kong Branch 220
Guidelines on monitoring of investment made in Security Receipts due to sale/ 221
assignment of borrowal accounts on cash-cum-security receipt basis
Chapter-17 : Adoption of e-Auction Procedure & Uploading of All Auctions 222
on Government Tender Website for Sale of Assets under SARFAESI ACT
2002
Eligibility criteria for empanelment of e-auction Service Provider 222
Authority for empanelment of e-auction service provider & its renewal & 223
cancellation
Procedures for empanelment & documentation
Procedure to be Followed by the field functionaries for e-auction
Activities on the day of e-auction 226
Payment terms and payment of bills of Service Provider 227
Procedure for uploading of all auction/ sale notices issued under SARFAESI Act 228
on Government Tender Website
Public short notice in news papers for sale of immovable & movable properties 230
under SARFAESI Act (e-auction)
Facilitation Centers in Rural Areas for e-Auction
Adoption of Procedure of auction as per directions of DRT for sale of assets 231
located in Rural Areas
Conclusion 232
LIST OF ANNEXURES OF RECOVERY MANAGEMENT POLICY 2019-20 UPLOADED ON INTRANET SITE
Annexure
Sl PARTICULARS
Number
1 1 DETAILS OF GROSS ADVANCEs, GROSS NPAs, NET ADVANCEs & NET NPAs
2 2 FORMAT FOR COMPUTING COUNTERCYCLICAL PROVISIONING BUFFER
COMOPROMISE OFFER /LETTER TO BE TAKEN ON BUSINESS LETTER HEAD OF
3 3
BORROWER
LETTER TO BE ISSUED ON BANK’S LETTER HEAD TO PARTY REGARDING
4 4
ADJUSTMENT OF NO LIEN AMOUNT UPON SANCTION OF COMPROMISE PROPOSAL
COMPROMISE PROPOSAL PROCESS SHEET (FALLING UNDER THUMB RULE
5 5
COMPROMISE MODULE)
FORMAT FOR SUBMISSION OF PROCESS NOTE/ COMPROMISE PROPOSAL UNDER
6 6
BENCH MARK SCORE BY BRANCHES TO ZO/FGM/HEAD OFFICE
FORMATS FOR SUBMISSION OF SMALL COMPROMISE PROPOSAL (COB UPTO RS.
7 7
15.00 LAC) IN BULK TO ZO/HO
FIVE POINT CERTIFICATE ON STAFF ACCOUNTABILITY TO BE SUBMITTED ALONG
8 8
WITH COMPROMISE PROPOSAL
APPROVAL LETTER OF COMPROMISE SETTLEMENT TO BE ISSUED ON BANK’S
9 9
LETTER HEAD SEPARATELY AS PER THE APPROVED TERMS OF SETTLEMENT
STATEMENT OF COMPROMISE PROPOSALS SANCTIONED UNDER VARIOUS
10 10
DISCRETIONARY AUTHORITY DURING THE MONTH
CONSOLIDTED PROGRESS REPORT ON OTS BY VARIOUS AUTHORITIES DURING
11 11
THE MONTH
CONSOLIDTED PROGRESS REPORT ON SMALL OTS (UPTO Rs.15.00 LACS)
12 12
SANCTIONED BY VARIOUS AUTHORITIES DURING THE MONTH
ACCEPTANCE LETTER TO BE OBTAINED FROM PROPOSER OF COMPROMISE OFFER
13 13
ON HIS BUSINESS LETTER HEAD
14 14 MOU APPLICABLE FOR COMPROMISE SETTLEMENT IN NON SUIT FILED ACCOUNTS
TERMS OF COMPROMISE SETTLEMENT (TOS) APPLICABLE FOR SUIT FILED
15 15
ACCOUNTS
TERMS OFCOMPROMISE SETTLEMENT (TOS) APPLICABLE FOR DECREED
16 16
ACCOUNTS
MEMORANDUM OF UNDERSTANDING APPLICABLE IN NON SUIT FILED ACCOUNTS
17 17 WHERE COMPROMISE SUM AS PER APPROVED TERM IS TO BE PAID BY INVESTOR /
THIRD PARTY i.e., OTHER THAN BORROWER & GUARANTOR
18 18 MOU FOR SALE OF PROPERTY TO 3RD PARTY WITH PERMISSION OF BANK
RECOMMENDATIONS OF ZONAL CREDIT APPROVAL COMMITTEE FOR CLAIM OF
19 19 AMOUNT FROM HEAD OFFICE OF LEFT OVER BALANCE AMOUNT AFTER RECEIPT
OF ENTIRE COMPROMISE SUM
DRAFT OF NO DUES CERTIFICATE TO BE ISSUED ON RECEIPT OF COMPROMISE
20 20
SUM AS PER TERMS OF SANCTION
QUARTERLY PROGRESS REPORT ON REALISATION OF BANKs DUES THROUGH
21 21
VARIOUS STATE REVENUE RECOVERY CERIFICATES(RC)
22 22 PROPOSAL FOR WAIVER OF LEGAL ACTION
23 23 STATEMENT OF CASES APPROVED FOR WAIVER OF LEGAL ACTION
RECOMMENDATION OF THE ZONAL CREDIT APPROVAL COMMITTEE FOR WRITE
24 24 OFF OF BAD DEBTS HAVING SANCTIONED LIMIT AND/OR PRESENT OUTSTANDING
BALANCE UPTO Rs.1.00 LAC
25 25 OFF OF BAD DEBTS HAVING SANCTIONED LIMIT AND/OR PRESENT OUTSTANDING
BALANCE ABOVE Rs. 1.00 LAC & UP TO Rs. 2 LAC
26 26 OFF OF BAD DEBTS HAVING SANCTIONED LIMIT AND /OR PRESENT OUTSTANDING
BALANCE ABOVE Rs. 2.00 LAC
27 27 MONTHLY PROGRESS REPORT ON ACTION UNDER SARFAESI ACT 2002
MONTHLY PROGRESS REPORT ON LOSS ASSETS OF Rs. 10.00 LAC AND ABOVE
28 28 OUTSTANDING FOR MORE THAN 2 YEARS WHERE LEGAL ACTION NOT YET
INITIATED
29 29 HISTORYSHEET PROPOSAL FOR SEEKING PERMISSION FILLING OF SUIT
Annexure
Sl PARTICULARS
Number
QUARTERLY STATISTICAL DATA OF SUITFILED IN CIVIL COURTS (OTHER THAN
30 30
DRT/DRAT) BY BANK FOR BANK’S DUES
FORTNIGHTLY STATISTICAL DATA ON SUITFILED/RECOVERY APPLICATION FILED IN
31 31
DRT (OTHER THAN CIVIL COURT) BY BANK FOR RECOVERY OF BANK’S DUES
32 32 PROPOSAL FOR ADJOURNMENT OF CASE SINE DIE
APPLICATION FOR EMPANELMENT OF RECOVERY AGENT BY BANK FOR RECOVERY
33 33
IN NPA ACCOUNTS
DRAFT OF LETTER TO BE IISSUED ON BANK’S LETTER HEAD TO THE RECOVERY
34 34
AGENT ADVISING THEM ABOUT THEIR EMPANELMENT
DRAFT OF UNDERTAKING TO BE OBTAINED FROM THE RECOVERY AGENT BY WAY
35 35
OF AFFIDAVIT
36 36 LIST OF APPROVED/EMPANELLED RECOVERY AGENTS
LETTER OF AUTHORITY TO THE RECOVERY AGENT ENTRUSTING THE JOB OF
37 37
RECOVERY IN LOAN ACCOUNTS
LETTER TO THE BORROWERS/GUARANTORS COMMUNICATING THEM ABOUT
38 38
ENGAGEMENT OF RECOVERY AGENT FOR RECOVERY OF BANK’S DUES
PROGRESS REPORT ON PERFORMANCE OF RECOVERY AGENTS ENGAGED FOR
39 39
RECOVERY IN NPA ACCOUNT
APPLICATION FOR EMPANELMENT OF RETIRED EMPLOYEE RECOVERY OFFICER
40 40
(RERO)
DRAFT OF AGREEMENT TO BE EXECUTED BETWEEN RETIRED EMPLOYEE
41 41
RECOVERY OFFICER (RERO) & BANK
DRAFT OF AGREEMENT FOR ENGAGEMENT OF SERVICE PROVIDER / SPECIFIED
42 42
RECOVERY AGENT
PROGRESS REPORT ON PERFORMANCE OF RETIRED EMPLOYEE RECOVERY
43 43
OFFICER (RERO) ENGAGED FOR RECOVERY IN NPA ACCOUNT
44 44 CLAIM OF FEE & OTHER EXPENSES BY THE RECOVERY AGENT
CLAIM OF FEE & OTHER EXPENSES BY THE RETIRED EMPLOYEE RECOVERY
45 45
OFFICER (RERO)
CLAIM OF FEE & OTHER EXPENSES BY THE RESOLUTION CUM ENFORCEMENT
46 46
AGENT (REA)
47 47 CLAIM OF FEE & OTHER EXPENSES BY SERVICE PROVIDER AS RA
PROGRESS REPORT ON PERFORMANCE OF RESOLUTION CUM ENFORCEMENT
48 48
AGENT (REA) ENGAGED FOR RECOVERY IN NPA ACCOUNT
49 49 PROGRESS REPORT ON RIN MUKTI SHIVIR/ RECOVERY ORGANISED
50 50 PROGRESS OF SETTLEMENT THROUGH LOK ADALATS
51 51 DATE WISE PROGRESS REPORT OF LOK ADALAT
DETAILS OF FRESH SLIPPAGE (NPA) IDENTIFIED / CLASSIFIED DURING THE MONTH
52 52
ENDED
ACCOUNTWISE DETAILS OF FRESH SLIPPAGE OF Rs. 10.00 LAC & ABOVE DURING
53 53
THE MONTH
54 54 REVIEW SHEET OF NPA ACCOUNTS HAVING BALANCE BELOW RS. 5.00 CRORE
55 55 REVIEW SHEET OF NPA ACCOUNTS OF RS. 5.00 CRORE & ABOVE
DETAILS OF ACCOUNT SELECTED FOR DECLARATION AS WILFUL DEFALUTER (Rs.
56 58
25.00 LAC AND ABOVE)
LIST OF ACCOUNTS/BORROWER IDENTIFIED FOR DECLARATION AS WILLFUL
57 59
DEFAULTER FOR THE QUARTER ENDING
DRAFT OF THE LETTER TO BE SENT TO THE BORROWER FOR INTIMATING BANKS
58 60
PROPOSAL OF DECLARING THEM AS WILLFUL DEFAULTER
FORMAT FOR SUBMISSION OF TABULAR ANALYSIS OF REPLY RECEIVED FROM
59 61
BORROWER TO WHOM BANK INTENT TO DECLARE AS WILFUL DEFAULTER
DRAFT OF THE LETTER TO BE SENT TO THE BORROWER FOR INTIMATING THAT
60 62
BANK HAS CLASSIFIED THEM AS A WILFUL DEFAULTER
DATA CORRECTION REQUEST FORM TO BE SUBMITTED TO CICs -DECLARATION AS
61 63
WILFUL DEFAULTER
PRELIMINARY INFORMATION MEMORANDUM (PIM) FOR SALE OF ASSET TO ARCs/
62 64
ASC/ BANKs
Annexure
Sl PARTICULARS
Number
TERMS OF AGREEMENT ENTERED BETWEEN BANK & SERVICE PROVIDER FOR E-
63 65
AUCTION
DETAILS & OTHER TERMS & CONDITION OF E-AUCTION OF ASSEST TO BE
64 66
CONDUCTED BY SERVICE PROVIDER
65 67 DUTIES & RESPONSIBILITIES OF BANK & SERVICE PROVIDER
66 68 DRAFT OF NOTICE OF SALE
67 69 PROCESS COMPLIANCE FORM
68 70 FORMAT TO SUBMIT THE LIST OF ELIGIBLE BIDDERS TO THE SERVICE PROVIDER
BASIC INFORMATION SHEET FOR UPLOADING FOR AUCTION/SALE NOTICES ON
69 71
GOVERNMENT TENDER WEBSITE
70 72 LIST OF PRODUCT CATEGORIES AVAILABLE ON "tenders.gov.in" WEBSITE
71 73 SHORT SALE NOTICE (E-AUCTION ) TO BE PUBLISHED IN NEWS PAPERS
72 74 SAMPLE OF SHORT SALE NOTICE(E-AUCTION ) TO BE PUBLISHED IN NEWS PAPERS
73 75 LIST OF COMMITTEES
74 76 VISIT CUM VALUATION REPORT_RESERVE PRICE.DOC
75 77 FORMAT FOR WILFUL DEFAULTER DATA SUBMISSION
76 78 VISIT REPORT_IMMOVABLE_COMPROMISE CASES
77 79 VISIT REPORT_MOVABLE_COMPROMISE CASES
78 80 DECLARATION OF ASSETS & LIABILITIES BY THE BORROWER
79 81 DECLARATION OF ASSETS & LIABILITIES BY THE GUARANTOR
80 82 FLOW CHART ONLINE CWO
81 83 APPLICATION FOR EMPANELMENT OF SARFAESI VALUER
82 84 VISIT REPORT BEFORE INITIATING SARFAESI ACTION
83 85 PROPOSAL FOR SEEKING PERMISSION TO INTIATE ACTION UNDER IBC 2016
84 86 APPLICATION FOR EMPANELMENT OF DETECTIVE AGENCY
AGREEMENT TO BE EXECUTED BETWEEN BANK & DETECTIVE AGENCY FOR
85 87
EMPANELMENT
86 88 PROGRESS REPORT OF WORK ATTOTED TO DETECTIVE AGENCY
87 89 15 DAYS NOTICE TO THE BORROWER UNDER SALE & SEIZURE POLICY
88 90 POSSISSION CUM SALE NOTICE UNDER SALE & SEIZURE POLICY
89 91 SALE NOTICE UNDER SALE & SEIZURE POLICY
90 92 NOTICE DEMANDING BALANCE AMOUNT AFTER SALE OF VEHICLE
91 93 QUARTERLY PROGRESS REPORT ON SALE & SEIZURE OF VEHICLES
92 94 SALE NOTICE (BY PRIVATE TREATY) TO BORROWER
93 95 LETTER TO BE SENT TO PROPOSED PURCHASER UNDER PRIVATE TREATY
FORMAT FOR ACCEPTANCE OF PURCHASE OF PROPERTY THROUGH PRIVATE
94 96
TREATY BY PROPOSED PURCHASER
95 97 AUDIT OF RECOVERY IN NPA ACCOUNTS SOLD TO ARCs ON CASH CUM SR BASIS
CHAPTER 1
PRUDENTIAL NORMS ON INCOME RECOGNITION, ASSET CLASSIFICATION AND
PROVISIONING PERTAINING TO ADVANCES
The prudential norms adopted by the Bank are based on the guidelines received from
Reserve Bank of India from time to time and is in sync with the practices adopted by the
banking industry.
When a Loan Asset becomes Non-Performing, it not only ceases to generate income to
the Bank, but also requires provisions to be made against expected losses. These
NPAs have well defined credit weakness that jeopardize the liquidation of debts and
may be characterized by the distinct possibilities that the Bank will sustain some loss.
Overdue and Out of order statuses are two important concepts for NPA definition, which
are explained below:
1. 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.
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'.
An account shall be classified as Non-performing Assets (NPA) for various types

of credit facilities or advances as under
a. In case of term loan (other than agricultural Loan), either interest and/or installment
of principal dues remains ‘overdue’ (i.e. if they are not paid on the due date fixed by
the Bank) for a period more than 90 days.
b. In case of running account such as cash credit or overdraft (other than agricultural
Loan), the account remains ‘Out of Order’ as indicated above.
c. If the regular/ adhoc limits are not reviewed/ renewed within 180 days from the
due date of review/ renewal or date of adhoc sanction.
d. If the Stock Statements are not submitted continuously for a period of 90 days
and limits / drawings are allowed on such irregular drawing power continuously for
90 days.
e. In case of bills purchased and discounted, if the bills remain ‘overdue and unpaid’
for a period more than 90 days.
f. In case of other loan facilities, any amount to be received remains ‘Overdue’ for a
period more than 90 days.
g. Since advances to Tea Industry is considered/governed by the norms as applicable
for agricultural advances (Madhukar Committee Report), such accounts will be
considered as NPA if interest and/or installment of principal remain overdue for two
crop seasons (as Tea is considered as short duration crop by IBA and also by the
SLBC, West Bengal).
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h. State Government guaranteed advances are classified as NPA if interest and/ or
installment remain unpaid beyond 90 days irrespective of whether the guarantee is
invoked or not. Date of NPA, however, is to be considered from the original date of
irregularity and accordingly the asset classification of such advances is to be made
based on age of irregularity / delinquency in the account.
i. Central Government Guaranteed advances are to be classified as NPA only after 90
days of repudiation of the guarantee by the Government, when the same is invoked.
This exemption from classification of Central Government guaranteed advances as
NPA is not for the purpose of recognition of income. The interest/income in such
accounts will not be booked unless the same is recovered.
j. In case of Agricultural Loan, the identification norms are stipulated on the basis of
periodicity of the crop grown as detailed hereunder:-
(A) Short duration Crop (up to 12 months):- A loan granted for short duration Crop
will be treated as NPA if the installment of the principal or interest remains unpaid for
two crop seasons beyond the due date.
(B) Long duration crops (beyond 12 months) :- A Loan granted for long duration
crop will be treated as NPA if the installment of the principal or interest payable
thereon remains unpaid for one crop season beyond the due date.
All the above prescriptions of crop loans (for identification of NPA) would also be
applicable for agricultural term loans mutatis mutandis. For further clarification
regarding treatment of Agricultural Loans and loans sanctioned under KCC, HOIC
14907/ Credit Monitoring/ 2016-17/09 dated 24.03.2017, Chapter D, page 14 onwards
may be referred).
k. Securitization transaction
The amount of liquidity facility remains outstanding for more than 90 days, in respect
of a securitization transaction undertaken in terms of guidelines on securitization
dated February 1, 2006.
l. Derivative transactions
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 granted to the client shall also be
classified as non-performing asset following the principle of borrower-wise
classification
m. In case of interest payments, an account will be classified 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.
n. Accounts with temporary deficiencies

The classification of an asset as NPA should be based on the record of recovery. An
advance account should not be classified 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
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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
following guidelines are could be followed:
i. It should be ensured 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 Branches 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/ regularized 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 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.
INCOME RECOGNITION
Income Recognition Policy
1. As per RBI guidelines the policy of income recognition has to be objective and based
on the record of recovery. Internationally income from nonperforming assets (NPA)
is not recognized on accrual basis but is booked as income only when it is actually
received. Therefore, in NPA accounts any type of income should not be charged and
taken to Income Head. This will apply to Government guaranteed accounts also.
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. Fees and commissions earned as a result of renegotiations or rescheduling of
outstanding debts should be recognized on an accrual basis over the period of time
covered by the renegotiated or rescheduled extension of credit.
4. Interest Income in respect of Restructured Asset classified as standard asset will be
recognized on accrual basis & that in respect of Restructured assets classified as
non-performing assets will be recognized only on cash basis.
5. Interest realized 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.
Reversal of income
1. If any advance, including bills purchased and discounted, becomes NPA, the entire
unrealized interest credited to income account in the past periods, should be
reversed. This will apply to Government guaranteed accounts also.
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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. 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 nonperforming, and remaining unrealized, should be
reversed or provided for in the current accounting period.
RULES OF COMPUTATION OF UNCHARGED INTEREST IN NPA ACCOUNTS IN

CBS SYSTEM
As per RBI guidelines when an account turns NPA no interest should be charged &
booked. Accordingly, branches /CBS system should not charge interest and book
income. However, bank may continue to record such interest in a memorandum account
in their books. For the purpose of computing Gross Advances, interest recorded as
Uncharged Interest should not be taken into account. Uncharged Interest will be
maintained / charged in CBS system as under:
A) NPA Accounts other than Written-Off & Prudential Write-Off
In CBS System Uncharged Interest in all the NPA accounts including decreed/suit filed ,
will be calculated at prevailing rate of interest of the respective loan products in which
particular loan account was initially opened or is being maintained, but neither this
interest will be debited in the loan account nor booked in profit loss account of the
Bank. Interest thus calculated will be kept separately as uncharged interest till the
account is upgraded as Performing Asset.
B) Written off accounts

In case of virtual written off accounts a credit advice is issued by Head Office to the
Zones/ Branches for credit in respective loan account. So on credit of the written-off
amount in the loan account, balance is reduced/ account is closed. In the absence of
specific marking in the CBS system as regards virtually written off accounts, system
computes interest on balance amount in partially written off accounts at prevailing rate
of interest of the respective loan products in which particular loan account was initially
opened or is being maintained, but this interest is neither debited in the loan account
nor booked in profit loss account of the Bank. Branches have to manually maintain list
of all virtually written off accounts (full and partial). In such written off accounts,
wherever need arises (like closure/compromise etc., in future), they will have to
manually calculate the uncharged interest/ sacrifice in uncharged interest. Rate on
which this computation is to be done has been dealt with under “General guidelines on
compromise” section of this policy.
C) Prudential Written off accounts

In case of Prudential written off accounts (Partial/full) no credit advice will be issued by
Head Office to the Zones/ Branches for credit in respective loan account, thus in CBS
system outstanding in the loan account will remain as such.
In CBS System Uncharged Interest in all the NPA accounts (including Prudentially
Written off), will be calculated at prevailing rate of interest of the respective loan
products in which particular loan account was initially opened or is being maintained,
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but neither this interest will be debited in the loan account nor booked in profit loss
account of the Bank. Interest thus calculated by CBS system & will keep it separately as
uncharged interest till the account is upgraded as Performing Asset.
Computation of uncharged interest for arriving at amount of sacrifice while considering
compromise proposal and relevant rate of interest to be considered have been dealt
with under “General guidelines on compromise” section of this policy.
D) General guidelines
CBS system calculates the amount of uncharged interest from the date when account is
marked in the system as NPA. So branches are advised to recheck date of NPA as well
as uncharged interest in CBS system, especially in case of accounts classified as NPA
prior to migration in CBS system and correct it in case of any discrepancy.
In case of exceptional circumstances viz. DRT /COURT/ CDR/ SDR/ S4A/ NCLT
directions & others, uncharged interest is to be calculated as per the directions of above
referred authorities.
Computation of NPA level at Head Office
Gross Advances, Net Advances, Gross NPAs and Net NPAs, will be computed as per
RBI guidelines (Annexure-1) at Head Office level only.
ASSET CLASSIFICATION
Bank has already adopted system based classification of Assets. CBS project office and
Head Office, Department of Information Technology will ensure that in CBS system
Parameters for classification of assets and provisioning are set as per IRAC norms
formulated by RBI / Bank’s guidelines and Head Office, Department of Information
Technology will also issue necessary policy guidelines for management of entire
parameter setting in CBS system.
CRITERIA FOR ASSETS CLASSIFICATION
Following criteria will be followed for classification of assets
(A) STANDARD ACCOUNTS
Standard assets/ Performing Assets are those assets which do not disclose any
problem and which do not carry more than normal risk attached to the business. Such
accounts should be in order and interest/installments should not remain overdue
beyond the limits prescribed for the category of advance in which the financed asset is
categorized. (As defined in ensuing paragraphs of the policy documents)
For better monitoring of credit portfolio, CBS system is parameterized to classify the
periodicity of irregularity in each Standard assets/ Performing Assets in under noted
slabs:-
Sl. Nomenclature Period of irregularity Identification in
NO CBS system with
IRAC Code NO
1 Std- Regular(SMA-0) Up to 15 days 00
2 Std-Irregular(SMA-0) Above 15 days & up to 30 days 01
3 PNPA- Stage 1 (i.e HC 2A) Above 30 days but up to 60 02
(SMA-1) days
4 PNPA- Stage 2 (i.e HC 2B) Above 60 days but below 90 03
(SMA -2) days
5
(B) NON PERFORMING ASSETS (NPA)
Non-Performing Assets (NPA) are further divided in undernoted three broad categories
based on the period for which the asset has remained non-performing and the
realizable value of the securities charged to the Bank.
I. Sub-Standard Assets,
II. Doubtful Assets,
III. Loss Assets.
I. Sub-Standard Assets
With effect from 31 March 2005, a substandard 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 jeopardize the liquidation of the debt and are
characterized by the distinct possibility that the banks will sustain some loss, if
deficiencies are not corrected. In CBS System Sub-Standard Assets will be shown
with IRAC Code 04
II. Doubtful Assets

With effect from March 31, 2005, an asset would be classified as doubtful if it has
remained in the substandard category for a period of 12 months. A loan classified as
doubtful has all the weaknesses inherent in assets that were classified as substandard,
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
Erosion in the value of security can be reckoned as significant when the realizable 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.
Doubtful Assets depending upon their periodicity are further classified under three
categories:-
a. Doubtful Assets (DF I)

A Non-Performing Asset which has remained in sub-standard category for a period
ranging from 12 months to 24 months. In CBS System it will be shown with IRAC
Code 05.
b. Doubtful Assets (DF II)

A Non-Performing Asset which has remained in Doubtful Asset category for a period
more than one year & up to three Year. In CBS System it will be shown with IRAC
Code 06.
c. Doubtful Assets (DF III)

A Non-Performing Asset which has remained in Doubtful Asset category for more than
three years. In CBS System it will be shown with IRAC Code 07.
III. Loss Assets

Loss Asset is one where loss has been identified by Bank’s Internal Inspector, External
Auditor or the RBI Inspectors but the loan account has not been written off wholly or
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partly. In other words, such an Asset is considered uncollectible/non-recoverable/un
realizable & of such little value that its continuance as a bankable asset is not warranted
although there may be some salvage or recovery value. If the realizable value of the
security, as assessed by the bank/ approved valuers / RBI is less than 10 per cent of
the outstanding in the borrower accounts, the existence of security should be ignored
and the asset should be straightaway classified as loss asset. In CBS System Loss
Assets will be shown with IRAC Code 08.
A standard/substandard/Doubtful (DF-I, DF-II & DF-III) asset may be classified
straightway in Loss Asset if the value of security is eroded beyond 90%.
Accounts, where guarantee from ECGC/CGTMSE are available, should not be

classified as loss assets, unless the claims are not enforceable. Such NPA accounts
should be classified as sub-standard or doubtful depending upon the period / age of
NPA.
A NPA need not to go through various stages of classification in cases of serious

credit impairment and such asset should be straightaway classified as doubtful
or loss asset as described above.
GUIDELINES FOR CLASSIFICATION OF ASSETS

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 realization of dues.
The Bank has established appropriate internal systems to eliminate the tendency to
delay or postpone the identification of NPAs through automated marking of the same.
The Bank has fixed a minimum cut off point of Rs.10.00 crore to constitute a high value
account. However, for accounts of Rs.10.00 Crore and above, the Zonal Head would be
responsible for ensuring proper asset classification. If there is any doubts in NPA asset
classification due to any reason then it is to be settled through clarifications from the
Head Office Recovery Department within one month from the date on which the
account would have been classified as NPA as per extant guidelines.
1. Accounts regularized near about the balance sheet date

The asset classification of borrower 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
Branches must furnish satisfactory evidence to the Statutory Auditors/Inspecting
Officers about the manner of regularization of the account to eliminate doubts on their
performing status
2. 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 nonperforming
and may be classified as ‘standard’ accounts. Upgradation of a restructured/
rescheduled account will be done in accordance with prudential guidelines on
Restructuring of Advances
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3. Asset Classification to be borrower wise and not facility wise
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 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.
4. 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 as described in under noted para.
i. Erosion in the value of security can be reckoned as significant when the realizable
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 realizable value of the security, as assessed by the bank/ approved valuers/ RBI
is less than 10 per cent of the outstanding in the borrower accounts, the existence of
security should be ignored and the asset should be straightaway classified as loss
asset. It may be either written off or fully provided for by the bank.
i. 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 borrower’s principal operating account for the purpose of
application of prudential norms on income recognition, asset classification and
provisioning.
ii. The bills discounted under LC favoring 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.
iii. 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 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. Accordingly, 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 crystallized or might crystallize in
future and is / becomes receivable from the client, should be parked in a separate
8
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) (a) 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-to-market 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 unrealized 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 .
e. Further, in cases where the derivative contracts provides for more settlements in future,
the MTM value will comprise of (a) crystallized receivable 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
crystallized receivable for 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 ‘Suspense account-
Positive MTM”, not in the 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 overdue in cash, the balance in the “Suspense Account-Crystallized
receivables” may be transferred to the ‘Profit & Loss Account’ to the extent payment is
received.
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 crystallized/ 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 of 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.
5. 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
9
will be treated as not serviced in the books of the other member banks and therefore, be
treated as NPA. The branches 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.
6. 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 no 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 explained earlier.
7. 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 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.
8. Advances against Term Deposits, National Savings Certificates (NSCs), Kisan

Vikas Patra (KVP)/Indira Vikas Patra (IVP), 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.
9. Loans with moratorium for payment of interest

i. In the case finance is 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.
10. 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
10
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 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 per
HO Instruction Circular No. 14462 /PSC/2016-17/ 17 dated 25.07.2016 based on
amendments since been made by RBI and advised in master direction, vide
RBI/FIDD/2016-17/33 Master Direction FIDD.CO.Plan.1/04.09.01/2016-17 dated
07.07.2016 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,
Branches have to provide relief measures by 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 as per guidelines issued by RBI/ Head Office Priority Sector
Department.
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
remain 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, Branches should ensure that the interest/installment payable on such
advances are linked to crop cycles.
11. 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 31 March 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.
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12. Projects under implementation
(A) For all projects financed after 28th May, 2002, the ‘Date of completion’ and the
‘Date of Commencement of Commercial Operations’(DCCO), of the project should be
clearly spelt out at the time of financial closure of the project and the same should be
formally documented. These should also be documented in appraisal note during the
sanction of the loan.
(B) Project Loans

There are occasions when the completion of projects is delayed for legal and other
extraneous reasons like delays in Government approvals etc. All these factors, which
are beyond the control of the promoters, may lead to delay in project implementation
and involve restructuring / re-schedulement of loans by banks. Accordingly, the
following asset classification norms would apply to the project loans before
commencement of commercial operations.
For this purpose, all project loans have been divided into the following two categories:
(a) Project Loans for infrastructure sector.
(b) Project Loans for non-infrastructure sector.
Project Loan would mean any term loan which has been extended for the purpose of
setting up of an economic venture. Date of Commencement of Commercial Operations
(DCCO) for all project loans must be fixed at the time of sanction of the loan / financial
closure (in the case of multiple banking or consortium arrangements).
(C) Project Loans for Infrastructure Sector

I. A loan for an infrastructure project will be classified as NPA during any time before
commencement of commercial operations as per record of recovery (90 days overdue).
II. A loan for an infrastructure project will be classified as NPA if it fails to commence
commercial operations within two years from the original DCCO, even if it is regular as
per record of recovery, unless it is restructured and becomes eligible for classification
as 'standard asset' in terms of paras (iii) to (v) below.
III. If a project loan classified as 'standard asset' is restructured any time during the period
up to two years from the original date of commencement of commercial operations
(DCCO). It can be retained as a standard asset if the fresh DCCO is fixed within the
following limits, and further provided the account continues to be serviced as per the
restructured terms.
a. Infrastructure Projects involving court cases

Up to another 2 years (beyond the existing extended period of 2 years i.e. total
extension of 4 years), in case the reason for extension of date of commencement of
production is arbitration proceedings or a court case.
b. Infrastructure Projects delayed for other reasons beyond the control of promoters
Up to another 1 year (beyond the existing extended period of 2 years i.e. total
extension of 3 years), in other than court cases.
IV. It is re-iterated that the dispensation in above para 11C(iii) is subject to adherence to
the provisions regarding restructuring of accounts which would inter alia require that the
12
application for restructuring should be received before the expiry of period of two years
from the original DCCO and when the account is still standard as per record of
recovery. The other conditions applicable would be :
a. In cases where there is moratorium for payment of interest, Branches should not
book income on accrual basis beyond two years from the original DCCO,
considering the high risk involved in such restructured accounts.
b. On such accounts provisions will be maintained as per guidelines issued by RBI
from time to time, as long as these assets are classified as standard assets in
addition to provision for diminution in fair value: Present provision requirement is as
under-
Particulars Provision Requirement
If the revised DCCO is within two years
from the original DCCO prescribed at 0.40 per cent
the time of financial closure
If the DCCO is extended beyond two Project loans restructured with effect from June 1,
years and up to four years or three 2013:
years from the original DCCO, as the 5.00 per cent- From the date of such restructuring till
case may be depending upon the the revised DCCO or two years from the date of
reason for such delay restructuring whichever is later
v. For the purpose of these guidelines, mere extension of DCCO would not be considered
as restructuring, if the revised DCCO falls within the period of two years from the
original DCCO. In such cases the consequential shift in repayment period by equal or
shorter duration (including the start date and end date of revised repayment schedule)
than the extension of DCCO would also not be considered as restructuring provided all
other terms and conditions remain unchanged. As such project loans will be treated as
standard assets in all respects; they will attract standard provision of 0.40 per cent.
vi. In case of infrastructure projects under implementation, where Appointed Date (as
defined in the concession agreement) is shifted due to the inability of the Concession
Authority to comply with the requisite conditions, change in date of commencement of
commercial operations (DCCO) need not be treated as ‘restructuring’, subject to
following conditions:
a. The project is an infrastructure project under public private partnership model
awarded by a public authority;
b. The loan disbursement is yet to begin;
c. The revised date of commencement of commercial operations is documented by
way of a supplementary agreement between the borrower and lender and;
d. Project viability has been reassessed and sanction from appropriate authority has
been obtained at the time of supplementary agreement.
(D) Project Loans for Non-Infrastructure Sector (Other than Commercial Real Estate
exposure)
(i) A loan for a non-infrastructure project will be classified as NPA during any time before
commencement of commercial operations as per record of recovery (90 days overdue),
unless it is restructured and becomes eligible for classification as 'standard asset' in
terms of paras (iii) to (iv) below.
(ii) A loan for a non-infrastructure project will be classified as NPA if it fails to commence
commercial operations within one year from the original DCCO, even if it is regular as
per record of recovery, unless it is restructured and becomes eligible for classification
as 'standard asset' in terms of paras (iii) to (iv) below.
13
(iii) In case of non-infrastructure projects, if the delay in commencement of commercial
operations extends beyond the period of one year from the date of completion as
determined at the time of financial closure, fresh DCCO will be prescribed and
“standard" classification will be retained by undertaking restructuring of accounts
provided the fresh DCCO does not extend beyond a period of two years from the
original DCCO. This would among others also imply that the restructuring application is
received before the expiry of one year from the original DCCO, and when the account is
still "standard" as per the record of recovery.
The other conditions applicable would be:
a. In cases where there is moratorium for payment of interest, income will not be
booked on accrual basis beyond one year from the original DCCO, considering the
high risk involved in such restructured accounts.
b. Provisions on such accounts will be maintained as per guidelines issued by RBI from
time to time, as long as these assets are classified as standard assets apart from
provision for diminution in fair value due to extension of DCCO:
Particulars Provision Requirement

If the revised DCCO is within one year from 0.40 per cent
the original DCCO prescribed at the time of
financial closure
Project loans restructured with effect from June 1,
2013:
5.00 per cent- From the date of restructuring for
If the DCCO is extended beyond one year
two years
and up to two years from the original DCCO,
Stock of project loans classified as restructured as
as the case may be depending upon the
on June 1, 2013:
reason for such delay
 5.00 per cent - with effect from March 31, 2016
The above provisions will be applicable from the
date of restructuring for two years
(iv)For the purpose of these guidelines, mere extension of DCCO would not be considered
as restructuring, if the revised DCCO falls within the period of one year from the original
DCCO. In such cases the consequential shift in repayment period by equal or shorter
duration (including the start date and end date of revised repayment schedule) than the
extension of DCCO would also not be considered as restructuring provided all other
terms and conditions of the loan remain unchanged. As such project loans will be
treated as standard assets in all respects; they will attract standard asset provision of
0.4 per cent.
(E) Other Issues

(i) All other aspects of restructuring of project loans before commencement of commercial
operations would be governed as per prudential norms on Income Recognition, Asset
Classification and Provisioning Pertaining to Advances. Restructuring of project loans
after commencement of commercial operations will also be governed by these
instructions.
(ii) Any change in the repayment schedule of a project loan caused due to an increase in
the project outlay on account of increase in scope and size of the project, would not be
treated as restructuring if :
14
a. The increase in scope and size of the project takes place before commencement of
commercial operations of the existing project.
b. The rise in cost excluding any cost-overrun in respect of the original project is 25%
or more of the original outlay.
c. The viability of the project will be re-assessed before approving the enhancement of
scope and fixing a fresh DCCO.
d. On re-rating, (if already rated) the new rating is not below the previous rating by
more than one notch.
(iii) Project Loans for Commercial Real Estate

The commercial real estate (CRE) projects also face problems of delays in achieving
the DCCO for extraneous reasons. Therefore, for CRE projects, mere extension of
DCCO would not be considered as restructuring, if the revised DCCO falls within the
period of one year from the original DCCO and there is no change in other terms and
conditions except possible shift of the repayment schedule and servicing of the loan by
equal or shorter duration compared to the period by which DCCO has been extended.
Such CRE project loans will be treated as standard assets in all respects for this
purpose without attracting the higher provisioning applicable for restructured standard
assets. However, the asset classification benefit would not be available to CRE projects
if they are restructured.
(Iv) Multiple revisions of the DCCO and consequential shift in repayment schedule for equal
or shorter duration (including the start date and end date of revised repayment
schedule) will be treated as a single event of restructuring provided that the revised
DCCO is fixed within the respective time limits stipulated at point No 11 C (iii) & 11 D
(iii) mentioned above.
(F) Income recognition

(i) Income on accrual basis will be recognized in respect of the projects under
implementation, which are classified as ‘standard’.
(ii) Income on accrual basis will not be recognized in respect of the projects under
implementation which are classified as a ‘substandard’ asset. Income in such
accounts will be recognized only on realization on cash basis.
In case income in the past has been wrongly recognized then it should be reversed, if it
was recognized as income during the current year or provision will be made for an
equivalent amount if it was recognized as income in the previous year(s).
As regards the regulatory treatment of ‘funded interest’ recognized as income and
‘conversion into equity, debentures or any other instrument’ following guidelines will be
followed:
a) Funded Interest:
Income recognition in respect of the NPAs, regardless of whether these are or are not
subjected to restructuring/ rescheduling/ renegotiation of terms of the loan agreement,
should be done strictly on cash basis, only on realization and not if the amount of
interest overdue has been funded. If, however, the amount of funded interest
15
is recognized as income, a provision for an equal amount should also be made
simultaneously. In other words, any funding of interest in respect of NPAs, if recognized
as income, should be fully provided for.
b) Conversion into equity, debentures or any other instrument:

The amount outstanding converted into other instruments would normally comprise
principal and the interest components. If the amount of interest dues is converted into
equity or any other instrument, and income is recognized in consequence, full provision
will be made for the amount of income so recognized to offset the effect of such income
recognition. Such provision will be in addition to the amount of provision that may be
necessary for the depreciation in the value of the equity or other instruments, as per the
investment valuation norms. However, if the conversion of interest is into equity which
is quoted, interest income can be recognized at market value of equity, as on the date
of conversion, not exceeding the amount of interest converted to equity. Such
equity must thereafter be classified in the “available for sale” category and valued at
lower of cost or market value. In case of conversion of principal and /or interest in
respect of NPAs into debentures, such debentures should be treated as NPA, ab initio,
in the same asset classification as was applicable to loan just before conversion and
provision made as per norms. This norm would also apply to zero coupon bonds or
other instruments which seek to defer the liability of the issuer. On such debentures,
income should be recognized only on realization basis. The income in respect of
unrealized interest which is converted into debentures or any other fixed
maturity instrument should be recognized only on redemption of such instrument.
Subject to the above, the equity shares or other instruments arising from conversion of
the principal amount of loan would also be subject to the usual prudential valuation
norms as applicable to such instruments.
13. Change in ownership

In case of change in ownership of the borrowing entities, credit facilities of the
concerned borrowing entities may be continued/ upgraded as ‘standard’ after the
change in ownership is implemented, either under the IBC or under the revised
framework for stressed assets. If the change in ownership is implemented under
this framework, then the classification as ‘standard, shall be subject to the following
conditions:
i) Banks shall conduct necessary due diligence in this regard and clearly
establish that the acquirer is not a person disqualified in terms of
Section 29A of the Insolvency and Bankruptcy Code, 2016.
ii) The new promoter shall have acquired at least 26 per cent of the paid up
equity capital of the borrower entity and shall be the single largest
shareholder of the borrower entity.
iii) The new promoter shall be in ‘control’ of the borrower entity as per the
definition of ‘control’ in the Companies Act 2013 / regulations issued by
the Securities and Exchange Board of India/any other applicable
regulations / accounting standards as the case may be.
iv) The conditions for implementation of RP as per Section I-C of the RBI
Notification dated 12.02.2018 on “Resolution of Stressed Assets-Revised
Framework” are complied with.
16
Standard accounts classified as NPA and NPA accounts retained in the same
category on restructuring by the lenders may be upgraded only when all the
outstanding loan/ facilities in the account demonstrate ‘satisfactory performance’
(i.e., the payments in respect of borrower entity are not in default at any point of time)
during the ‘specified period’.
‘Specified period’ means the period from the date of implementation of Resolution
Plan (RP) up to the date by which at least 20 percent of the outstanding principal
debt as per the RP and interest capitalization sanctioned as part of the restructuring, if
any, is repaid. Provided that the specified period cannot end before one year from the
commencement of the first payment of interest or principal (whichever is later) on the
credit facility with longest period of moratorium under the terms of RP.
For such accounts to continue to be classified as standard, all the outstanding loans/
credit facilities of the borrowing entity need to demonstrate satisfactory
performance during the specified period. If the account fails to perform satisfactorily
at any point of time during the specified period, the credit facilities shall be
immediately downgraded as non- performing assets (NPAs) i.e., ‘sub-standard’.
Any future upgrade for such accounts shall be contingent on implementation of a fresh
RP (either under IBC, wherever mandatory filings are applicable or initiated voluntarily
by the lenders, or outside IBC) and demonstration of satisfactory performance
thereafter.
Further, the quantum of provisions held by the bank against such account as on the date
of change in ownership of the borrowing entities can be reversed only after satisfactory
performance during the specified period.
14. Takeout Finance

Takeout finance is the product emerging in the context of the funding of long term
infrastructure projects. Under this arrangement, the institution/the bank financing
infrastructure projects will have an arrangement with any financial institution for
transferring to the latter the outstanding in respect of such financing in their books on a
predetermined basis. In view of the time lag involved in taking-over, the possibility of a
default in the meantime cannot be ruled out. The norms of asset classification will be
followed in case it stands in our books as balance sheet item as on the relevant date. If
it is observed that the asset has turned NPA on the basis of the record of recovery, it
should be classified accordingly. Income on accrual basis will not be recognized and will
be accounted for the same only when it is paid by the borrower/ taking over institution (if
the arrangement so provides). Provisions will be made for any asset turning into NPA
pending its take over by taking over institution. As and when the asset is taken over
by the taking over institution, the corresponding provisions could be reversed. However,
if we are taking over such assets then provisions will be made treating the account
as NPA from the actual date of it becoming NPA even though the account was not in
its books as on that date.
15. Post shipment Supplier's Credit

i. In respect of post shipment credit extended for export of goods to countries for which
the ECGC’s cover is available, EXIM Bank has introduced a guarantee cum-refinance
programme whereby, in the event of default, EXIM Bank will pay the guaranteed
17
amount to the bank within a period of 30 days from the day the bank invokes the
guarantee after the exporter has filed claim with ECGC.
ii. Accordingly, to the extent payment has been received from the EXIM Bank, the
advance may not be treated as a nonperforming asset for asset classification and
provisioning purposes.
16. Export Project Finance

i. In respect of export project finance, there could be instances where the actual
importer has paid the dues to the bank abroad but the bank in turn is unable to remit
the amount due to political developments such as war, strife, UN embargo, etc.
ii. In such cases, where we are able to establish through documentary evidence that
the importer has cleared the dues in full by depositing the amount in the
bank abroad before it turned into NPA in the books of the bank, but the importer's
country is not allowing the funds to be remitted due to political or other reasons, the
asset classification may be made after a period of one year from the date the
amount was deposited by the importer in the bank abroad.
(FOR LATEST GUIDELINES ON ASSET CLASSIFICATION/ IRAC NORMS PLEASE

REFER HEAD OFFICE INSTRUCTION CIRCULARS / GUIDELINES ISSUED BY
HEAD OFFICE CREDIT MONITORING DEPARTMENT & HEAD OFFICE RECOVERY
DEPARTMENT FROM TIME TO TIME)
17. Transactions Involving Transfer of Assets through Direct Assignment of Cash

Flows and the Underlying Securities
A. If our Bank is Originating Bank:

The asset classification and provisioning rules in respect of the exposure representing
the Minimum Retention Requirement (MRR) would be as under:
i. Our bank will maintain a consolidated account of the amount representing MRR if
the loans transferred are retail loans. In such a case, the consolidated amount
receivable in amortization of the MRR and its periodicity should be clearly
established and the overdue status of the MRR should be determined with reference
to repayment of such amount. Alternatively, our bank may continue to maintain
borrower-wise accounts for the proportionate amounts retained in respect of those
accounts. In such a case, the overdue status of the individual loan accounts should
be determined with reference to repayment received in each account.
ii. In the case of transfer of a pool of loans other than retail loans, our Bank will
maintain borrower-wise accounts for the proportionate amounts retained in respect
of each loan. In such a case, the overdue status of the individual loan accounts
should be determined with reference to repayment received in each account.
iii. If our bank is servicing as an agent of the assignee bank for the loans transferred,
then we should know the overdue status of loans transferred which should form the
basis of classification of the entire MRR/individual loans representing MRR as NPA
in our books, depending upon the method of accounting followed as explained in
above para (i) and (ii).
18
B. If our Bank Purchasing Bank:
In purchase of pools of both retail and non-retail loans, income recognition, asset
classification and provisioning norms will be applicable based on individual obligors and
not based on portfolio. Bank will not apply the asset classification, income recognition
and provisioning norms at portfolio level, as such treatment is likely to weaken the credit
supervision due to its inability to detect and address weaknesses in individual accounts
in a timely manner. Our bank will maintain the individual obligor-wise accounts for the
portfolio of loans purchased, or will have an alternative mechanism to ensure
application of prudential norms on individual obligor basis, especially the classification
of the amounts corresponding to the obligors which need to be treated as NPAs as per
existing prudential norms. One such mechanism could be to seek monthly statements
containing account-wise details from the servicing agent to facilitate classification of the
portfolio into different asset classification categories. Such details should be certified by
the authorized officials of the servicing agent. Bank’s concurrent auditors, internal
auditors and statutory auditors should also conduct checks of these portfolios with
reference to the basic records maintained by the servicing agent. The servicing
agreement should provide for such verifications by the auditors of the bank. All relevant
information and audit reports should be available for verification by the Inspecting
Officials of Zonal Office/Head Office/RBI during the Annual Financial Inspections of the
banks.
C. The guidelines prescribed above at Point No.16 (i) & (ii) do not apply to
(i) Transfer of loan accounts of borrowers by our bank to other bank/FIs/NBFCs and
vice versa, at the request/instance of borrower;
(ii) Inter-bank participations;
(iii) Trading in bonds;
(iv) Sale of entire portfolio of assets consequent upon a decision to exit the line of
business completely. Such a decision should have the approval of Board of
Directors of the bank;
(v) Consortium and syndication arrangements and arrangement under Corporate Debt
Restructuring mechanism;
(vi) Any other arrangement/transactions, specifically exempted by the Reserve Bank of
India.
19
PROVISIONING NORMS
1. General
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 management and
the statutory auditor. The assessment made by the inspecting officer of the RBI shall be
a guiding factor to the bank to assist the bank management and the statutory auditors in
taking a decision in regard to making adequate and necessary provisions in terms of
prudential guidelines.
In conformity with the prudential norms, provisions should be made on the Non
Performing Assets (NPA) on the basis of classification of assets into prescribed
categories as detailed above. Taking into account the time lag between an account
becoming doubtful of recovery, its recognition as such, the realization of the security
and the erosion over time in the value of security charged to the bank. Guidelines for
holding/ making provision against substandard assets, doubtful assets and loss assets
are as follows:
2. Loss assets
For loss assets 100 percent of the outstanding should be provided for i.e. 100%
provision should be made. Loss assets should be preferably written off.
3. Doubtful assets
I. 100 percent of the extent to which the advance is not covered by the realizable value
of the security to which the bank has a valid recourse and the realizable value is
estimated on a realistic basis.
II. In regard to the secured portion, provision will 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 advance Asset IRAC Code Provision

has remained in ‘doubtful’ Classifica in CBS requirement
category tion (%)
Up to one year DF-I 5 25
One to three years DF-II 6 40
More than three years DF-III 7 100
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 Rs. 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. Comprehensive guidelines for assessment of various security values
for provisioning in NPA accounts and other related concepts/ guidelines have been
given in Para 12 below.
20
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
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, there should be 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 realizable
value of the security, as assessed by the bank/approved valuers/Reserve Bank’s
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 relevant Schedule 9 of the bank’s balance sheet & the followings have
been introduced 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, authorizations, etc., charged to the bank
as collateral in respect of projects (including infrastructure projects) financed by us,
should not be reckoned as tangible security. Hence such advances shall be reckoned
as unsecured.
b. However, we 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 bank’s 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 our Bank 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;
21
iv) The lenders have a right to trigger termination in case of default in debt service;
and
v) Upon termination, the Project Authority has an obligation of (i) compulsory buy-out
and (ii) repayment of debt due in a pre-determined manner.
In all such cases, branches/field offices must satisfy themselves about the legal
enforceability of the provisions of the tripartite agreement and factor in their past
experience with such contracts.
d. As per RBI Directives the bank will 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. Standard assets
(i) The provisioning requirements for all types of standard assets stand as below. Bank will
make general provision for standard assets at the following rates for the funded
outstanding on global loan portfolio basis:
S Sector % of Provisioning
NO required
A Direct advances to agricultural and Small and Micro Enterprises 0.25
(SMEs) sectors
B advances to Commercial Real Estate (CRE) Sector 1.00
C Advances to Commercial Real Estate – Residential Housing 0.75
Sector (CRE - RH) (For this purpose, CRE-RH would consist of
loans to builders/developers for residential housing projects
(except for captive consumption) under CRE segment. Such
projects should ordinarily not include non-residential commercial
real estate. However, integrated housing projects comprising of
some commercial space (e.g. shopping complex, school, etc.) can
also be classified under CRE-RH, provided that the commercial
area in the residential housing project does not exceed 10% of
the total Floor Space Index (FSI) of the project. In case the FSI of
the commercial area in the predominantly residential housing
complex exceeds the ceiling of 10%, the project loans should be
classified as CRE and not CRE-RH)
D all other loans and advances not included in (a), (b) and (c) above 0.40
E Medium Enterprises 0.40
F Housing loans and advances at teaser rates (in case bank 2.00
sanctions loan under this scheme) (would revert to 0.40
percent after 1 year
from the date on
which the rates are
reset at higher rates
if the accounts
remain ‘standard”)
G Restructured advances 5.00 % - with effect
from March 31, 2016
Note- For Standard individual Housing Loans, the provisioning requirement shall be in terms of
HOIC: 15045/CPRMD/2017-18/06 dated 14.06.2017.
22
(ii) The provisions on standard assets should not be reckoned for arriving at net NPAs.
(iii) As per RBI guidelines the provisions towards Standard Assets will not be netted from
gross advances & will be shown separately as 'Contingent Provisions against
Standard Assets' under 'Other Liabilities and Provisions Others' in relevant Schedule 5
of the Bank’s balance sheet.
(iv) The definition of the terms Micro Enterprises, Small Enterprises, and Medium
Enterprises shall be in terms of Master Circular issued by RBI / Bank’s Circularized
instructions on Lending to Micro, Small & Medium Enterprises (MSME) Sector.
(v) While the provisions on individual portfolios are required to be calculated at the rates
applicable to them, the excess or shortfall in the provisioning, vis-a-vis the position as
on any previous date, should be determined on an aggregate basis. As per RBI
guidelines if the provisions required to be held on an aggregate basis are less than the
provisions held as on November 15, 2008, the provisions rendered surplus should not
be reversed to Profit and Loss account; but should continue to be maintained at the
level existed as on November 15, 2008. In case of shortfall determined on aggregate
basis, the balance will be provided for by debit to Profit and Loss account. Accordingly
Our Bank will continue to have the provision on NPA equal to or more than the amount
of provision actually held as on 15.11.2008.
(vi) A high level of unhedged foreign currency exposures of the entities can increase the
probability of default in times of high currency volatility. Hence, bank is required to
estimate the riskiness of unhedged position of their borrowers as per the RBI
guidelines/ instructions and make incremental provisions on their exposures to such
entities.
Likely loss/EBID (%) Incremental provisioning requirement on the
total credit exposures over and above the
extant standard asset provisioning
Upto 15 % 0
More than 15% and up to 30% 20 bps
More than 30% and up to 50 % 40bps
More than 50 % and up to 75% 60 bps
More than 75 % 80 bps
6. Prudential norms on creation and utilization of floating provisions

a) Principle for creation of floating provision
As per RBI guidelines 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. Board of the Bank would
approve the level to which floating provision can be created. As per RBI norms the Bank
will continue to make provision on Standard Assets Restructured assets and NPA
(account wise specific provision) besides having Rs.24.00 crore in Counter Cyclic
Buffer. Looking to the present position Bank considers the present Counter Cyclic Buffer
as adequate.
23
b) Principle for utilization 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 nonperforming 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 board’s approval and with prior permission of
RBI.
ii. The Boards of the banks will decide as to what circumstances would be considered
extraordinary, however, as per RBI guidelines, 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.
 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.
 Credit category- only exceptional credit losses would be considered as an extra-
ordinary circumstance.
As a countercyclical measure, on February 7, 2014, banks were permitted by RBI to

utilize up to 33 per cent of countercyclical provisioning buffer / floating provisions held
by them as on March 31, 2013, for making specific provisions for non-performing
assets, Accordingly the Bank’s Board has approved in their meeting held on 28.02.2014
vide Agenda No 07/06 dated 28.02.2014 to utilize up to Rs 16.00 crore in such
circumstances. Further, RBI vide their circular no. RBI/2014-15/522 DBR
No.BP.BC.79/21.04.048/2015-15 dated March 30, 2015 allowed banks to utilize up to
50 per cent of countercyclical provisioning buffer/ floating provisions held by them as at
end of December 31,2014 , for making specific provisions for non-performing assets.
As on September 30, 2018 Bank has held countercyclical provisioning buffer of
Rs.24.00 crore and there is no floating provisions held by the Bank.
c) Few instances of extra-ordinary circumstances under which Bank can utilize the
same for making specific provisions for non-performing assets are given below:
 Causes of NPA beyond control of Bank/Borrower like change in Govt. Policy,
Disturbed law& order situation, Natural Calamities, etc.
 Occurrence of fraud/detection of fraud at later date.
 The charged property acquired by Govt. Body/Statutory Authorities.
 Any other cogent/unforeseen reasons having features of exceptional/ extraordinary
circumstances.
 Adverse ruling of competent Judicial Authority.
The authority to approve utilization of the countercyclical provisioning buffer/floating
provisions up to 50% under any of above circumstances is vested with the Managing
Director & chief Executive Officer or in his/her absence or preoccupation with the
Executive Director.
d) Accounting
Floating provisions cannot be reversed by credit to the Profit and Loss account. They
can only be utilized for making specific provisions in extraordinary circumstances as
mentioned above. Until such utilization, these provisions can be netted off from gross
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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.
e) Disclosures
As per RBI guidelines Bank will make comprehensive disclosures on floating provisions
in the “notes on accounts” to the balance sheet on the following-
i. opening balance in the floating provisions account,
ii. the quantum of floating provisions made in the accounting year,
iii. purpose and amount of draw down made during the accounting year, and
iv. closing balance in the floating provisions account
7. Additional Provisions for NPAs at higher than prescribed rates

The regulatory norms for provisioning represent the minimum requirement. As per RBI
guidelines 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.
8. Provisions on Leased Assets

i) Substandard assets
a. 15 percent of the sum of the net investment in the lease and the unrealized 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 lease exposures, as defined in paragraph 4.11 above, 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 realizable value of
the leased asset. Realizable 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 unrealized portion of finance income net of finance
charge component of the secured portion, depending upon the period for which asset
has been doubtful:
Period for which the advance has Asset IRAC Code Provision
remained in ‘doubtful’ category Classifica in CBS requirement
tion (%)
Up to one year DF-I 5 25
One to three years DF-II 6 40
More than three years DF-III 7 100
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 unrealized
portion of finance income net of finance charge component should be provided for.
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9. Guidelines for Provisions under Special Circumstances
a) Advances granted under rehabilitation packages approved by BIFR/term lending
institutions/NCLT
I. In respect of advances under rehabilitation package approved by BIFR/term lending

institutions/NCLT, 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 finalized by
BIFR/NCLT 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 as per RBI guidelines/Bank’s Circularized Instructions] and where
rehabilitation packages/nursing programmes have been drawn by the bank or under
consortium arrangements, no provision need be made for a period of one year.
b) 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.
c) Treatment of interest suspense account
As per RBI guidelines 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. Interest Not Collected Account
(INCA) and uncharged interest are neither debited to loan account nor contra entry is
booked in Income head, so no adjustment of any entry is required at field level.
d) 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, realizable value of the securities should first be deducted from the outstanding
balance in respect of the amount guaranteed by the Corporation and then provision
made as illustrated hereunder:
Example
Outstanding Balance Rs. 4 lakh
ECGC Cover 50 percent
Period for which the advance has More than 2 years remained doubtful
remained doubtful (say as on March 31, 2017)
Value of security held (Excludes worth of Rs.) Rs. 1.50 lakh
Provision required to be made
Outstanding balance Rs. 4.00 lakh
Less: Value of security held Rs. 1.50 lakh
Unrealized balance Rs. 2.50 lakh
Less: ECGC Cover Rs. 1.25 lakh
26
(50% of unrealizable balance)
Net unsecured balance Rs. 1.25 lakh
Provision for unsecured portion of Rs. 1.25 lakh (@ 100 percent of
advance unsecured portion)
Provision for secured portion of advance Rs.0.60 lakh (@ 40 per cent of the
secured portion)
Total provision to be made Rs.1.85 lakh (as on March 31, 2017)
e) 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 non-
performing, 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 nonperforming advances. An illustrative example is given
below
Example
Outstanding Balance Rs. 10 lakh
CGTMSE/CRGFTLIH Cover 75% of the amount outstanding or 75% of the
unsecured amount or Rs.37.50 lakh, whichever is
the least
Period for which the advance More than 2 years remained doubtful
has remained doubtful
Value of security held Rs. 1.50 lakh
Provision required to be made

Balance outstanding Rs.10.00 lakh
Less: Value of security Rs. 1.50 lakh
Unsecured amount Rs. 8.50 lakh
Less: CGTMSE/CRGFTLIH Cover (75%) Rs. 6.38 lakh
Net unsecured and uncovered portion: Rs. 2.12 lakh
Provision for Secured portion @ 40% of Rs.1.50 lakh Rs.0.60 lakh
Provision for Unsecured & uncovered portion @ 100% of Rs.2.12 Rs.2.12 lakh
lakh
Total provision required Rs.2.72 lakh
f) Takeout finance
Bank will make provisions against a 'takeout finance' turning into NPA pending its
takeover by the taking-over institution. As and when the asset is taken- over by the
taking-over institution, the corresponding provisions could be reversed.
g) 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.
27
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, bank should
treat the full amount of the Revaluation Gain relating to the corresponding assets, if
any, on account of Foreign Exchange Fluctuation as provision against the particular
assets.
h) RBI guidelines for Provisioning for country risk

Bank will 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, bank 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
Bank is 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.
Bank 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.
Bank 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).
i) 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 RBI guidelines (RBI Master Circular on Prudential guidelines on Capital
Adequacy and Market Discipline - New Capital Adequacy Framework (NCAF) and
Master Circular on Prudential Norms on Capital adequacy - Basel I Framework).
28
j) 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 re-schedulement of principal amount are permitted to be netted from the relative
asset.
k) Provisioning norms for Liquidity facility provided for Securitization transactions
The amount of liquidity facility drawn and outstanding for more than 90 days, in respect
of securitization transactions undertaken in terms of RBI guidelines on securitization
dated February 1, 2006, should be fully provided for.
l) 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
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.
m) Provisioning for housing loans at teaser rates
In respect of 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. RBI has 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, RBI has increased the standard asset provisioning on the outstanding
amount of such loans 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’.
10. Restructured Advances:
Provision on restructured advances
i. Banks will hold provision against the restructured advances as per the extant
provisioning norms.
ii. Restructured accounts classified as standard advances will attract a higher provision
(as prescribed from time to time) in the first two years from the date of restructuring. In
cases of moratorium on payment of interest/principal after restructuring, such
advances will attract the prescribed higher provision for the period covering
moratorium and two years thereafter.
iii. Restructured accounts classified as non-performing advances, when upgraded to
standard category will attract a higher provision (as prescribed from time to time) in
the first year from the date of up gradation.
The above-mentioned higher provision on restructured standard advances would
increase to 5 per cent with effect from March 31, 2016
Provisioning Requirement for Non-Performing Accounts is summarized in under noted
table
Category of Advances Revised Rate (%)
Sub- standard Advances
1.Secured Exposures 15
29
Category of Advances Revised Rate (%)
2.Unsecured Exposures 25
3. Unsecured Exposures in respect of Infrastructure loan accounts 20
where certain safeguards such as escrow accounts are available.
Doubtful Advances-Unsecured Portion 100
Doubtful Advances-Secured Portion
1.For Doubtful up to 1 year 25
2.For Doubtful > 1year &up to 3 years 40
3.For Doubtful > 3 years 100
Loss Advances 100
(For detailed guidelines (other than provisioning) on IRAC norms, please refer to
guidelines issued by Head Office Credit Monitoring Department & by RBI from time to
time)
11. RBI guidelines on Provisioning Coverage Ratio
i. Provisioning Coverage Ratio (PCR) is essentially the ratio of provisioning to gross non-
performing assets and indicates the extent of funds a bank has kept aside to cover loan
losses.
ii. From a macro-prudential perspective, bank 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 the bank, as also the stability
of the financial sector. Accordingly, as directed by RBI, bank should augment its
provisioning cushions consisting of specific provisions against NPAs as well as floating
provisions, and has to ensure that their total provisioning coverage ratio, including
floating provisions, is not less than 70 per cent. Accordingly, banks were advised by RBI
to achieve this norm not later than end-September 2010. (Our Bank has surpassed
stipulated minimum PCR of 70% as on Sept 2010)
iii. RBI has advised that till they introduce 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 to follow under noted guidelines :
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 RBI format (Annexure-
2) and
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, RBI advised the banks to build up
‘Dynamic Provisioning Account’ during good times and utilize 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 standardized
30
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. In this regard, the
Credit Policy & Risk Management Department has to develop necessary capabilities to
compute the long term average annual expected loss for different asset classes, for
switching over in near future (after getting approval of the Board) to the dynamic
provisioning framework.
12. RBI Guidelines on Security Value in NPA Loan Accounts:

As per the RBI guidelines on Prudential Norms on Income Recognition, Asset
Classification and Provisioning pertaining to Advances circulated vide RBI/2015-16/101
DBR.No.BP.BC.2/21.04.048/2015-16 dated 1st July, 2015, the provisioning should be
made on the basis of the classification of assets based on the period for which the asset
has remained non-performing and the availability of security to which the Bank has a
valid recourse and the realisable value thereof.
The Realisable Value should be estimated on realistic basis. It is to be assessed by the

bank/ approved valuers/ Reserve Bank’s inspecting officers. While assessing the
realisable value of security, primary as well as collateral securities should be reakoned,
provided such securities are tangible securities. Intangible Securities in the form of
Guarantee, Net Worth of promoters/ guarantors etc should not be considered.
Therefore, the Security available to the Bank in NPA accounts plays a very important
role in determining the provision requirement in the account. In certain cases depending
on the erosion of security value, it may also determine its asset classification. It is
therefore necessary that correct Realisable Value of available securities is entered in
the CBS system.
It is further clarified that where the account is under consortium, in case of 1 st pari passu
charge (Primary/ Collateral), pro-rata share of the value of securities would be taken.
Where only 2nd charge is available, pro-rata share of the available value of securities in
excess of the aggregate liability outstanding of 1 st charge holder/s would be taken.
Guidelines for assessment of Various Security Values for Provisioning in NPA accounts:
(i) Normal NPA Accounts: In normal NPA accounts (not admitted in NCLT), the
Realisable Value of the underlying Security shall be taken into the CBS System.
The second highest value mentioned in the Valuation Report shall be taken as
Realisable Value, i.e., 2nd highest value of Security as per Valuation Report of
Bank’s empanelled Valuer not more than three years old.
(ii) NPA accounts where Corporate Debtor undergoing CIRP in NCLT:- In NPA
accounts which are undergoing Corporate Insolvency Resolution Process (CIRP),
the Valuation obtained by Resolution Professional shall be considered. In accounts
which is under Resolution (not under Liquidation), the Fair Value of the Enterprise
arrived at will be considered as per Bank’s share in admitted claim in the CIRP.
However, in case a Resolution Plan (RP) has been received and passed by COC,
proportionate share in the value of RP payable to the Bank shall be taken as value
of Security. In this case, the value should be considered as cash value on which no
provision will be required.
31
If Liquidation has been ordered, Bank’s share in the Liquidation Value of the NPA
account shall be considered.
Besides, if any other security charged to the Bank is available in the name/s of
guarantor/s/ third party, the value of such security shall also be considered as in point
no 1 above in addition to Enterprise or Liquidation Value.
It may so happen that the Valuation of Corporate Debtor under CIRP has not been
completed by the Resolution Professional. In such Cases, Realisable Value of Charged
securities will be taken as per Normal NPA account.
Other related concepts/ guidelines:-
Types of approved Valuers:

Valuations of Charged assets are done by Bank’s Empanelled Valuers (empanelled by
respective Zonal Offices) and Board approved Valuers. The Valuers can undertake
valuation of properties/ other assets as per their competencies. However, their valuation
cannot be utilised for any action undertaken under SARFAESI Act. In terms of
SARFAESI Act all the properties to be sold under SARFAESI Act are to be valued by
the Bank’s Board approved Valuers only.
Valuation by Bank Officials:

All securities charged to the Bank have to be visited by at least two branch officials &
they have to assess the value of assets charged to Bank. Branch Head/Officials must
visit the charged securities and should assess valuation on the basis of their own
assessment and information gathered from local Property Dealers and nearby
residents. Branch has to submit a visit-cum-valuation report of these officials. This visit
report should not be older than 3 months. Their assessment of values both fair market
value & realisable value has to be considered for assessing the fairness of the value
assessed by the valuers. Their valuation can be considered for the above purposes,
provided the realisable value is not more than Rs.10.00 lacs.
Valuation of different types of Securities:

The valuation of charged securities should be done by the Board approved valuer/
empanelled valuer. The Valuer has to mention Fair Market Value (FMV) as well as
Realizable Value (RV) of the securities. If the valuer in his report mentioned any second
highest value other than Market Value/ Fair Market Value by any name (Distress Sale
Value, Forced Sale Value, etc), it will be treated as Realizable Value. The Valuation
Report should not be more than 3 years’ old for the purpose of provisioning and not
more than 1 year old for other purposes.
a. Immovable Assets:- For immovable properties/securities- Area of Land, nature

of land (Agricultural Land, Industrial Land, commercial, residential etc.) carpet /
built up area, location, nature of ownership (freehold or lease hold) balance/
leftover period of lease in case of leasehold and the related information have to
be considered/ recorded. While assessing realizable value & marketability of
charged securities, the factors like, properties protected by law, i.e.,
agriculturists/SCs/tribal people if located in specified/classified areas, restrictions
on sale of land classified for agriculture purpose & mortgaged with Bank for
32
purpose other than agriculture, property located in disturbed area or near to
cremation ground/ graveyard or approach/ entry to the charged property is not
proper or demarcated, litigated, tenanted, etc have to be considered.
b. Stocks & Book Debts:- In case where adequate stocks are available & also
where book debts are not more than 6 months old, Valuation of such securities
has to be obtained from the Bank’s empanelled Stock Auditors/ Chartered
Accountants.
c. Plant & Machinery and other Movable assets: The Valuation of Plant &
Machinery and other movable assets shall be done by empanelled valuers
(Board approved Valuers in case of SARFAESI Action). Two Valuations shall be
taken for assets valued at over Rs.50 Lakh. The realisable value (2 nd highest
value/ forced sale value) shall be considered in NPA accounts. In case the
valuation is not available, branch may consider depreciated value of Plant &
Machinery and other movable assets as per last Audited balance Sheet,
valuation mentioned/admitted in the Insurance Policy in force, etc.
d. Liquid Assets:- The Net present value/ premature payment value/ surrender
value shall be considered.
e. Intangible Assets:- The intangible assets in the form of guarantee, Net Worth of
Borrower/ Guarantors etc will not be considered and their value shall not be
recognised for the purpose of security.
Treatment of Valuation on the basis of multiple charge as in case of Consortium/

Multiple Banking/ various accounts:-
In the accounts financed under consortium/ multiple banking arrangement, the value of
our share of security should be considered. It should be ascertained whether bank has
exclusive first charge, paripassu first charge or second charge or subservient charge. In
case of second/ subservient charge, the residual value of security after satisfying the
first charge holders’ dues should be considered.
Reporting & updating the Value of Charged Securities in CBS System for Closing
& recommendation for fixing of accountability for non compliance
It has been observed that large numbers of MOCs issued by the Statutory Auditors and
accepted by Branches are pertaining to Value of Securities available to the Bank with
regard to respective NPA Loan accounts. In some cases, the Security fed in the CBS
system expires on the last day of closing. It is therefore necessary that the field
functionaries should be aware of such cases where security value expires on the last
day of the quarterly closing and take proactive steps to avoid/ minimise such situation
and update the security’s realisable value in the CBS system much before the last day
of quarterly closing.
The realizable security value as per available record should be put in CBS system well
in time in each NPA account to have proper provision as per the RBI guidelines and
also to avoid MOC at the time of audit. Accordingly, it is to be ensured that all branches
should complete the task of correction in security value in each NPA account 15 days
before the respective quarterly closing. After completion of updation of Security on CBS,
33
each Branch will send account wise confirmation to their respective Zonal Office.
Further, the Branch shall submit account wise security details with proper value as
stated above to respective Zonal Office for all accounts above Rs.10.00 Lac. The Zonal
Office shall check the same and send confirmation to FGMO. The FGMO shall check
all accounts above Rs.5.00 Cr and send confirmation to Recovery Department, Head
Office before 5 days of the last date of quarterly closing.
34
CHAPTER 2
POLICY ON HOLDING ON OPERATION IN POTENTIALLY VIABLE/VIABLE UNITS
Reserve Bank of India, vide notification no. DBR.No.BP.BC.101/21.04.048/2017-18

dated 12th February, 2018, has withdrawn the existing instructions on resolution of
stressed assets such as Framework for Revitalizing Distressed Assets, Corporate Debt
Restructuring Scheme, Flexible Structuring of Existing Long Term Project Loans,
Strategic Debt Restructuring Scheme, Change in Ownership outside SDR, and Scheme
for Sustainable Structuring of Stressed Assets. Exceptions were given in case of
restructuring in projects under implementation involving deferment of date of
commencement of commercial operations, change of ownership under IBC & RBI’s
above framework and the revival and rehabilitation of MSMEs as defined under “The
Micro, Small and Medium Enterprises Development Act, 2002”. As such, the asset
classification benefit in all other advances would not be available once the account is
restructured.
In spite of best efforts and intentions, sometimes corporate find themselves in financial
difficulty because of factors beyond their control and also due to certain internal reasons
and start showing warning signals. Some of them are mentioned below:
 Delay in submission of stock statement / other control statements / financial

statements.
 Return of cheques issued by borrowers. Devolvement of DPG installments and non-
payment within a reasonable period.
 Frequent devolvement of LC and non-payment within a reasonable period.
 Frequent invocation of BGs and non-repayment within a reasonable period.
 Return of bills / cheques discounted.
 Non-payment of bills discounted or under collection.
 Poor financial performance in terms of declining sales and profits, cash losses, net
losses, erosion of net worth etc.
 Incomplete documentation in terms of creation / registration of charge / mortgage
etc.
 Non-compliance of terms and conditions of sanction.
For the revival of the borrowal accounts as well as safety of the money lent by the
banks, timely support through restructuring in genuine cases is called for. To address
this, and other allied issues, RBI based on the Kohli Committee recommendation,
issued direction to the Banks and other financial institution so as to bring back the units
to a healthy track.
The RBI advised banks to permit the borrower a holding on operation so that
functioning in the account does not stop. Holding on operation gives respite to the
borrower to run the unit till finalization of the rehabilitation or/and restructuring package.
In this regard RBI has issued the under noted guidelines.
“While identifying and implementing the rehabilitation package, banks /FIs are advised
to allow “holding operation” for a period of six months. This will allow small-scale
35
units to draw funds from the cash credit account/Letter of Credit facility at least to the
extent of their deposit of sale proceeds during the period of such ˜holding operation'.
In this backdrop the salient features of the guidelines for permitting holding on operation
in all units (viable / potentially viable) eligible for restructuring are framed as under:
I. Eligible Accounts:
The following three categories of accounts may be considered for holding on operation:
a) Category I: Potential NPA accounts.
b) Category II: Accounts which are not in potential NPA category but are showing
early warning signals such as frequent return of cheques / bills discounted,
devolvement of LCs, poor financials etc.
c) Category III: NPA accounts classified under substandard category & doubtful-1
category.
II. Accounts Prohibited:

a. The borrowers/ directors/partners/ proprietors who are included in the willful
defaulters list issued by RBI/SAL/IBA/Our Bank etc.
b. The borrowers /guarantors who have defrauded our bank/ other banks.
c. The units becoming non-operational or sick on account of willful default, fraud,
unauthorized diversion of fund outside the company/unit.
III. Method of permitting holding on operation:

The branch will seek a formal request letter from the borrower asking for the facility for
allowing holding on operation along with comments of borrower on poor financial
performance, return of bills, cheques etc.& probable time for submission of complete
rehabilitation proposal so that a study on intrinsic viability for considering Holding on
operation may be conducted.
The branch/offices, while recommending the proposal submitted by the borrower should
critically analyze and comment upon the following points, before sending it for
consideration to the Competent Authority.
a. Reasons for the account being identified as PNPA / deterioration in asset quality.
b. The assumptions made at the time of credit sanctions and its adherence.
c. Completeness and correctness of documentation including revival position, creation
/registration of charges, insurance cover etc. and rectification of deficiencies, if any.
d. Details of major outstanding irregularities (if any) pointed out in Head Office
Inspection/Audit/AFI pending for rectification.
e. Whether the borrowers/ directors/partners/ proprietors included in the willful
defaulters list issued by RBI/SAL/IBA/CIBIL/Other Credit Information Companies
(CICs), Our Bank etc.
f. Whether the borrowers/guarantors have defrauded our bank/other banks(if any).
g. Whether the units have become non-operational or sick on account of willful default,
fraud, unauthorized diversion of fund outside the company/unit(if any).
h. Details of outstanding statutory dues of the unit.
i. Discuss the unit’s problems with the promoters / guarantors and find out whether
they have a future plan for the unit.
j. Find out the proposed borrowers/ partners’ contribution & sources to meet the fund
requirement while submitting the holding on operation/rehabilitation proposals.
k. Find out the existing primary and secondary sources of cash flow and determine
whether the unit is intrinsically viable.
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l. Whether the problems faced by the unit are of a temporary nature.
m. Whether any proactive action from the bank is required to sustain its viability.
n. Whether the promoter(s) / management has/ have genuine intent to rehabilitate the
unit.
o. Whether the promoters / management has/have the ability to turnaround the unit.
p. Whether any external factors (market scenario, Govt. Policies, Input related risk,
etc.) have influenced the present operation of the account.
q. Whether there is any diversion of fund outside the unit, if any.
r. Comparative performance of the unit for last 2 years
IV. Processing of Proposal of Holding on Operation

The concerned loan processing/dealing department at the Head Office (i.e.
Credit/SME/Agriculture Credit/ Retail Credit Department) will process such proposals of
PA/PNPA//NPA accounts as per their specialization. At Zonal Office level the Credit
department will process such proposals. After taking a view on the viability of the unit /
feasibility of restructuring proposal, the competent authority should decide on the need
to immediately put the unit on holding on operations. If the competent authority is
satisfied that the unit needs to be put on holding on operations, pending finalization and
implementation of the restructuring package, he may extend the same immediately.
V. Authority of permitting holding on operation:

Delegation Authority for granting/approval/ permitting holding on operation is as under:
Sanctioning Authority Authority for permitting Holding on

operation
1. Branch ZLCC
2. Zonal Head/ZLCC headed by FGMLCC
AGM/DGM.
3 GM (CR) & ZLCC of GM headed HLCC ED
Zone/ZLCCFGM/GMHLCC
4. Executive Director / EDHLCC CAC
5. MD & CEO/CAC & MCBOD CAC
In absence of the Managing Director & Chief Executive Officer, meeting of CAC cannot
be organized so HLCCED may permit the holding on operation in those cases where
the power is vested with the CAC.
(Authority for permitting Holding on operation will change from time to time in
accordance with the Circulars/Guidelines issued by CPRMD/ department
concerned at Head Office).
VI. Period for disposal:
Permission for holding on operation may be permitted within 7 working days. Any delay
in the process will defeat the spirit of allowing holding on operation in the account.
However branches/offices should note that allowing operation more than DP/Sanction
limit may attract the IRAC norms. i.e. if such irregularities persists more than 90 days ,
the account may turn to NPA. In case of NPA accounts the viability study period may be
extended by sanctioning authority reasonably.
VII. Extent of drawal:
a. The bank may have different limits for PNPA/NPA:
37
(i) In case of PNPA:
The borrower may draw funds from the account to the extent of 90-95% of their
deposit of sale proceeds irrespective of calculation of drawing power, based on cash
flow /generation of the unit and considering that the operation of the unit is not
hampered & the residual amount (5-10%) is utilized for servicing of interest and
other irregular portion.
(ii) In case of NPA:

The borrower may draw funds from the account to the extent of 90% of their deposit
of sale proceeds irrespective of calculation of drawing power during the period of
such holding on operation. The 10% deduction should be utilized for recovery of
current interest, overdue interest, overdue installment & out of order portion
respectively.
While submitting such proposal, if any liability (statutory or otherwise) is to mature

/crystallize during the period of holding on operation, has to be stated in the proposal for
allowing holding on operation. The debit balance standing at the time of allowing holding
on operation will be termed as frozen limit.
b. Servicing of Interest:
In case of NPA accounts the borrower will deposit at-least to the extent of interest
accrued & any other expenses, Insurance Premium etc charged to the account i.e. debit
balances more than the frozen limit for the period of holding on operation so that it
should not cost bank in terms of making higher provisions or otherwise. In case of
PNPA or PA (showing warning signals) interest should be realized as and when due.
VIIIX. Non fund Facilities:

The branches may, continue to open LCs/BG even if an LC had devolved/BG had
invoked earlier due to genuine cash flow problems / mismatches within the frozen limit.
(However the aggregate outstanding LC devolved/ BG had invoked amount plus
outstanding LC/BG amount will not exceed the aggregate LC/BG limit).
Interchangeability may also be permissible from Funded to Non-funded as per existing
guidelines within the permissible limit.
IX. Important Stipulations:

While allowing holding on operation the branches/Zonal offices to ensure that total
funded and non-funded exposure (CC, TL, Guarantees, Overdraft, LC Opened and
outstanding, Bill received under LC, cheque purchased, Bill purchased /discounted and
/or any other outstanding etc.) should not increase than the exposure outstanding prior
to start of holding on operation and with each operation the outstanding (including
interest) should come down as agreed.
X. Maximum permissible period for holding on operation:
a. In case of PNPA accounts :

Holding on operations may in deserving cases continue for a maximum period of six
months from the date account is declared PNPA and within which efforts should be
made to regularize the account.
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b. In case of NPA (SST, DF-I) Account:
Holding on operations may in deserving cases continue for a period of maximum six
months from the date of NPA and within which the rehabilitation package be
implemented.
XI. Communication to the Borrower:

The branch will communicate to the borrower regarding the following while accepting
the proposal that:
a) A fresh charge /security will be created on the basis of outstanding as on the
date of allowing holding on operation.
b) Holding on operation will not be reckoned as a pre-condition for accepting
rehabilitation / restructuring with or without reliefs and concessions.
c) Restructuring if not considered feasible on account of non-viability or any other
reason, the bank has the right to withdraw holding on operation taking the
necessary measures including legal recourse for recovery of the Banks dues.
XII. In case of non acceptance of proposal:

If the proposal of holding on operation is not acceptable due to certain reasons recovery
efforts are to be initiated communicating the same to the borrower immediately.
XIII. Roll-over of operation:

Normally no roll-over will be permitted. However in case of genuine needs, the holding
on operation may be extended. The total period of holding on operation should not be
more than six months.
XIV. Adhoc Limit:

No adhoc limit will be allowed in such account during the period of holding on operation.
XV. Penal Interest:

No penal interest be levied during the period of holding on operation for operating the
account over DP/Sanction.
XVI. Deviations:
The deviation if any from the existing guidelines may be permitted by the Credit
Approval Committee (CAC) on case to case basis.
Other terms and condition of the loans and advances including asset classification will
be same as per existing guidelines.
(Guidelines issued by RBI/Bank on Holding on Operation from time to time will be
meticulously followed.)
39
CHAPTER 3
PRUDENTIAL GUIDELINES ON RESTRUCTURING OF ADVANCES
Background
A restructured account is one where the bank, for economic or legal reasons relating to
the borrower's financial difficulty, grants to the borrower concessions that the bank
would not otherwise consider. Restructuring would normally involve modification of
terms of the advances / securities, which would generally include, among others,
alteration of repayment period / repayable amount/ the amount of installments / rate of
interest (due to reasons other than competitive reasons). However, extension in
repayment tenor of a floating rate loan on reset of interest rate, so as to keep the EMI
unchanged provided it is applied to a class of accounts uniformly will not render the
account to be classified as ‘Restructured account’. In other words, extension or
deferment of EMIs to individual borrowers as against to an entire class, would render
the accounts to be classified as 'restructured accounts’. Upon re-structuring, the
account shall immediately be classified as NPA.
When a bank restructures an account a second (or more) time(s), the account will be
considered as a 'repeatedly restructured account'. However, if the second restructuring
takes place after the period up to which the concessions were extended under the terms
of the first restructuring, that account shall not be reckoned as a “repeatedly
restructured account”.
The concerned loan processing/ dealing department at the Head Office (i.e. Credit/
SME/ Agriculture Credit/ Retail Credit Department) will process such proposals related
to re-phasement & restructuring as per their specialization. At Zonal Office level the
Credit department will process such proposals. After taking a view on the viability of the
unit / feasibility of restructuring proposal, the competent authority should decide on
restructuring of the proposals on merit.
The bank’s policy on Restructuring/ Rescheduling etc have been dealt in Chapter on
Restructuring/ Rescheduling in the Bank’s Lending Policy.
The detailed guidelines on SME Debt Restructuring Mechanism have been circularized
vide HOIC: 14396/SME/2016-17/04 dated 28.06.2016
The detailed guidelines regarding restructuring/ rescheduling/ relending of Agricultural

advances as a special treatment/ relief measures in areas affected by natural calamities
has been circularized vide HOIC: 14365/PSC/2016-17/08 dated 09.06.2016 and
14488/PSC/2016-17/26 dated 06.08.2016.
1. Prudential Norms for Restructured Advances
The principles and prudential norms laid down here under are applicable to all advances
including the borrowers, who are eligible for special regulatory treatment for asset
classification as specified in Para 4
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1.1 Asset classification norms
1.1.1 The accounts classified as 'standard assets' should be immediately re- classified
as 'sub-standard assets' upon restructuring.
1.1.2 Standard accounts classified as NPA and NPA accounts retained in the same
category on restructuring by the bank should be upgraded only when all the outstanding
loan/facilities in the account perform satisfactorily during the ‘specified period’ as
defined in Chapter-1, Para 12.
1.1.3 In case, however, satisfactory performance after the specified period is not
evidenced, the asset classification of the restructured account would be governed as
per the applicable prudential norms with reference to the pre-restructuring payment
schedule.
1.1.4 If a restructured asset, is subjected to restructuring on a subsequent occasion, it

should be classified as a sub-standard or a doubtful asset and its asset classification
will be reckoned from the date when it became NPA on the first occasion. However,
such advances restructured on second or more occasions may be allowed to be
upgraded to standard category after the specified period in terms of the current
restructuring package, subject to satisfactory performance.
1.2 Income recognition norms

Subject to provisions of paragraphs 2.2 and 3.2, interest income in respect of
restructured accounts classified as 'standard assets' will be recognized on accrual basis
and that in respect of the accounts classified as 'non-performing assets' will be
recognized on cash basis.
1.3 Provisioning norms

1.3.1 Provision on restructured advances
(i) Bank will hold provision against the restructured advances as per the extant
provisioning norms.
(ii) Restructured accounts classified as standard advances will attract a higher provision
(as prescribed from time to time) in the first two years from the date of restructuring.
In cases of moratorium on payment of interest/ principal after restructuring, such
advances will attract the prescribed higher provision for the period covering
moratorium and two years thereafter.
(iii) Restructured accounts classified as non-performing advances, when upgraded to
standard category will attract a higher provision (as prescribed from time to time) in
the first year from the date of upgradation.
(iv) The above-mentioned higher provision on restructured standard advances would
done at 5 per cent.
1.3.2 Provision for diminution in the fair value of restructured advances
i. Reduction in the rate of interest and / or reschedulement of the repayment of principal
amount, as part of the restructuring, will result in diminution in the fair value of the
advance. Such diminution in value is an economic loss for the bank and will have
impact on the bank's market value of equity. It is, therefore, necessary for the bank to
measure such diminution in the fair value of the advance and make provisions for it by
debit to Profit & Loss Account. Such provision should be held in addition to the
41
provisions as per existing provisioning norms as indicated in Provision on restructured
advances above, and in an account distinct from that for normal provisions.
For this purpose, the erosion in the fair value of the advance should be computed as the
difference between the fair value of the loan before and after restructuring. Fair value of
the loan before restructuring will be computed as the present value of cash flows
representing the interest at the existing rate charged on the advance before
restructuring and the principal, discounted at a rate equal to the bank's PLR or base rate
(whichever is applicable to the borrower) as on the date of restructuring plus the
appropriate term premium and credit risk premium for the borrower category on the date
of restructuring. Fair value of the loan after restructuring will be computed as the
present value of cash flows representing the interest at the rate charged on the advance
on restructuring and the principal, discounted at a rate equal to the bank's PLR or base
rate (whichever is applicable to the borrower) as on the date of restructuring plus the
appropriate term premium and credit risk premium for the borrower category on the date
of restructuring.
The above formula moderates the swing in the diminution of present value of loans with
the interest rate cycle and will be followed by bank consistently in future. Further, it is
reiterated that the provisions required as above arise due to the action of the bank
resulting in change in contractual terms of the loan upon restructuring which are in the
nature of financial concessions. These provisions are distinct from the provisions which
are linked to the asset classification of the account classified as NPA and reflect the
impairment due to deterioration in the credit quality of the loan. Thus, the two types of
the provisions are not substitute for each other.
ii. It was observed that on a few occasions, there were divergences in the calculation of
diminution of fair value of accounts by the branches. Illustratively, divergences could
occur if branches are not appropriately factoring in the term premium on account of
elongation of repayment period on restructuring. In such a case the term premium used
while calculating the present value of cash flows after restructuring would be higher than
the term premium used while calculating the present value of cash flows before
restructuring. Further, the amount of principal converted into debt/equity instruments on
restructuring would need to be held under AFS and valued as per usual valuation
norms. Since these instruments are getting marked to market, the erosion in fair value
gets captured on such valuation. Therefore, for the purpose of arriving at the erosion in
the fair value, the NPV calculation of the portion of principal not converted into
debt/equity has to be carried out separately. However, the total sacrifice involved for the
bank would be NPV of the above portion plus valuation loss on account of conversion
into debt/equity instruments.
Branches should correctly capture the diminution in fair value of restructured accounts
as it will have a bearing not only on the provisioning required to be made by them but
also on the amount of sacrifice required from the promoters. Further, there should not
be any effort on the part of branches to artificially reduce the net present value of cash
flows by resorting to any sort of financial engineering. Branches should ensure accurate
calculation of erosion in the fair value of restructured accounts.
iii. In the case of working capital facilities, the diminution in the fair value of the cash credit
/ overdraft component may be computed as indicated in para (i) above, reckoning the
higher of the outstanding amount or the limit sanctioned as the principal amount and
taking the tenor of the advance as one year. The term premium in the discount factor
42
would be as applicable for one year. The fair value of the term loan components
(Working Capital Term Loan and Funded Interest Term Loan) would be computed as
per actual cash flows and taking the term premium in the discount factor as applicable
for the maturity of the respective term loan components.
iv. In the event any security is taken in lieu of the diminution in the fair value of the
advance, it should be valued at Re.1/- till maturity of the security. This will ensure that
the effect of charging off the economic sacrifice to the Profit & Loss account is not
negated.
v. The diminution in the fair value may be re-computed on each balance sheet date till
satisfactory completion of all repayment obligations and full repayment of the
outstanding in the account, so as to capture the changes in the fair value on account of
changes in BPLR or base rate (whichever is applicable to the borrower), term premium
and the credit category of the borrower. Consequently, banks may provide for the
shortfall in provision or reverse the amount of excess provision held in the distinct
account.
vi. If due to lack of expertise / appropriate infrastructure, a branch finds it difficult to ensure
computation of diminution in the fair value of advances, as an alternative to the
methodology prescribed above for computing the amount of diminution in the fair value,
branches will have the option of notionally computing the amount of diminution in the
fair value and providing there for, at five percent of the total exposure, in respect of all
restructured accounts where the total dues to bank(s) are less than rupees one crore.
1.3.3 The total provisions required against an account (normal provisions plus
provisions in lieu of diminution in the fair value of the advance) are capped at 100% of
the outstanding debt amount.
1.4 Risk-Weights
a) Restructured housing loans should be risk weighted with an additional risk weight of
25 percentage points.
b) With a view to reflecting a higher element of inherent risk which may be latent in
entities whose obligations have been subjected to restructuring / rescheduling either
by banks on their own or along with other bankers / creditors, the unrated standard /
performing claims on corporates should be assigned a higher risk weight of 125%
until satisfactory performance under the revised payment schedule has been
established for one year from the date when the first payment of interest / principal
falls due under the revised schedule.
2. Prudential Norms for Conversion of Principal into Debt / Equity

A part of the outstanding principal amount can be converted into debt or equity
instruments as part of restructuring. The debt / equity instruments so created will be
classified in the same asset classification category in which the restructured advance
has been classified. Further movement in the asset classification of these instruments
would also be determined based on the subsequent asset classification of the
restructured advance.
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2.2.1 Standard Accounts

In the case of restructured accounts classified as 'standard', the income, if any,
generated by these instruments may be recognized on accrual basis.
2.2.2 Non- Performing Accounts

In the case of restructured accounts classified as non-performing assets, the income, if
any, generated by these instruments may be recognized only on cash basis.
2.3 Valuation and provisioning norms

These instruments should be held under AFS and valued as per usual valuation norms.
Equity classified as standard asset should be valued either at market value, if quoted, or
at break-up value, if not quoted (without considering the revaluation reserve, if any)
which is to be ascertained from the company's latest balance sheet. In case the latest
balance sheet is not available, the shares are to be valued at Rs. One. Equity
instrument classified as NPA should be valued at market value, if quoted, and in case
where equity is not quoted, it should be valued at Rs. One. Depreciation on these
instruments should not be offset against the appreciation in any other securities held
under the AFS category.
3. Prudential Norms for Conversion of Unpaid Interest into 'Funded Interest Term
Loan' (FITL), Debt or Equity Instruments

The FITL / debt or equity instrument created by conversion of unpaid interest will be
classified in the same asset classification category in which the restructured advance
has been classified. Further movement in the asset classification of FITL / debt or equity
instruments would also be determined based on the subsequent asset classification of
the restructured advance.

3.2.1 The income, if any, generated by these instruments may be recognized on accrual
basis, if these instruments are classified as 'standard', and on cash basis in the cases
where these have been classified as a non-performing asset.
3.2.2 It is reiterated that whenever the unrealized interest income of a loan is converted
into FITL / Debt or equity instrument, bank must have a corresponding credit in an
account styled as "Sundry Liabilities Account (Interest Capitalization)
3.2.3 The unrealized income represented by FITL / Debt or equity instrument should
have a corresponding credit in an account styled as "Sundry Liabilities Account (Interest
Capitalization)" exceeding the amount of interest converted into (Interest
Capitalization)"ie.87438000326.
3.2.4 In the case of conversion of unrealized interest income into equity, which is
quoted, interest income can be recognized after the account is upgraded to standard
category at market value of equity, on the date of such up gradation.
44
3.2.5 Only on repayment in case of FITL or sale / redemption proceeds of the debt /
equity instruments, the amount received will be recognized in the P&L Account, while
simultaneously reducing the balance in the "Sundry Liabilities Account equity.
3.3 Valuation& Provisioning norms

Valuation and provisioning norms would be as mentioned above. The depreciation, if
any, on valuation has to be accounted properly.
4. Miscellaneous
4.1 The Competent Authority should decide on the issue regarding convertibility (into
equity) option as a part of restructuring exercise whereby the bank shall have the right
to convert a portion of the restructured amount into equity, keeping in view the statutory
requirement under Section 19 of the Banking Regulation Act, 1949, (in the case of
banks) and relevant SEBI regulations.
4.2 Conversion of debt into preference shares should be done only as a last resort and
such conversion of debt into equity/preference shares should, in any case, be restricted
to a cap (say 10 per cent of the restructured debt). Further, any conversion of debt into
equity should be done only in the case of listed companies.
4.3 Acquisition of equity shares / convertible bonds / convertible debentures in

companies by way of conversion of debt / overdue interest can be done without seeking
prior approval from RBI, even if by such acquisition the prudential capital market
exposure limit prescribed by the RBI is breached. However, reporting of such holdings
is to be done to RBI, Department of Banking Supervision (DBS), every month along with
the regular DSB Return on Asset Quality. Nonetheless, bank will have to comply with
the provisions of Section 19(2) of the Banking Regulation Act, 1949.
4.4 Acquisition of non-SLR securities by way of conversion of debt is exempted from the
mandatory rating requirement and the prudential limit on investment in unlisted non-SLR
securities, prescribed by the RBI, subject to periodical reporting to the RBI in the
aforesaid DSB return.
4.5 Branches may consider incorporating in the approved restructuring packages

creditor’s rights to accelerate repayment and the borrower’s right to pre pay. Further, all
restructuring packages must incorporate ‘Right to recompense’ clause and it should be
based on certain performance criteria of the borrower. In any case, minimum 75 per
cent of the recompense amount should be recovered and in cases where some facility
under restructuring has been extended below base rate, 100 per cent of the
recompense amount should be recovered.
4.6 As stipulating personal guarantee will ensure promoters’ “skin in the game” or
commitment to the restructuring package, promoters’ personal guarantee should be
obtained in all cases of restructuring and corporate guarantee cannot be accepted as a
substitute for personal guarantee. However, corporate guarantee can be accepted in
those cases where the promoters of a company are not individuals but other corporate
bodies or where the individual promoters cannot be clearly identified.
45
5. Disclosures
As per RBI guidelines with effect from the financial year 2012-13, bank is disclosing in
its published annual Balance Sheets, under "Notes on Accounts", information relating to
number and amount of advances restructured, and the amount of diminution in the fair
value of the restructured advances. The information would be required for advances
restructured under CDR Mechanism, SME Debt Restructuring Mechanism and other
categories separately. Bank has to disclose the total amount outstanding in all the
accounts / facilities of borrowers whose accounts have been restructured along with the
restructured part or facility. This means even if only one of the facilities / accounts of a
borrower has been restructured, the bank should also disclose the entire outstanding
amount pertaining to all the facilities / accounts of that particular borrower. The
disclosure information, inter-alia, includes the following:
i. details of accounts restructured on a cumulative basis excluding the standard
restructured accounts which cease to attract higher provision and risk weight (if
applicable);
ii. provisions made on restructured accounts under various categories; and
iii. details of movement of restructured accounts.
This implies that once the higher provisions and risk weights (if applicable) on
restructured advances (classified as standard either abinitio or on up gradation from
NPA category) revert to the normal level on account of satisfactory performance during
the prescribed period, such advances should no longer be required to be disclosed as
restructured accounts in the “Notes on Accounts” in the Annual Balance Sheet.
However, the provision for diminution in the fair value of restructured accounts on such
restructured accounts will continue to be maintained as per the existing instructions.
Therefore branches/Zones should submit the information at the end of each quarter.
46
CHAPTER 4
RECOVERY/REDUCTION OF NPA
Credit risk is the most sensitive area in the Bank. Once an account becomes NPA, the
Bank first approaches the borrower for regularization of the account at the earliest. The
same is done through the recovery of critical dues (minimum irregular amount required
for up gradation of an NPA account) and thereby upgrading the asset or through
restructuring of debts where immediate recovery is not feasible but the account is
having merit / potentiality to revive in due course.
1. Up-gradation
Up-gradation is normally done in sub-standard category of NPAs. On an account turning
NPA, the status of the account is to be analyzed critically to assess the nature of
irregularity, as also the quantity of dues that remains unpaid. The borrower is to be met
personally and to be persuaded for payment of the overdue amount so that the account
is regularized and upgraded to standard asset.
In some cases the nature of irregularity as also the quantum of dues is such that
immediate payment is not feasible by the borrower, but the account may revive if
technical / financial support is provided. In such cases, the dues may be re-phased /
restructured. If the account runs satisfactorily as per the restructured terms for a period
of one year, the account is upgraded to standard asset irrespective of asset
classification during the pre-restructured period. During the period as stated above, the
status of the account remains unchanged.
2. Action Points for up-gradation

a. Listing of all fresh NPAs/ substandard assets/restructured assets.
b. Assessment of irregularities both by nature and quantity.
c. Critical analysis and identification of potential accounts for up gradation.
d. Allocation of the accounts to the employees/ Officers of the Branch for
close/personal follow up & monitoring.
e. Personal visit to the borrowers and persuasion for regularization of the accounts /
payment of overdue amount.
f. The outcome of the visit to be recorded for future course of action.
g. The development in the accounts to be noted by the Zonal Offices and the progress
made be reviewed on monthly basis.
h. The branch has to continue follow-up measures till up-gradation of the accounts.
i. On up-gradation of the account, the same is to be monitored continuously to prevent
it’s once again slippage / down gradation.
3. Cash Recovery in NPA accounts

Recovery in the following manner is considered as cash recovery:
a. Any reduction in outstanding balance except write-off provided by Head Office.
b. Recovery in Compromise settled accounts.
c. Recovery from sale of charged Assets either through DRT/Court or under
SARFAESI Act.
d. Recovery through sale of Assets to ARCs / ASCs / Banks etc. on cash basis or
only cash component on SR basis,
47
Personal visit to the borrower and persuasion for recovery of dues is the approach that
the Branches have to make regularly. List of defaulting borrowers is to be prepared and
recovery notices are to be served at regular interval. Recovery camps/Rin Mukti Shivirs
are also to be organized and for the said purpose, local agencies like
Panchayat/Municipalities, Block Offices etc are to be involved and wide publicity for
recovery of dues has to be made.
With the introduction of the SARFAESI Act, 2002, the Bank is taking possession of
securities and the same is being disposed of for recovery of dues. The sale proceeds
are deposited in the borrowal account and the amount thus recovered is considered as
cash recovery.
4. Action Points for cash recovery
a. Each branch has to prepare list of NPA borrowers inclusive of written-off debts and
amount of overdue there-against. The list should be compiled village-wise, ward-
wise etc.
b. Demand notices are to be served at regular intervals.
c. List of such defaulting borrowers is to be handed over to the respective Panchayat /
Municipalities seeking their assistance for recovery of dues.
d. Regular recovery camps/ Settlement Camps/ Rin Mukti Shivir are to be organized
on predetermined date. These camps are to be organized after proper publicity /
advertisement & with proper advance preparations.
e. In certificate cases, the Tehsildars / Amins are to be contacted regularly and they
should be involved in the recovery process.
f. Recovery issue is required to be raised regularly in BLBC/DCC/DLRC/SLBC
Meeting and regular follow up measures are to be continued.
g. All employees/Officers are to be involved in the process of recovery.
h. Execution proceedings in decreed debts are to be made for disposal of the assets
for recovery of Bank dues.
i. The Govt. of India has enacted the SARFAESI Act, 2002 for recovery of dues in
secured NPA accounts. The provisions of the Act have to be invoked in all eligible
NPA accounts wherever validly charged securities are available. Notices are to be
served to each eligible borrower and possession of the assets has to be taken in
each case. The assets under possession have to be disposed off through
compliance of required procedural formalities. Regular follow up and review of
development/progress of actions taken under the SARFAESI Act, 2002 is required.
Since the action points are time framed and steps are to be followed one by one,
continuity of steps is essential. Concerned Zonal Offices are required to monitor the
issue at every step to bring forth desired outcome. The progress made under the
Act, is to be reported to next higher authority on monthly basis.
j. The progress of recovery is to be reviewed branch wise by the respective
controlling office at least once in a month.
k. Representatives of respective Zonal Offices should visit the branches regularly to
take stock of the situation and accelerate the process of recovery.
5. APPROPRIATION OF RECOVERY IN NPA ACCOUNTS
Interest realized 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.
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Appropriation of recoveries in NPA accounts has become one of the major issues
where bankers, Auditors and RBI Inspectors have different opinion as to whether
the same will be adjusted towards earning of uncharged interest or towards
reduction in NPA balances. Reserve Bank of India has come out with an
instruction that in the absence of clear agreement between the bank and the
borrower for the said purpose, banks should adopt an accounting principle and
exercise the right of appropriation of recoveries in a uniform and consistent
manner.
In order to frame the policy in line with stated objective following operational aspects for
our CBS System have also been considered.
A. In CBS System when an account is marked NPA, Current year interest capitalized in
the account but not recovered is reversed by the system and this amount may
appear in a head named “INCA” (INTEREST NOT COLLECTED ACCOUNT) but net
of the account level balance and INCA is taken as ledger balance so that Ledger
Balance may be same as in case of existing system prevailing in the Bank where
such reversal is directly credited in customer account as there was no provision for
any head like “INCA”.
B. If for any reason an account is to be classified as NPA w.e.f. a date whose full or
part of default period falls under previous financial year then branch may check up
Interest debited during previous financial year vis a vis credit in account and reverse
the amount of interest unrecovered/due for payment using menu under “Interest
Adjustment” with proper narration before marking the account as NPA. Branches
should also exercise caution during first two month of New Financial Year and
should check up the same on or before month end date in respect to standard
accounts whose New IRAC is “04 (i.e. the accounts which are to be marked NPA by
system on month end)”. However Branch must increase the interest accrual figure of
system by same amount using proper menu available in CBS when ever such
manual interest reversal is done. The steps to be followed for marking of account as
NPA is given below-
6. STEPS TO BE FOLLOWED FOR ACCOUNTS TO BE MARKED NPA
I. STEP 1 (Before NPA Marking) :- First Credit Interest adjustment to be done in the
account as suggested by the Auditor:
In case of TL/DL -- visit menu DL/TL Accounts & ServicesInterest
Adjustmentsselect Credit Intt adjustmentsenter the account number & amt to be
reversed.
In case of CC/OD-- visit Deposit/CC/OD/Bills Accounts & servicesInterest
AdjustmentsCap. Intt Credit Adjust enter the account number & amt to be
Reversed.
II. STEP 2 (Before NPA Marking):- Increase the Interest accrual by the same amount
as reversed above through following menu.
In case of TL/DL-- visit menu DL/TL Accounts & Services Interest Adjustments
Intt Accrual Adjustment enter the account number & amt that has been reversed.
In case of CC/OD-- visit Deposit/CC/OD/Bills Accounts & servicesInterest
AdjustmentsDebit Intt Accrual Adjustments enter the account number & amt that
has been reversed.
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III. STEP 3 (NPA Marking) :- Mark the Account as NPA through following menu:-
In case of TL/DL-- visit menu Common ProcessingOverdue NPAAmend
/Enquire NPA status TL/DLEnter the New IRAC code as suggested by the Auditor
& select Update Old IRAC status as YESTRANSMIT
In case of CC/OD-- visit menu Common ProcessingOverdue NPAAmend
/Enquire NPA status CC/ODEnter the New IRAC code as suggested by the Auditor
& select Update Old IRAC status as YESTRANSMIT
IV. CBS System after marking an account NPA, continues interest calculation but park it
as uncharged interest & is debited in the NPA account at month end only when
account comes in credit balance or it is upgraded to standard assets. System also
does not book any interest in the account after recovery in the account but there is
provision to book the interest in part or in full using available menu.
V. When some amount is recovered/ credited in account, system firstly checks whether
there is any amount under UIPY (Unrealized intt for previous year). If there is any
amount lying in the head UIPY, system simply reduces value of UIPY maximum to
the extent of credit amount but it does not pass financial entry as it was not passed
while marking the account as NPA. Recovery in excess of UIPY is then appropriated
towards INCA and financial entry is also passed (i.e Debit INCA Credit-Interest
Received). In majority of cases recovery is firstly appropriated towards INCA as value
under UIPY is negligible or zero in such cases.
In the light of the above, following guidelines must be followed meticulously:

 In case of doubtful / loss assets, the recovery made either through cash recovery or
through OTS should be adjusted towards reduction of outstanding balance till
repayment of principal dues (i.e. Ledger Balance). On recovery of principal dues, the
amount of recovery over and above the ledger outstanding, if any, should be booked as
interest. However, if there is any amount lying under the Head “INCA” , same will be
appropriated by the system first.
 In case of Sub-standard account the recovery will be adjusted towards reduction in the
outstanding balance if the account becomes NPA for nonpayment of principal dues till
the total dues as required for upgradation of the account is recovered. On realization of
total dues as stated above, the interest element (uncharged) and other admissible
expenses, if any, (postage, supervision, service charges for the guarantee fund
insurance premium etc.) should be realized and the account will thus be upgraded to
Standard asset. In other words, in cases of substandard assets, the recoveries will be
appropriated in terms of irregularity that led to turn the account SST and on realization
of overdue amount; the account will be upgraded instantaneously. However, if there is
any amount lying under the Head “INCA” , same will be appropriated by the system first
 However, in case of Sub Standard Accounts where SARFAESI Act, 2002, has
been invoked and entire dues have been recalled, the appropriation of recovery
shall be contingent on the intention of the borrower / Guarantor.
i) If the borrower intends to upgrade / regularize the Account by way of repaying the
quantum of default amount, a request / consent letter, addressed to the Bank, must
be obtained from the borrower / guarantor in this regard. This letter must contain,
inter alia, the undertaking to the effect that “in case of further default, the Bank is
authorized to initiate / carry out subsequent action against me / us under
50
SAARFAESI Act, 2002, in continuation of Notice issued against me on……………/
Possession of the Assets taken on ……………”.
ii) If such specific consent / request letter is not given by the borrower, the Bank shall
not upgrade the Account. Despite partial repayment in such cases, all subsequent
action under SARFAESI Act shall continue till full repayment of Bank’s dues.
 However, accounts which have been restructured / re-negotiated and are being
operated as per approved terms and conditions, interest should be appropriated in
terms of restructuring package.
 In case of compromise settlement where amount of sacrifice includes part or full of
INCA Amt, i.e settled at or below ledger balance (Actual Outstanding in CBS minus
INCA is Ledger Balance), Excess amount under INCA first should be appropriated in
Borrowal Account using “Credit Interest Adjustment” menu before crediting
compromise sum or transferring amount held under “No Lien”. However, if
compromise fails on future date, said transaction should also be reversed.
7. BOOKING & REPORTING OF RECOVERIES IN WRITTEN- OFF DEBTS
Recovery of bank dues (Pre write off balance) be booked in BGL head “Recovery
against Write-Off debts” BGL number 82048 & interest portion be booked under the
BGL head “Other Income-Derecognized Interest” BGL number 82050. Both the
amounts of these BGL should be shown in BCR separately (HO Accounts deptt. will
advise the BCR code number & schedule number separately from time to time).
8. IDENTIFICATION AND TREATMENT OF RECOVERIES AND RECOVERY COST
FOR LOSS GIVEN DEFAULT (LGD)
As the Bank prepares to move to the Internal Rating Based (IRB) approaches,
calculation of LGD is a key element. The Bank has already prescribed standards and
guidelines for the identification and treatment of recoveries and costs associated with
recovery for this purpose:
 Identification of NPAs should be an automated process, through in-built system rules
based on the NPA definitions of the various categories of assets, and should not
have any scope for manual intervention (Our CBS system is incompliance /conformity
of the same).
 The source of recovery is a key parameter in the LGD estimation model. It is
indicative of the likelihood of the repayment from a particular payment source. The
system should enable the personnel to recognize the source of recovery from the
following options:
 Full recovery from borrower
 Recovery from guarantor
 Settlement with Obligor through OTS
 Sale of Charged assets (primary /collateral security) under SARFAESI Act 2002,
 Sale of NPAs to ARCs/Banks
(Head Office, Department of Information & Technology/CBS Project Office to take up the
matter suitably with our Software Service Provider for creation of provisions for data entry
of above type of recoveries in CBS system. As & when required CBS system should be
able to give bifurcation of recoveries in NPA accounts in above categories may be
account wise/Sector wise/Activity wise/Zone wise/State wise/etc)
 In case of sale of assets, the same amount should be appropriately recognized as

sale, the sales price should be credited to the specific NPA account, and all costs
51
associated with the sale should be debited to the account, assisting the Bank in
calculating the realized loss on default and post the sale of assets.
 The cost incurred by the Bank for recovery, which may be in the form of legal
charges, commissions, other charges, should be identified to the account and
documented appropriately.
(Head Office, Department of Information & Technology/CBS Project Office to take
up the matter suitably with our Software Service Provider for creation of provisions
for data entry of above type of cost /expenditure in recoveries in CBS system. As
& when required CBS system should be able to give bifurcation of cost
/expenditure in recoveries in NPA accounts in above categories may be account
wise/Sector wise/Activity wise/Zone wise/State wise/etc)
 In case of costs incurred on a group of accounts, the same should be appropriated
on a proportionate basis.
 Recovery of above referred costs from the borrower should be credited to each
account to which it is associated to.
52
CHAPTER 5
BANK’S GENERAL GUIDELINES ON COMPROMISE / SETTLEMENT & HANDLING
OF COMPROMISE PROPOSALS
When a loan account becomes Non-Performing and all efforts to bring the account in
order or to make it performing fail, then the branch must immediately recall the account
and initiate steps to recover Bank’s dues in full.
Normally, bank would like to recover the entire dues with uncharged interest on
contractual rates and other costs in full, i.e. without any sacrifice. However, there may
be certain conditions/cases where the bank may consider sacrifice of part of the ledger
balance & waiver of part /full uncharged interest and/or legal & other charges and agree
to settle the account by receiving a less amount. In such a situation, the bank may enter
into a compromise settlement with the borrower to accept a specified amount instead of
the actual dues towards full and final settlement of total Bank’s dues.
A) Conditions where generally compromise proposal should not be entertained

I. Branches should not, in general, consider compromise proposals where
adequate realizable securities, properly charged to the Bank are available and
fully cover the Bank’s dues &can be easily sold out to recover entire Bank’s
dues either under SARFAESI Act or on execution of the Decree already passed
by Civil Court/DRT.
II. Net worth of the borrower/s and guarantor/s is adequate & bank’s dues are fully
covered by guarantee cover of ECGC/ CGTMSE/etc.
B) General conditions where compromise proposal can be entertained by the Bank:

Normally compromise proposals can be considered in the following situations:
1. Coverage:
a) Account should be NPA as at the end of previous quarter. Further, the field
functionaries (Branch/ZH/FGM) will consider the compromise/OTS proposals as per
their existing discretionary authority in the NPA accounts after gap of minimum three
months between the date of declaration of NPA and the date of consideration of
OTS proposal for all loan accounts except agriculture and other small loan accounts
up to Rs.5 lacs. On case to case basis with the specific reasons/circumstances, the
authorities at Head Office level as per the discretionary authority can consider
OTS/Compromise proposal in accounts which are less than three months old under
NPA category.
b) The scheme will also cover Written-off/Prudential Written Off account, Suit filed,
Bakijai cases, Decreed, Recovery Certificate Issued, cases pending before
Courts/DRTs subject to obtaining consent decree from the respective court/forum.
c) Failed compromise cases not beyond one year old from the last date of repayment
schedule, would be covered by the scheme
d) d) Written off accounts, including PWO accounts (Partial/ Full) on settlement of
DICGC/ CGTMSE / etc claim or as an internal arrangement will also be covered by
the scheme. Failed compromise cases, would also be covered by the scheme.
e) In fraud account compromise can be done only with respect to Civil Liability.
53
2. When the branch feels that the time taken and cost involved in recovering the Banks’
dues through SARFAESI action or other legal process of filing a suit and executing the
Court decree will be more than the amount likely to be recovered through such legal
actions.
3. When a unit is suffering from chronic labour problem, production problems, sales etc.
and it has become non-viable to continue operations and borrower’s verifiable means /
resources as well as securities are not adequate.
4. When there is no security available or realization of the same is difficult or unit is closed
and there are no assets for execution of decree and the borrower/guarantor is willing to
settle the dues out of court.
5. When State or Central Government has directed the Bank for implementation of
compromise scheme under their special relief measures.
6. In cases, where the borrower is dead / absconding / suffering from chronic ailments /
partial or total disablement / the borrower has become destitute or for any other valid
convincing reasons causing complete impairment of repayment capacity.
C) General guiding factor, basic principle for negotiation & settlement of

compromise offer
1. Determination of Cut-off Balance (COB):
The Cut-off Balance (COB) will be the deciding factor for considering any compromise
proposal under different compromise/OTS modules. Once the account is marked NPA,
system reverses the unrealized interest and the remaining balance is reported as
Ledger Balance for the NPA account. In order to find the correctness of the Ledger
Balance in the system, sanctioning authority is required to verify all the transactions in
the account to arrive at the Ledger Balance considering the total genuine credits in the
account. For calculation of COB, the undernoted principles/formulae should be followed.
a) For compromise proposals of small loans (NPA accounts with balance up to
Rs.15.00 lakhs) processed under thumb rule system, the Cut Off Balance (COB) for
consideration of compromise will be Ledger Balance outstanding (including write off
amount) as on the date of consideration of OTS proposal PLUS Legal & other expenses
not debited to loan account Less (i) Subsidy, margin money, any type of credit entry or
balance in sundry creditor a/c (ii) FDR/Maturity value of the other liquid securities held
separately (if any) related to the account under compromise.
Cut-off Balance (COB) = Ledger Balance as on the date of consideration of OTS
proposal without uncharged interest & INCA
(-) Subsidy/Liquid security held if any for adjustment
(+) Write-off Amount if any
(+) Legal & other expenses already incurred but not debited to loan account
(+) Any amount refundable to ECGC/ CGTMSE/etc on settlement of compromise (if
any).
Note: COB for agriculture advance will be arrived at the balance as calculated above or
2 times of the principal amount sanctioned whichever is lower.
For other proposals not covered under small NPA accounts i.e. Proposals
processed under Benchmark Score System Compromise modules) the Cut-off
balance(COB) will be outstanding Ledger Balance (including write off amount) as on the
date of consideration of OTS proposal PLUS (i) Legal, security expenses &other
expenses already incurred and debited to P/L A/c but not debited to loan account, (ii)
Notional uncharged interest (calculated at the Bank’s Base rate (simple) prevailing at
54
the time of processing of the compromise proposal from the date of last interest charged
till the date of final repayment of compromise sum on reducing balance).
b) LESS (i) Subsidy, margin money, any type of credit entry or Credit balance in sundry
creditor a/c (ii) FDR/ maturity value of the other liquid securities held separately related
to account under consideration (if any).
Cut-off Balance (COB) = Ledger Balance as on the date of consideration of OTS

proposal without uncharged interest & INCA
(+) Notional uncharged interest (calculated at the Bank’s Base rate (simple) prevailing at
the time of processing of the compromise proposal from the date of last interest charged
till the date of final repayment of compromise sum on reducing balance).
(-) Subsidy/Liquid security held if any for adjustment
(+) Write-off Amount if any
(+) Legal & other expenses already incurred but not debited to loan account
(+) Any amount refundable to ECGC/ CGTMSE/etc on settlement of compromise (if
any).
2. While considering the compromise proposal non-crystallized non funded liabilities

(LC/BG/etc) are to be properly considered. Wherever, 100% cash margin is not
available either endeavor be made to obtain 100% cash margin for non-crystallized non-
funded liabilities or balance left over after adjusting the cash margin be considered in
the outstanding liability of the borrower /cut off balance for compromise.
3. In the cut-off balance (for small loans module)/ ledger balance (for other compromise
modules) amount refundable to ECGC/CGTMSE/etc on settlement of compromise will
be added.
4. In farm sector, ledger balance for computation of cut off balance as above should not
exceed the principal / limit of the account by two times.
5. APPLICABLE RATE OF INTEREST FOR COMPUTATION OF NOTIONAL

SACRIFICE WHILE CONSIDERING COMPROMISE PROPOSALS.
a) For the purpose of arriving at Bank’s sacrifice on compromise , Notional uncharged

interest will be calculated at one Month MCLR (Simple) prevailing at the time of
processing of the compromise proposal from the date of last interest charged till the
date of final repayment of compromise sum on reducing balance.
b) However, in the cases where the proponent offers to pay the settled amount in
installments with one Month MCLR (Simple) Rate/ documents rate/ stipulated rate
then notional interest will be calculated only up to the period to which compromise
sum bears no interest.
c) In case of exceptional circumstances viz. DRT /COURT/SDR/ S4A/ CDR directions
& others, Notional uncharged interest is to be calculated as per the directions of
above referred authorities
6. NOTIONAL AMOUNT DUE & SACRIFICE:

Accordingly, the amount by which the Notional amount due exceeds the proposed
compromise offer would constitute the sacrifice. Such quantum of sacrifice would
determine the delegated authority; that should approve the compromise.
55
a) Notional Amount Due: The sum total of Ledger Balance + Written off Amount +
Notional Uncharged Interest (calculated as mentioned above at Sr. No 4) + Legal &
other Expenses not debited in the account + Amount to be refunded to ECGC /
DICGC/CGTMSE + Any other future expenses or expenses in the Pipe Line.
b) SACRIFICE: Sacrifice is the amount of difference between Notional Amount Due
less the amount offered for Compromise.
Norms for sacrifice of principal and waiver of unapplied interest in case of
compromise settlement:
Bank’s norms for extent of sacrifice of principal and waiver of unapplied interest has
been organized under two buckets viz., Thumb Rule system and Bench Mark score
system. In case of Thumb Rule system, the unapplied interest may be totally waived
and extent of sacrifice of the principal has been linked to the quantum of the cut off
balance outstanding, status of NPA classification, security position and the level of
sanctioning authority. Similarly in case of Bench Mark score system, sacrifice of
principal and waiver of unapplied interest has been linked to the Bench mark score
which is based on 8 parameters that are pertinent. Accordingly, ceiling levels for
sacrifice and waiver of interest etc., are as provided under the Thumb Rule/Bench mark
score respectively. Any deviation needs approval of appropriate authority as per
delegation of authority.
7. Reasons for the failure of business / unit are also important. Sometimes, a change in
Government guidelines and policies may be the cause of failure of the unit. Sometimes,
it can be due to mismanagement and willful act by the borrower.
8. If the unit is running and prospects are good and field functionaries have not lost trust in
borrower’s conduct and dealings; it would be worthwhile to consider possibility to
rehabilitate the unit. If, however, the unit is closed and prospects are bleak, it would be
better to compromise and recover the dues to the maximum.
9. The amount of compromise sum and the period for receiving the payment with or
without interest (if paid in installment) will also influence the terms of compromise. We
have to make efforts to recover maximum amount including reasonable interest within
the shortest possible time. While deciding the amount of compromise, the most
important guiding principle should be the minimum sacrifice as far as possible, so that
there is no or minimum adverse impact on Profit & Loss A/c.
10. While arriving at a negotiated settlement, the cost benefit analysis be made i.e. the
advantage available to the Bank from prompt recycling of funds should be weighed in
comparison to the likely recovery by following legal or other protracted course of action.
11. In case of consortium advances/Multiple Banking arrangement we should normally fall
in the line with consortium leader/major Banks. If any better terms are offered to any
other Bank, then the same terms will be applicable to our Bank also. However it is
usually felt that finalization of compromise proposal from all the consortium member
banks takes longer time so endeavor should be made for mobilization of compromise
proposal outside consortium with better offer & early payment terms.
12. A proper distinction is to be made between “Willful defaulters” and “defaulters due to
circumstances beyond their control”. While in the case of former, a tough stand may be
taken, in latter case a sympathetic view is to be taken.
13. Due weight-age is to be given to present earning activities & means of the
borrower/guarantor & their net worth. However, while ascertaining their net worth value
of the charged securities owned by them is to be excluded from their net worth as value
of these securities is considered against the value of securities charged to the Bank
56
14. There shall be a committee approach for approving/sanctioning compromise proposals
to ensure fair and proper assessment of proposal.
15. Estimation of Realizable Value of Primary & Collateral Securities:
I. Full details of primary & collateral securities (moveable and immoveable assets) are to be
considered. For immovable properties/securities- Area of Land, nature of land (Agricultural
Land, Industrial Land, commercial, residential etc.) carpet / built up area, location, nature
of ownership (freehold or lease hold) balance/leftover period of lease in case of leasehold
and the related information have to be considered/ recorded.
II. Following factors should be considered for assessing realizable value & marketability of
charged securities:-
a) Various laws meant for protection of properties of agriculturists/SCs/tribal people if
located in specified/classified areas. There will be lot of constraints in selling
/marketability of such securities as availability of purchasers for above referred
properties will be difficult.
b) Getting permission from the collector / District Magistrate Competent Authority of State
Government of obtaining physical possession. Under Section 14 of SARAFAESI Act
2002, the Chief Metropolitan Magistrate or District Magistrate shall pass an order
within 30 days. For the reasons beyond his control time is allowed not exceeding in
aggregate sixty days. However reasons are to be recorded in writing.
Any undue delay in such cases may be referred to FGMO for seeking permission
for filing Petition before the Higher Court/High Court for seeking direction to
DM/CMM for early disposal of the matter on cases to case basis.
c) Restrictions on sale of land classified for agriculture purpose & mortgaged with Bank
for purpose other than agriculture.
d) Charged property located in communal disturbed area or near to cremation ground/
graveyard.
e) Approach/entry to the charged property is not proper or demarcated.
f) The property is heavily tenanted and getting vacant possession is much difficult or
next to impossible.
g) Security is a subject matter of litigation between the owner, tenant and paramount title
holder & others.
h) Security is subject to planning, environment, forest law restrictions.
i) Security is subject to expropriation proceedings due to violation of user conditions etc.
j) Type of charge (sole/pari passu/second charge/others) available on charged
securities.
III) The nature and realizable value of securities available is an important factor to be
considered while arriving at a compromise sum. The valuation of charged securities
should be done by the empanelled valuer and it should not be more than one year old in
case of immovable properties and plant & machineries & six months old in case of
movable properties including stocks & book debts at the time of receipt of compromise
proposals at branch level. The Valuer has to give Fair Market Value (FMV) as well as
Realizable Value (RV) of the securities. If the valuer in his report mentioned any second
highest value other than Market Value/ Fair Market Value by any name (Distress Sale
Value, Forced Sale Value, etc), it will be treated as Realizable Value. In case the value of
the property is more than Rs.50.00 lacs as on date of sanction/last valuation, the valuation
reports have to be taken from two different empanelled valuers. In case where adequate
stocks are available & also where book debts are not more than 6 months old, Valuation
of such securities has to be obtained from the Bank’s empanelled Stock Auditors/
Chartered Accountants.
57
IV) Distress sale value of the charged security will be as mentioned in the valuation report
obtained from the Bank’s approved valuer. Branch Head/Officials must visit the
charged securities and should assess valuation on the basis of their own assessment
and information gathered from local Property Dealers and nearby residents. In case
the compromise recommending authority do not agree with the distress sale value
given by the Bank’s approved valuer then he/she has to mention the Realizable value
assessed by him/her with full justification in the compromise proposal. All securities
charged to the Bank have to be visited by at least two branch officials & they have to
assess the value of assets charged to Bank. Branch has to submit a visit-cum-
valuation report of these officials (as per Annexure 78 for immovable properties &
Annexure - 79 in case of movable securities including book debts). This visit report
should not be older than 3 months from the date of submission of compromise
proposals by the proponent.
V) In the accounts financed under consortium/multiple banking arrangement, the value of

our share of security should be considered. It should be ascertained whether bank has
exclusive first charge, paripassu first charge or second charge. In case of second
charge, the residual value of security after satisfying the first charge holders’ dues
should be considered.
VI) The average of Realizable Values (RV), i.e., Forced Sale Value assessed by the
valuers (one or two as the case may be) will be taken as the Realizable Value of
charged securities for the purpose of compromise settlement. However, two officials
will visit the properties/units to assess whether the valuers have given the value on the
realistic basis as per the local information collected and they will comment regarding
the marketability of the properties/securities.
VII) If the securities are adequate and easily realizable, the sacrifice in the compromise
should be minimum.
VIII) In NCLT cases which are under liquidation and Bank has not relinquished its security
interest in favour of liquidation estate, the average liquidation value arrived at during
CIRP can be considered as Realizable value.
16. Net Present Value (NPV) of Compromise Settlement Amount & Realizable value
of Securities
a) As per RBI guidelines vide their circular no. DBOD.No.BP.BC.34/21.04.048/2007-
08 dated Oct 4, 2007, generally, where the Compromise sum is offered in
bullet payment & or in installment over a period, the net present value(NPV)
of the compromise settlement sum should not be below the net present
value(NPV) of the realizable value of the available securities charged to the
Bank net of the cost of realization.
b) Guiding Principles for settlement of Compromise Sum:
I. Normally Compromise sum should not be below the Realizable Value of
Securities except in OTS cases under Thumb rule model.
II. NPV of the compromise sum should not be below the NPV of the Realizable
Value of the securities net of the cost of realization.
58
III. However, in appropriate cases, Bank can with proper justification accept less
than the said minimum acceptable amount
c) Circumstances where NPV of Compromise Sum & Realizable value of
securities need not be calculated :
Under the following situations/circumstances NPV of the realizable value of assets
and NPV of compromise sum need not be calculated.
In other cases, NPVs of the compromise sum and the Realizable value of securities
have to be assessed.
 Compromise Proposal falling under Thumb Rule Modules.
 Compromise sum offered is more than the Realizable Value of Securities &
being paid within 3 months of approval of compromise and if paid in more than 3
months but with interest at one month MCLR (Simple) rate
In other cases, NPVs of the compromise sum and the Realizable value of securities
have to be assessed.
d) Calculation of NPV:
I) NPV of realizable value of available securities may be calculated as under:
Realizable Value of the Security
(as per the latest valuation report)
NPV = ------------------------------------------- less cost of realization
(1 + R/100)N
R= Rate of interest i.e prevailing one year MCLR (Simple) rate at the time of
compromise proposal is under consideration
N = Number of years to be taken for actual realization of securities from date of

approval of compromise
II) Cost of realization may be normally considered at 10% of the realizable value of the
security.
III) Proper justification should be given for arriving at the duration (N) i.e. number of
years to be taken for calculation of NPV depends upon the status of various
recovery actions taken. For example:
Status of various recover actions Expected period to be taken
for actual realization of
securities
If Physical possession taken under SARFAESI Act One year
If Symbolic possession taken u/s 13 (4) of Two years
SARFAESI Act
13 (2) Notice issued/not issued under SARFAESI Three
Act/ Stay granted by DRT/various Courts on our
SARFAESI Action (at any stage i.e. 13(2),
13(4),sale) & cases referred to NCLT but not yet
admitted.
DRT/Court recovery proceeding/ litigation against Four years
the charged securities is going on.
Tenanted properties Five years
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IV) For calculation of NPV in case of the compromise settlement amount is payable in
installments the following formula will be used:
Ct
NPV = ∑ ------------------
t=1 (1 + R/100)t
Ct = Compromise installment amount to be received during each period

R = rate of interest to be paid during the installment period
t = number of installment periods during which compromise amount to be
repaid
v) For calculation of NPV of the realizable value of the charged securities & the
compromise amount to be repaid in installments, the field functionaries can use
standard “NPV/ Discount factor table” available in market/internet.
17. Negotiation shall start from the Bank’s total dues i.e. cut off Balance and be finalized
looking to the realizable value of available charged securities, borrower’s/guarantor’s
net worth, etc.
18. Net Worth of Borrowers/Guarantors:

i) The net worth /means/ attachable assets (not charged to any lender) of the
borrowers/guarantors is one of the important factors to assess their capacity to
pay and the source of payment of the compromise amount. Therefore, their
present net worth /means should be ascertained
ii) The borrowers/guarantors should be asked to submit their present net worth
/asset liability declaration by oath and it has to be correlated with the last credit
report submitted to the bank at the time of sanction/renewal of loan.
iii) Borrowers/Directors/Partners have to submit the details of their present net
worth/asset liability declaration on the prescribed format (Annexure-80:
Declaration by the borrowers/ directors/partners. Guarantors have also to submit
the details of their present net worth/asset liability on the prescribed format
(Annexure-81: Declaration by the guarantors on affidavit cum indemnity). In case
the borrower/director/partner has also executed the Guarantee Deed, then, the
declaration (Annexure-80) has to be amended suitably. For such guarantors
separate Declaration in Annexure-81 is not required. It is to be ensured that in
above Declaration all information are dully filled in & is executed on appropriate
non-judicial stamp paper as per concerned State Stamp Act
iv) In cases where any borrower/guarantor is not offering the compromise / has
expired/not available/is absconding/insane the proposer of the compromise has to
declare the relevant situation on oath and also to mention the assets & liabilities/
net worth of borrower/guarantor known to him/her.
v) While considering Net worth of Borrowers and Guarantors the value of securities
charged to the Bank has to be excluded from the net worth of the concerned
borrower/guarantor and accordingly score has to be awarded in the benchmark
score sheet.
vi) Two Officials of the Branch, including Branch Head has also to broadly estimate
the net worth/ means/ other attachable assets of the borrowers/ guarantors by
discrete market enquiries/observing their life styles or own judgment.
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19. Wherever compromise settlement is extended over 3 months/90 days, it is necessary
to negotiate/recover the suitable rate of interest not only to cover cost of funds but also
prompting the borrower not to delay the repayments. Interest negotiation may be @
one month MCLR (Simple) rate on reducing balance. Same may be stipulated to be
recovered simultaneously, with each installment.
20. In accounts which are already written – off or full provision has been made because of
nil or negligible security, any other recovery effected through compromise would
increase the income by credit of such recovery to P/L A/c or release of provision.
21. In the case of non-suit filed NPA accounts, it shall be ensured that the documents are
kept alive by obtaining acknowledgement of debts from borrowers/ guarantors.
Above mentioned guiding factors and basic principles for negotiation & settlements of
compromise offer are only illustrative and not exhaustive. It is important that an overall
view is taken, while considering compromise proposals.
D) PROCEDURE OF HANDLING COMPROMISE PROPOSAL AT DIFFERENT

LEVELS:-
In order to make uniform process of handling of compromise proposals the following
procedure should be followed by all the Branches/offices/compromise approving
authorities:-
1. Selection of Module:-
On the basis of the outstanding balance at the time of consideration of compromise
/Schemes under which advance was made, these can be divided in two categories,
namely Thumb Rule system & Bench Mark Score system, which are as under
A. Thumb Rule System Compromise Modules for Small Dues (NPA Accounts
with Cut-off Balance (COB) up to Rs.15.00 lakhs
The existing thumb rule modules have been re-aligned as under:
1. OTS Module for All Types of Tiny Dues with COB up to Rs.1,00,000/-
2. OTS Module for NPA accounts with COB of Rs.1,00,001/-upto Rs.15.00 Lac for
Advance under Farm Sector & Other NPA accounts where full security as
mortgage is available.
3. OTS Module for NPA accounts with COB of Rs.1,00,001/- upto Rs.15.00 Lac for
Advance under Govt. Sponsored Cases, Retail Loans sanctioned abinitio
unsecured & Farm Sector and Other NPA accounts where full security as
mortgage is not available
B. Bench Mark Score System Compromise Module

List of compromise modules falling under Bench Mark Score System are as under
1. OTS Module for NPA Accounts under MSME sector

2. OTS Module for NPA Accounts with COB above Rs.15.00 lac up to Rs.25.00 Lac
3. OTS Module for Other NPA Accounts (i.e. COB above Rs.25.00 lac) (not covered
under any other Modules) including Fraud declared accounts
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On receipt of the compromise proposals from the borrower/guarantor or during
discussion/negotiation for compromise first of all, Branch officials have to select
compromise module, best suited out of the above modules in which the account falls.
The selection of the module should be based on the nature of activity of the borrower &
amount of the cut-off balance.
In case the nature of an OTS proposal is such that it can be disposed off under more
than one module, the field functionaries may consider the proposal under the module,
wherein the benchmark sum is on lower side, so that the proposal may be disposed off
in more liberal manner.
2. Request Letter/Compromise offer from borrowers/ guarantors/others:
The borrowers should be asked to give the compromise proposal/Offer in writing
preferably on the Bank’s prescribed format (Annexure- 3). In case of compromise
proposal related to firms/ companies then content of the format should be got written or
typed on their (firms/ companies) letter head. In respect of compromise proposal from
company, the required company resolution must be taken along with the compromise
proposal. In request letter/ compromise offer there must be acknowledgement of Bank
dues(as discussed above), compromise sum offered & schedule of payment of offered
compromise sum, down payment with the authority of its adjustment on approval of the
compromise offer, sources of funds & other terms proposed by the offerer. While
receiving compromise proposals, endeavor should be made by the Branches/ZOs for
obtaining the signature of all the borrowers, guarantors and mortgagor on compromise
offer.
3. Down payment for consideration of compromise proposal-

All efforts should be made to realize entire OTS amount in lump sum/ by bullet payment.
However, in deserving cases OTS proposals may be considered with down payment of
25% and balance in installments. However on case to case basis proposals with down
payment below 25% may also be considered by the compromise approving authority.
Amount of down payment should be kept in No Lien account pending finalization of OTS
proposal. It should be adjusted immediately after sanction of OTS proposal by the
competent authority. For adjustment of the down payment, the required authority
(mentioned in Annexure-3) from the proponent has to be obtained at the time of deposit
of down payment itself. In case the proposal is not found suitable the same should be
refunded to the depositor of the down payment amount through Banker’s Cheque only.
In exceptional circumstances it can be allowed to be kept (preferably where the
compromise offer is submitted) in form of any deposit account/deposit scheme of the
Bank. Immediately on the receipt of compromise offer, Branch must issue the letter (as
per Annexure-04) to the offerer of the compromise proposal for adjustment of said
down payment by the Bank on approval of the compromise offer.
4. Repayment terms of compromise sum-

As a matter of principle, compromise settlement shall be negotiated for direct bullet
payment i.e. normally within 30 days of advising the sanction. In the cases where
compromise sum is not paid in bullet & is proposed to be paid in more than one
installment then the remaining compromise sum (excluding down payment) should be
usually paid in lump sum within a period of 30-90 days of communication of bank’s
approval. In exceptional cases where the cash flow does not permit or assets will take
62
time to be sold and realized, then compromise approving authority may extend the
repayment period of compromise sum maximum up to 3 years. In case where
repayment period of more than 3 years is required /requested, such cases will be
approved by MCBOD. The compromise approving authority may propose payment of
compromise amount without or with interest. Interest may not be charged if the
compromise amount is paid within the 3 months. The interest will be charged from the
date of approval of compromise at simple rate on reducing balance. The interest at
one month MCLR (Simple) rate prevailing at the time of approving compromise or less
than the one month MCLR (Simple) rate will be decided in negotiation with the
proposer. However, Branch/Zonal Office/FGMO will assess the sacrifice amount
taking into consideration the offered rate if below the one month MCLR (Simple) rate
prevailing at the time of consideration of compromise.
5. Processing of Compromise Proposal & Submission to Sanctioning Authority:-

As per the suggestions of the Ministry of Finance, Govt of India under reform agenda,
the bank has to provide ease and comfort to the NPA borrowers with online platform
(internet) to submit OTS application against their NPA dues and have online tracking
system for its disposal.
Bank has developed an in-house Online OTS Application Module which has been
designed for easy access by the concerned NPA borrower and guarantors in the
account for the purpose of offering OTS proposal in their NPA accounts. The module
shall facilitate the NPA borrower with online platform (internet) to submit OTS offer
against their NPA dues along with facility to track its status. (The detailed guidelines are
given in HO IC No.15958/Recovery/2018-19/11 dated 29.09.2018).
a) As per Bank’s policy all the compromise proposals at all levels

(Branch/Zone/FGM/HO) are to be processed /sanctioned in committee approach.
Composition of Committee at various level/offices is given below.
b) For easy & quick disposal of compromise proposals falling under Thumb Rule system
(above mentioned at Sr No. 1 to 5) a small process note is developed & enclosed with
this policy as Annexure-05. Compromise proposals falling under Bench Mark Score
are to be submitted/ processed on a detailed process sheet whose specimen is
enclosed as Annexure-06. Its hard & soft copy (through email) is to be submitted to
all the next higher authorities up to which proposal is to be sanctioned.
c) During the Rin Mukti Shivirs (Recovery Camps), usually large number of compromise
proposals are received and can be processed on Annexure-07.
d) In compromise proposal/process note all the details of the account & compromise
proposal received are to be properly incorporated. Date of valuation and details of the
property mortgaged to the Bank shall be invariably mentioned and justification for the
value shall be given in case there is wide downward variation in the value of the
mortgaged property while sanctioning the advance and while negotiating compromise,
the cogent reasons to be explained in the proposal invariably.
e) All the major Inspection irregularities pointed out in various Inspection/Audit reports
outstanding for rectification as on the date of processing the compromise proposal
63
should be mentioned with reasons of their non-rectification at relevant place in the
process note (Annexure-05/06/07)
f) In case of ECGC/DICGC/CGTMSE/etc claim/subsidy from Government/NABARD is

not received/not available, the reason for the same shall be mentioned and
justification to be incorporated in the compromise proposal.
g) Examination of Staff Accountability: In case of any staff lapse is observed,

compromise recommending authority shall mention the same along with the action
proposed/taken by them. Copy of the report may be enclosed with the compromise
process note. Even if no staff accountability observed, required five point certificate
(as per Annexure-08) is to be invariably be enclosed with the compromise proposal.
6. Various Compromise Committees:
A. COMPROMISE APPROVING AUTHORITIES

At different levels Constitution of various Credit Approval Committees, which will
approve the compromise proposals will be circularized by the Credit Processing & Risk
Management Department of Head Office from time to time as per the approval of the
Competent Authority. Present level and constitution of various committees is as under
(as per HOIC No.14221/CPRMD/2015-16/23 dated 22.03.2016):
a) At Branch Level
Branch Head irrespective of Scale is authorized to approve the compromise within his
/her delegated authority (given in the respective guidelines of the compromise
modules) as per the recommendations of Branch Compromise/Write-off Committee.
b) At Zonal Office Level
In Zonal Office the Zonal Level Credit Approval Committee (ZLCC) is authorized to
approve the compromise proposal within their delegated authority whose details are
given in the guidelines of the respective compromise modules. Present constitution
(Members) of ZLCC is as under:
(i) Zonal Head(Chairman of the Committee)
(ii) Assistant General Manager/Chief Manager (second line at ZO looking after Credit)
(iii) Senior most officer of Risk Management/Credit Monitoring Deptt of ZO
(iv) Senior most officers in charge of Finance/P&D Deptt. of ZO
(v) Senior most officer of Recovery Department of ZO
(vi) Branch Head of IFB/IB/Main branch of station
Note: Assistant General Manager/Chief Manager (Credit)/ Senior Manager (Credit) will be
Convener the committee
c) At Field General Manager Office (FGMLCC)
In Field General Manager Level Credit Approval Committee (FGMLCC) is authorized to
approve the compromise proposal within their delegated authority whose details are
given in the guidelines of the respective compromise modules. Present constitution
(Members) of FGMLCC is as under:-
(i)Field General Manager(Chairman of the Committee)
(ii)Local Zonal Head
(iii)DGM/AGM/Chief Manager (second line at FGM office looking after Credit)
(iv) Branch Head of IFB/IB/Main branch of station
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(v)Senior most officer of Risk Management/Credit Monitoring Deptt of FGMO
(vi)Senior most officers in charge of Finance/P&D Deptt. of FGMO
Note: DGM/AGM/Chief Manager/ SM, Credit at FGM Secretariat) will be Convener of
the Committee.
d) General Manager Level Credit Approval Committee at Head Office(HLCCGM)
At Head Office General Manager Level Credit Approval Committee (HLCCGM) is
authorized to approve the compromise proposal within their delegated authority whose
details are given in the guidelines of the respective compromise modules. Present
constitution (Members) of HLCCGM is as under
(i) General Manager (Credit)- Chairman of the Committee
(ii)General Manager (IRM)
(iii)General Manager(F&A)
(iv)General Manager(Recovery)*
(v)General Manager (PSC)
(vi)General Manager (Retail Credit)
* As & when any proposal relating to Recovery Deptt is put up
e)Executive Director Level Credit Approval Committee (HLCCED)

At Head Office Executive Director Level Credit Approval Committee (HLCCED) is
authorized to approve the compromise proposal within their delegated authority whose
details are given in the guidelines of the respective compromise modules. Present
constitution (Members) of HLCCED is as under
(i)Executive Director - Chairman of the Committee
(ii)General Manager (Credit)
(iii)General Manager (IRM)
(iv)General Manager (PSC)
(v)General Manager (Retail Credit)
(vi)General Manager(F&A)
(vii)General Manager(Recovery)*
* As & when any proposal relating to Recovery Deptt is put up
Convener: DGM (Credit)
Quorum: 3 members including Chairman of the Committee
f) Credit Approval Committee of the Board(CAC)

At Head Office Credit Approval Committee of the Board (CAC) is authorized to approve
the compromise within their delegated authority whose details are given in the
guidelines of the respective compromise modules. Present constitution (Members) of
CAC is as under;
(i) Managing Director & Chief Executive Officer - Chairman of the Committee
(ii)Executive Director
(iii)General Manager (Credit)
(iv)General Manager(IRM)
(v)General Manager (F&A)
Convener: GM (Credit)
65
For above committee minimum quorum will be three (3) where the attendance of
Managing Director & Chief Executive Officer and one Executive Director is must.
B. Compromise Proposal Screening & Recommending/Advisory Committees:
a) HO Compromise Screening Committee of DGM & AGM (HOCSC):

I. Its main function is to examine and recommend compromise & write-off proposals for
approval/sanction under the authority of the GMHLCC at HO.
II. The committee is constituted by any three members comprising either DGM or AGM
of Inspection Department, RBI Inspection, Priority Sector Credit, Financial Inclusion,
Credit Monitoring, Marketing, Risk Management, ALM, BPR Cell/Departments.
III. DGM & AGM of same department will not be in the committee at the same time.
IV. AGM & DGM of Recovery Department will not be in the committee.
b) General Managers’ Screening Committee at Head Office (HOGMSC):
The main functions of the Committee are-

i. To examine and recommend compromise in NPA accounts sanction under the
authority of the EDHLCC/ Credit Approval Committee of the Board/ MCBOD.
ii. To examine and recommend Virtual Write Off & Prudential Write Off proposals and;
iii. To evaluate and recommend the reserve price of the assets for sale to ARC as well
as to decide which asset to be sold singly or in baskets to ARCs
The committee shall be constituted as under:-
Senior-most 3 General Managers including CGM but excluding General Manager

(Inspection) present on the day of HOGMSC meeting will be its members. However, for
all compromise proposals whose approval is falling under the authority EDHLCC & CAC,
all GMs who are members of EDHLCC & CAC will not be member of HOGMSC for the
meeting to be held on that day. On such day, Committee excluding such General
Managers will deal with all the compromise proposals placed on that day irrespective of
the level of the approving authority (i.e., EDHLCC/CAC/ MCBOD) under whose authority
such proposals fall
c) EXTERNAL SETTLEMENT ADVISORY COMMITTEE (ESAC)
I) Functions: The function of the External Settlement Advisory Committee (ESAC) is to

screen & recommend the compromise proposals falling under the authority of
EDHLCC, Credit Approval Committee (CAC), Management Committee of the Board
II) Constitution of Committee: External Settlement Advisory Committee (ESAC)
should include any two of the undernoted external eminent persons along with
General Managers of the bank
 Retired High Court/Supreme Court Judge
 Retired Senior Executive of any nationalized bank/ Financial Institution
 Professionals like Chartered Accountants
External Settlement Advisory Committee (ESAC) is constituted with two outside
members (as stated above) & General Manager (INSP) [In his absence General
Manager (HR)] with the approval of the Board. Two members would constitute the
quorum of the committee. The General Manager (Recovery) shall be the convener of
the committee
66
III) Criteria for Selection of External Members:
a) The concerned external person should have enriched experience & good track
record in his field/area (Law, Banking or Accountancy).
b) He should have respectable image in public.
c) He should not be the staff member of our Bank.
IV) Selection of External Members: A Departmental Search Committee will search

candidates for selection of external members of ESAC. The Departmental Search
Committee will consist of top two senior executives of the Recovery, Law, Inspection
& Accounts Departments of Head Office and four members of such committee with at
least one from each department will make the quorum. The committee will enquire
about the local eminent personalities in the field of legal, accountancy & banking
through various sources in order to empanel two external numbers. After search &
consultation, the committee will recommend two personalities; who are having
enriched experience in their respective fields; suitable to discharge the required
functions and agreeing to the terms and conditions of the bank
V) Authority for approving empanelment of External Members

The Board of Directors will approve fresh empanelment of external members for tenure
of one year, extendable yearly up to maximum period of three years. The Managing
Director & Chief Executive Officer/ the Executive Director (in absence of the MD &CEO)
will approve yearly extension on their satisfactory performance. Beyond this, any
extension may be allowed by the Board/MCBOD or new members may be inducted on
approval of the Board/MCBOD.
VI) Honorarium for External Members: The present honorarium for external members is
Rs.10000.00 per sitting besides conveyance / transportation. The Managing Director &
Chief Executive Officer/ the Executive Director (in absence of the MD &CEO) is
empowered for modification/revision of the honorarium while extending the annual term
of the external members.
7) DELEGATED AUTHORITY FOR APPROVAL OF COMPROMISE PROPOSALS:-

Delegated authorities for approval of write off & waiver in compromise settlement is
depending upon the quantum of outstanding in NPA accounts, compromise module in
which compromise offer is falling & amount of write-off &/or waiver on acceptance of
compromise offer. Minimum Bench Mark Sum given at the end of each compromise
module is just an indicative amount; all the compromise approving authorities have to
endeavor for minimum sacrifice.
As mentioned above generally, compromise sum approved should not be below the net
present value / realizable value of the securities charged to the Bank and in appropriate
cases with proper justification compromise sum below the realizable value of the
securities can be accepted with proper recording of reasons for deviation. Under such
circumstances compromise approving authority up to FGMLCC will mention all the
details /reasons of acceptance of compromise in their Monthly Statement of
Compromise Approved submitted to Next Higher Authority. Details of Compromise
proposals approved by HLCCGM, HLCCED & CAC are presently placed before
MCBOD through quarterly agenda. Therefore, these Committees need not to report
separately.
67
The authority sanctioning of compromise/One Time Settlement must adhere to above
guidelines of RBI & also append a certificate in relevant process note of compromise
proposal that the compromise settlements are in conformity with RBI / IBA / Head Office
guidelines. Proper record is to be kept in each & every compromise approved or
rejected.
A) Thumb Rule System Compromise Modules for Small Dues

Under Thumb Rule system there is no scoring based system for bench mark
calculation.
Minimum Compromise sum (Benchmark sum) to be accepted in compromise proposals
depends upon COB, position of asset classification and the sanctioning authority.
Minimum Compromise sums and detailed terms & conditions are mentioned where
compromise modules are described in detail in this policy, which please be referred to
accordingly. Compromise approving authorities may approve / sanction compromise
proposal up to the respective benchmark sum (percentage of cutoff balance) they are
authorized irrespective amount of sacrifice involved.
B) Bench Mark Score System Compromise Modules
Minimum Compromise sum to be accepted in compromise proposals will depend upon
the Net Bench Mark score worked out after putting requisite marks in the Compromise
Bench Mark Score Calculation Sheet. Compromise approving authorities may approve /
sanction sacrifice (Write-Off & waiver) up to their delegated authority which varies from
Compromise Module to Module. (Details of these Module are given in this chapter,
where modules are described one by one ).
1. OTS Module for NPA Accounts under MSME sector

2. OTS Module for NPA Accounts with COB above Rs.15.00 lac up to Rs.25.00 Lac
3. OTS Module for Other NPA Accounts (i.e. COB above Rs.25.00 lac) (not covered
under any other Modules) including Fraud declared accounts
Recommendations for approval of compromise proposals has to be initiated/

routed from branch level up to the compromise approving authority i.e. from
Branch Head to ZLCC to FGMLCC to Head Office as the case may be.
C) Standard/Potential Non Performing Assets & NPA of current quarter

Normally Bank will not entertain compromise proposals of those accounts which are in
standard/Potential Non Performing Asset category as on the date of submission of
compromise proposal & accounts which became NPA in the current quarter. However in
exceptional circumstances such compromise proposals can be considered only by
Management Committee of the Board.
D) Compromise Offer in respect of accounts in which Fraud has been declared by

the Bank
There can be cases where full recovery of Bank dues is not possible & borrower/
guarantor/ authorized representative of borrower & guarantors are coming forward for
settlement. As per CVC guidelines Bank can recover its dues through compromise even
in those cases where bank has declared fraud & has initiated criminal action against the
fraudsters, State police, CBI, CID & other statutory authorities have also initiated their
action. Such compromise proposals shall be considered by authority not lower than
68
FGMLCC as per separately defined discretionary authority. The proposal shall be
appraised as per the format prescribed for Benchmark system of Compromise
settlement. All sanctions made by FGMLCC shall be reported to HO Recovery
Department on monthly basis, enclosing copy of process note for placing before the
Board of Directors/ MCBOD for information.
While negotiating such offers, it must be made clear to all the concerned parties that
recovery of the loan taken by the borrower and the criminal action for the fraud
committed by him/ guarantor are two separate and distinct matters. It should be
clarified at the outset that if the settlement proposal is accepted, such settlement will
relate only to CIVIL LIABILITY/ recovery proceedings and shall not in any way affect the
CRIMINAL LIABILITY/ criminal action taken by the bank, which shall continue.
Branches have to be careful in such cases & have to discharge some additional duties,
whose details & other guidelines related to such matter are given in Chapter 6.
E) Compromise Offer in respect of accounts of deceased staff member & related

to or guaranteed by staff member
Bank can entertain proposal falling under above categories, but they will not be dealt
below FGMLCC. In such cases before approving OTS Proposal, necessary clearance
shall be obtained from the Head Office Vigilance Department whose complete
guidelines on this issue are given in Chapter 6.
F) Compromise cases in which Bank has received or filed ECGC/CGTMSE/etc

claim
Compromise cases of NPA accounts where Bank has filed claim with or has received
claim from ECGC/ CGTMSE/etc are to be approved subject to taking approval from
ECGC/ CGTMSE/etc. After receipt of compromise sum branch has to retain only its
retainable portion (percentage of claims received) and the amount over & above it
(returnable portion of ECGC/ CGTMSE /etc claim) is to be refunded to ECGC/
CGTMSE/etc.
8) Issuance of Compromise Sanction Letter:-

In each & every case Branch will issue a sanction letter to the compromise proposer
/borrower /guarantor in which all details of terms & condition of compromise approved
including that of repayment plan are to be mentioned. For convenience of branches a
Draft of sanction letter (Annexure-9) is enclosed. Details of terms of compromise
settlement are also to be updated in the CBS system.
9) Submission of Monthly Statement of Approved Compromise Proposals to next

higher authority
All the compromise approving authorities up to FGMLCC are required to submit the
details of all the compromises approved by them under their discretionary authority as
per prescribed format (Annexure-10) along with a copy of the compromise approval
process note (other than those cases approved under Tiny & Micro OTS modules under
Thumb rule) sheet during each month to their next higher authority within 10th day of
succeeding month for their scrutiny. In case no compromise proposal is approved even
then NIL statement is to be submitted. On scrutiny of the monthly statements of the
approved compromise proposals of FGMLCCs, HO Recovery Department will place the
same before EDHLCC.
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10) Submission of Progress Report on Sanction of Compromise
Zonal Offices will submit the monthly consolidated progress report (as per Annexure-
11) on OTS sanctioned by various authorities under their Zone and progress report on
small OTS (up to Rs 15.00 lac) as per Annexure-12 within 7 days to their respective
FGMO, who will in turn submit the consolidated position to Head Office Recovery
Department within 10 days.
11) Acceptance of sanction terms & conditions by proposers of Compromise offer:-
In all the cases branch has to obtain from the proposer of the compromise offer
acknowledgement of receipt of sanction letter issued by them containing detailed terms
& conditions of the approval of compromise. For convenience of branches a draft of
acceptance letter to be obtained from compromise proposer (Annexure-13) is
enclosed.
12) Execution of Agreement:-
Once the terms & conditions of the compromise settlement are conveyed to the
proposer of the compromise proposal & accepted by him/her & offered compromise
sum is to be paid in installments, then Branch has to go for execution of under noted
agreements. We have enclosed the drafts of these agreements with the policy.
However, Zones/ Branches are advised to take the help of their law officials/ law
retainer/panel advocate for filling, drafting & execution & filing of these agreements with
appropriate authorities. In case under noted agreements attract any stamp duty or
advolerum as per State’s stamp act then same has to be borne by the
borrower/guarantor/mortgager/third party (as the case may be).
S. Particulars-Status of Legal action in NPA account , etc. Annex
No ure No
1 For compromise cases related to NPA accounts where Bank has neither
filed suit with any Court/ DRT nor it is a decreed account 14
2 For compromise cases related to NPA accounts where Bank has filed suit 15
with any Court/ DRT, Terms of Settlement duly signed by the bank and the
borrower/guarantor shall be filed with the Court/DRT subject to default
clause and consent decree shall be obtained. Consent decree shall contain
the default clause to the effect that in case of failure in full or in part to repay
Bank’s dues in accordance with the terms, the contractual dues shall be
recoverable along with interest at contracted rate, costs and expenses
3 For compromise cases related to NPA accounts where Bank has obtained 16
Decree / Recovery Certificate from relevant Court/ DRT
4 For compromise cases related to NPA accounts where payment of 17
compromise Sum is offered by some third party & title deeds & other papers
related to securities are to be delivered to that third party on receipt of entire
compromise amount.
13) Submission of proposal for claim of Write-Off of residual Ledger balances from
Head Office & Closure of accounts in CBS system:-
Branches after the receipt of entire compromise sum (with or without interest as
stipulated in compromise sanction letter) will submit the claim on the prescribed format
(Annexure-19) to their respective Zonal Offices which in turn after proper scrutiny of
same will forward it to Head Office Recovery Department through on-line OTS module
(as per HO IC No.15958/Recovery/2018-19/11 dated 29.09.2018). Please note that
70
other than submission of claim form through on-line OTS module, no other document is
required until or unless it is asked for by the Head Office Recovery Department.
Branches on receipt of claim amount from ZO/HO will credit the amount in the
respective compromise account and will ensure closure of account in CBS system
through account closure menu as given in CBS manual mentioning the details of
Compromise.
14) Issue of No dues Certificate & release of charged securities:-
After compliance of above instructions of closure of accounts in CBS system branches
may issue “No Dues Certificate” to the borrowers strictly as per format given in
Annexure-20 & there after release the charge securities to its mortgager/authorized
person of the mortgager/ as per terms of settlement/Memorandum of understanding &
also file satisfaction of Bank’s charge with concerned authorities where ever
applicable.
15) Reporting/ updation of record in database of Credit Information Companies
(CIBIL & others):-
After closure of the accounts in CBS system branches will submit the complete
information on Data Correction request form -OLM (Annexure-63) form or any other
prescribed form by CIC) to our CBS Project Office which in turn will pass on the
information to all the Credit Information Companies. Branches to note that accounts
which are closed through compromise in above referred OLM form at appropriate place
they have to mention “settled & closed” or any other appropriate words which reflects
closure of accounts through compromise.
16) Revival of failed OTS proposals:-
Failed compromise cases not beyond one year old from the last date of scheduled
repayment as per original sanction, would be covered by the scheme. Its detailed terms
& conditions are given in Chapter 6
17) Compromise proposals under certain specific conditions /compromise related
issues:-
Banks guidelines on Compromise related to consortium advances, suit filed cases,
decreed cases, compromise through assignment of decree, waiver of uncharged
interest, staff accountability; other issues are given in detail in Chapter 6
18) Source of Payment of Compromise Payment:

Branches / Offices should advise the borrowers to provide a written statement about
source of settlement amount. The statement thus provided should be examined critically
before official acceptance of the compromise proposal and should be narrated in details
in the proposal.
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COMPROMISE MODULES /SCHEMES
I. Thumb Rule System Compromise Modules
1. OTS Module for all types of tiny dues with COB up to Rs.1,00,000/- including all
types of loan
A: COVERAGE:
 On the date of submission of compromise proposal COB should not be more than
Rs. 1,00,000/= including all types of loan.
 On the date of Write Off outstanding ledger balance should not be more than Rs.
1,00,000/=
B. Discretionary authority for approval of compromise proposals:
Category of NPA Authority for Field Functionaries to accept under noted minimum
as on the date of percentages of above referred Cut off Balances (COB) as an OTS
submission of Amount
Compromise proposal Branch Head ZLCC headed by FGMLCC
AGM/DGM
Substandard 75% of COB 50% of COB 20 % of COB
Doubtful – I & II 50% of COB 25 % of COB 15% of COB
Doubtful-III/ Loss/WO 30% of COB 20 % of COB 10% of COB
(Partial /full)
2. OTS Module for NPA accounts with COB of Rs.1,00,001/- upto Rs.15.00 Lac for
advance under Farm Sector & other NPA accounts where full security as
mortgage is available.
A. COVERAGE:
 It will cover all Direct Agriculture NPA accounts of all types of farmers, having Cut
Off Balance from Rs.1,00,001/- up to Rs.15.00 lakh as on the date of submission
of Compromise proposal irrespective of sanctioned limit.
 All NPA accounts having COB of Rs.1,00,001/- up to Rs. 15.00 lac financed
under any scheme & for any purpose/ activity (where full security as mortgage is
available) other than those covered in Tiny dues up to Rs. 1,00,000/- OTS
module for Govt. sponsored cases & OTS module for Retail Loans sanctioned
abinitio unsecured.
Category of Bench Mark Sum for NPA accounts with COB of Rs.1,00,001/-upto Rs.15.00 Lac
NPA for Advance under Farm Sector & Other NPA accounts where full security as
Classification mortgage is available
Branch Head ZLCC headed by FGMLCC
AGM/DGM
SST 85% of COB 75% of COB 50% of COB
DF-1 75% of COB 60% of COB 35% of COB
DF-3/ Loss/ 50% of COB 40% of COB 20% of COB
WO/ PWO
(Partial /Full)
Note: Compromise proposal beyond the Authority of FGMLCC will be considered by
GMHLCC at Head Office.
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For farm sector advances, the discretionary authority for approval of compromise
proposals may be considered on facility/ individual account basis.
COB for agriculture advance will be arrived at the balance as per OTS calculation
given above or two times of the principal amount sanctioned whichever is lower.
3. OTS Module for NPA accounts with COB of Rs.1,00,001/- up to Rs.15.00 Lac for
Advance under Govt. Sponsored Cases, Retail Loans sanctioned abinitio unsecured, Farm
Sector & Other NPA accounts where full security as mortgage is not available.
A. COVERAGE
 All NPA accounts under various Govt. Sponsored Schemes with COB of
Rs.1,00,001/- up to Rs.15.00 Lac.
 Loans sanctioned under Bank’s Retail Schemes where no tangible securities are
stipulated abinitio, like Personal loan, SBOD, Personal loan for Doctors, Personal
loan for Pensioners, Education Loan (without any collateral-mortgage) etc with
COB from Rs.1,00,001/- up to Rs 15.00 lac.
 All NPA accounts having COB of Rs.1,00,001/- up to Rs. 15.00 lac financed
under any scheme & for any purpose/ activity (where full security as mortgage is
not available) other than those covered in Tiny dues up to Rs.1,00,000/- and
Farm Sector & Other NPA accounts where full security as mortgage is available.

Category of Bench Mark Sum for NPA accounts with COB of Rs.1,00,001/- upto Rs.15.00
NPA Lac for Advance under Govt. Sponsored Cases, Retail Loans sanctioned
Classification abinitio unsecured, Farm Sector & Other NPA accounts where full security as
mortgage is not available
Branch Head ZLCC headed by FGMLCC
AGM/DGM
SST 80% of COB 70% of COB 50% of COB
DF- 40% of COB 35% of COB 20% of COB
3/Loss/WO/PWO
Note: Compromise proposal beyond the Authority of FGMLCC will be considered by
GMHLCC at Head Office.
For farm sector advances, the discretionary authority for approval of compromise
proposals may be considered on facility/ individual account basis.
COB for agriculture advance will be arrived at the balance as per OTS calculation
given above or 2 times of principal amount sanctioned whichever is lower.
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II. BENCH MARK SCORE SYSTEM COMPROMISE MODULES
A. COMPROMISE MODULES & their Coverage:
4 .OTS Module for NPA Accounts under MSME sector
It will cover all MSME NPA accounts inclusive of written off debts (Partial/ Full).
5. OTS Module for NPA Accounts of other Sectors with COB above Rs.15.00 lac
up to Rs.25.00 Lac
 Will cover all Non-Performing Assets (which have been classified as NPA as at the
end of previous quarter) inclusive of written off debts including PWO accounts
(Partial/ Full) on settlement of all types of claim (if any) or as an internal arrangement
irrespective of nature of business, sector or classification of assets having COB up
to Rs.25.00 lac only.
 All non performing assets including where loans are sanctioned for no economic
activity like Housing loans, Car loans etc
6. OTS Module for Other NPA Accounts(i.e. COB above Rs.25.00 lac) not covered
under any other Modules including Fraud Declared Accounts
 NPAs with COB of above Rs.25.00 lac irrespective of the fact whether the
outstanding ledger section balance has been subsequently reduced or written-off as
an internal arrangement of the Bank(which have been classified as NPA as at the
end of previous quarter.)
 Advances of erstwhile UIB Ltd, where the ledger balance have been transferred (part/
full) to NRAC account at Head Office. But compromise proposal related to such
accounts will not be approved by at field level (Branch, ZLCC, and FGMLCC)
irrespective of amount of sacrifice. Such proposals will be approved by GMHLCC
/EDHLCC / CAC /MCBOD at Head Office as per their delegated authority.
 NPAs which are not covered by any other modules stated earlier.
1. All accounts where Fraud has been declared (irrespective of amount) by Head Office
shall be processed under this module and sanctioned by authority not lower than
FGMLCC under separately defined discretionary authority for Fraud accounts.
However, in such fraud accounts the loan/security documents including title deeds
will not be released to the borrower/guarantor/other third party paying the
compromise amount even on payment of full dues/compromise amount.
B. BENCH MARK SCORE SHEET FOR ASSESSMENT OF BENCHMARK SUM
For above three benchmark score system compromise modules, a common benchmark
score sheet for assessment of benchmark sum has been designed keeping in view of the
following key parameters which influence the minimum benchmark sum for negotiation of
compromise proposal.
1. Realizable Value of securities

2. Marketability/ Sale-ability of securities
3. Net worth of Borrowers + Guarantors together excluding the value of securities charged to the
Bank
4. Level of Business Operation/ Cash Flow Position/ Turnover
5. Pre NPA Age of the Account (Number of years the account remained standard)
6. Asset Classification (Period of NPA)
7. Legal Position/Enforceability of documents
8. Previous OTS
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PROPOSED BENCH MARK SCORE SHEETFOR ALL ABOVE 3 MODULES:
Name of the Account:
Key Parameters Points to be Considered Score Score
awarded
1.Realizable Value L.B.Rs…… Equivalent to Ledger balance (LB) or more 50
of securities Equivalent to 75% of LB or more but less than LB 40
(RVS= Primary + RVS Equivalent to 50% of LB or more but less than 75% of LB 20
Collateral) Rs…….. Rs…….
Equivalent to 25% of LB or more but less than 50% of LB 10
RVS/LB=… No realizable security or security Less than 25% of LB or 0
% security is not enforceable due to fraud/disputes
2.Marketability/ Sale-ability of Easily / readily marketable/sale-able /where value of the 10
securities properties has appreciated by 10% or more in comparison to the
(In case of more than one value taken at the time of last sanction /renewal/enhancement
property charged to the bank, the (over span of 2 years).
marketability parameter Not easily marketable/auction sale failed up to two times 5
applicable to more than 50% of Negligible Marketability/ Sale-ability – uncertain due to unique 2
the value of security shall be features of properties/auction sale failed 3/4 times
taken in determining the No Marketability/ Sale-ability – remote due distinct intrinsic or 0
benchmark sum) external adverse factors/auction sale failed more than four
times/where no security taken or Realizable Value of Security is
Nil.
3.Net worth of L.B.Rs… Equivalent to Ledger balance (LB) or more 10
Borrowers + ….. Equivalent to 75% of LB or more but less than LB 5
Guarantors together N.W
Equivalent to 50% of LB or more but less than 75% of LB 3
excluding the value of Rs…….
securities charged to NW/LB=. Equivalent to 25% of LB or more but less than 50% of LB 2
the Bank (Rs…….) ..% Less than 25% of LB 0
4. Level of Business Working satisfactorily/ Activity at 75% & above of normal level 10
Operation/Cash Flow working at 50% to below 75% of normal level 5
Position/Turnover working at 10% to below 50% of normal level 3
Working at below 10% of normal level 2
Business closed/no cash flow/no salary/no pension 0
5. Pre NPA Age of the Account Less than 3 years 5
(Number of years the account 3 years to less than 5 years 3
remained standard) 5 years to less than 7 years 2
7 years to less than10 years 1
10years & more 0
6.Asset Classification Sub-standard 5
(Period of NPA) Doubtful – 1 4
Doubtful – 2 3
Doubtful – 3 2
Loss & Fully Written Off Debts 0
7.Legal Position/Enforceability of Bank’s claim on borrower/guarantor & charge on 5
documents securities/mortgage both are in order
Only Charge on securities/mortgage is NOT in order* 3
Only Bank’s claim on borrower/guarantor is NOT in order 2
Both the claims of Bank defective/not enforceable 0
8. Previous OTS OTS approved & recovered less than 50% of OTS amount 5
OTS approved & recovered 50% and more of OTS amount 3
No OTS approved in past 0
Final BENCHMARK SCORE 100
In case of benchmark score under the factor
“Marketability of securities” is less than 10,
specify restrictive features of the property in
putting sale under SARFAESI Act.
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C. Calculation of Benchmark Sum on the basis of total Benchmark Score:
On the basis of the above total benchmark score obtained, the benchmark sum for the
above three modules is to be assessed for the respective modules as per the chart given
below:
Final Benchmark Sum
Score OTS Module for MSME OTS Module for other OTS Module for All other NPA
Sector Sector with Ledger accounts (i.e. other than
Balance up to Rs.25.00 MSME & with ledger balance
lacs above Rs. 25.00 lacs
91-100 LB + Cost + 80% of notional LB + Cost + 90% of LB + Cost + Full notional
uncharged interest. notional uncharged uncharged interest.
interest.
81-90 LB + Cost + 50% of notional LB + Cost + 60% of LB + Cost + 70% of notional
uncharged interest. notional uncharged uncharged interest.
interest.
71-80 90% of LB LB LB + cost
61-70 80% of LB 85% of LB 90% of LB
51-60 65% of LB 70% of LB 75% of LB
41-50 40% of LB 50% of LB 60% of LB
31-40 30% of LB 40% of LB 50% of LB
0 – 30 20% of LB 30% of LB 35% of LB
LB: Ledger Balance
Cost: Expenses incurred for recovery not debited to ledger &or yet to be paid
a) Name of the OTS Module:
b) Total Benchmark Score:
c) Total Benchmark Sum:
D. Minimum Recoverable (OTS) Amount (MRA):
a Outstanding Ledger Balance Amount
b PWO Amount
Notional Uncharged Interest @ one month MCLR (simple) from the date of last
c
interest charged up to the period to which compromise sum bears no interest.
d Legal & other dues (paid but not debited to ledger or payable)
Total Notional Dues(which includes LB,PWO, Notional uncharged Intt, Legal &
e
other dues )
Benchmark Sum as ………% of Ledger Balance plus …. On the basis of
f
Benchmark Score (….) as per benchmark score sheet (annexure-…)
g Present Realizable Value of all Securities charged to the Bank
Net Present Value (NPV) of the Securities charged to the Bank, (if compromise
h sum offered is less than realizable value of securities)
Net Present Value (NPV) of compromise sum offered (If payable in installments &
i
without interest OR interest below one month MCLR (simple) rate.
Generally Minimum Recoverable (OTS) Amount (MRA) is computed as under: If i=>h,
then MRA = higher of f or g. But in certain cases, OTS amount will be lower than MRA
j
but the NPV of compromise amount will be not be less than NPV of realizable value of
securities.
If amount of compromise sum offered is less than above referred MRA and/or i<
k h, then specify the reasons for recommendation of compromise offer.
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E. CALCULATION OF TOTAL SACRIFICE& ITS IMPACT
TOTAL SACRIFICE
Write Off Of Ledger Balance
Absorption of PWO/VWO balance
Waiver Of Uncharged Interest
Waiver Of Legal & other dues
Impact of acceptance of this compromise on
Reduction in NPA
Realization of uncharged/unrealized interest (increase of Profit)
Credit Back of PWO amount in Other Income(increase of Profit)
Release /Reversal of presently held Provision for this
A/C(increase of Profit)
Debit to Provision/PWO A/C for closure of A/C
Additional Debit to P&L A/C for closure of A/C (decrease of Profit)
Recovery /realization of Legal & other Expenses already incurred
by Bank (Gain for Bank )
Absorption of Legal & other Expenses already incurred by Bank
(Loss for the Bank)
F. DISCRETIONARY AUTHORITY FOR APPROVAL OF COMPROMISE PROPOSALS

UNDER BENCH MARK MODULE
DELEGATEES SACRIFICE
(Rs. in Lac)
Write off Waiver of
notional
interest and
other charges
BOARD/MANAGEMENT COMMITTEE OF THE FULL FULL
BOARD (MCBOD)
CREDIT APPROVAL COMMITTEE OF THE 250.00 250.00
BOARD (CAC)
EDHLCC 175.00 175.00
GMHLCC at Head Office 70.00 70.00
FGMLCC 50.00 50.00
ZLCC headed by DGM 20.00 20.00
ZLCC headed by AGM 10.00 10.00
VLB/ ELB/EELB (HEADED BY SCALE – IV & 5.00 5.00
ABOVE)
G. For above three benchmark score system compromise modules (except for fraud cases),
the amount of sacrifice involved will determine the discretionary authority for approval of
the compromise proposals.
H. Compromise proposal in which the write off amount of the ledger balance will be more
than the provision held in the account as on the preceding quarter will be considered by
the next higher authority under whose delegated authority for sacrifice will fall.
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I. For Accounts declared as fraud (irrespective of amount) by the Bank, the
Discretionary Authority for approval of Compromise Proposals at various levels
shall be as under-
(Rs. in Lac)
Outstanding SACRIFICE
DELEGATEES Ledger (Write-off
Balance &waiver
Upto together
BOARD/MANAGEMENT COMMITTEE OF THE BOARD FULL FULL
(MCBOD)
CREDIT APPROVAL COMMITTEE OF THE BOARD (CAC) 100 150
EDHLCC 50 75
GMHLCC at Head Office 15 20
FGMLCC 10 15
ZLCC headed by DGM NIL NIL
ZLCC headed by AGM NIL NIL
VLB/ ELB/EELB (HEADED BY SCALE – IV & ABOVE) NIL NIL
Note-
2. On sanction of Compromise Proposals by FGMLCC in Fraud declared accounts, the
FGMO shall submit a copy of process note along with copy of sanction letter to HO
Recovery Department at the end of each month for placing before the Board of
Directors/ MCBOD for information as per RBI guidelines.
3. In case of fraud accounts the loan/security documents including title deeds will not
be released to the borrower/guarantor/other third party paying the compromise
amount even on payment of full dues/compromise amount.
III.Proposal below Benchmark Sum

Compromise proposal below the Bench Mark sum may be considered by next higher
authority only on case to case basis depending upon realizable value of the security, net
worth of the borrower/guarantor, recoverability of dues and other pertinent factors as the
case may be. However, amount of sacrifice should not exceed their respective
delegated authorities, if the sacrifice exceeds, then it will be considered by next higher
authority under whose delegated authorities amount of sacrifice falls.
IV. Exercise of Discretionary Authority at the time of Recovery Camp/Lok Adalat:
While conducting the Recovery Camps/Lok Adalats at different locations the executives
from the controlling offices (ZO/FGMO/HO) are being deputed for taking on the spot
decisions at the camp site. For taking quick decision on compromise proposals the
highest Executive present at the camp site will approve in principle the compromise
proposals with authority of the Committee level equivalent to his/her rank. For example
the Deputy General Manager/General Manager from controlling offices attending the
Recovery Camp/Lok Adalat can exercise the authority of DGM ZLCC/FGM HLCC
respectively. Such in principle approvals will be placed before the concerned committee
for final sanction.
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CHAPTER 6
COMPROMISE AND OTHER RECOVERY RELATED ISSUES
HANDLING OF COMPROMISE PROPOSALS WITH SPECIAL CONDITIONS
1. Payment of compromise sum by third party /investor /purchaser of charged

assets as part of OTS
There may be certain cases where Borrowers / guarantors want to settle their dues with
the bank through OTS but have no liquidity for making the payment. In such a situation,
they arrange for funds from Lender /Investor / Purchaser of charged assets/ARC/ Third
Party (hereinafter referred as Third party), who is ready to lend them the money for
making payment to the bank. In lieu of this, the said third party wants to secure himself
and may request the bank as under:-
I.Assignment of Debt as part of OTS
In this case above referred third party to secure himself requests the bank to transfer by
way of assignment all its rights to recover the dues from the borrowers (right of
subrogation) to him to which the borrowers have also agreed. This arrangement is
known as OTS through Assignment of Debt. The assignee other than a Securitization
Company cannot step into the shoes of bank’s recovery proceedings in DRT/Court.
Assignment agreement will be executed on behalf of the Bank by the Branch Head
authorized by the Competent Authority. (Draft of the assignment agreement is to be
prepared with the help of Senior Manager (Law)/ Manager (Law) /Law Retainer). Above
such proposals will be considered /sanctioned by all the field functionaries within their
delegated authority of allowing /sanctioning sacrifice /loss approved by the Board for
normal compromise proposals.
II.Assignment to ARC as part of OTS:

Assignment to ARC can be made only under the provisions of SARFAESI Act.
Compromise Proposals where amount of compromise offered or part of compromise
sum offered is to be paid by ARC against Assignment of debt are to be dealt &
processed like other normal compromise proposal (Please refer Chapter 5) . However,
all such proposals will be approved under the authority of MCBOD. With such
proposals offer letter/ consent letter of ARC must be enclosed. Branches after the
receipt of entire compromise sum as per terms of the sanction will assign the debt in
favour of ARC & Assignment agreement will be executed on behalf of the Bank by the
Branch Head authorized by the Competent Authority. Draft of the assignment
agreement is to be prepared with the help of Senior Manager (Law) / Manager (Law)
/Law Retainer). Security & other documents are to be delivered to the ARC against
acknowledgement only after receipt of Compromise Sum as per terms of sanction.
III.Delivery of the title deeds & other related documents related to charged assets
held with bank.
Above such proposals will be considered /sanctioned by all the field functionaries within
their delegated authority of allowing /sanctioning sacrifice /loss approved by the
Board for normal compromise proposals. While approving of such proposals, following
terms and conditions have to be additionally stipulated in terms & conditions of sanction
letter.
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a. All cost towards Stamp duty, registration and other charges (if any) shall be borne by
the Assignee /Third Party /Investors /Purchaser of Charged Assets.
b. The Third Party /Investors /Purchaser of Charged Assets other than a Securitization
Company cannot step into the shoes of bank’s recovery proceeding in DRT/Any Court.
c. Bank will file application before concerned DRT/Court for closing the recovery
proceeding initiated at DRT/ Court by the Bank after receipt of entire compromise sum
from such Assignee/Third Party/ Investor/ Purchaser of Charged Assets.
d. The Assignee /Third Party /Investors /Purchaser is to pursue its rights separately, at
its own.
e. In terms of RBI guidelines any compromise proposal approved by the bank in suit filed
account has to be placed before the Court/DRT by way of a joint petition for consent
decree with a default clause. In case the Assignee /Third Party /Investors /Purchaser
are agreeable to pay on behalf of the borrowers / guarantors the compromise sum
immediately on bank’s communication, the bank may accept the same and on
recovery of entire compromise sum as per terms of sanction a joint compromise
petition signed by the bank and the defendants has to be filed before Civil Court/DRT
without fail facilitating the Court/DRT to dispose of the suit accordingly.
f. The charged security should not be released to the Assignee /Third Party /Investors
/Purchaser before completion of the process as above.
g. No dues certificate should be issued only on completion of the process mentioned as
above.
h. In case Third party requests for Assignment of Debt as part of OTS then a
Memorandum of Assignment of Debt will be executed incorporating the terms and
condition of the sanction in each case after being duly vetted by the Law Officer /Law
Retainer of the Zone.
i. In case the third party requests for delivery of the title deeds & other related
documents then an Agreement (as per annexure -17) will be executed between
(1)Borrower (2) Guarantor /Mortgagor,(3) The Third Party /Investors /Purchaser & (4)
The Bank incorporating the terms and condition of the sanction. In each case it is to
be executed after being duly vetted by the Law Officer /Law Retainer of the Zonal
Office.
2. Refund of the compromise amounts received from the third party/investor as per
the terms of agreement between bank, borrower mortgagor and third party and on
repayment of entire compromise sum Bank has to release the charged securities
a. When Bank will accept compromise wherein third party/ investor will make the
payment of the compromise sum and against which Bank will release all or part
charged securities, under such condition entire compromise sum paid by the third
party or investor will be kept in a No Lien account and same will be adjusted /
credited in concerned loan account only at the time of release of title deeds as per
the terms of agreement between Bank, borrower, mortgagor and
purchaser/investor.
b. Refund of the compromise amount received from the third party arises under the
following situations.
 When the competent court gives specific order of refund of amount deposited by
third party/Investor
 If Bank is not able to discharge its obligation as contained in sanction letter/MOU
due to legal case/complications propped up or created by Borrower /Guarantor/
other third parties (refund after 6 months of reporting/ notice of such situations.
 If any defect is found later on in the title of the mortgaged property under sale.
80
c. If the third party fails to pay the total compromise amount for other than above
reasons, then it will be forfeited by the Bank.
d. The refund of such compromise amount debited to “No Lien Account” is
vested with the following authorities:
Authority Amount
FGMLCC Actual amount paid/ deposited by third party/investor
EDHLCC Actual amount paid/ deposited by third party/investor
plus interest @ SB rate
CAC Actual amount paid/ deposited by third party/investor
plus interest @ above SB rate
3.1. RELEASE OF CHARGED SECURITIES IN NPA ACCOUNTS:
In certain cases borrowers/guarantors approach the bank for release or sale of their
securities mortgaged to the Bank against payment by themselves or third party
(purchaser). In past it has been learned that in some cases Bank has faced
problems to sell the charged properties under SARFAESI Act due to non-receipt of
bidding, but the mortgagor comes forward for release of the securities on payment of
the value of the properties by himself or through the third party. Bank has also
received proposals from the mortgagor for release of the securities on payment of
the value of the properties by himself or through the third party in some cases like
where SARFAESI Act is not enforceable or where the mortgagor approaches the
bank before or in process of enforcement of SARFAESI Act.
With a view of early recovery Bank will consider such cases on case to case basis
by following under mentioned terms, conditions and procedures:
A. Release of the securities charged in NPA accounts to the mortgagor himself:
In these cases Bank will release the charged securities to the mortgagors directly if
they fulfill the under noted criteria.
 Amount offered for release of the charged security should be higher than the
highest of the under noted values of the charged securities to be released.
a) It’s Latest highest Fair Market Value assessed by any of the two Bank’s
approved valuers (valuation should not be more than 3 months old).
b) It’s Fair Market Value taken at the time of last sanction / renewal/
enhancement/restructuring.
c) Value estimated considering present circle rate.
 The mortgagor borrower/guarantor has to deposit 25% of the amount offered and
all up to date expenses incurred by the bank in various recovery actions for
recovery of bank’s dues.
 It has to enter into an agreement/MOU with the bank containing liability &
discharge of duties/ terms & conditions as stipulated by the bank.
B. Release of the securities charged in NPA accounts to the mortgagor for sale
to the third party
There may be instances in NPA accounts where the mortgagor borrower/guarantor

comes forward and proposes to sell the property to the prospective buyer on pre-
negotiated terms with the conditions of deposit of sale proceeds directly with the
bank and release of the property to the mortgagor. In such cases, the proposals
81
should be assessed on case to case basis looking to prospects of early recovery. In
these cases Bank will release the charged securities to the mortgagor directly if they
fulfill the under noted criteria.
 Auction sale under SARFAESI Act or by DRT must have failed at least twice.
 Branch has to comply with the KYC norms of the purchaser and has also to
ascertain the genuineness of the third party purchaser.
 The Reserve Price at the time of auction must have been fixed as described in
Chapter – 9 (taking into consideration the valuation by one or two valuers
depending upon each case and estimation value by the two Bank officials).
 Amount offered for release of the charged security should be higher by 10-
15% of the reserve price fixed at the time of last failed auction sale.
 The mortgagor borrower/guarantor has to deposit 25% of the amount offered and
all up to date expenses incurred by the bank in various recovery actions for
recovery of bank’s dues.
 It has to enter into an agreement/MOU with the bank containing liability &
discharge of duties/ terms & conditions as stipulated by the bank.
a) PROCEDURES TO BE FOLLOWED AT THE TIME OF RELEASE OF

SECURITIES:
 After receipt of entire proceeds of sale of charged securities and expenses as
referred above / approved by the competent authority, the title documents and
charge over the property shall be released to the concerned mortgagor.
 The bank shall not be liable for handing over possession of the property and the
documents which are not in possession of the Bank.
 Under no circumstances Bank will issue sale certificate or execute any document
relating to sale/purchase of the property.
 The borrower/guarantor/mortgagor shall not be discharged/ exonerated from the
Bank’s outstanding liability after credit/adjustment of proceeds of sale or release of
charged securities and the bank shall be at liberty to proceed against them and other
secured assets for recovery of balance dues through action under
SARFAESI/DRT/Court etc.
 Borrower/Guarantor/Mortgagor and purchaser should execute MOU with the bank.
The Draft Memorandum of Understanding as per Annexure – 18 will be prepared by
the bank’s panel advocate and vetted by the law officials posted at Zonal
Office/FGMO.
 Bank’s SARFAESI action against those particular securities to be released will be
kept in abeyance only after receipt of 25% of the approved amount for sale/release
of securities and execution of MOU as stated above.
b) Delegation Authority for releasing the charged securities:
For releasing the charged securities as stated above, the power is vested with the
authority that has last sanctioned/enhanced/reviewed/renewed/restructured the loan
account. The concerned approving authority except MCBOD will report such approvals
to the next higher authority for information.
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3.2. RELEASE OF CHARGED MOVABLE SECURITIES IN NPA ACCOUNTS:
The detailed guidelines / procedure in this regard have been circularized in HOIC No.
14174/ Recovery/2015-16/05 dated 02.03.2016 which is required to be strictly followed
by the field functionaries. For the sake of convenience the contents of the said circular
is being reproduced hereunder.
It has been observed that in some cases field functionaries find difficulty to sell the
charged moveable securities such as vehicles, stocks & other current assets, etc and
also plant & machineries under SARFAESI Act due to various reasons. Particularly in
case of finance to the transporters operating in pan India, the bank faces difficulty in
taking possession of the vehicles for sale. In certain cases borrowers approach the
bank for release or sale of their moveable securities hypothecated to the Bank against
payment by themselves or third party purchaser.
The procedure for dealing such cases is given below:
When any borrower comes forward and proposes to sell the charged moveable
securities and plant & machineries to the prospective buyer on negotiated terms with
the conditions of deposit of sale proceeds directly with the bank and release of the
property to the third party or to release such securities to him on payment. In such
cases, the proposals should be assessed on case to case basis looking to prospects of
early recovery.
In these cases the field functionaries will release the charged securities to the
borrower/third party purchaser if the under noted criteria are fulfilled.
a) Auction sale under SARFAESI Act must have failed at least once in case of Plant &
Machinery, equipments etc. installed in the factory or unit.
b) In case of moveable securities (such as vehicles/ stocks etc.) where bank could not
take possession of the securities due to various reasons such as vehicles are plying
pan India, safe keeping of the charged security is difficult or a costly affair, etc. prior
auction sale is not mandatory.
c) The charged securities should be valued by Bank’s approved valuers /surveyors/
automobile engineers (please refer to HOIC No. 12186/Retail credit/2012-13/23
dated 1/12/2012 regarding valuation of vehicles). If the present value of the charge
securities is more than Rs.10.00 lacs, valuation should be obtained from two
independent valuers. In case where bank’s approved valuers/surveyors/ automobile
engineers are not available, branch may avail service of the approved valuer of the
other bank (SBI & other PSU bank). The valuation report should not be more than 3
months old.
d) Two bank’s officers will visit the charged securities & submit their visit cum valuation
report in the prescribed format. In case the charged securities are located at far
away from the lending branch, help of the nearby branch/zone may be availed.
Officers’ visit report should not be more than 3 months old.
e) For release of the charged moveable securities and plant & machineries, bank,
besides obtaining valuations as stated above (approved valuer /two bank officers’
valuation) will also work out the present depreciated value of the moveable assets to
be released on the basis of the depreciation allowance allowed on the basis of the
written down value method as per Income Tax Act. The highest valuation out of
above referred different valuations will be treated as the benchmark value for
releasing/sale of such moveable securities.
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f) Authority for issuance of In-principle permission/ No Objection Certificate
(NOC) for release of charged securities
Whenever the borrower requests for In-principle permission/No Objection Certificate

(NOC) for release/sale of the charged moveable securities and plant & machineries so
that the borrower can initiate the process of mobilization of prospective buyer, with the
intention to reduce/liquidate the dues of the Bank, the authority to accord issuance of
such In-principle permission /NOC will be as under, however, final approval for
sale/release of the charged movable securities will be accorded as per undernoted
clause “j”.
Sl Category/situation Authority for Remarks
grant NOC
1 All loans sanctioned

below the Rank of Zonal ZLCC
Head /ZLCC. Bank should have not declared
fraud, flag as “Red Flag” & also
2 All loans sanctioned by
should have not perceived
Zonal Head/ZLCC. FGMLCC
fraud in the account.
FGM/FGMLCC. CAC
CAC/MCBOD/Board & all
accounts where bank has Irrespective of last
flagged “Red Flag” & has CAC Sanctioning / reviewing
perceived fraud. Authority of the loans.
5 All fraud declared

accounts MCBOD
g) The branch has to comply with the KYC norms of the Purchaser & has also to
ascertain the genuineness of the third party purchaser.
h) Validity of the notice/NOC to be issued by the bank will be initially for a period up to
three months. In case borrower is unable to complete the sale in first three months
then at the request of the borrower above referred competent authority can further
extend it by another three months provided they feel that completion of sale within
stipulated period was beyond the control of the borrower. After the expiry of the
validity period of NOC or at any stage if Bank is of the opinion that borrower is not
putting serious efforts for sale of charged movable assets then bank can withdraw
the NOC and will reinitiate its recovery process where it was stalled at the time of
consideration of borrowers request for issuance of NOC.
i) Borrower in his request letter for issuance of In-principle permission/No Objection
Certificate (NOC) for release/sale of the charged moveable securities and plant &
machineries, should mention that he can initiate the process of mobilization of
prospective buyer, with the intention to reduce/liquidate his dues towards our bank
and will also undertake for the following:-
i. To publish notice in the two leading Newspapers about his inviting bids for sale of
moveable assets on which he has created bank’s charge specifically specifying
therein, that he is offering the same for sale pursuant to NOC issued by the bank
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and the sale shall be subject to the terms & condition of the NOC issued by the
bank. Out of these two Newspapers, one will be in local vernacular language.
ii. Sale proceeds thereof shall be directly deposited by the purchaser with the Bank for
reduction / liquidation of Bank’s dues towards him.
iii. Copy of notice got published by him in two news papers duly served upon the
Guarantor (if any) will be provided by him to the bank.
iv. Charged movable assets will be sold to highest bidder only.
v. After the expiry of the validity period of NOC or at any stage, if Bank is of the
opinion that he is not putting serious efforts for sale of charged movable assets,
then bank can withdraw the NOC & can reinitiate its recovery process where it was
stalled at the time of submission of the request for issuance of NOC.
j) Final Authority for releasing the charged securities.
The authority for release /sale of the charged moveable securities will depend upon the
difference between the benchmark value for releasing/sale of the charged moveable
securities worked out as per the procedure mentioned above in para “e” and the amount
offered by the third party purchaser/the highest amount finalized/negotiated under
auction process. The Authority for approval for sale/ release of the charged movable
securities are vested with as under:
Amount: Rs. in lacs
Authority level Amount of difference between the benchmark Remarks
value of the securities to be released and the
amount to be paid by the third party purchaser /
the amount finalized /negotiated under auction
process
ZLCC headed No difference / offered amount greater than Bank should have not declared
by AGM/DGM benchmark value fraud, flag as
“Red Flag” & also
FGMLCC 50.00 should have not perceived
GM HLCC at HO 60.00 fraud in the account.
EDHLCC 150.00
CAC Any Amount
Any Amount All cases where Bank

has declared fraud, flag as
MCBOD “Red Flag” & have perceived
fraud in the account.
k) The borrower/guarantor shall not be discharged/ exonerated from the balance
outstanding liability.
l) The Bank will issue NOC & permit sale of charged movable assets for realization its
dues part or full (Civil Liability only) from the borrower(s)/ the guarantor(s).There will
be no settlement /NOC with respect to any criminal liability which is established
/under trial (criminal cases / proceedings) in any Courts / State Police, CBI, CID &
other Statutory Authorities /agency, OR for any fraud(Criminal Case) , which may be
detected by the bank on later date against borrower(s)/ the guarantor(s)/any other
person.
m) In cases where any type of legal cases (Recovery Suit/Original Application
(OA)/SARFAESI Application (SA) /Appeal/Decree Execution) is going on in any
court/DRT (Supreme court /High Court /DRT/DRAT etc) Agreement/Memorandum of
85
understanding (MOU)/ petition containing all terms & conditions of NOC/ terms of
sale of charged movable assets for realization bank’s dues in part or full will be filed
with the relevant courts/DRTs etc, with a further request that on non compliance of
any terms & condition of NOC /MOU/ petition by the Borrower, relevant court may
award of decree against him/them . Approval of such NOC/ sale will be subject to
the permission/approval granted by the relevant court. In cases where the
Police/CBI complaint had been filed, the interest of the investigating agency should
be kept in mind and protected while permitting NOC/permitting sale of charged
movable assets for realization bank’s dues part or full. The compliance of
precautions/guidelines approved by the Board for accepting /approving compromise
in fraud cases will also be ensured in such cases without fail.
n) For movable charged assets which is reported in fraud report/FIR, neither NOC will
be issued & nor permission will be granted by the competent authority without
obtaining permission from the investigating agency/ Statutory Authorities.
o) In case of sale to third party, borrower and purchaser should execute MOU with the
bank and sale proceeds will be directly deposited with the bank with down payment
of 25%. The Draft Memorandum of Understanding in line with existing Memorandum
of Understanding provided in the Recovery Management Policy (Annexure 18) will
be prepared (suitable changes to be made on case to case) by the bank’s panel
advocate and vetted by the law officials posted at Zonal Office and if no such law
person posted at ZO, then by the law officials posted at FGMO/HO.
p) After receipt of the entire proceeds, the charge over the property shall be released to
the concerned borrower only.
q) The bank shall not be liable for handing over possession of the moveable charged
securities and the documents which are not in possession of the Bank.
r) Under no circumstances Bank will issue sale certificate/ transfer certificate or
execute any document relating to sale/purchase of the charged moveable security.
4. Debt Asset Swap as part of OTS

In the context of invocation of SARFAESI Act, 2002 against the defaulting borrowers,
there may be instances when the borrowers in response to the notices served on them,
may propose that since they are under financial constraints, the bank may acquire
secured assets/ mortgaged property/flat towards part liquidation of outstanding dues or
full and final settlement of outstanding dues of the borrower. This is termed as Debt-
Asset Swap. This can be helpful in such situations in arriving at OTS when settlement
amount is proposed to be received by way of acquisition of land/building of the
borrower/ co-obligants.
For this mortgagor has to provide the vacant and peaceful possession of the property to
the Bank & there should not be any municipality & other statutory dues /taxes payable
(overdue). Bank can purchase/acquire the mortgaged property either for its own use or
for sale at a later period. As per section 9 of Banking Regulation Act, such property has
to be disposed off within 7 years if property is not purchased for Bank’s own use. In this
condition, the salability of the property to recover the cost and other expenses incurred
by the bank should be ascertained by the Zonal Office based on market demand,
locational and other advantages of the property. Such properties have to be valued by
two Board approved valuers & we have to further discount the lowest realizable values
suggested by these valuers by 10%. This will be the maximum bench mark for branch &
ZLCC for negotiation of the price of the property offered by the mortgagor for acquisition
86
by the Bank for part or full realization of their dues. Once ZLCC finally arrived at price
agreeable to them & mortgagor, concerned Zonal Office has to put up the above
proposal of acquisition of land/building of the borrower/ co-obligants along with the price
of the property in question arrived at, with their due recommendation & uses of the
proposed property to Head Office Premises Department who in turn will take the
permission/approval from the Competent Authority (In terms of their own policy for
purchase of premises & Bid policy) & convey the same along with credit advice being
the price of the property to be acquired by the Bank to the concerned Zonal Office .
Once the required permission & price of the property finalized by the premises
Department is obtained & proposal is for Debt Asset Swap as part of OTS then amount
of sacrifice will be calculated as usual (as described in this policy-handling of
compromise proposal) then Delegated Authority for approval of such proposal is as
under.
Delegated Authority for approval for Debt Asset Swap as part of OTS:
(Rs.in lac)
Authority Sacrifice up to
(write off & waiver of interest together)
Management Committee of the Board Full powers
Credit Approval Committee of the Board (CAC) 100.00
Executive Director Level Credit Approval 50.00
Committee (EDHLCC)
General Manager Level Credit Approval 25.00
Committee at Head Office (GMHLCC)
Concerned branch after taking physical possession of the said property, completing all
the formalities of registration of sale deed / deed of conveyance with the Competent
Registering Authority, its mutation in favor of the bank & payment of statutory dues to
the concerned Authority will send the all the original documents to HO Premises
Department for their safe custody.
This option should not be used by the bank as a tool to bail out the borrower but to be
used judiciously and sparingly based on pragmatic decision. The Branches and Zonal
Offices must put the justification on record while recommending such cases to HO. It
should be onus of the recommending branch and zonal office to ensure disposal of the
property within maximum permissible period of 18 months if the property is not acquired
for the purpose of bank's own use.
5. ASSIGNMENT OF DECREE
Bank can also consider assignment of Decrees for a consideration. For the purpose of
assignment of Decree, the value/amount of the assignment would be the amount
decreed by the Court together with the future rate of interest awarded in the decree from
the date of filing suit till payment or realization.
For determining the consideration amount in each case the benchmark system as
applicable to compromise settlement under OTS Module for all other accounts shall be
taken into consideration. The consideration amount for assignment of decree will be at
higher of the two i.e. benchmark sum and realizable value of securities available in the
decreed account.
The amount of sacrifice will be determined on the basis of ledger balance/ notional
ledger balance (in case of written off debts) plus legal & other expenses and uncharged
87
interest as applicable to respective asset classification during compromise settlement as
incorporated in this policy guideline. Based on the sacrifices/ loss arrived at, such
proposal will be sanctioned by the authority competent to sanction the
OTS/Compromises as delegated by the Board.
Assignment / selling of decree should be done in consultation with the competent
Advocate to ensure observance of all legal procedures in this regard.
6. COMPROMISE IN SUIT FILED ACCOUNTS

Compromise settlement can be considered in the Suit filed accounts or cases where
decree/recovery certificates have not yet been passed by Civil Court/Debt Recovery
Tribunals by observing the following guidelines :
i. While receiving compromise proposals, endeavor should be made by the

Branches/ZOs for obtaining the signature of all the defendants on those proposals.
After approval of the proposal by the Competent Authority the letter of the bank
(communicating such proposals) addressed to the borrower/Guarantor specifying
the terms and conditions should be acknowledged and accepted by the defendants
by endorsing acceptance of those terms and conditions.
ii. In terms of RBI guidelines any compromise proposal approved by the bank in suit
filed account has to be placed before the Court/DRT by way of a joint petition for
consent decree with a default clause. In case the borrowers / guarantors are
agreeable to pay the compromise sum immediately on bank’s communication, the
bank may accept the same and on recovery a joint compromise petition signed by
the bank and the defendants has to be filed before Civil Court/DRT without fail
(Annexure-15) facilitating the Court/DRT to dispose of the suit accordingly. The
charged security should not be released before completion of the process as above.
No dues certificate should be issued on completion of the process as above.
iii. If any one or more of the defendants are not joining in signing the compromise
proposal and similarly all the defendants are not joining in accepting the terms and
conditions of compromise settlement and are also not joining in the compromise
petition, the suit may be continued against those defendants who are not joining in
the joint compromise petition. Consent decree would be passed by the court/tribunal
between the bank and the consenting parties. In case the consenting parties pay
compromised amount in full and final settlement of the account as per the repayment
schedule, the suit/recovery proceedings against the other defendants will not be
proceeded with by the bank.
In this connection the following points should be noted:-

a) In case some of the defendants have to be released, for which prior permission of
the competent authority has already been obtained in this regard, then these
defendants need not sign the joint compromise petition and the Recovery suit need
not be continued against them.
b) In case all the defendants are not signing the compromise proposal, branches/
ZOs should ensure that those defendants, joining the compromise proposal have
adequate credit worthiness.
c) The defendants who have created securities in bank’s favour by way of mortgage
or by any other means should not be absolved from their liability for the reason that
in case of any default in repayment of compromise amount, the bank will not be in
88
a position to enforce the securities created by them if they are released by the
bank.
d) In case of default by the defendants against whom consent decree with default
clause has been passed / ordered, it is necessary to file petition immediately
before DRT requesting for issuance of recovery certificate in case of default by
those defendants. In that application, the bank should specify the amount of
decree /the amount received by the bank and the balance amount payable by the
defendants together with interest,
iv. In case entire OTS amount is received by the Bank as per the sanctioned terms and
account is closed, then application be filed in DRT for closure of OA (Suit), release
of security documents and consigning the case to the records.
7 COMPROMISE IN DECREED ACCOUNTS:

Where the suit is a mortgage suit or a suit where decree in respect of mortgaged
property is sought and the court granted preliminary decree and at this stage a
compromise settlement is arrived at between the bank and the defendants, then a joint
compromise can be filed by both parties and the court can pass Joint compromise or
Consent Decree incorporating the terms of compromise (Annexure-16).
In case of preliminary decrees, where there is no compromise, the bank should file an
application for final decree before the court and the same must be filed within three
years from the date of Preliminary decree or if any period is fixed in the preliminary
decree, in that case the limitation period available is 3 years from the date of expiry of
such period.
a) In case of Decree of Civil Court

If execution not started – bank may defer execution till realization of dues as per
compromise.
b) If execution proceedings already started -
c) A joint petition before the execution court should be filed narrating facts of the
compromise settlement and to keep the execution in abeyance till realization of dues
as per compromise.
OR
d) In case of breach of compromise by Defendants / Judgments Debtors – execution
proceedings will be restored by filing a petition for restoration of execution
proceedings.
OR
e) The limitation period available for execution of decree before civil courts is 12 years.
Therefore in appropriate cases where sufficient limitation period is available and the
compromise settlement is arrived at and the repayment is spread over a period of
time in phased manner or in installments then the bank may apply to the executing
court for keeping in abeyance / closure of the execution petition with a liberty to file
fresh execution petition on a later date for restoration of the EP, in case of default by
the Judgment debtors and without prejudice to the charges created in bank’s favour
and attachment orders passed. In such cases, it is to be ensured that filing fresh
EP/petition for restoration of EP is made within limitation period.
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f) In case of Recovery Certificate of DRT
There are two options available in the above cases to the bank looking to the practice of
DRT.
1. A joint petition before the Recovery Officer narrating facts of the compromise
settlement with a prayer to postpone the execution proceedings till realization of
dues should be moved.(Annexure-16)
2. In case of breach of compromise, execution proceedings should be restored.
3. In case entire OTS amount is received by the Bank as per compromise terms,
application for closure of RP/RC, release of documents and consigning the case
to records be filed.
their delegated authority of allowing /sanctioning sacrifice /loss approved by the
Board for normal compromise proposals.
8. COMPROMISE SETTLEMENTS WITH BORROWERS AGAINST WHOM CRIMINAL

CASES HAVE BEEN FILED BY THE BANK FOR OFFENCES LIKE CHEATING,
FORGERY, etc.
(References: HO Recovery Department Circular Letter No. Ref/HO/Recovery/Circular
Letter/ 219 dated 01.06.2009; HO/RECOVERY/CIRCULAR LETTER/VIG./842 dated
16.11.2009 and IBA’s Circular Letter No. LEGAL/CIR/655 dated 8 th June 2009)
On the matter as captioned we once again reiterate that the bank deals with civil liability
of the borrowers while entering into an OTS with such borrowers. As such there should
not be any clause in the settlement agreement / Memorandum of Understanding (MOU),
petition for consent decree filed with the Courts / DRTs etc. which may dilute the
criminal liability of the borrowers.
Central Vigilance Commissioner in a recent communication has provided some

directives to the bankers through Indian Bank’s Association in this regard. In the said
communication CVC has, inter alia, observed that ……. ‘on compromise settlement/
One Time Settlement …….. while they had no issue/ problem with the normal
compromise agreement taking place between the banks and the borrowers, in cases
where the CBI complaint had been filed, the interest of the investigating agency is to be
kept in mind and protected while disposing off the OTS.’
In order to protect their interest, CVC/ CBI also expects the Public Sector Banks
to do as under:
a. In case of compromise settlement reached with the borrower, those settlements
should contain a specific clause that such settlement will not have any bearing what
so ever on the ongoing criminal cases / proceedings pending in the courts against the
Borrowers/Guarantor/Bank Staff (In service /Retired).
b. Complaints submitted by banks to the CBI for registration of a case must clearly
indicate whether the bank have entered into One Time Settlement (OTS) with the
Borrowers/Guarantor/Bank Staff(In service /Retired).
c. In the case of financial fraud against the consortium of banks, all members of the
consortium should file a complaint with the CBI for registration of the case.
d. The problem arising out of incorrect valuation/ opinion by Chartered Valuers/
Chartered Accountants and Advocates should also be referred to the CBI. For further
steps please refer to Vigilance Department HOIC No.11774 dt. 18.02.2012.
90
e. If there is any case where a person has obtained loan from the bank by making
fraudulent representation or otherwise committing any fraud, as far as possible,
efforts should be made to recover the entire amount of the loan. This is necessary to
ensure that a person committing fraud is not allowed to benefit from commission of
such fraudulent acts.
f. In spite of the above basic policy requirement, there will be cases where it is not
possible to recover the full amount and the Borrowers/ Guarantor/ Bank Staff (In
service /Retired) is coming forward to offer settlement. While negotiating the offer, it
must be made clear that recovery of the loan taken by the borrower and the criminal
action for the fraud committed by him are two separate and distinct matters. It should
be clarified at the outset that if the settlement proposal as given by the borrower is
accepted, such settlement will relate only to the recovery proceedings and shall
not in any way affect the criminal action taken by the bank, which shall
continue.
g. It is the practice of banks to record the terms and conditions of the settlement in
consent order to be obtained from the Court or DRT. In such consent orders, a
specific clause should be incorporated stating that the settlement agreed between the
parties shall not in any way affect or be construed as settlement of ongoing criminal
cases/ proceedings pending in the Court against the Borrowers/ Guarantor/ Bank
Staff (In service /Retired).
h. The Officers/ employees who are required to appear as witnesses in the criminal
proceedings should be advised that although the bank has accepted the settlement
proposal given by the Borrowers/ Guarantor/ Bank Staff (In service /Retired), there is
no settlement in regard to the criminal proceedings initiated against the Borrowers/
Guarantor/ Bank Staff (In service /Retired). Such officer or employee should be
advised to make this position clear when he/ she is examined as a witness in the
criminal proceedings.
The Hon’ble Supreme court of India, in criminal Appeal No. 1080-1085 of 2009 (Arising
out of SLP (Crl.) Nos. 8854-57 of 2008) in the matter of Central Bureau of Investigation
(CBI) vs. A. Ravishankar Prasad and others decided on 15 th May, 2009, held that mere
repayment of loan under a settlement cannot exempt the accused from the criminal
proceedings pending against him in the Court of Law.
Compromise Proposals in all Fraud declared accounts shall be considered by

authority not lower than FGMLCC as per separately defined discretionary
authority and reported to the Board/ MCBOD.
In case of fraud accounts the loan/security documents including title deeds will not be
released to the borrower/guarantor/other third party paying the compromise amount
even on payment of full dues/ compromise amount.
9. COMPROMISE IN CONSORTIUM ADVANCES:

In case of Consortium Advances, where our Bank is a leader, we should take a decision
regarding compromise at appropriate level. Thereafter, we may persuade other
members to fall in our line. However, if they differ with our views, we may go for OTS
independently.
91
In those cases, where our Bank is a member, we may go with the decision of the
consortium. However, compromise proposal will be considered /sanctioned as per
delegated authority to consider sacrifice/loss. Endeavour is to be made to ensure that
our sacrifices should not exceed that of the Leader. Not only that our endeavor should
be there to recover over and above the amount of our share that we are supposed to
receive from the pool of OTS amount offered in the consortium. If any better terms are
offered to the other consortium banks, then the same terms shall apply to our Bank
also. In this regard we may have to approach the borrower / Guarantor independently.
their delegated authority of allowing /sanctioning sacrifice approved by the Board for
normal compromise proposals.
10. COMPROMISE IN STAFF /EX-STAFF (WORKMEN & OFFICERS) RELATED

LOANS
 If the borrowers are relatives of a staff/ex-staff, but that staff/ ex-staff has not
guaranteed the loan, in such cases compromise proposals will be dealt with in usual
manner like other OTS Proposals. The competent Authority in such cases shall be
the same as in other cases.
 If the borrowers are relatives of a member of staff/ ex-staff and the said staff/ ex-staff
has guaranteed the loan, in such cases the Competent Authority shall be the
authority under whose delegated authority sacrifice amount falls but not be below
FGMLCC. However, in such cases before approving OTS Proposal, necessary
clearance shall be obtained from the Vigilance Department.
 If the staff/ ex-staff member is himself/herself a borrower and he/ she has expired &
proposal is submitted by his/her legal heirs /family members, in such cases, the
Competent Authority will be the authority under whose delegated authority sacrifice
amount falls but not be below the Credit Approval Committee of the Board.
 In case the staff/ ex-staff is himself/ herself a borrower, even in cases, where he has
not been in Bank’s service for more than two years, the OTS in such cases may be
considered by the Credit Approval Committee of the Board.
11. WAIVER OF UNCHARGED INTEREST IN DECEASED ACCOUNTS DURING

COMPROMISE
In terms of bank’s circularized instruction vide HOIC No. 9776/ CP & RMD/ 2007-08/ 13
dated 24.09.2007, no interest should be realized/ charged in a deceased account,
because the contract ceases to have effect from the date of death of the individual
borrower / proprietor and the debit balance as on the date of death should be
crystallized and legal notice should be given to the legal heirs for recalling and payment
of loan.
Having taken cue from the instruction as above it is recommended that:
a) The branch should immediately write to the legal heir/s within 30 days from date
of death of borrower regarding borrower’s indebtedness to the Bank. The legal
heir/s of the borrower should either repay the dues fully immediately or come out
with the arrangement of refinancing or re-phasing over a period along with
interest from the date of death. In case of repayment immediately, we can waive
the interest for a period not exceeding 60 days provided the value of security is
not adequate.
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b) In all other cases the uncharged interest since the death of individual borrower/
proprietor would also be claimable as dues and therefore same would be treated
as bank’s sacrifice during approval of compromise proposal. The applicable rate
for uncharged interest would be as per extant Recovery Management Policy. The
delegated authority would be decided on the basis of quantum of sacrifice.
12. EXAMINATION OF STAFF ACCOUNTABILITY ASPECT DURING COMPROMISE

.
A. The Reserve Bank of India has advised that while approving write-off and compromise
proposals, the following aspects should be scrupulously followed by Banks:
a) That the authority approving the write off proposal had not sanctioned the advance
in question in his individual capacity.
b) That the sanctioning authority in the case of advances had exercised his power
judiciously and adhered to the guidelines issued by the Bank in the matter of grant of
advances and those normal terms and conditions were stipulated.
c) That there was no laxity in the conduct and post disbursement supervision of the
advances.
d) That there was no act of commission or omission on the part of the staff leading to
the debt proving irrecoverable.
e) That all possible steps to recover the dues have been taken and there are no further
prospect of recovering the debt and that writing off or compromise is in the larger
interest of the Bank.
f) It is, therefore, absolutely necessary to investigate as to whether there was any
laxity on the part of the Bank employee in the sanctioning stage (including credit
appraisal) or during and after disbursement of funds, leading to slippage of the
advances to NPA or failure to arrest slippage to NPA.
B. Staff accountability will be examined in terms of Bank’s guidelines circularized from time
to time (Present Policy circulated vided HOIC No11828/Recovery/2012-13/6 dated
30.03.2013).
C. SUBMISSION OF FIVE POINT CERTIFICATE WITH COMPROMISE PROPOSALS
While processing /forwarding any compromise proposal to higher authority for
consideration or under self discretion, FIVE POINT CERTIFICATE ON STAFF
ACCOUNTABILITY (as per Annexure-8 ) to be held/provided by the Branch/ZLCC to
the Competent Authority approving the compromise proposal.
13. REVIVAL OF FAILED COMPROMISE PROPOSAL WITH DELAYED PERIOD

INTEREST
Revival of failed compromise can be considered by the Branch Head, ZLCC headed by
DGM/ AGM, FGMLCC, GMHLCC, EDHLCC & CAC for approving the revival of failed
compromise proposals with delayed period interest depending upon the amount of
waiver of delayed period interest, details as under:
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S Waiver amount of delayed Minimum payment Approving Authority
L period Interest
1 NIL s 1 Month MCLR +1% Branch Head
Interest
2 NIL I Month MCLR Interest ZLCC headed by
DGM/ AGM
3 Upto Rs.25.00 Lac I Month MCLR Interest -3% FGMLCC
4 Above Rs.25.00 Lac up to 15% of delayed period GMHLCC
Rs.50.00 Lac Interest
5 Above Rs.50.00 Lac up to 10% of delayed period EDHLCC
Rs.1.00 Crore Interest
6 Full waiver CAC
While sanctioning the waiver of delayed period interest of failed Compromise proposal
under the above mentioned authorities, it should be kept in mind that the waiver of
delayed period interest is kept at minimum along with following additions :
1) Proposal for revival of failed compromise proposals with delayed period interest
will be considered where the date of proposal for revival should not be more than
one year from the last date of repayment schedule of OTS.
2) If the same is beyond one year the same shall be treated as fresh proposal.
3) This above conditions should not be incorporated in the sanction letter to
borrower, while approving the OTS proposal.
4) At the time of placing the OTS proposal before any committee, it must be
mentioned that delay period interest can be considered by a lower committee
also as per the authority as mentioned above.
5) A post facto note on permitting revival of OTS at concessional interest must be
placed before the authority which has originally sanctioned OTS.
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CHAPTER 7
WAIVER OF LEGAL ACTION
Under the existing lending norms and also in terms of guidelines issued by
NABARD/RBI, a moratorium period of 12-18 months is provided to small loans under
Priority Sector Credit/Various Govt. Sponsored Scheme/borrowers affected by natural
calamities. The Bank has opted out of DICGC with effect from 01.04.1998. Since then it
has become a crucial issue as to how the small loans under Priority Sector
Credit/Various Govt. Sponsored Scheme/borrowers affected by natural calamities and
failed to generate sufficient cash flow to take care of their credit liabilities (even after
rescheduling/ renegotiations) will be dealt with, if no recovery is received in such
accounts. The situation is further aggravated with the economic slow-down, stiff
competition, unstable markets, and volatility in price system, disturbed payment/
settlement system etc. Most of such accounts tend to become loss asset owing to
closure/suspension of activity, which leads to erosion of primary security. Normally no
collateral security is taken in such accounts. Since chances of recovery is bleak in such
accounts and very often the borrowers become non-cooperative and refuse to
acknowledge their debts. It is observed that branches are facing constraints owing to
threat of expiry of limitation period in many small accounts/Govt. sponsored cases. For
obvious reason, if no repayment/debt acknowledgement is received during this period,
the account is likely to be barred by limitation and the branch has got no alternative to
file suit against such borrowers before expiry of limitation period.
The above situation was examined and observed that filing of suit in such cases is
nothing but throwing good money after bad money for some uncertain purposes. Scope
of recovery is almost nil in all such cases. Filing of suit will only attract additional legal
cost. Over and above the legal expenses, the branch managers will have to attend the
suits/cases and that will again come in the way of smooth functioning of the Branches.
For obtaining permission/approval for waiver of legal action in a borrowal account, the
concerned branches will submit the proposal of waiver of legal action on prescribed
format (Annexure-22) to their respective Zonal Offices and in turn they (ZO) will
critically examine each such proposal and concerned borrowal account strictly on
individual merit to ascertain the prospect of future recovery based on security position,
net worth of the borrower /guarantor, other assets available, details of unattached,
assets of borrower & guarantors, social status and means of the borrower etc. to take a
view as to whether filing of suit/certificate cases etc. will be justified or for the larger
interest of the bank initiation of Legal action should be waived in such cases. The
decision of waiver of legal action will be based on committee approach at each level. At
Zonal Office, it will be taken by ZLCC, at FGM by FGMLCC & at Head Office by
HLCCGM/HLCCED/CAC/MCBOD (under whose delegated authority proposal of
waivement of legal action falls). The delegated authority should scrutinize all relevant
factors and should ensure that the process should not jeopardize the recovery of other
debts. Staff accountability aspect, if any should also be examined before granting
approval for waiver of legal action. Like compromise proposals, proposal for waiver of
legal action will also route from Branch to ZLCC to FGMLCC and so on. (I.e. up to the
level of approving authority).
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Delegated authority for granting permission for waiver of legal action in borrowal
accounts will depend upon Scale/Rank of the Officer /Head of the approving Committee,
Asset classification and amount of provision held by the bank as on the date of taking
decision in the matter. Details of Delegated Authority for granting permission for waiver
of legal action in borrowal account as under:
A. The delegated authority granting permission for waiver of legal action in borrowal
accounts which are classified as Loss Asset or provided in full
(Rupees in lac)
FUNCTIONARIES DELEGATED AUTHORITY
PER BORROWER
(i) Board/Management Committee of Bank’s FULL
Board
(ii) CAC of the Board Upto Rs.50.00
(iii) HLCCED Upto Rs.30.00
(iv) HLCC GM at Head Office Upto Rs.20.00
(v) FGM LCC Upto Rs.20.00
(vi) ZLCC headed by DGM Upto Rs.10.00
(vii) ZLCC headed by AGM Upto Rs.5.00
B. The delegated authority granting permission for waiver of legal action in borrowal
accounts which are not classified as Loss Assets ( No full provision)
(Rupees in lac)
DESIGNATION DELEGATED
AUTHORITIES
BOARD/MCBOD Full Power
CAC of Board 10.00
HLCCED 7.50
HLCCGM at H.O/ FGMLCC 4.00
ZLCC headed by DGM 2.00
ZLCC headed by AGM 1.00
.
POINTS TO BE CONSIDERED FOR WAIVER OF LEGAL ACTION BY THE
AUTHORITY APPROVING THE WAIVEMENT OF LEGAL ACTION
1) It is to be ensured that all liquid collateral securities like FD/DDP/NSC/LIP/KVP etc, if

any, kept as security has been adjusted in account.
2) In respect of more than one credit facility (like P/N, C/C, IBD etc.), granted to the same
borrowal account under the same name and same constitution, the aggregate ledger
section balance of all such credit facilities should be taken into consideration for
exercising delegated power.
3) The delegated authority will be exercised strictly
- before expiry of limitation period
- after examination of staff accountability or initiation of disciplinary action in
appropriate cases as per Bank’s Policy guidelines.
4) The delegated power will not be exercised by the authority in respect of the advances
sanctioned by him in his individual capacity. Such cases will be referred to the next
higher authority for consideration.
96
5) The delegated authority will be exercised only after being fully satisfied that chance of
recovery through legal action are remote and not cost effective at all.
6) The delegated authority will not be exercised partially for one or few borrowers/
guarantors of a single borrowal account. The waiver will cover all the borrower(s)/
guarantor(s) of the account.
7) A higher authority may exercise the power vested with a lower authority but a lower
authority will not be authorized to exercise the power delegated to a higher authority.
8) Quarterly statement of cases approved for waiver of legal action will be submitted to
the next higher authority (as per Annexure--23).
ACTION POINTS FOR BRANCHES IN LEGAL ACTION WAIVED ACCOUNTS
i. Branches after the receipt of the approval of legal action waivement, from the
competent authority will first mark at appropriate place in the CBS system (Please refer
to CBS manual).
ii. Waiver of legal action will be accorded strictly as Bank’s internal decision and will not be
divulged to the borrower(s)/ guarantor(s) under any circumstances either in writing or
verbally.
iii. Recovery efforts will continue to be made for realization of bank’s dues.
iv. In CBS System Uncharged Interest in all the NPA accounts (including legal action
waived accounts), is calculated at prevailing rate of interest of the respective loan
products in which particular loan account was initially opened or is being maintained,
but neither this interest will be debited in the loan account nor booked in profit loss
account of the Bank. Interest thus calculated will be kept separately as uncharged
interest till the account is upgraded as Performing Asset.
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CHAPTER 8
WRITE-OFF OF NPA /BAD DEBTS
Recovery of Bad Debts is the prime issue of concern before the Bank and all possible
measures including legal proceedings are initiated for recovery of non-performing
advances, but in many cases, the desired outcome is not ensured. In such cases,
where no security is available from which the Bank can realize its dues and full
provision has been made, the Bank adopts write off as one of the measures to bring
down its gross level of NPA. As regards to Income Tax treatment in connection to
writing off of NPAs & its recovery, the Head Office Accounts Department will take
care of the same as per RBI/GOI guidelines.
Write-off is of three types viz.

1. Compromise linked Write Off (To write-off left over balance amount after receipt of the
entire compromise sum as per terms of sanction)
2. Write Off of Bad Debts (account is closed at branch level by crediting amount of write-
off in the account for that Credit is provided by Head Office by debiting to P & L
account).
3. Prudential Write Off (It is done at HO level only, account continues to remain live as
normal NPA account at branch level)
1) COMPROMISE LINKED WRITE OFF

Based on the realizable value of security as also other pertinent factors, compromise
Settlement is sometimes made even below the ledger balance. In such cases, the Bank
accepts the loss as credit risk factor and comes to a settlement after negotiation as per
approved Policy guidelines to settle the dues below the ledger outstanding. On
settlement and recovery of the entire compromise sum as per terms of sanction, the
balance amount left in the account is written off and the borrower / guarantor is
absolved from his/their responsibilities/liabilities once for all. Such write off is termed as
compromise linked write off. Branches after the receipt of entire compromise sum (with
or without interest as stipulated in compromise approval letter) will submit the claim on
the prescribed format (Annexure-19) to their respective Zonal Offices, which in turn
after scrutiny of the same will submit the claim on the Online Compromise Write-off
Module in our Intranet Portal to Head Office Recovery Department. Zonal Head will
designate Officers of their Zonal Offices who can access the site for lodging their write
off claim for the compromise settled NPA accounts on behalf of their branches. The
details of the operational manual for accessing the site & submitting the write-off claim
information has been provided in Annexure-82.
Branches on receipt of claim amount from ZO/HO will credit the write-off amount in the
respective compromised account and will ensure closure of account in CBS system
through Account Closure Menu as given in CBS manual.
2) WRITE OFF OF BAD DEBTS

There are Debts (NPAs) which are unsecured and of small amount having 100%
provision. Filing of suit is considered of no use for recovery of debts and considered for
waiver of legal action. Instances of suit filed and decreed cases are also observed
where no tangible securities are available, borrowers/guarantors are found to be devoid
98
of net worth or absconding and therefore recovery through chasing of legal proceeding
appears to be bleak and remote. These are representing mainly Bad Debts arising out
of various Govt. sponsored Schemes where the borrowers have died / absconded / not
traceable etc. and the activity is suspended, the value of the charged security is
NIL/negligible, there is no tangible net worth of the borrower/guarantor, old debit entries
in SB/Current account/BR account/credit card/ other small left out balances in the
borrowal accounts where scope of further recovery appears to be bleak etc. Such types
of accounts are to be considered for Write-off of Bad debts.
The Delegated Authority for write-off of Bad Debts per account is as under: -
Delegatee Authority (All Credit facility per
borrower)
Board / MCBOD Full Authority.
Credit Approval Committee of the Board. Upto Rs.10.00 lac.
HLCCED Upto Rs.7.50 lac
HLCC GM (Only at Head Office) Upto Rs.2.00 lac
Branches shall submit the write-off proposals on the undernoted prescribed format to
their respective Zonal offices:
1. Accounts having sanctioned limit and/or present outstanding Balance up to Rs. 1.00 lac
(as per Annexure-24)
2. Accounts having sectioned limit and/or present outstanding Balance above Rs 1.00 lac
to Rs 2.00 lac (as per Annexure-25)
3. Accounts having sectioned limit and/or present outstanding Balance above Rs 2.00 lac
(as per Annexure-26).
At Zonal Office above proposals will be put up before the ZLCC, which in turn will
scrutinize and if found that the debt is absolutely irrecoverable and there is no further
scope for recovery of dues ,recommend to Head Office for write-off of Bad Debts.
Branches on receipt of write-off amount from ZO/HO will credit the amount in the
respective accounts and will ensure closure of account in CBS system through Account
Closure Menu as given in CBS manual.
Although, Write off Bad debts will be considered in appropriate cases with a view to
clean the books of the Bank, but the borrower/guarantor will not be absolved from
their liabilities and “no dues certificate” will not be issued. The branch will maintain
account wise record of such accounts and no opportunity is to be missed to recover the
amount at a later date.
3) PRUDENTIAL WRITE OFF AT HEAD OFFICE LEVEL
In terms of RBI guidelines, 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. Accordingly, with effect from the financial year 2004-05 our bank is doing
Prudential Write off (PWO) at Head Office level. No credit advice is issued by Head
Office to the Branches; simply required entry is passed at Head Office. Thus at the
Branches the ledger balance of the borrowal accounts is not effected on account of
Prudential Write off done at HO level. This write-off is considered as an internal
arrangement and the borrower/ guarantor is not absolved from liabilities/
99
responsibilities. All possible recovery measures including OTS, suits/execution of
decree/ liquidation process etc continue as usual to recover the bank’s dues (OTS, if
any, is done as per delegated authority above).
The delegated authority for approving Prudential Write off at Head Office is as
under:
Authority Authority to Write off
(All Credit facility per borrower)
Management Committee of Bank’s Board Full Power
Credit Approval Committee of the Board. Up to Rs.10.00 Lacs
In urgent circumstances Credit Approval Committee of the Board (CAC) and in absence
or preoccupation of Managing Director & Chief Executive Officer, Executive Director
Level Credit Approval Committee (HLCCED) may approve Prudential Write off up to
any amount, however their (CAC/HLCCED) action is to be got ratified from
Management Committee of Bank’s Board on later date. For this purpose Head Office
Recovery Department will debit the duly approved amount to the Provision for Bad &
Doubtful Head maintained at Head Office (BGL number 81221000325) & Credit the
same amount in Prudential Write Off Account maintained at Head Office (BGL number
81220000325). Head Office Recovery Department after completion of Audit/ Review at
Head Office will provide complete list of accounts prudentially Written-Off as at the end
of each quarter to CBS Project Office, for marking these accounts as PWO in CBS
System. This will help the Branch/ Zone/ Inspectors/ Auditors in identification of
Prudentially Written-Off accounts.
Head Office Recovery department will put up a review note on current status of Prudentially
written off accounts along with recovery effected before MCBOD for the Half Year ending
June and December each year.
RECOVERY OF WRITTEN OFF DEBTS

During the last few years, substantial amount of Bad Debts have been written off and the
Bank has taken up the matter strongly to ensure regular recovery drive for each such written
off debts. Much weight age has been given towards recovery of written off debts. Separate
budget for recovery of written off debts is given to the branches/ ZOs and the performance is
reviewed on monthly basis.
The written off accounts are to be considered a ‘hidden treasure’ for the bank since any
recovery made in written off account directly adds to bank’s bottom line.
Services of Empanelled Recovery Agents, Enforcement cum Resolution Agents, Retired

Employee Recovery Officer (RERO) should be taken with the permission of ZO for tracing
out absconding borrowers/ guarantors and their personal assets for attachment and
exploring chances of compromise settlement. For this purpose, services of Competent
Detective Agencies may also be engaged with the permission of ZO.
Special drive for compromise settlement in written off debts should be taken up and the
proposals are decided/ sanctioned keeping in view the status of realisability of the dues.
Record of written off debts must be maintained account wise at the branches/ZOs as per
prescribed guidelines and recovery amount should also be noted as and when made.
100
Branches should maintain record of such accounts in a very organized and systematic
manner so that the recovery drives may be taken up in each such account by the field
functionaries. The Zones should maintain a database of written off accounts branch wise
keeping track of recovery and ensuring regular follow up and monitoring in this vital area.
H.O. Accounts Department and CBS PO will ensure that this amount is shown
separately in the BCR booklet. Branches are advised to credit the recovered amount in
write-off accounts in BGL -RECOVERY AGAINST WRITE-OFF DEBTS
(82048XXXXXX)
RECOVERY OF DE-RECOGNIZED/UNCHARGED INTEREST
In terms of Prudential Norms charging/ booking of interest in Non-Performing Advances

ceases from the date of identification/classification of NPA. The interest element remains un
charged in the account. Maximum efforts must be initiated to ensure recovery of de-
recognized interest to the possible extent. Branches are advised to credit the recovered
de-recognized/ uncharged interest in BGL-OTHER INCOME / DERCOGNISED
INTEREST – (82050……).
RECOVERY IN PRUDENTIALLY WRITTEN-OFF ACCOUNTS
At Branch level, the Prudential Write-Off accounts (PWO) will be maintained as a

normal NPA account, however, at Head Office level the recoveries/ reduction in balance
in Prudentially Written-Off accounts will be calculated by Head Office Recovery
Department and they will debit this amount (Amount by which outstanding balance in
Prudentially Written Off account is reduced) in Prudentially Written-Off account (BGL-
81220000325) and credited the same amount in Other Income BGL Head (BGL-
82051000329). If in PWO accounts any de-recognized/ uncharged interest over &
above of outstanding Ledger Balance is recovered, then this amount will be directly
credited by CBS system in BGL-OTHER INCOME / DERCOGNISED INTEREST –
(82050……).
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CHAPTER 9
QUASI-LEGAL / LEGAL & OTHER MEASURES OF RECOVERY
ACTION UNDER SECURITISATION AND RECONSTRUCTION OF FINANCIAL

ASSET & ENFORCEMENT OF SECURITY INTEREST ACT, 2002 (SARFAESI ACT,
2002)
In order to strengthen recovery of bad debts /Non-Performing Advances, Parliament has
enacted the SARFAESI Act-2002. The provisions of the said Act have empowered the
Bank to take possession of mortgaged securities without intervention of the Court and to
dispose of the same for recovery of NPA dues. The SARFAESI Act has since been
modified vide the Enforcement of Security Interest and Recovery of Debts Laws
and Miscellaneous Provisions (Amendment) Act, 2016 which was notified on
16.08.16 as well as by The Security Interest (Enforcement) (Amendment) Rules,
2002 which was notified on 04.11.2016. In the light of aforesaid amendments,
modifications have been made by Legal Department in the SARFAESI Manual and
the formats attached therein & incorporated in MANUAL ON SARFAESI issued
vide HO IC No. 15477/Legal/2010-2011/12 dated 31.01.2018. The guidelines
issued in the aforesaid Manual and formats attached therein must also be taken
into consideration while invoking SEARFAESI action in any account.
COVERAGE
 As part of the legal reforms to strengthen recovery of Bad-Debts / NPA accounts, the
Parliament has enacted the SARFAESI Act, 2002 as amended from time to time.
 Under the Act, Banks & Financial Institutions are given quasi-judicial powers to recover
their dues by sale of the Secured Assets, without intervention of the Court or Tribunal.
 Thus, the action under SARFAESI can be initiated by the Bank in the following
situations and in the following manner:
PRE-CONDITIONS TO BE SATISFIED AS SPECIFIED IN THE SARFAESI ACT 2002

i. The Asset or account of the borrower which has been classified by the bank as
substandard, doubtful or loss, in accordance with directions or guidelines issued by
RBI relating to asset classification. Meaning thereby the account must be NPA in
accordance with the IRAC norms.
ii. The amount of Debt due must be above Rs. One Lac and the amount due must be
more than 20% of the Principal amount and interest thereon.
iii. The secured asset to be enforced must not be Agricultural Land.
iv. The secured Asset must not be under Bank’s lien / pledge.
v. The account must be within the period of limitation and the loan documents executed
by borrower / guarantor should be valid and enforceable.
vi. Security is available in the form of mortgage of immovable properties or hypothecation
of movable properties, stocks, book debts, conditional sale, hire-purchase, lease, etc.
Cases where SARFAESI Act not applicable

 Non-NPA Accounts
 The claim amount including uncharged interest is for an amount less than Rs. 1.00
lakh.
 Amount due less than 20% of the principal amount & interest thereon.
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 Personal assets of the borrower / guarantors not charged / mortgaged to the bank.
 Security interest created on agricultural land. But The Hon'ble Supreme Court, in
its recent decision dated 19.03.2018 in the matter of ITC Limited vs. Blue Coast
Hotels Ltd. & Ors has held that
“since no security interest can be created in respect of agricultural lands and yet
it was so created, goes to show that the parties did not treat the land as
agricultural land and that the debtor offered the land as security on this basis,
accordingly the use of land at the time of security creation an invocation of
SARFEASI action should be taken into consideration”.
Field functionaries should accordingly take in view the land use and municipal
tax payment qua the land to ascertain that whether SARFAESI can be invoked
qua the land/property.
 Pledged securities, lien, aircraft, vessels, unpaid stocks

 Properties not liable to attachment / sale under Section 60 of CPC (except the
properties specifically charged with the debt recoverable under the Act).
 If an application filed by borrower company or by any person before the National
Company Law Tribunal for initiating resolution process against the borrower and
same is admitted by the Adjudicating Authority there is moratorium period of six
months from the date of admission of the application and no legal or quasi legal
proceeding shall be initiated against the borrower/guarantors.
ACTION POINTS FOR TAKING RECOVERY ACTION UNDER SARFAESI Act

Issuance of Demand Notice u/s 13(2) of the Act
1. Issuance of Demand Notice under Section 13(2) of the Act by the Authorized Officer
of the Bank immediately after the account is classified as NPA, is required to be
issued to the defaulting borrower, all co-borrowers and guarantors, preferably on the
next working day of declaration of NPA, allowing 60 days time to repay the entire
dues of the bank from service of notice. Details of property, date of NPA, rate of
interest and bifurcation of dues must be incorporated in the notice. Besides above,
the following sentence may be incorporated in the demand notice inviting their
attention for redemption of the mortgaged property as under : -
“The Borrower’s attention is invited to provisions of section 13(8) of the
Securitization & Reconstruction of Financial Assets & Enforcement of Security
Interest Act, 2002, in respect of the time available, to redeem the secured assets.”
In our bank, the Board has approved all the officers in the rank of Chief Manager and
above, to act as the Authorized Officers for the purpose of SARFAESI Act 2002. The
Assistant General Manager/ Chief Managers posted in the branches will act as
Authorized Officer for their branches. The Zonal Head will nominate the Assistant
General Manager/ Chief Managers posted at Zonal Office/ Other Branches/ ARMB
under their control for acting as Authorized Officer for other branches where such
executives are not posted on the basis of volume of the work & proximity of the
branches. The concerned branches will maintain the original records of various
actions taken under the said Act where as the designated Authorized Officer will
maintain its copy for ready reference & necessary action.
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2. Demand Notice u/s 13(2) must be delivered/ served upon the defaulting borrower/
guarantor/ mortgagor, as the case may be, at the latest available address of such
persons. If such borrower / guarantor/mortgagor is a company, the notice must be
served on its Registered Office address and on any other branch of such company.
Service of such notice should be made through Registered AD Post/ Speed Post
with AD or by hand delivery or Courier or by registered Fax or by registered
electronic mail service with proper receipt of service.
3. Proof of service of such demand notice like postal dispatch receipt,
Acknowledgement Card duly received, Postal track record/ tracking of consignment
from the website of the India Post in respect of each person is required to be held in
file, In case of hand delivery, proof of acknowledgement/ receipt delivery against
each borrower/ guarantor/ mortgagor should be kept in record for future reference.
4. In case notice u/s 13(2) is returned un served, then notice should be affixed at the
prominent place of residence/ business place of the borrower/ guarantor in presence
of witnesses preferably within 5 days from receipt of un served notice for record of
affixing the notices. Photographs should be taken at the time of affixation which
should be held in record. Demand Notice may also be published in two
Newspapers, out of which one should be in vernacular language (contents of notice
also be in vernacular language) and original newspapers of such date of publication
of notice should be kept in record.
5 In case of joint financing / multiple financing / consortium advances, consent of co-
lenders representing 60% in the value of outstanding dues is required. The branch
should seek mandate of all other banks/ co-lenders, before issuance of notice under
section 13 (2), where our bank is the Consortium Leader.
6 Any Objection / Representation from the borrowers/ guarantors concerning the 13 (2)
notice whether received by the branch or by the Authorized Officer should be replied
within15 days of its receipt, which is mandatory under section 13(3A) of the Act.
Before proceeding for action of taking possession of property under Section 13
(4) of the Act, it must be ensured that the objection so received is suitably
disposed of and is not pending.
Proof of disposal/ consideration of the objection/ representation and service
thereof upon the borrower/ guarantor/ mortgagor who have made such
representation should be properly held in record for future reference.
7 Default / Failure by the borrower / Guarantor to discharge the liability in full as
mentioned in 13(2) notice, within the notice period of 60 days from date of service
shall entitle the Bank to take further action under 13 (4) of the Act.
Recourses available to the secured creditor {Sec. 13 (4)}:

If the borrower fails to discharge his liability in full within 60 days from the date of
receipt of demand notice, the bank can take one or more of the following recourse to
recover its secured debts:
(i) Take possession of the secured assets of the borrower including the right to transfer
by way of lease, assignment or sale for realizing the secured assets.
(ii) Takeover the management of the secured assets including the right to transfer by
way of lease, assignment or sale and realize the secured assets.
Provided that the right to transfer by way of lease, assignment or sale shall be
exercised only where the substantial part of the business of the borrower is held as
security for the debts.
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Provided further that where the management of the whole of the business is
severable, the secured creditor shall take over the management of such business of
the borrower which is the relatable security or the debts.
(iii) Appoint any person to manage the secured assets, the possession of which has
been taken by the secured creditor bank.
(iv) Require at any time by notice in writing, 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, to pay it to the secured creditor bank. Such person
making any payment will get a valid discharge as if he has made payment to the
borrower.
(For example – Book debts / receivable arising out sale of secured assets by the
borrower, payment of which is still due to the borrower. In case, there are recognized
tenants, notice may be given (to such tenants) directing them to deposit the rent or
lease rentals with the Authorized Officer).
BENEFITS OF ACTION UNDER SARFAESI.

1 After completion of 60 days from the service of the 13(2) notice & replying to the
representation, if any received, within 15 days and default in complying that notice by
the borrower / guarantors, the Bank can straightway take possession of the Secured
Assets including the right to transfer and recover the dues either by sale, lease or
assignment of those Assets. The Bank can also recover money from third parties
owing money to the borrowers/ guarantors.
2 The Bank can also take over management of business of the borrower and can
appoint own Directors and Administrators over the business of the borrowers to
manage the same.
3 The Bank can also appoint Asset Reconstruction Company / Asset Securitization
Company as Receiver.
4 The notice under 13(2) shall be treated as a restraint order on the borrower/
guarantor immediately on receipt of the demand notice or notice of takeover of
management against sale / transfer of Secured Assets and will be automatic bar on
them from alienating or transferring or dealing with such property.
If any objection or representation is received from the borrower, the secured

creditor shall consider such objection or representation and if the secured
creditor comes to the conclusion that such objection or representation is not
acceptable or tenable, he shall communicate the reason for non-acceptance of
the representation or objection to the borrower within 15 days from the date of
receipt of such representation or objection.
POSSESSION OF SECURED ASSETS

If the borrower / guarantor fails to repay the dues within 60 days notice period, from
service of notice steps for taking over possession of the Secured Assets (both movable
and immovable) and further steps for sale thereof should be taken in the following
manner preferably for all properties on the same day or if the properties are situated at
different places, on consecutive days. In this regard, it should be noted that publication
of possession notice in relation to a property should be made within 7 days from the
date of taking possession of such property.
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It is therefore clarified that effort should be made for taking possession of all properties
available in the account in such a manner so that a joint publication of possession
notice if possible, can be made within 7 days of first possession .
In respect of movable assets / property
 Please note that symbolic possession of movable assets is not envisaged under the
SARFAESI Act. Therefore, only physical mode of possession should be adopted for
movable assets.
 The Authorized Officer should take physical possession / custody of the movable
assets in the presence of two witnesses. For taking possession of the Secured Assets,
the Authorized Officer should prepare a PANCHANAMA on the prescribed format
(Appendix – I of the Rules) duly signed by him and two witnesses with date & time and
an INVENTORY of the said movable assets has to be prepared. After taking
possession of the movable property, intimation by way of notice should be given to the
borrower along with a copy of the Panchanama & the Inventory prepared as above.
 If the moveable assets charged to the bank are in the possession of persons other
than the borrower, notices may be issued to both the borrower and the persons in
possession of such moveable assets calling upon them to handover possession of the
same.
 If the assets are in the custody of Court / Court Receiver / Official Liquidator, etc
possession of such assets shall be taken only after obtaining permission from such
court /authority.
 On taking physical possession / custody of the movable assets, the assets should be
kept at a safe custody place/ go-down under Lock & Key of the Bank and under
supervision of security guards wherever required for security of properties: due care
for preservation, security, insurance, etc. of the said Secured Assets should be taken.
The Secured Assets taken in possession by the Authorized Officer, can be kept in his
own custody or in the custody of any person, authorized / appointed by him.
 Provided that if such asset is subject to speedy or natural decay or the expense
of keeping such asset in custody is likely to exceed its value, the authorized
officer may sell it at once.
 After taking possession of Movable Assets, the Authorized Officer shall obtain its
estimated value, fix Reserve Price preferably within 5 days and thereafter further steps
for sale as mentioned herein below should be taken.
In respect of immovable property
1. A possession notice should be prepared by the Authorized Officer on the prescribed
format (Appendix – IV of the Rules) in sufficient copies. Possession notice should be
affixed on the outer door or at such conspicuous place of the house / building /
property.
2. A copy of the possession notice should also be delivered to the concerned borrower
/ guarantor / mortgager by hand against due acknowledgment or through Registered
Post with AD.
3. The Authorized Officer should preserve the proof of affixation of possession notice
and proof of delivery of such possession notice.
Publication of Possession Notice:
4. The Authorized Officer should also get the possession notice published in two
leading newspapers, within Seven (7) days from the date of taking possession, of
which one in vernacular language (contents of notice should also be translated into
vernacular language) having wide circulation in the area.
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Court assistance in taking possession of Secured Assets
Steps should be taken by the Authorized Officers for obtaining physical
possession of the property immediately after taking symbolic possession under
section 13(4) of the Act. The application along with affidavit of Authorized Officer
and copies of relevant documents as required under amended provisions of
Section 14 of SARFAESI Act to the appropriate Chief Metropolitan
Magistrate(CMM) / District Magistrate(DM) to take possession of the assets and
hand over the same to the Banks should be made within week of taking such
symbolic possession. Such affidavit should be duly affirmed by the authorized officer
of the Bank containing –
a. The aggregate amount of financial assistance granted and the total claim of the
Bank as on the date of filing the application;
b. 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 the limitation period;
c. The borrower has created security interest over various properties giving the details
of properties;
d. The borrower has committed default in repayment of the financial assistance granted
Aggregating the specified amount;
e. Consequent upon such default in repayment of the financial assistance the account
of the borrower has been classified as a non-performing asset;
f. Affirming that the period of sixty days notice as required by the provisions of sub-
section (2) of section 13, demanding payment of the defaulted financial assistance
has been served on the borrower;
g. The objection or representation in reply to the notice received from the borrower has
been considered by the secured creditor and reasons for non-acceptance of such
objection or representation had been communicated to the borrower point wise.
h. The borrower has not made any repayment of the financial assistance in spite of the
above notice and the Authorized Officer is, therefore, entitled to take possession of
the secured assets under the provisions of sub-section (4) of section 13 read with
Section 14.
i. That the provisions of SARFAESI Act and the rules made there under had been
complied with.
Obtaining physical possession of assets and then subsequent sale will not only
provide smooth transfer of asset to the prospective purchaser through bidding
but also avoids various complaints / litigations arising due to sale without taking
physical possession.
The DM or the CMM may authorize any officer subordinate to him to take possession of
such assets and documents relating thereto and forward such assets and documents to
the Secured Creditor. In case of necessity, force can be used by the DM/CMM for taking
such action.
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Filing of Caveat: Section 18C (Right to lodge a caveat)
As per the amended provisions of the SARFAESI Act, Bank can file Caveat in
DRT/Court for preventing any ex‐parte order in appeal/SA filed/likely to be filed by
borrower/guarantor against the Bank for action taken under 13(4) of the Act. Hence,
immediately after invoking section 13 (4) of the Act i.e. whether it is for taking
possession or sale of property, a caveat shall be filed before the DRT and the High
Court having jurisdiction to avoid ex‐parte orders affecting SARFAESI action of the
Bank
1.NPA Accounts/Cases where caveat is to be filed:

The Authorized Officer should follow the under guidelines:‐
NPA accounts where

outstanding Ledger Balance Filing of Caveat is Compulsory
is Rs 1.00 Crore and above
NPA accounts where Optional
outstanding Ledger Balance (Field functionaries may consider for filing caveat
is less than Rs 1.00 Crore. depending upon litigant nature of the
borrower/guarantor to frustrate recovery
proceeding & prevailing practice of locality)
2.When caveat is to be filed:

The cause of action arises for filing S.A/M.A Cases against the bank, when the
Authorized Officer of the Bank takes Symbolic Possession of the charged
securities U/s 13(4) of the SARFAESI Act or thereafter. It is, therefore, advisable
to file a caveat on the following occasions:‐
a) Immediately after taking Symbolic Possession/ physical possession of the
Secured assets
b) When the Authorized Officer is in process of initiating sale process of the
Secured assets.
c) All other situations where it is felt that the borrower/guarantor/third party
may frustrate bank’s recovery action by initiating legal case against the
Bank.
It is needless to mention that the Authorized Officer of the bank, before taking
symbolic possession of the property, may get their records examined that the
notice U/s 13(2) of SARFAESI Act has been served upon the borrower/guarantor
and a proper receipt of acknowledgment is with them and also representation, if
any, received by the Authorized Officer U/s 13(3A) of SARFAESI Act has been
responded appropriately within the prescribed period (i.e. 15 days from the date
of receipt of such representation of the borrower/guarantor/s), identify of the
property proposed to be purchased is not under dispute and there is no stay/legal
embargo against taking possession of the property.
3. Who can file caveat

The Authorized Officer of the Bank who has initiated recovery action under SARFAESI
Act, 2002, has to file caveat at the appropriate court in time, through empanelled
advocate of the Bank.
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4. Where the caveat is to be filed:
A caveat petition is to be filed at the following places/courts.
At DRT Level:
At such DRT within whose jurisdiction the Authorized Officer of Branch/Zonal Office
which has issued a demand notice U/s 13(2) of the SARFAESI Act or property is
situated or borrower’s account is maintained .
At High Court Level

In normal circumstances the Hon’ble High Court does not entertain any matter relating
to SARFAESI Act on the ground that the alternate remedy is available with the DRT but
it is observed that the Hon’ble High Court, in certain case, entertain application filed
before them challenging action of the Bank under SARFAESI Act . It is, therefore,
proposed that a caveat is also to be filed before such Hon’ble High Court within local
limits of whose jurisdiction the property falls.
At Civil Court Level

At such Civil Court within whose jurisdiction the charged asset/s is/are situated.
5. Validity period of Caveat filed;

Caveat filed by the bank is valid for 90 days from the date of filing of caveat petition
before the concerned court unless the concerned application/appeal has been filed by
borrower/aggrieved person against the Bank within said period. If the secured asset is
likely to put on sale within 90 days from taking symbolic/physical possession of
property, previous caveat filed by Authorized Officer shall serve the purpose. After
expiry of the caveat, if necessary, the bank can file another caveat before the
concerned DRT/High Court/Civil Court.
6. Payment of Professional fee of the Advocate for filing a caveat
For Chennai, Chandigarh, Kolkata, Lucknow, Mumbai & New Delhi:

The professional fee of the advocate may be settled up to the extent of Rs 5000/‐
(Maximum) including all expenses.
For Other Places:
The professional fee of the advocate may be settled up to the extent of Rs 3000/‐
(Maximum) including all expenses.
Note: Field Functionaries shall endeavor to negotiate the professional fee of the
advocate lower than the above proposed professional fee. In case where fee claimed is
more than the above ceiling, the Field General Manager is empowered to consider such
cases
Sale of the Secured Assets (both movable & immovable)

The Bank can sell the Secured Assets through the following modes :-
i) By obtaining quotations from parties dealing in the secured assets or otherwise
interested in buying such assets.
ii) By inviting tenders from the public
iii) By holding public auction including through e-auction mode
iv) By private treaty
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Valuation & Fixation of Reserve Price of Secured Assets under SARFAESI Act:
1. Just after issuance of 13(2) notice valuation of Secured Assets should be got done
from the valuers approved by the Board and thereafter further steps for sale as
mentioned here in below should be taken.
2. Valuation report should clearly indicate market value & Realizable value (forced sale
value) of the property.
3. In respect of properties valued at Rs. 50.00 lacs and above, it shall be valued by two
Valuers approved by the Board. The list of board approved valuers is uploaded
on Intranet >> HO Departments >> Recovery Department.
4. In above both cases the higher Realizable value (forced sale value) (RV) should be
considered for the fixation of the reserve price.
5. In case of property value below Rs. 50.00 lac, present value has decreased by 25%
of the value at the time of last sanction/renewal/enhancement the second valuation
is to be taken from another Board approved valuer.
6. Authorized officer along with another officer of the concerned branch has to visit the
property & their visit cum valuation report (Annexure-76) has to be kept on record.
For detailed guidelines on valuation of securities the field functionaries can refer HOIC
15787/IRM/2018-19/05 dated 05.07.2018.
Fixation of Initial Reserve Price

1. The basis of fixing Reserve Price should be the Realizable value (forced sale
value) (RV) assessed by the Authorized Officer on the basis of the valuation report
received from the Bank’s Board approved valuer. This value will depend upon the
location and condition, occupancy, nature, age of the property, etc.
2. Valuation reports should not be older than 12 months.
3. Valuation reports taken for fixation of Reserve Price will be valid for one year for
assessment of Reserve Price to be fixed for various sales
4. Where two valuations have been obtained Reserve Price should be the highest of
Realizable value (forced sale value) mentioned in the two reports.
5. After expiry of one year, fresh valuation reports as per above mentioned guidelines
6. The Reserve Price of the property should be fixed as per the following guidelines:
a) Authorized Officer will fix the initial reserve price in consultation with ZLCC, but
where the reserve price to be fixed is below 75% of the Realizable value
(forced sale value)accepted at the time of last sanction/renewal/ enhancement/
restructuring, then the reserve price will be fixed in consultation with FGMLCC.
In such cases, FGMO will assess the present realizable value by obtaining visit
cum valuation report from two officials so as to ascertain the correctness of the
present realizable value assessed by the valuer. If it is found that at the time of
sanction, the valuation has been inflated, necessary notice has to be issued to
the valuers to find out the justification for such valuation. If FGM considers that
value given earlier during last renewal is unduly inflated, show cause notice for
depanelment should be issued but in no case fixation of reserve price will be
kept held up for more than 30 days from the date of receipt of the proposal.
b) In case of consortium /multiple bank finance, where our Bank is the Leader, the
Reserve Price should be fixed in consultation with co-lenders in consortium
meeting.
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c) In case of consortium /multiple bank finance, where our Bank is not the Leader,
Bank will give mandate for fixation of Reserve Price in line with discussions
taken in concerned consortium/ Joint Lenders Meeting.
Reduction in Reserve Price

However, in case of failure to sell the properties due to non receipt of bids, the reduction
in reserve price fixation will be permitted as under on recommendation of the concerned
authorized officer/ZO/FGMO after recording the specific negative features/reasons for
failure of e-auction. The salability of the property should be guiding the factor for
reduction in fixation of revised reserve price.
Authority to % of Reduction to be permitted from the Original

reduce the Reserve Price (RP)
Reserve Price
ZLCC Up to 5% on first occasion, then up to 10% (i.e.
additional 5%) on second occasion
FGMLCC Additional 5% reduction per reference ( total maximum

reduction up to 20% (i.e. 10% by ZLCC plus 10% by
FGMLCC in initial RP)
General Any reduction above 20% will be decided on case to
Managers case basis looking into reasons for sale failure.
Screening
Committee
(GMSC) at HO
The above authority is subject to the following conditions:
a) At the time of refixation/ reduction of the reserve price, the valuation report, on the
basis of which reserve price is to be refixed, should not be more than one year old.
b) If the Realizable value (forced sale value)of the latest valuation report (taken after
expiry of one year of last valuation) is lower than the last failed Reserve Price, the
ZLCC can fix the latest Realizable value (forced sale value)mentioned in latest
valuation report as Reserve Price.
c) If the Realizable value (forced sale value) of the latest valuation report is higher than
or equal to the last Reserve Price, then to refix the Reserve Price below the last
failed Reserve Price in order to sell the property.
d) The discount rate has to be worked out on the latest Realizable value (forced sale
value) of securities.
e) On the basis of the discount rate, the authority for re-fixation of the reserve price will
be decided as per the above authority table & process will continue for further
reduction, if required, provided satisfying the condition as stated in above point no
(a).
1. ISSUE OF NOTICE FOR SALE OF SECURED ASSETS

a. The notice for sale (First Sale notice against the property) should be served to be
borrower / guarantor / mortgagor giving clear 30 days notice from the date of service by
hand against due acknowledgement or through Registered Post / AD. The sale notice
may also be served through email/fax, if possible.
b. The Sale Notice should contain details of the parties (Borrower/guarantor/
mortgagor), outstanding dues, description of assets to be sold, reserve price, terms and
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conditions of sale, mode of sale, time and place of sale, stipulation regarding deposit
and forfeiture of Earnest Money etc.
c. The Sale Notice should also be affixed on the conspicuous part of the immovable
property & photograph of such affixation should be kept on record. The Sale Notice
should also be uploaded on Bank’s website.
d. Public notice/sale notice regarding sale has to be published in two leading news
papers of which one in vernacular language (contents to be in the same vernacular
language) having wide circulation in the area. The notice should contain details of Bank
and borrower, outstanding secured debts / dues, reserve price, description of properties
to be sold including the details of the encumbrances known to the Bank, earnest money
to be paid, time, date and place of auction etc. The auction should be conducted
through e-auction mode only (Full details provided separately in chapter No.17).
e. However, on failure of First Sale Notice as aforesaid on account of lack of bidders,
the property is again put on sale and the Authorized Officer shall serve, affix & publish
the Sale Notice in the manner described hereinabove giving clear 15 days notice to the
borrower in place of 30 days notice as mentioned at point (a). It should be noted that for
every subsequent sale notice, entire procedure described in point no. (a) to (d) should
be followed strictly otherwise the same will invalidate the Sale process. If the sale is
cancelled due to other reasons, or could not take place on the notified date, the
authorized officer shall again process to fix up sale by giving 30 days notice for sale to
the borrower/guarantor and also publish notice of sale in news paper/s.
2. Facilitation Centre: In order to enable to prospective buyers in rural areas who may
be interested for bidding in e-auction, facilitation centre should be opened in the branch
nearest to the location of the property in terms of the guidelines described in Chapter
No.17
3. Publication of short advertisement in News papers for Sale of immovable &

movable Properties under SARFAESI Act, 2002. (e-Auction)
In order to minimize the expenses on account of publication of a full-scale Notice of
Sale in news papers and to high light the salient features of assets (like nature of
property i.e Residential / Commercial with prominent features like mention of
carpet area / no of bedroom / kitchen / drawing and dinning/ photograph if
available / distance from railway station and airport) under sale so that maximum
number of bidders can be attracted, the format of Notice of Sale (details provided in
Chapter No.17) should be adopted for the purpose of publication in leading News
Papers. However the Branches/Authorized Officer shall continue to up load the
complete Notice of Sale along with the entire terms & conditions (in both languages in
which short notice was published) as per existing practice as described in Chapter
No.17 on web portal of Government of India (www.tenders.gov.in), Bank’s Web site
(www.allahabadbank.in) and that of the e-Auction Service Provider which can be easily
downloaded by the intending bidders/any interested party
4. UPLOADING OF SALE NOTICE IN TENDER WEBSITE OF GOVT OF INDIA

As per directives of Government of India, all the auction/sale notices issued by the
PSBs/FIs under SARFAESI Act has to be uploaded on the Government website
(tenders.gov.in) minimum 30 days before auction/sale date to give more publicity for
getting better response.
The detailed guidelines are described in Chapter No.17 which may be referred to.
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5. SEARCH OF PROSPECTIVE BUYER:
 Spade work for searching the prospective buyers should be done vigorously well before
the auction date. Where the land or building to be sold under public auction is situated
at the urban area, the branch/Zonal Office shall make endeavor for publicity of the sale
through distribution of pamphlets & announcement through loudspeaker at the locality,
so that the maximum bidder may participate in the auction process & the bank may
fetch better price of the property.
 The concerned borrower/guarantor should also be advised to mobilize their own buyers
so as to realize maximum value by sale of the property.
 If the Zonal Office has engaged Recovery Agent or Head Office has allotted that
particular account to ARC (REA) for providing assistance to branch in recovery, then
their services are to be used effectively for finding prospective buyers.
Earnest Money Deposit (EMD), Sale Proceeds & Confirmation of Sale:

 The Authorized Officer shall maintain a separate current account in the name of 'The
Authorized Officer, Allahabad Bank' in the branch where he/she is posted. In case of
ARMB/ZO, such account should be opened in the nearby branch.
 Generally 10% of the Reserve price should be demanded as EMD along with the
bid/tender/Process Compliance Form (Annexure 69) in the form of Demand Draft in
favor of The Authorized Officer, Allahabad Bank payable at the place of
Branch/ARMB//ZO conducting the sale/e-auction. It can also be advised to deposit
EMD amount through RTGS/ NEFT for credit into the above mentioned current account.
In the notice of sale, full details of this account (Name and account number) along with
branch IFSC Code are to be mentioned.
 After finalization of successful bidder, only EMD of successful bidder should be retained
and EMD of unsuccessful bidders should be returned in the form it is received from the
bidders i.e. if received in the form of DD then to return their DD and if in the form of
RTGS/NEFT then return it through RTGS/NEFT.
 After finalization of successful bidder in all respects, a new account in the name of the
Authorized Officer, Allahabad Bank, A/c (Name of the Borrower) is to be opened
and the EMD amount so received from the successful bidder should be transferred from
the above current account of the Authorized Officer to this new current account.
 Further sale proceeds may also be collected /held in the new borrower current account
(Authorized Officer, Allahabad Bank, A/c (Name of the Borrower)).
 As per provisions of the Act, on declaring the highest bidder as successful bidder, he/
she/ they shall deposit 25% of the sale proceeds (including 10% EMD amount)
immediately but not later than next working day and balance 75% of sale proceeds
within 15 days of declaration of successful bidder.
 However, looking to genuine difficulty of the purchaser and on his request in writing, the
Secured Creditor Bank may extend the date of deposit of balance 75 per cent of bid
amount as may be agreed between the Secured Creditor and the purchaser /
successful bidder but in any case the said extended period should not exceed 3
months. The sale proceeds should be held in the above account till the sale certificate
is issued in favour of the successful purchaser.
 In the event of default by the purchaser for payment of balance amount within 15 days
or extended period allowed by the Secured Creditor Bank, the deposit shall be forfeited
and bidder should be informed accordingly and the property shall be put to re-auction by
reissuing a notice for sale giving time as mentioned above.
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 The forfeited amount, whether EMD or part of sale proceeds, belongs to the bank. In no
case the benefit of forfeited amount should be given to the NPA borrower.
Bid by the Bank:

If the sale of the charged assets under SARFAESI Act 2002 has failed (once) for want
of bids then bank can also bid for purchasing the property on subsequent sale. As per
section 9 of Banking Regulation Act, such property has to be disposed of within 7 years
which may be extended for further 5 years if property is not purchased for Bank’s own
use. For taking part in the bid process on behalf of the Bank, the concerned
branch/Zonal Office/ FGMO/ department of Head Office has to submit the proposal for
taking part in the bid along with the amount of the bid to be quoted with their due
recommendation to Head Office Premises Department who in turn will take the
permission from the Competent Authority (In terms of their own policy for purchase of
premises & Bid policy) & convey the same along with permission to debit Suspense
Account Capital/ Premises or will send credit advice being the price of the property to
be acquired by the Bank to the concerned Zonal Office. Before submitting such
proposal FGMO has to first ascertain the statutory dues, electricity, water, society &
other similar dues, charges for estimated registration amount required upfront, etc.
Zonal Office/Branch will respond the entry related to purchase of property accordingly &
Authorized officer of the Bank will issue the necessary sale certificate in favor of the
Bank. Concerned branch after taking physical possession of the said property,
completing all the formalities of registration of sale certificate with the Competent
Registering Authority, its mutation in favor of the bank & payment of statutory dues to
the concern Authority will send all the original documents to Head Office Premises
Department for their safe custody.
Refund of EMD/Sale Proceeds in part or full

In under noted exceptional conditions bank can consider refund of EMD/Sale Proceeds
deposited by the successful bidder.
a. If any defect is found in the title of the mortgager of the property under sale.
b. If Bank is not able to deliver physical possession of the property beyond 6 months
from the auction date due to restrain /conditional order passed by the Court/DRT or
any other valid reason justifying such refund.
c. To comply with DRT/Court orders
All the proposals for refund of EMD/sale proceeds are to be submitted by the Authorized
Officer through the Branch Head with full facts and circumstances with their
recommendation & are to be approved by Zonal Level Credit Approval Committee
(ZLCC). Please note that under normal circumstances no interest is to be paid to the
bidder. The authority for refund of EMD/Part or full Sale Proceeds is mentioned below
I. ZLCC will approve refund of EMD/Part or full Sale Proceeds in circumstances
narrated above at point no. a & b without interest and also as per the Court
Order.
II. FGMLCC will approve refund of EMD/Part or full Sale Proceeds in other than
above cases and with payment of interest up to SB rate.
III. GMHLCC will approve refund of EMD/Part or full Sale Proceeds in other than
above cases and with payment of interest beyond SB rate
114
In such cases where stay order has been granted after sale of the property, such cases
should be contested tooth and nail before the court/Higher court and effort should be
made to get the stay order vacated and handing over of the possession and period of
refund may be extended subject to convenience of the successful bidder/ auction
purchaser.
SALE BY PRIVATE TREATY

There can be circumstances when charged assets is having a good market value but
sale has failed twice (If value is one crore and above) for want of bids or due to various
reasons it is difficult to sell them even at distress price or the authorized officer of the
bank is of the opinion that Open Public Auction/ Auction through Sealed Tender will not
fetch good price then he may go for sale of charged assets under Private Treaty on the
terms mutually settled /agreed between the Bank and the prospective buyer.
The alternative mode of sale by private treaty should be resorted to only when the other
more transparent methods of obtaining quotations/ inviting tenders or public auction etc
have not been successful. Further while processing for sale under private treaty efforts
should be made to sell the assets for a price not less than 90% of the reserve price
when the last auction failed.
It is advised that while resorting to the mode of sale by way of Private Treaty, the
following aspects should be taken into consideration.
a) There should be at least ONE unsuccessful attempt of sale by way of public

auction/sealed tender when the assessed value/ reserve price fixed for the secured
asset is up to Rs.One crore.
b) There should be at least TWO unsuccessful attempts of sale by way of public auction
/sealed tender when the assessed value/ reserve price fixed for the secured asset is
more than Rs.One crore.
The alternative of private treaty may be considered without resorting to other methods if
all the dues of the bank and dues of other public sector banks known to the bank, are
being fully recovered by sale through this method.
Further, it may be noted that where the dues of the banks is not fully recovered and the
amount recoverable through sale in Private Treaty is less than the assessed value/
reserve price, approval of the FGMLCC should invariably be obtained.
For assistance of field functionaries, drafts of the notice/s to be issued in sale under
Private treaty are attached with policy as Annexures 94 to 96. It may further be noted
that as the sale is under the provision of SARFAESI Act, sale certificate is to be issued
as per the sale certificate provided in SARFAESI Manual.
If a bid under Private Treaty is received for a value less than 90% of the last auction
failed reserve price, Swiss Challenge Method as described below along with standard
operating procedure should be adopted in the sale under private treaty.
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Swiss Challendge Method (SCM):
This method consists of features of both an open auction and a closed tender to
discover the best price for an asset.
It may be noted the anchor bid for the assets under Swiss Challenge Method should not
be less than 65% of the reserve price fixed at the time of last failed auction sale.
Once the bid (called anchor bid) for a value less than 90% of the last auction failed
reserve price is received, the Bank shall call for counter bids through sealed tenders
from other prospective buyers keeping the value in anchor bid as reserve price. On
receipt of any bid through tender process quoting value higher than the anchor bid, the
Bank shall first invite the anchor bidder to match the enhanced bid. If the anchor bidder
matches the value of the enhanced bid, he/she will be the winning bidder. In the event
of anchor bidder refusing to match the enhanced bid value, the bidder who quoted the
higher value than the anchor bid will be declared as the H1 bidder.
It is to be noted that since the right of refusal rests with anchor bidder and Bank will
have to declare him/her the H1 bidder in the absence of any other bids under sealed
tender process, acceptance of the anchor bid value by the Bank to be fixed as reserve
price under SCM is of paramount importance which should be decided with prudence.
Standard Operating Procedure for SCM:
1. If the sale process as per eligibility norms under Private Treaty (i.e., getting a bid
for a price not less than 90% of the last auction failed reserve price) is not
successful, but an offer is made by a prospective purchaser for a lower amount,
SCM should be adopted as a transparent price discovery mechanism.
2. The bid (called “anchor bid”) received from the base bidder (anchor bidder) will
be fixed as reserve price.
3. A suitable letter from the anchor bidder incorporating acceptance of the terms of
sale under SCM viz., (i) the anchor bidder is agreeable to the bid amount quoted
by him to be fixed as reserve price by the bank for inviting sealed tenders (ii) that
he/she is agreeable to forego the bid in the event he/she is unable to match any
enhanced quote that may be received and (iii) that the EMD will be forfeited in
the event the anchor bidder withdraws from sale process upon being declared as
H1 bidder.
4. Such letter and the bid should also be accompanied by a demand draft/ cash
deposit equal to 25% of the bid value.
5. Immediately upon receipt of the letter, bid and EMD from the anchor bidder,
branch should inform in writing to the mortgagor/borrower that bank proposes to
adopt SCM for sale of the property, quoting the reserve price.
6. Within 3 days of receipt of the letter from the anchor bidder, branch should
submit a proposal seeking approval of the FGMLCC through proper channel
along with details of valuation reports/ reserve prices fixed in the earlier auctions/
reasons for failure of the auctions/ reasons for accepting a lower price as anchor
bid.
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7. FGMLCC should carefully analyse the reasons for fixation of a reserve price
lower than 90% of the last auction failed reserve price before approving the sale
through SCM.
8. Decision of FGMLCC should be conveyed to the branch within 7 days from the
date of anchor bidder’s letter.
9. The branch should invite sealed tenders to be submitted within 15 days from
prospective purchasers by way of advertisement in news papers / display in
notice board, following the same procedure as adopted under SARFAESI Act,
keeping the anchor bid value as reserve price. Such advertisement should be
released within 2 days of receipt of FGMLCC’s approval.
10. It should also be mandatory that the prospective purchaser submits EMD
equivalent to 25% of the amount quoted by him/her along with the sealed tender.
11. Sealed tenders received should be opened on sixteenth day of the date of
advertisement in presence of three branch staff/ officials with their
signatures/witness.
12. If no bid or bid equal to the reserve price is received, branch should declare
anchor bidder as H1 bidder immediately in writing and demand the balance 75%
of the reserve price to be paid within 3 days. The EMD submitted by other
bidders should be returned forthwith.
13. If the anchor bidder withdraws at this stage or does not make payment despite
being declared as H1 bidder, the EMD paid by him will be forfeited.
14. If any bid more than the reserve price is received, the anchor bidder should be
informed of the enhanced bid and asked to match the bid within 3 days of the
date of communication with upfront payment of balance amount i.e., enhanced
price less EMD paid by the anchor bidder.
15. Once the anchor bidder matches the quote and makes the payment, EMD of the
highest bidder should be returned forthwith.
In the event anchor bidder does not wish to increase his offer by matching the
enhanced bid, the prospective purchaser who has offered the highest quote should be
declared as H1 bidder and has to pay the balance 75% of such enhanced quote within
15 days of communication from the branch. EMD of the anchor bidder should be
returned.
Distribution of sale proceeds of the assets of the borrower company under

liquidation
If the borrower company is in liquidation, the amount realized from secured assets shall
be distributed in accordance with provisions of Section 326 of Companies
Act, 2013 taking care of the Worker’s dues. It may however be noted that distribution
and preferential payment under Companies Act and IBC are different and Section
326 shall not be applicable in the event of liquidation under IBC.
TDS on sale of immovable property:

As per the section 194-IA newly introduced in the Income Tax Amendment Act, 2013,
any person being a transferee of any immovable property (other than the agricultural
land in rural area in India) and being responsible for paying to the transferor a sum of
Rs.50 lacs or more by way of consideration is liable to deduct tax at source. Tax shall
be deducted at the time of making payment to the transferor of such sale consideration
either in cash or by issue of cheque or draft or in any other mode or at the time of giving
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credit to the transferor in the books of accounts of the transferee whichever is earlier.
Tax is deductible @ 1% of amount being paid.
In this connection, necessary guidelines have been given by the General Accounts
Department of Head Office vide their circular no. 14046/General A/Cs & Audit/2015-
16/61 dated 08.12.2015 which may be perused for more clarity. (Field functionaries are
advised to refer to the latest circularized guidelines in this regard)
Accordingly, this provision is applicable if any immovable property is bought by the

bank as well as sold by the bank under SARFAESI Act, 2002. While buying, the
responsibility of making TDS lies on the Bank. In case of sale under SARFAESI Act, the
responsibility lies on the purchaser and hence the purchaser is to be enlightened to
make TDS at applicable rate and pay the tax to the Government in the account of title
holder of the property not in the account of the bank.
As the sale under SARFAESI Act is for recovery of loan, deduction of tax at source in
the sale consideration should be taken care of.
Since the sale will be complete only on payment of 100% bid amount and on issuance
of sale certificate, the application of TDS provision will arise only on making payment of
remaining 75% and the purchaser may be advised to make TDS only at the time of
making payment of remaining 75% but to deduct the tax @ 1% based on full sale
consideration. It is made clear that the amount forfeited is not the proceeds of
sale/transfer, the provision of section 194-IA will not apply against such forfeited
amount.
If the sale is set aside by the DRT/DRAT/High Court or if the purchaser demands the
bid amount back on the ground that the bank is not in the position to handover the
physical possession of the property, the bank shall have to repay the amount received
from the purchaser. Then it is the buyer, through the title holder on whose account the
TDS was paid, to get tax refunded to him. Onus on such matters will not lie on the
bank.
Although the responsibility of TDS lies on the purchaser, for protecting the interest of
the bank, the following line is to be added in the terms and conditions of sale of property
whose reserve price is fixed at Rs.50.00 lacs or more:
“Payment of sale consideration by the successful bidder to the bank will be subject to
TDS under section 194-IA of Income of Tax Act and the TDS is to be made by the
successful bidder only at the time of deposit of remaining 75% of bid amount is paid”.
GST on Sale of Assets under SARFAESI
1. Repossessed Goods
2. Supply of used and old vehicles:
In case of supply of used and old vehicles repossessed by Banks, GST has to be paid
at the applicable rates depending on the category of vehicles as mentioned in the
notification (notification no. 8/2018 – central tax (rate) dated 25/01/2018 & notification
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no. 9/2018 – integrated tax (rate) dated 25/01/2018) on the amount arrived at by
reducing purchase value from the consideration received on supply of the vehicles. If
this value is negative, then no tax needs to be paid.
Example:
1. Sale value Rs 100, Purchase cost Rs 40, Applicable tax shall be paid on the
margin i.e. Rs 60 (Rs 100 – Rs 40)
2. Sale value Rs 40, Purchase cost Rs 60, As the margin (Rs 40 – Rs 60) is
negative, tax need not be paid.
Supply of goods other than used and old vehicles:
In case of supply of goods other than used and old vehicles repossessed by Banks,
GST has to be paid on the difference between sale price and purchase price, if such
repossession is done from person not registered under GST. In case the difference is
negative, it shall be ignored for the purpose of GST calculation. Purchase price for the
value of calculation shall be purchase price of defaulting borrower minus 5% for every
quarter or part thereof.
Example
1. Bank Y has repossessed goods of borrower Mr X as he has defaulted in payment
of loan. The purchase price of goods of Mr X - Rs 1,00,000, Date of purchase by
Mr X – 01/07/2017, Date of sale by Bank Y – 30/06/2018. Sale consideration
received by Bank Y – Rs 85,000. Calculation of GST payable (assuming GST @
18%) by the Bank:
Deemed Purchase Price – 1,00,000 – (5%*4)*1,00,000 = Rs 80,000
GST to be paid – (85,000 – 80,000)*18% = Rs 900
2. Bank Y has repossessed goods of borrower Mr X as he has defaulted in payment

of loan. The purchase price of goods of Mr X - Rs 1,00,000, Date of purchase by
Mr X – 01/07/2017, Date of sale by Bank Y – 30/06/2018. Sale consideration
received by Bank Y – Rs 75,000. Calculation of GST payable (assuming GST @
18%) by the Bank:
Deemed Purchase Price – 1,00,000 – (5%*4)*1,00,000 = Rs 80,000
GST to be paid – (75,000 – 80,000)*18% = Nil
In case goods other than used and old vehicles are repossessed from registered
persons, then Bank has to discharge GST liability on the entire sale consideration.
Identifying Rates of Goods:

For the purpose of determining applicable rates, reference may be made to notification
no. 1/2017 – central tax (rate) dated 28/06/2017 amended from time to time.
Bank may decide to treat the amount recovered as inclusive of taxes and discharge the
GST liability accordingly.
3. Immovable Properties
Sale of land will not attract GST and sale of building after obtaining completion
certificate or after its first occupation will not attract GST. Sale of building before its first
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occupation or before issuance of completion certificate will be taxed under GST, and
shall be treated as supply of service.
Applicability of the Act in pending suit filed cases

The Hon’ble Supreme Court in “Transcore Vs. Union of India & Anr., 2008 1 SCC 125”
has ruled as follows:-
That the Banks or Financial Institutions having opted to seek their remedy in terms of
the RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTION ACT,
1993 (commonly known as DRT Act, 1993) can still invoke the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the
SARFAESI Act, 2002 also known as “NPA Act, 2002”) for realizing the secured assets
without withdrawing or abandoning the O.A. filed before the DRT under the. RDDBFI
Act ,1993
In view of the above judgment, Bank can go ahead with action under SARFAESI Act,
2002 even in suit filed cases. In other words, bank can proceed with Recovery Suit
before DRT and simultaneously can proceed under SARFAESI Act without the need for
withdrawing the suit before DRT. Immediate steps should therefore be taken for
vacation of stay in all cases where stay has been granted by DRTs / High Court. The
above judgment should be cited before DRTs / High Court for the said purpose.
Applicability of Act for NCLT Admitted Cases

After insolvency commencement date, a moratorium period shall commence prohibiting
any recovery action against the Corporate Debtor (CD) under any law and also
prohibiting the Corporate Debtor from alienating/ disposing any asset of the Corporate
Debtor. The said moratorium period shall cease to have effect after approval of
resolution plan or passing of order of liquidation of Corporate Debtor.
Action to be taken if SARFAESI Action is withheld as A/c is regularized:

After serving notice u/s 13(2) or after taking over possession of the charged Assets, if
the Borrower / Guarantor approaches the Bank for regularizing the Account by way of
repaying the quantum of default amount in full, a conscious decision should be taken
for upgradation / regularization of the account in the CBS system. In case the account
has been upgraded and the borrower fails to keep the account performing & the said
account is classified as NPA again, fresh action under the SARFAESI Act should be
initiated and earlier notices issued u/s 13(2) and / or 13(4) under SARFAESI Act should
not be taken into consideration & relied upon.
Completion of the action under SARFAESI ACT in a time bound manner

For early recovery, Authorized officer/field functionaries are advised to adhere to
undernoted time schedule for action under SARFAESI Act.
Steps Time schedule
Issuance of Notice under sec.13(2) 7 days from date of NPA
Reply to Representation/objection raised Within 15 days from the date of receipt
by the borrower / guarantor (if any) under of representation
sec 13 (3A)
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Taking of symbolic possession under After 70 days of service of 13 (2) notice
section 13(4)
Publication of possession notice in the Within 7days from the date of the
News paper possession u/s 13(4)
Valuation of assets under possession Within 7 days from the date of symbolic
possession
Fixing of Reserve Price Within 3 days of getting the valuation
report
Issuance of sale notice & publication Within 3 days of fixation of Reserve
Price
Gap period between the date of Minimum 35 days in case of 1st sale
publication of sale notice & the date of notice & 20 days in case of subsequent
proposed e-auction sale notice.
Confirmation of sale & receipt of sale price Within 15 days of successful e-auction
Total Normal Period for completion of all 162 days
actions under SARFAESI Act
In case of SARFAESI Appeal (SA) filed by the borrower against above action of the
bank, the DRT shall consider whether the actions taken by the secured creditor are in
accordance with SARFAESI Act and Rules made there under and such application has
to be disposed off by the DRT within 60 days with a maximum period of 4 months with
the reason of delay to be recorded by the DRT. If the application is not disposed off
within 4 months, then either party may make an application before DRAT for direction to
the DRT for expeditious disposal thereof. Accordingly where our above actions are held
up due to delay in disposal of SA by DRT, the Authorized officer should take up the
matter with the concern authority.
Precautions to be taken while taking action under SARFAESI ACT, 2002

Field functionaries should take under noted precautions while taking action under
SARFAESI Act
(A) Precautions to be taken before issuance of Demand Notice under Section 13 (2)
of the SARFAESI, Act, 2002:
(i) The details of the physical position of the Property mortgaged to the Bank are to be
verified by Authorized Officer along with one Officer (Preferably who has earlier visited
the property and submitted the Report or person who is well conversant with the said
account) of the Bank with respect to the correctness of Patta Numbers/Khata
Numbers, Survey Nos/ Khatian Nos, Plot Numbers, Lay Out, if any, and boundaries as
mentioned in the Recitals, Letter Confirming the Deposit of title deeds/Mortgage Deed
& title deed of the property. Visit Report has to be prepared as per Annexure- 84 and
kept in record.
(ii) If there is any difficulty in identifying the Plot/Property by the Bank’s Authorized
Officer/Officer, the assistance of the Government Surveyors/ BLLRO or Revenue
Department, in whose jurisdiction the said plot/property is situated, is to be taken, for
its proper identification.
(iii) Latest NEC is to be obtained and ascertained whether there are any encumbrances or
alienations after the charge is created in favour of the Bank.
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(B) Precautions to be taken before taking symbolic possession of immovable
properties under Section 13 (4) of the SARFAESI, Act, 2002:
(i) The property must be visited by the Authorized Officer personally along with the
valuer at the time of the Valuation for sale under SARFAESI Act.
(ii). The Authorized Officer while taking the symbolic/physical Possession of the
Property & while delivering the 13 (4) Notice to the mortgagor shall take photographs.
(iii) It must be mentioned in the Sale notice that the property is being sold on “As is
where is basis”, “As is what is basis” and “whatever there is basis”.
(iv) If the Part of the mortgaged property has already been sold/ released then
precaution must be taken at each step of the SARFAESI ACT, 2002 and more
particularly while publishing the Possession Notice/Sale Notice. It is to be clearly
mentioned about the details of the property and actual boundaries and remaining
position/part of the property.
However, while publishing the Possession Notice/Sale Notice in News papers, it
should not contain the photograph of Borrower/Guarantor & Mortgagor.
(C) Precautions to be taken when Authorized Officer has taken Possession of

movable properties:
(i) Precautions to be taken by the authorized officer for safe keeping the movable
properties, whose physical possession has been taken & it is to be kept, either in his
own custody or in the custody of any authorized person appointed by him, who shall
take care of property in his custody as an owner of ordinary prudence. The authorized
officer shall take appropriate steps for preservation & protection of the said properties.
Such movable property should be insured against loss/damage/theft,etc., if necessary,
till they are sold or otherwise disposed off.
(ii) In case physical possession of perishable goods is taken and the expenses for
safe keeping of such property in custody is likely to exceed its value, the Authorized
Officer may sell it at once after enquiring in the market about its value
(D) Other precautions:
(i) The Authorized Officer of the bank, while invoking any action under SARFAESI Act
against the property mortgaged to the bank, should describe the details of the
immovable property strictly as per the title deeds held in the bank and under no
circumstances any deviation from the description of the title deeds should be made.
(ii) The detailed description of the property including boundary of the immovable
property should be given invariably in their demand notice, Possession notice and
sale notice as well. Any discrepancy in the matter may defeat whole process taken
by the bank under SARFAESI Act.
(iii) It has been observed from several demand notice/sale notice issued by the different
branches that they describe the title deed Number and name of the title deed holder
in their demand notice/possession notice, which is not sufficient in the eye of law
and invite several litigation. Detail description i.e. name of Mouza, Tauzi No, Khata
No, Khatian No, Dag No, Name of Police Station, Area of the land, nature of land
i.e. vacant/ home stead, Industrial, commercial, constructed single/double storied
building etc should be described properly in the demand notice/possession
notice/sale notice. Thereafter, the name of the mortgagor should be written.
(iv) The Authorized Officer, before issuing sale certificate, should ensure that successful
bidder has given process compliance form, complete KYC details (along with
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photograph) and have complied with Income Tax and GST. The same is to be kept
in record.
(v) The sale certificate, if issued, may be delivered to the buyer with proper
acknowledgement. The Sale Certificate should not be delivered to third party.
(vi) Field functionary may keep in mind that the sale certificate is as good as the title
Deed/Conveyance Deed. While the Authorized Officer issues Sale Certificate under
the SARFAESI, it should be taken utmost precaution and should be issued in
accordance with the format prescribed in the “Manual on SARFAESI”. The
Registration of Sale Certificate is to be effected by the Purchaser at his own cost. In
case, the details of encumbrance are not known to the bank, such portion in sale
certificate should not be kept blank but the same may be omitted from the sale
certificate.
(vii) In case, if the intending buyer insists for issuing duplicate Sale Certificate or another
sale certificate, such request of the buyer should not be entertained as there is no
provision under SARFAESI Act for issuance of the Duplicate Sale Certificate and
another sale certificate/duplicate sale certificate should not be issued at any point of
time. The authorized officer may however provide certified copy of sale certificate.
(viii)The Authorized Officer of the bank shall not issue sale certificate in favour of third
person or such person nominated by the buyer under any circumstances.
(ix) The Original title deeds, link deed and other papers/documents i.e. tax receipt,
mutation receipt, municipal tax receipts etc pertaining to the property sold to the
buyer should be handed over invariably to the buyer with proper acknowledgment
and a copy of those documents/paper authenticated by the branch manager to be
kept on the Bank’s record.
(x) If, two or three properties are put on public auction by fixing single reserve price, the
Authorized Officer shall issue a single Sale Certificate describing detail of all the
properties put on sale in the schedule of the Sale Certificate. Under such conditions
the Authorized Officer shall not issue property wise Sale Certificate.
Guidelines on Empanelment of Valuers by Bank’s Board for valuation of Movable

and Immovable Property/ Plant & Machinery to be sold under SARFAESI Act, 2002
a) In terms of SARFAESI Act all the properties to be sold under SARFAESI Act are
to be valued by the Bank’s Board approved valuers only just after taking
possession (issuance of section 13(4) Notice).
b) Fixation of Reserve Price and then further steps for sale are to be based on
timely and proper valuation of the charged properties. Valuation report should
clearly indicate market value and realize value of the property.
c) The Bank’s existing valuer, who has been registered as a valuer under Section
34AB of Wealth Tax Act 1957, is eligible for empanelment to undertake valuation
of properties under SARFAESI Act.
d) His empanelment in our bank should be minimum 6 months old.
e) He should have undertaken valuation of at least 5 properties for the Bank & his
reports have been accepted by the Bank.
f) The valuer must have not been debarred by any bank/financial institution. His
name should not be in the debarred list of I.B.A.
g) He will be empanelled as per his existing category of valuer approved by the
Bank.
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h) The duration of empanelment will be 5 years, subject to annual review by Z.O. &
satisfactory service rendered.
i) Professional fees will be paid as per the Head Office Circular/guidelines.
j) The valuer has to apply in the Prescribed format (Annexure-83). It has to be
scrutinized & recommended by ZLCC to FGMLCC who in turn will send the
proposal to H.O. Recovery Department for approval by the Board.
FILING OF SUIT & EXECUTION OF DECREE/RECOVERY CERTIFICATE

1. Legal recourse is the ultimate measure to be taken for recovery of Bank’s dues.
When all possible measures fail to yield any satisfactory outcome, the Bank
proceeds for adoption of legal measures.
2. In States where Certificate Case/Recovery Certificates can be issued for recovery of
non performing advances, the Bank will arrange for issuance of such certificates.
3. In case of suit filed accounts, Bank has already circulated a compendium containing
detailed guidelines for steps to be followed for monitoring of suit filed accounts and
decreed accounts. (HO Instruction Circular no. 8167/Legal/2004-2005/01 dated
20.05.2004).
4. Suit Amount below Rs.20.00 lacs has to be filed in Civil Courts. Suit amount of
Rs.20.00 Lacs and above has to be filed in DRTs (Presently Stay order passed by
Hon’ble Rajasthan High Court in the matter of Kirti Kapoor & Ors Vs UOI on
implementation of the aforesaid Central Govt Notification. The implementation
thereof shall be subject to outcome of the aforesaid petition). The detail process of
filing cases at Civil Court/DRT has been explained later on & common application to
be filed is explained below at point no.8.
5. It should be ensured that details of the securities available in the account be
described in the O.A. (in terms of Sec-19(3A)(a) of the Recovery of Debts and
Bankruptcy Act, 1993 referred to RDBA, 1993) along with their estimated value.
6. If the estimated value of the available securities is not sufficient to liquidate the entire
dues of the Bank, details of uncharged assets / properties belonging to the
defendants, if any, should also be described in the O.A. (in terms of Sec-19(3A)(b)
of RDBA, 1993) along with their estimated value. In this regard, Branch shall rely on
the declaration made by the borrower/guarantor during course of sanction of loan
and/or any conclusive evidence thereof.
7. If the estimated value of the properties (charged / uncharged) as abovementioned is
not sufficient to liquidate the entire dues of the Bank, prayer should be made in
terms of Sec-19(3A)(c) of the said Act for seeking direction upon the defendant/s to
disclose particulars of other properties or assets owned by the defendants for
securing the recovery of entire dues like personal movable and immovable
properties, bank accounts, lockers, fixed deposits with any
bank/companies/organization/, mutual funds, Bonds, Shares in Demat as well as
physical form, securities, etc.
8. Application may be filed before DRT/Courts for seeking under noted orders
i. Restraining the Borrower/ Promoters/ Directors of the Company, their servants,
agents from transferring or dealing with their share holding in the borrowing Concern/
Firm/LLP/ Company.
ii. Directing the borrowers/ guarantors for disclosing on oath, the details of their
personal movable and immovable properties with description and value, details of
investments such as bank accounts, fixed deposits, mutual funds, bonds, shares and
other securities, lockers and other deposits.
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iii. Directing the borrowers to furnish full particulars of book debts including the name
and address of the debtors and outstanding amount.
iv. Restraining the borrower/borrower company and its director/guarantors not to
alienate, transfer and create third party interest on the secured assets during
pendency of the suit.
v. Directing closure of all bank accounts, other than with the consortium member banks
and route all transactions through Allahabad Bank or consortium banks only.
vi. Application may also be filed for appointment of a Commissioner for making inventory
of the hypothecated movables, verify the status of the book debts and mortgaged
properties and submit report to the DRT/Court.
vii. To grant liberty to the bank to cause publication of the gist of the orders in
newspapers passed by the DRT in matters involving suit amount of Rs 1.00 crore &
above. Immediately after passing of necessary orders by the DRT.
viii. Wherever considered fit and proper, in matters involving suit amount of Rs.5.00
crores & above, applications may be filed in DRT for direction to the borrower/
guarantor to surrender their Passports to the DRT and / or for restraining the
borrower/guarantor from leaving the country without permission from Tribunal. Copy
of the such order should be communicated to the passport authority/office and for
issue of arrest warrant against those persons when/if the DRT deems fit.
ix. To obtain permission from the DRT for publication of extracts of interim
relief order/attachment order issued by the DRT and photograph of the Borrower and
the Guarantors in the leading newspaper as a Public Notice for general awareness of
the public
9. ZO/ARMB should try to settle maximum of suit filed/decreed cases and also non-
suit filed cases through Lok Adalat conducted by DRT/Court every month.
10. Monthly meeting of Lawyers is to be conducted to review the position of filing of suit /
suit filed cases and future plan of action and to keep track of cases. Details of cases
with suit amount, advocate name, next date of hearing etc., should be uploaded in
the legal case monitoring portal (Advocate Manager). Guidelines issued by Legal
Department, Head Office in this regard from time to time should be complied with.
11. Substitution of legal heirs immediately on death of any defendant has to be made
within 90 days.
12. Immediate execution of decree in all cases where Decretal order has been issued
and security / asset is available.
13. In case of non availability of any charged assets, the Zonal Office should permit
the branch well in advance to engage and appoint a competent Investigating Agency
to find out the personal assets of the borrowers/ guarantors so that during recovery
proceeding the same can be placed before the Recovery Officers for attachment and
none of the hearing is adjourned in absence of available reports/ findings in this
regard. The original branch to which the loan accounts belong should extend all help
to the ARMBs in this regard.
14. Branches are required to submit a monthly status Report for Loss Assets (more than
two years) where suit has not been filed (Rs. 10.00 Lac & above) on Annexure-28
incorporating reasons for delay.
15. For seeking permission for filing suit Branches are required to submit History Sheet
(as per prescribed format enclose as Annexure-29) covering details of the account,
security particulars, reasons for becoming irregular, recovery measures adopted for
realization of dues, staff accountability aspect, if any, and other related matters to
respective Zonal Offices / Authority to accord permission for filing of suit. On critical
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examination of the particulars, permission for filing of suit is to be given by the
Competent Authority as per undernoted delegated authorities. However, the field
functionaries should ensure that under no circumstances, account should be
allowed to become time barred. While in cases where moratorium is declared
under insolvency proceedings, filing of suit can be deferred, it may be noted
that in all the NCLT admitted cases/accounts (whether filed at the instance of
our bank and/or other bank/FIs/operational creditor) suit should immediately be
filed against the personal guarantors/ corporate guarantors (excluding those
corporate guarantors against whom CIRP process has been admitted) In case of
those corporate guarantors who have substantial net worth to repay bank’s
dues in which case insolvency proceedings against such corporate guarantors
should be filed with NCLT. Bank’s claim has to be lodged invariably in all CIRP
processes against corporate guarantors under IBC.
Delegated Authority for according permission for filing of suit (Amount per case
on the basis of ledger balance) (Rs./Lacs)
Sl No. Authority for according permission for filing of suit Amount/case on the basis of ledger balance
1 MANAGING DIRECTOR & CEO FULL POWER
2 EXECUTIVE DIRECTOR 5000.00
3 GENERAL MANAGER (Recovery) 2000.00
4 FIELD GENERAL MANAGER 1500.00
5 DEPUTY GENERAL MANAGER (BRANCH 750.00
HEAD/ZONAL HEAD)
6 ASSISTANT GENERAL MANAGER(BRANCH 500.00
HEAD/ZONAL HEAD)
7 SCALE – IV ( BRANCH HEAD ) 50.00
However where permission for filing NCLT case has been given and/or declaration
of wilful defaulter has been done, no fresh permission is required for filing suit;
in such accounts suit should immediately be filed against the borrower/
guarantors/corporate guarantors, as per applicability in consultation with Legal
Department of ZO/FGMOs.
16. After obtaining permission from Competent Authority (as per above) branch has to
engage competent lawyer in consultation with Zonal Head. Draft Plaint/ Original
Application for filing in DRT/Court prepared by dealing advocate is to be properly
checked by Branch Head & has to be vetted by Officials of Law Department of Zonal
Office/ Law Retainer of Zonal Office. Branch shall also confirm that details
incorporated regarding jurisdiction, Limitation, Brief of the case, Prayer for Interim
Relief, fee paid are correct as per details of the account,
17. Side by side branch has to search / find out personal assets / uncharged assets of
Borrower & Guarantor. For this they may refer to Credit Reports, Income Tax
Returns, and tax receipts held in the records. If needed, the branch, with the
permission of the Zonal Office, may engage the services of Detective
Agency/Chartered Accountant/Recovery Agent /Enforcement agent (Empanelled) to
find out such assets for obtaining attachment before judgment by the Competent
Court.
18. Complete record of filing of suit and expenses incurred in it are to be entered in the
Suit filed register. Relevant details of Suit Filed are also to be up dated in the CBS
system.
19. In respect of filing of suit, payment of court fee, lawyer fee, follow-up in DRT/Court etc.
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branch has to follow the guidelines issued by our Head Office, Legal Department from
time to time.
20. Branches are to regularly follow-up Suit Filed & Decreed accounts and submit the
progress report on prescribed formats as per under noted schedule/Annexure.
a) Branches to regularly follow-up Suit Filed & Decreed accounts and submit the
progress report on prescribed formats as per Annexure-30.
b) Fortnightly Statistical Data on Suit Filed/ Recovery Application filed in DRT (other
than Civil Court) by bank for recovery of Bank dues (as per Annexure-31).
21. In case entire OTS is received as per the terms of sanction by the Bank, and account
is closed then application should be moved in DRT for closure of OA, release of
documents/securities and consignment of the case to records.
FILING OF SUIT IN DEBT RECOVERY TRIBUNALS (DRT)
1. NPA accounts having Suit (Original Application - OA) amount of Rs.20.00 Lacs and
above is to be filed in DRTs having the jurisdiction. These applications should be filed
under section 19 of RDDBFI Act. Permission from competent authority must be
taken before filing suit. Further it may be noted that if any order declaring
moratorium under the Insolvency and Bankruptcy Code, 2016 has been passed
by the NCLT/DRT against the borrower and is in operation, filing of such suit
should be deferred till such moratorium period cease to exist. However, it may
be noted that in all the NCLT admitted cases/accounts (whether filed at the
instance of our bank and/or other bank/FIs/operational creditor) suit should
immediately be filed against the personal guarantors/ corporate guarantors
(excluding those corporate guarantors against whom CIRP process has been
admitted) In case of those corporate guarantors who have substantial net worth
to repay bank’s dues in which case insolvency proceedings against such
corporate guarantors should be filed with NCLT. Bank’s claim has to be lodged
invariably in all CIRP processes against corporate guarantors under IBC.
2. While filing the Original Application in the DRT, branch/Zone has to ensure the
following:
A. Legible copies of documents are filed in a paper book form as per the
requirement of the DRT. A memo containing the list of all the documents should be
filed in the DRT at the time of filing the Original Documents so that same may be
noted in the Order sheet. Derecognized Interest and uncharged Interest up to the
date of filing suit must be added in suit amount.
B. Complete details of the Hypothecated movable assets, Mortgaged immovable

properties and other attachable assets if any, should be incorporated in the Original
Application.(OA)
C. Application may also be filed before DRT for seeking special orders as
mentioned in serial no.8 above.
D. Where photocopies of documents have been filed with the OA, original set of
documents should be maintained in the branch in proper order, so that same
may be produced at the time of evidence. As, in terms of Indian Evidence Act,
primary documents (Original documents) should be produced to prove a
document.
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E. Where documents has been seized by the Police Authority/Enforcement
Authority seizure memo along with certified copy thereof should be filed.
3) Follow up with lawyer is to be made for taking OA No., order for IR, Service of notice,
filing of service affidavit on first returnable date, closure of stage of written statement
for defendants.
4) Complete the service of the summons issued by the DRT within 15-20 days and
ascertain the service from postal track available on internet for 30 days.
5) File an application before the tribunal on next hearing date for service through
alternate mode if summons are not served.
6) Important Tips for Field Functionaries for dealing the DRT cases
Field Functionaries should keep in mind undernoted important provisions of Recovery of

Debts and Bankruptcy Act, 1993.
i. Where a bank filed a Recovery Application for recovery of its dues against such
person against which another bank or financial institution has already filed a case,
then the later bank may join the applicant bank at any stage of the proceedings,
before passing final order, by making an application to the tribunal. {Refer to
Section 19(2)}
ii. Where the defendant claims right to set off against the applicant, he can do so only at
the first hearing of the application but not afterwards unless permitted by Tribunal for
this purpose.(Section 19(6)).
iii. Every application filed before DRT for recovery of Bank’s dues should state –
(A) details of secured assets & estimated value thereof.
(B) details of uncharged assets & estimated value thereof, if the secured assets as
disclosed in point A is not sufficient to liquidate the entire dues of the Bank
(C) If the assets as disclosed in terms of point A & B are not sufficient to liquidate the
entire dues of the Bank, prayer should be made in the O.A. seeking an order
directing the defendants to disclose to the Tribunal particulars of other assets
owned by them. {Refer to Section 19(3A).
iv. The nodal Officer of the bank should be aware that the tribunal, on receipt of the
Recovery Application of the bank,
(A) shall issue summons requiring the defendant to show cause within thirty days of
the service of the summons.
(B) shall direct the defendants to disclose particulars other than disclosed in O.A.
(C) shall restrain the defendant from dealing with the properties disclosed by Bank
/which may be disclosed by defendants pending the hearing & disposal of the
attachment application {Refer to Section 19(4)}
v. The defendant shall, within a period of thirty days from the date of service of
summons, file written statement of their defense including a claim for set-off or
counter claim, if any. The presiding officer may in exceptional cases and in special
circumstances extend the said period not exceeding 15 days to file the written
statements of his defense. The bank should protest for allowing any further
adjournment beyond 15 days. {Refer to Section 19(5)}
vi. In case of non-compliance of any order made by the Tribunal for disclosing other
uncharged assets by the defendant, the Presiding Officer may direct for civil
imprisonment of the defendant not exceeding three months. {Refer to Section 19(5)}
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vii. On receipt of Written Statement from the defendant along with the documents
(original/true copy), the Tribunal Shall fix the matter for admission & denial of
documents by the parties. {Refer to Section 19(5A)}
viii. Upon admission of the dues by defendant in full or in part, the Tribunal shall order
such defendant to pay the admitted amount to the bank within 30 days failing which
Tribunal may issue a interim certificate regarding the admitted dues. {Refer to Section
19(5B)}
ix. In case, the Tribunal is satisfied by affidavit or otherwise, that the defendant, with
intent to obstruct or delay or frustrate the execution of any order for recovery of debts
may be passed against him,
a) Is about to dispose of the whole or any part of his property; or
b) Is about to remove the whole or any part of his property from the local limits of the
jurisdiction of the tribunal or
c) Is likely to cause any damage or mischief to the property or affect its value by
misuse or creating third party interest,
The tribunal may direct the defendant either to furnish security of such sum as deemed
fit necessary by the PO or such portion thereof as may be sufficient to satisfy the
certificate to be issued by them and in case of failure on the part of defendant to show
cause why he should not furnish security or fails to furnish security, the Tribunal may
attach, conditionally or unconditionally, whole or such portion of the properties claimed
by the Applicant Bank or otherwise owned by the defendant to satisfy any recovery
certificate. {Refer to Section 19(13) & 19(15)}
x. In case of disobedience of an order made by the tribunal under sub-section 12, 13 &
18 of the Act or breach of any of terms on which the order was made, the tribunal
may order such person to be detained in civil prison for a term not exceeding three
months. {Refer to Section 19(17)}
7) In case entire OTS is received as per the terms of sanction by the Bank, and account is
closed then application should be moved in DRT for closure of OA, release of
documents/securities and consignment of the case to records before the tribunal in case
of OA and before the Recovery officer in the matters of Recovery Proceedings.
In this regard, as per Section 19(3A) of the Act(Rules 2013) refund of court fee is
applicable; if the matter is settled prior to the commencement of the hearing before the
Tribunal or at any stage of the proceedings before the final order is passed by the
Presiding Officer. No refund shall be allowed when the recovery proceedings are
pending with the Recovery Officer.
The Presiding Officer of the DRT may order refund of Court fee remitted at the time of
filing of the case, at the following rates:
a) 50 percent of the fee remitted in cases which are settled prior to commencement of
hearing before the Tribunal.
b) 25 percent of the fee remitted in cases which are settled at any stage of the
proceedings before the final order is passed by the Presiding Officer.
An application is required to be filed by the Applicant(s) & Defendant(s) jointly, before

the Registrar of the DRT for refund of court fee indicating the details of settlement.
Duties & Responsibilities of Nodal officers:

Do & Don’t as specified by the legal department vide HOIC no. 15409 dated
129
20.12.2017 should be meticulously complied with. Further for each DRT/DRAT the
bank has designated one nodal officer from ARMB/ZO for effective monitoring &
disposal of cases filed at DRT/DRAT. Their duties & responsibilities are furnished as
under:
A) For Cases Pending with Presiding Officers of the DRT:

i. The Nodal Officers should also meet the Registrar or Asst Registrar of the DRT and
obtain List of Cases pending with the Learned Presiding Officers (all cases like
Original Applications/ Miscellaneous Applications/ Transfer Petitions/ Interlocutory
Applications/ Securitization Appeals /Appeals against the Orders of Recovery Officer
etc). Upon prior appointment with the Learned Presiding Officer, the Nodal Officer
should meet the PO and if possible discuss the steps to be taken for quick disposal
of cases. The Learned P.O. may be requested to fix up the cases of Allahabad Bank
on a specified day in a week so that the Nodal Officer can attend on such days and
pursue for speedy disposal of the cases. The details of deliberations with the PO
should be submitted to ZO/FGMO on fortnightly basis as already advised earlier.
ii. The Nodal Officer should act as liaison Officer between the DRT and Concerned
Branch/Zonal Office and should ensure the timely submission of all necessary
documents to the DRT. He should also ensure that the Advocate appointed in each
matter is regularly attending the cases in time and he should ensure that no
adjournment is sought by the Bank's Advocate without any justifiable reason. If, any
advocate is seeking adjournments without any justifiable reason/cause, steps should
be taken to replace with another competent advocate immediately. The same should
be kept in mind while reviewing the performance of Advocate and recommending for
continuation of such advocate in the Bank’s panel.
iii. The Zonal Head & Nodal Officer should be in touch with Learned Presiding Officer of
the DRT and make all endeavors to hold a Lok Adalat at least once in every month
for Allahabad Bank and shall also include cases even before filing the Recovery
Applications/suits.
iv. However, it should also be ensured by the Nodal Officer that requisite information is
made available to the Bank’s Advocate well in time to contest the case.
(B) For Cases Pending with Recovery Officers of the DRT:

i. The Nodal Officer shall meet the Recovery Officer regularly and obtain list of all the
cases pending before the Recovery Officer and shall reconcile the same with the list
held at the Zonal Office. Necessary steps like filing of closure Petitions, petitions for
sine die adjournments with an option to reopen as when the Certificate Debtors &
Properties are traceable etc are to be immediately taken up and finally a reconciled
statement is to be arrived at.
ii. The Nodal Officer shall request each Recovery Officer to fix up cases of Allahabad
Bank on a particular day of the week for hearing so that the Nodal Officer can remain
present on that day in the DRT to understand the progress and requirement of the
DRT for taking effective steps for recovery.
iii. The Nodal Officer should meet the Recovery Officer at least once in a fortnight, by
fixing a prior date to review the progress of each case pending with the Recovery
Officer (as per the list of cases given by the Recovery Officer).
iv. In case, if there are no Recovery case(s) pending before the Recovery Officer, the
same should be specifically mentioned in the Report and in such cases there is no
need for meeting the Recovery Officers on fortnightly basis.
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v. The cases in which no properties are available and the Borrowers are not traceable,
a petition seeking for adjournment in such cases on sine die basis with an option to
reopen the same as and when the properties/Certificate Debtors are traceable with
prior written approval of the Competent Authority.
vi. In cases where Secured properties are not available, a petition seeking direction
against the Certificate Debtors for disclosure of their Assets on affidavit is to be filed.
vii. If, the Certificate Debtors are having means to pay the Certificate amount but are not
making the payment, A Petition seeking for arrest & Civil Imprisonment of Certificate
Debtors is to be filed. It should be made clear to the DRT that the Bank is ready to
pay the subsisting allowance on passing order of Civil Imprisonment.
viii. In cases where the Compromise is entered into with Certificate Debtors and on
recovery of the entire Compromise amount, a petition for closure of the Recovery
Case is to be filed and obtain suitable orders in this regard.
ix. The Zonal Heads shall fix up the Recovery Target at minimum 20% of the total
Recovery Certificate amount of the Zone after excluding the Closure cases as well as
Sine Die Cases for the Nodal Officers at the beginning of the financial year.
C) Performance of the nodal officer is to be monitored by the Zonal Head on monthly

basis and a copy of the monthly report should also be submitted by the nodal officer to
FGMO.
FILING OF SUIT IN CIVIL-COURT

1. NPA accounts having Suit amount of below Rs.20.00 Lac has to be filed in the Civil
Court having jurisdiction. Permission from competent authority must be taken before
filing. Further it may be noted that if any order declaring moratorium under the
Insolvency and Bankruptcy Code, 2016 has been passed by the NCLT/DRT
against the borrower and is in operation, filing of such suit should be deferred
till such moratorium period cease to exist.
2. After obtaining permission from the Competent Authority branch has to engage
competent lawyer in consultation with Zonal Head. Draft Plaint prepared by dealing
advocate is to be properly checked by Branch Head & has to be vetted by Officials
of Law Department of Zonal Office/ Law Retainer of Zonal Office and also confirm
that details incorporated regarding jurisdiction, Limitation, Brief of the case, Prayer
for Interim Relief , fees paid are correct as per details of the account,
3. Side by side branch has to search / find out personal assets / uncharged assets of
Borrower & Guarantor. For this they may refer to Credit Reports. If needed, the
branch, with the permission of the Zonal Office, may engage the services of
Recovery Agent /Enforcement agent (Empanelled) to find out such assets for
obtaining attachment before judgment by the Competent Court.
4. Branches should try to settle maximum number of suit filed/decreed cases and also
non- suit filed cases through Lok Adalat conducted by Court every month. The
concerned District judge should be met and requested to organize Lok Adalat
exclusively for our bank if having more number of cases. It is also a good tool to
obtain decree at Pre-litigation stage.
5. Branch should file execution of decree, if compromise approved in Lok Adalat, is
failed.
6. Branches should file Application for refund of court fee before respective court, if
case is settled in Lok Adalat, at the earliest.
7. Branches should file Application for issuance of appropriate order for Final Decree.
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EXECUTION OF RECOVERY CERTIFICATE (RC) IN DRT
1. In recovery proceedings before Recovery Officer (RO) of the DRT, application for
civil imprisonment of borrower/guarantor with prayer for direction to them for
declaration of their personal assets on affidavit should invariably be filed in RC/RP
matters.
2. Immediate execution of decree in all cases where Decretal order has been issued
and security / asset is available. Submit up to date claim as per terms of RC
before Recovery Officer and collect demand notice from RO for service to
defendants. An application is also to be filed for attachment of personal property if
available. Thereafter valuation from valuer empanelled in DRT should be obtained
and follow up the matter till sale.
3. In case of non availability of any charged assets, the Zonal Office should permit
the branch well in advance to engage and appoint a competent Investigating
Agency to find out the personal assets of the borrowers/ guarantors so that during
recovery proceeding the same can be placed before the Recovery Officers for
attachment and none of the hearing is adjourned in absence of available reports/
findings in this regard. The original branch to which the loan accounts belong
should extend all help to the Recovery Branches in this regard.
4. Submit update claim as per terms of Recovery certificate before Recovery Officer
to ascertain issuance of demand notice. Arrange to collect the notice and service
of the notice is to be completed at the earliest.
5. Obtain fresh valuation of the assets by the valuer empanelled by DRT.
6. File an application before Recovery Officer for attachment of personal properties if
any, other than the charged securities.
7. File an application before Recovery officer to start the proceedings for sale of
assets.
8. File an application immediately for disbursement of sale proceeds after successful
Auction.
File suitable reply in consultation with Lawyer and guidance of zonal office, in case
defendants filed any objections at the earliest.
EXECUTION OF DECREED CASES IN CIVIL COURT

1. Branches should file application for execution of decree in all cases where
Decretal order has been issued and security / asset is available.
2. Branch should calculate the up to date claim as per Decretal terms as awarded by
the Court including interest and expenses for deciding fees for execution in the
competent Court.
3. Branches should file execution of decree in Court, if decreed amount is below Rs.
20.00 lacs and in case the decreed amount is Rs. 20.00 lacs and above, the
transfer application should be filed under section 31of RDDBFI Act before the
DRT for issuance of Recovery Certificate & its execution.
4. Branches should follow up the matter with the Court for issuance of notice and
seizure of the property.
5. After seizure of property follow up the matter for sale of the assets at the earliest.
RECOVERY CERTIFICATE CASE

1. In States where Certificate Case/Recovery Certificates can be issued for recovery of
non performing advances, the Bank will arrange for issuance of such certificates.
132
2. For seeking permission for filing Recovery certificate case before concerned
Government officials, Branches are required to submit History Sheet (as per
prescribed format enclose as Annexure-29) covering details of the account, security
particulars, reasons for account becoming irregular, recovery measures adopted for
realization of dues, staff accountability aspect, if any, and other related matters to
Zonal Offices to accord permission in case of branches headed by Managers up to
Scale-III.
3. Certificate can be filed before concerned Govt. officials on prescribed format along
with copy of account statement before expiry of limitation.
4. The records of such Certificates should be reconciled regularly. The concerned Govt.
Officials/Certificate Officer/District Collect orate should be met and requested to help
the Bank in recovery of its Bad Debts. The matter for disposal of pending Recovery
Certificate cases should be regularly discussed in BLBC/DLCC. The Tehsildar/ Amins
are to be involved in the process of recovery. Regular visit / persuasion for recovery
is to be made so that the borrowers come forward to repay their dues or to settle their
dues.
5. An application should also be filed for attachment of personal properties, salary,
Balance lying in other bank’s accounts.
6. A Separate register is to be maintained with necessary details such as RC no., Date
of filing, Name and address of the borrower, Details of security available, Date when
Demand notice issued, Next date of hearing, Amount recovered, etc
POLICY ON ADJOURNMENT OF ONGOING RECOVERY PROCEEDINGS (RC/EP)

SINE-DIE
It has been observed that in number of cases securities are already sold or no security
is available and or borrower/ guarantors are absconding, and our field functionaries are
unable to furnish such details to the Recovery Officer/Courts and taking dates after the
dates. At some places DRT/Court has shown their displeasure on Bank’s request for
large number of adjournments.
The above situation was examined and observed that in Accounts where scope of
immediate recovery is almost remote in all such cases, continuation of EP/RC may cost
an additional legal expenditure. Over and above the legal expenses, the branch
managers/officers will have to attend the cases and that will again come in the way of
smooth functioning of the Bank.
In all the cases where uncharged assets of borrower/guarantors are not traceable
and/or borrower/guarantors nor traceable and non their uncharged assets are available,
in case borrower/guarantor has expired then their legal heirs are not available or
traceable then details of assets should be ascertained from credit report, IT returns,
audited financial papers of the borrowers / guarantors available on the record.
Branch Head has to personally verify the above facts and to submit the certificate to this
effect. In cases where outstanding ledger balance is more than Rs.10.00 Lac & above
efforts have failed then in addition to above Services of appropriate Recovery
Agency/Detective Agency/Investigating Agency etc have to be engaged. Services of
these outside agencies are to be selected and permitted by the Zonal Head after
finalizing the charges/fee payable to these agencies keeping in mind the outstanding
dues in the account.
133
In cases where outstanding ledger balance is more than Rs 1.00 Crore & above and
above efforts of locating the borrower/guarantors and their uncharged efforts have
failed, then a necessary application be moved before DRT to grant liberty to the bank to
cause Public Notice in newspapers to inform where about of the borrower/guarantors
and their assets. Immediately after passing of necessary orders by the DRT, steps may
be taken to make paper publications in newspapers having wide circulation. Draft of this
publication to be got prepared /vetted by the dealing advocate/Law Retainer/Manager
(Law) posted in Zonal Office.
If the borrower/guarantors/legal heirs/ their assets are untraceable despite the above
efforts, then filing of suitable application /request with the relevant Court/DRT is allowed
for seeking adjournment of case sine-die with liberty to revive/restore the case as and
when attachable assets or where about of borrowers/guarantors are traced out.
If Branch Head finds any of the ongoing RC/EP falls in above explained situation and is
of the opinion that continuance of ongoing RC/EP may not give fruitful results then
Branch Head will submit the proposal on prescribed format (Annexure -32) to their
respective Zonal Offices and they will critically examine each borrowal account/ongoing
case strictly on individual merit to ascertain the prospect of future recovery based on
security position, net worth of the borrower /guarantor, other assets available to be
attached, social status and means of the borrower etc. to take a view as to whether
continuation of EP/RC etc. will be justified or for the larger interest of the bank
Court/DRT should be requested for adjournment of case sine die with liberty to
revive/restore the case as and when attachable assets or whereabouts of
borrowers/guarantors are traced out. The delegated authority should ensure that the
decision taken by them should not jeopardize the recovery of bank’s dues. Staff
accountability aspect, if any should also be examined. Like compromise and write-off
proposals, proposal for sine die will also route from Branch to Zone to FGM and so on.
(I.e. up to the level of approving authority).
Delegated authority for permitting Adjournment of ongoing RC/EP cases sine-die will
depend upon Scale/Rank of the approving authority and outstanding ledger balance as
on the date of taking decision in the matter. Accordingly, its details are as under:
The Delegated Authority for permitting Adjournment of ongoing RC/EP cases

sine-die and also for granting permission for revival /restoration of the case when
attachable assets or where about of borrowers/guarantors are traced out.
Sl. Authority for permitting Adjournment of ongoing Delegated

No. RC/EP cases sine-die and also for granting Authority
permission for revival /restoration of the case when (Rs. in lac)
attachable assets or where about of
borrowers/guarantors are traced out.
(value per case on the basis of ledger
balance/notional balance)
1 MANAGING DIRECTOR & CEO FULL POWER
2 EXECUTIVE DIRECTOR 1000.00
134
3 GENERAL MANAGER (Rec)/GM AS ZONAL HEAD/ 700.00
FIELD GENERAL MANAGER
4 DEPUTY GENERAL MANAGER (BRANCH 100.00
HEAD/ZONAL HEAD)
5 ASSISTANT GENERAL MANAGER (BRANCH 50.00
HEAD/ZONAL HEAD)
6 SCALE – IV ( BM/ CM ) 25.00
Above delegated authorities can be exercised after observing the following

stipulations:
5. Cases where Bank has sold all charged assets & unable to locate personal
uncharged assets of borrower/guarantors for more than 3 years (from date of last
asset sold).
6. Cases where no charged assets available at the time of filing suit & unable to locate
personal uncharged assets of borrower/guarantors for more than 5 years(from the
date of EP/RC filed)
7. Cases where borrower & guarantors (individual persons) have expired & bank is
unable to locate legal heirs of the deceased / personal uncharged assets of
deceased borrower/guarantors or their legal heirs for more than 5 years (from the
date of EP/RC filed)
8. Proper record in respect of the following is placed /enclosed along with the sine-die
proposal / kept on record.
i. In case borrowers/guarantors has expired then authenticated copy of the death
certificate
ii. In case borrowers/guarantors has expired and their legal heirs are not known or
non-traceable then relevant certificate with respect to this.
iii. Non-traceability or non-possession of uncharged assets by the deceased
borrowers/guarantors
iv. In case borrowers/guarantors are non-traceable then their non-traceability certificate
v. Non-traceability of our charged assets
(For above A to E Branch Head to give his own certificate along with report of
Recovery Agency/Detective Agency/Investigating Agency etc. engaged by
them with the permission of the Zonal Office.)
Permission to be granted for Adjourned sine-die with liberty to revive/restore the case
as and when attachable assets or whereabouts of borrowers/guarantors are traced
out.
Action under Insolvency and Bankruptcy Code, 2016

For taking action under the Insolvency and Bankruptcy Code, 2016 (IBC 2016) for
recovery of bank dues, guidelines circulated vide HOIC No 14961/Legal/2017-18/01
dated 27.04.2017 regarding detailed provisions of the Insolvency & Bankruptcy Code,
2016 and HOIC No. 15866 /Recovery/2018-19/ 01 dated 16.08.18 regarding the
operational guidelines should be followed after obtaining approval from Competent
authority at Head Office.
135
CHAPTER 10
Guidelines on Empanelment of Third party agencies for deployment / utilization of

their services for effecting Bank’s recovery in NPA accounts
Presently, Bank has the policy of engaging the under noted third party agencies for
deployment and utilization of their services for effecting recovery of NPA
accounts/supplementing recovery actions:
1. Recovery Agents.
(as per HO IC no. 9060/Recovery/2005-06/11 dated 22.02.2006 and HO IC No.
11826/Recovery/2011-12/05 dated 29.3.2012)
2. Business Correspondents/Bank Mitras.
(As per HO IC No. 11710/PSC/FI/2011-12/51 dated 30.12.2011)
3. Bank’s Retired Employees as Recovery Officers (RERO)
As per HO IC no. 12236/Recovery/2012-13/4 dated 28.12.2012)
4. Asset Reconstruction Companies (ARCs) to act as Resolution cum Enforcement
Agent (REA) for the Bank for recovery in NPA.
(As per Bank’s Recovery Management Policy vide HO IC no.
15074\Recovery\2017-18\03 dated 27.6.2017)
All the field functionaries are advised to first make all out efforts for recovery of bank’s
dues. Services of recovery agents be used as last resort only, as it has cost
implications.
1. Eligibility Criteria for Empanelment
1 A. Recovery Agents.
1. individual person, a firm, a company or a group of individuals.
2. Recovery Agents should have specialized knowledge, past experience, capabilities,
expertise and infrastructural support for recovery of Bank’s dues.
3. The past performance of the Recovery Agents with the other banks/ Financial
Institutions, State financial corporation & others if any.
4. Their accessibility in the area of operation.
5. The availability of requisite administrative network, proximity to the branches etc.
They should have fair knowledge in local language of the area where their services
are to be utilized.
1 B. Business Correspondents/Bank Mitras

The Technology Service Provider (TSPs)/ Service Provider (SPs) shall appoint
Specified Recovery Agent (SRAs) for their command areas. There may be one or more
(maximum 50) Banking Correspondent/ Bank Mitras (BM) working as Recovery Agents
under each SRA. All Specified Recovery Agents (SRAs) must ensure that all the Bank
Mitras undertaking the role of Recovery Agents under their control are properly trained
to handle with care and sensitivity, their responsibilities, in particular aspects like hours
of calling, privacy of customer information etc and abide by the code of conduct.
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1 C. Bank’s Retired Employees as Recovery Officers (RERO)
Retired Bank Officers (including Voluntarily Retired Officers), who have not been
Dismissed/ Removed/ Compulsorily Retired from the Bank & who have the requisite
experience in recovery and who have the ability to act independently in issues relating
to settlement, litigation etc.
1 D. Asset Reconstruction Companies (ARCs) to act as Resolution cum

Enforcement Agent (REA) for the Bank for recovery in NPA
All ARCs registered with Reserve Bank of India having good track record will be eligible
for empanelment as Resolution Cum Enforcement Agent (REA) for assisting the Bank in
recovery process of NPA accounts of Rs.5.00 Lac & above.
2. Authority for appointment/engagement and Procedure:
2 A. Recovery Agents
The authority for selecting panel of Recovery Agents is vested with the Zonal Heads
only
For empanelment of Recovery Agents, a Recovery Agent Selection Committee (RASC)
will be formed at Zonal Office comprising of five Members headed by Zonal Head. Other
Members of the Committee will be the Executive next to Zonal Head, Departmental in
charges of Recovery, Inspection & Credit/Credit Monitoring Departments. If the
departmental in-charges are absent/ engaged in other assignments, then their second
line Officer can participate in the Selection committee. Minimum quorum will be 4
members; out of which Zonal Head, Executive next to Zonal Head and In-charge of
Recovery Department are must.
Newspaper publication will be made in English & Local Vernacular Language in the
name of the Zonal Head preferably through well circulated regional daily seeking
applications for engagement /empanelment of Recovery Agents for the Zone for
recovery of outstanding dues in NPA accounts. The geographical coverage of the Zone
specifying the names of districts will be mentioned. The interested parties will be asked
to collect the APPLICATION FORMAT as per Annexure-33 from the concerned Zonal
Office. A period of 6 (six) days time will be given for collecting and submitting the duly
filled in Application Form to the Zonal Offices.
 Copy of above advertisement to be displayed on the notice board of all the branches
under the Zone.
 In case sufficient applications are not received by Zonal Office than they can take
references from other Banks & our other nearby Zonal offices.
 Recovery Agent can also directly submit application to Zonal Office for empanelment
even without reference to above referred Paper publication.
Scrutiny of applications
All the applications received at Zonal Offices from any source will be first scrutinized by
a Recovery Agent Selection Committee. The information furnished & documents
attached in the application have to be verified for their genuineness in lines of the
bank’s guidelines
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Interview/interaction/ discussion with prospective Recovery Agents
After scrutiny of applications, above committee will hold Interview/interaction/ discussion
with only those Recovery Agents whose applications are found eligible for empanelment
for Recovery Agent as per bank’s guidelines.
Police Verification
Zonal Offices to ensure that documents pertaining to Police verification of all the
Recovery Agents are held in record.
Final Selection of Recovery Agents & issuance of Letter for empanelment

At last on the basis of above referred Due Diligence Report above referred committee
will have a final view on selection of Recovery Agents for empanelment. Zonal Office
will issue Letter (as per Annexure-34) to all the selected Recovery Agents advising
them about their empanelment & completion of Documentation within 7 days of receipt
of communication from Zonal Office .Wherever Zonal Heads feel that delay in
compliance of above guidelines was beyond the control of Recovery Agent then they
can Condon the delay but only after properly putting it on record.
Documentation for empanelment of Recovery Agents

Undertaking to be obtained by the Zonal Office from the Recovery Agent by way of
Affidavit for compliance of Best Practices Code during recovery efforts and all other
terms and conditions of assignment including fees / service charges payable to them
(As per Annexure-35)
Circulation of panel of Recovery Agents in entire Zone
Zonal offices after finalization of empanelled Recovery Agents will circulate the list of
empanelled Recovery Agents (as per statement given Annexure-36) amongst all the
branches under their Zone under copy to their FGMO & Head Office Recovery
Department.
Validity of selected Panel of Recovery Agents

Empanelment of Recovery Agents will be done for a financial year only irrespective of
their date of empanelment.
The Authority for allotting/engaging /authorizing Recovery Agent from the panel of
Recovery Agents approved by Zonal Office for recovery of banks dues in any NPA
account shall be with Zonal Head only. Under no circumstances, no branch head
irrespective of their scale will entrust any kind of job to any Recovery Agent.
Issuance of Authorization letter to Recovery Agents

Zonal Head after selection of NPA account for deployment of Recovery Agent for
recovery of Bank’s dues will issue Letter of Authority to the Recovery agent entrusting
them with the job of recovery in loan accounts as per Annexure-37. Zonal Head will
endorse copy of this letter to the branch for subsequent follow up with the Recovery
Agents including settlements / partial recovery etc.
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The General Manager (FI) shall be empowered to appoint Technology Service Provider
(TSPs)/ Service Provider (SPs) as agents for performing functions of NPA recovery in
addition to the banking business which they have been authorized to handle on behalf
of the Bank.
Bank shall enter into a separate contract with the TSPs/SPs. The contract will be
independent of the contract between Specified Recovery Agents working on behalf of
Service Provider (SPs). Corporate agreement will be entered into between Bank and
Service Provider (SP) and signed on the format enclosed as Annexure-42.
2 C.Bank’s Retired Employees as Recovery Officers (RERO)
All Zonal Offices will invite applications on the prescribed format (Annexure-40) from
the Retired Bank Officers (including Voluntarily Retired Officers), A copy of the
retirement letter issued by HO has to be enclosed with the application. Zonal Offices will
scrutinize all the applications, ensure that they are properly filled & will forward these
applications with their views and recommendations to their Field General Manager for
taking final view in the matter by FGMLCC. For empanelment of RERO, FGMLCC will
approve the name of RERO.
After final approval of names of RERO by competent authority, FGM office will advise
the approved list to respective Zonal Office for issuance of Letter of empanelment to
selected REROs
The process of empanelment will be a running one, with names, if found suitable, being
added to the list with approval of the competent authority as and when it is found
expedient to do so.
The tenure of the empanelment shall be 2 (two) years. Renewal in deserving cases
shall be considered by competent authority at Zonal Office.
This panel shall be circulated to all the Zonal Offices for the utilization of their services
for resolution of non performing accounts under the scheme.
Each RERO shall be required to execute Service Agreement containing the terms and
conditions including Indemnity Clause. Draft of the Service Agreement will be as
approved by the Legal Department, Head Office and will take into cognizance RBI
guidelines on Fair Practice Code for Lenders, guidelines on managing risk and Code of
Conduct in outsourcing of Financial services by the Bank, IBA model code for collection
of dues and repossession of security (CDRs Code), and the decision of Supreme Court
in the matter of ICICI Bank Ltd. Vs Prakash Kaur & others. Specimen of agreement
approved by Head Office Legal Department is enclosed as Annexure-41. On receipt of
list of approved penal of REROs from FGM Office, Zonal Office will call/invite REROs to
their Offices for execution of above referred Service Agreement & completion of other
formalities. On behalf of the Bank, the Service Agreement will be signed by GM/DGM/
AGM/ Chief Manager (any two officials) of the Zonal Offices. Properly executed Original
Service Agreement will be kept at Zonal Offices.
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Enforcement Agent (REA) for the Bank for recovery in NPA
The Managing Director & Chief Executive Officer and in his/ her absence, the Executive
Director is authorized for engagement of the ARC as Resolution cum Enforcement
Agents. They are also empowered for approving modifications to the terms of
appointment of these ARCs as well as termination of services of ARCs at any point of
time.
 The period of engagement will be for a period of 2 years. In case it is felt

necessary, the bank may extend the arrangement for a further period
 A Master Agreement will be signed separately with all the ARCs. The ARC will enter
into the Master Agreement with the Bank on legally valid terms
 Individual Agreements/Letters relating to accounts that are to be allotted will entered
into with each ARC during each trench of such allotment.
 Maximum period of engagement of REA for a particular account will be for a
period of six months from the date of allotment. REA will have no right for any
commission/fee thereafter. In case of genuine difficulties observed by the bank, then
period of engagement of REA for that particular account can be extended by another
six months by the respective FGM. However, further extension in the time beyond 12
months (6+6) from the date of original allotment will be permitted by the Executive
Director.
 In case, during the tenure of this agreement, the relationship is sought to be
terminated, the same can be done by either side, giving three months notice and after
all financial settlements have been made to the satisfaction of the Bank.
 All terms and conditions of the allotment will be set out in the Agreement, and will be
finalized after mutual discussion between the Bank and the ARCs. The terms will be
formulated keeping in mind the best interests of the Bank. Terms of Agreement
mentioned in the Agreement entered into with ASREC on 08.08.2012 may be treated
as Master Agreement. The Credit Approval Committee headed by Managing Director
& Chief Executive Officer will be the competent authority for approving the terms and
conditions and various agreements to be entered into by the Bank and the ARC, and
also any modifications of these terms in the future
 All legal documents/agreement/ letters will be formulated and vetted by the Head
Office Legal Department.
 REA during their recovery process will ensure the compliance of various
instructions/guidelines issued by RBI/IBA/Government of India from time to time
specially Guidelines on Fair Practices Code for Lenders, BCSBI’s Code of Bank’s
commitment to customers, IBA’s “Model Policy on collection of Dues” and
Repossession of Security etc
 On behalf of the bank, agreement with REA will be signed by the General Manager
(Recovery).
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3. Identification of NPA accounts for appointment /engagement of Recovery
Agent/BCs/RERO/REA for recovery of Bank’s dues
3 A. Recovery Agents.
Identification of NPA accounts (having outstanding of above Rs.25, 000/-) to be
assigned to the Recovery Agents for recovery of Banks dues. These accounts can be
out of following category:
a. NPA accounts of any category i.e. Substandard(more than 6 months old NPA),
Doubtful & Loss
b. Virtual or Prudentially Written Off accounts
c. Bank has filed recovery suit/ Recovery application with any Civil Court/DRT
d. NPA cases where decree execution /recovery proceeding are in progress.
e. Accounts in which Bank is in process of invoking /has invoked Action under
SARFAESI Act 2002.
f. Where earlier sale of assets under SARFAESI Act 2002 or sale by
Court/DRT/Recovery Officer has failed.
g. Recovery Certificate cases under PDR Act of various State Governments
h. Failed compromise cases.
i. Where borrower /guarantor are not traceable.
j. To locate the charged assets
k. Where details of the personal assets of the borrower/ guarantor are required for
attachment before judgment or for attachment for sale during decree execution.
MAXIMUM PERIOD OF ALLOTMENT OF AN ACCOUNT TO RECOVERY AGENT

FOR RECOVERY
As per the existing guidelines maximum period of engagement of any Recovery Agent
for Recovery in any account is for six months from the date of their engagement. In
case there are no recoveries in six months from the date of allotment, the Recovery
Agents will have no right for any commission and the accounts will also be withdrawn
from them for reallocation to others. In case of genuine difficulties in recovery, period of
engagement of recovery agent for a particular account may be extended on case to
case basis by another six months by the Zonal Heads. Further extension in the time
period beyond 12 (6+ 6) months from the date of their engagement will be permitted by
their respective Field General Manager on case to case basis looking to the progress in
legal case and efforts put by the Recovery Agent in resolving the issues propped up &
recovery of banks dues during the period, account remained with that Recovery Agent.

NPA Accounts of the command area of Branch or additional areas as allotted by Zone
to SP/SRA/Bank Mitra (BM).
NPA accounts irrespective of age of classification & amount outstanding up to Rs. 15.00
Lakhs shall be allotted to the Bank Mitras.
All NPA accounts including accounts virtually/ prudentially written off as also failed
compromise cases can be allotted.
Accounts where recovery Certificates have been issued by the branch under various
Recovery Acts can be allotted to SPs./Specified Recovery Agents.
The Bank Mitras to be permitted to receive Rs.10,000/- cash within the Umbrella
Insurance Limit of Single carrying limit : Rs. 1.00 Lakh, in recovery of loans, as has
been fixed for the routine transactions limit only in NPA accounts of the customers with
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due acknowledgement. In all other cases Bank Mitras are not authorized to receive any
cash with regard to recovery of loans. In such cases, the borrowers/ guarantors will be
asked to make all payment above Rs. 10000/- towards recovery directly to the
branches where the loan accounts are maintained against valid receipts and due
acknowledgements.
Bank will engage RERO for recovery in NPA accounts, tracing borrowers /guarantors,
locating properties charged to bank, locating uncharged properties of borrowers
/guarantors, to assist the Authorized Officer in enforcing various actions under
SARFAESI Act 2002, & others and other jobs/action related to recovery in loan
accounts.
For above functions, separate Authorization letter (Account wise or number of accounts
clubbed together) will be issued to Bank, which will be shown by RERO to the
concerned borrower/Guarantor on RERO’s very first meeting with them.
A RERO shall be allocated maximum 25 accounts and based on their performance

number of accounts may be increased by the Bank.
Allotment of NPA accounts for recovery to RERO will be the sole prerogative of the
bank. Without assigning any reason bank can withdraw any of the NPA accounts
allotted to RERO for recovery.
In allotted accounts in case RERO found that any Credit facility was sanctioned
/renewed by them when they were in service or borrowers or guarantors are related to
RERO then they will immediately inform the Bank, about such accounts so that they can
be withdrawn from them by Bank.
NPA accounts categorized as Doubtful / Loss whether non suit filed, suit filed or
decreed accounts shall be covered under the Scheme.
A borrowal account in which any case is pending before a Court / DRT / BIFR / action
under SARFAESI, may also be considered for allocation under the Scheme.
In case of written off accounts, outstanding balance at the time of write off, shall be
taken as Notional outstanding.
Borrowal accounts having outstanding ledger balance of 1 crore and above are not to
be assigned to RERO.
The borrowal accounts where non funded facilities are yet to be crystallized are not to
be allocated
Zonal Office, through branch concerned will provide RERO the information related to
dues of the borrower (Outstanding Ledger Balance plus Uncharged interest up to the
last day of the month preceding that in which the account will be assigned to RERO,
and costs, if any) complete address of borrowers/ co-obligants and details of suit filed
and charged securities, attachments (if any), claim lodged with the liquidator in case of
liquidation or claims lodged with official assignee in case of insolvency of the
borrower/guarantor.
RERO shall ensure that while acting on behalf of the Bank, they do not give rise to any
pecuniary liability to Bank otherwise they shall be held liable for their action.
The REROs shall not receive cash from the borrowers. They will rather persuade the
borrowers to deposit the cash at the branch. A statement of account of the recoveries in
the accounts allotted to REROs duly certified by the Branch Head, shall be submitted by
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the REROs on quarterly basis to the Zonal Office.
Removal : If Zonal Head is of the opinion that services of a RERO are not satisfactory
and has to be discontinued before expiry of his/her term then they will submit the
proposal with due recommendations and reasons thereof, to FGM Office which in turn
will refer to FGMLCC at FGM Office. The decision arrived at will be communicated by
FGM office to Zonal Office which in turn will communicate to respective RERO.

Enforcement Agent (REA)
Looking to the position of recovery measures so far taken by the branch/Zone and
looking to the available security, Office of the FGM will prepare the list of NPA
accounts to be allotted to different REAs for assisting the Branch /Zone /Bank in
recovery process. This list will be presented before FGMLCC for choosing the ARC
out of empanelled ARCs and also allotment of NPA accounts to them.
After approval, the Branch & Zone will be advised to provide full details of the account,
including the security details, so that the variable and fixed portions of the fee payable
to REA may be decided by FGM. NPA accounts allotted to Recovery Agents / RERO by
any authority will stand withdrawn with immediate effect. Under such circumstances,
Zonal Office will immediately issue account withdrawal notice to concerned Recovery
Agent/RERO.
4. FEE STRUCTURE
4 A. Recovery Agents and Business Correspondents/Bank Mitras
It is to be noted that very stiff recovery targets or offer high incentives to recovery
agents should not be set by the Zonal Heads /Branch Heads. Otherwise in turn it will
induce the recovery agents to use intimidation and questionable methods for recovery
of dues. Zonal offices are, therefore, advised to ensure that the contracts with the
Recovery Agents do not induce adoption of uncivilized, unlawful and questionable
behavior or recovery process.
Present commission/fee already agreed will be continued to be paid to recovery agents

till their expiry of present allotment period of allocated accounts. For fresh allotment of
accounts or renewal/extension of period of existing allotted accounts, maximum service
charges payable to the Recovery Agents will be as under
Mode of Recovery For Recovery up For Recovery more than Rs.100.00 Lacs
to Rs.100.00
Lacs
Cases with realizable value of tangible security more than principal amount
Cash Recovery 5% Rs.5.00 lac plus 3% of incremental cash recovery
made over Rs.100.00 lac
Cash Recovery through 4% Rs.4.00 lac plus 2% of incremental cash recovery
Compromise made over Rs.100.00 lac
By Sale/Release of 3% Rs.3.00 lac plus 1% of incremental cash recovery
Charged Assets made over Rs.100.00 lac
Cases with realizable value of tangible security between 50% to 100% of principal
amount
Cash Recovery 8% Rs.8.00 lac plus 4% of incremental cash recovery
made over Rs.100.00 lac
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Cases with realizable value of tangible security less than 50% of principal amt.
Cash Recovery 10% Rs.10.00 lac plus 5% of incremental cash
recovery made over Rs.100.00 lac
Cases without tangible security
Cash Recovery 15% Rs.15.00 lac plus 10% of incremental cash
recovery made over Rs.100.00 lac
Cash Recovery through 12% Rs.12.00 lac plus 8% of incremental cash
Compromise recovery made over Rs.100.00 lac
Zonal Offices should note that above mentioned fee/service charges payable to
Recovery Agent is maximum permissible limit. They have to fix up the fee/service
charges NPA account wise after proper negotiation with Recovery Agent keeping in
view the age of NPA account, security available, efforts required for sale of charged
assets & stage of the recovery proceedings / recovery actions at which services of
Recovery Agent for recovery are engaged.
Engagement of Recovery Agent for assisting in various duties/for taking various

actions under SARFAESI Act:
Assistance of Recovery Agents are asked for taking symbolic/physical possession of
assets, managing the charged assets after taking possession till its sale, mobilizing
prospective bidders for auction, organizing the auction etc. The remuneration of
Recovery Agents for such odd jobs should be finalized by the Zonal Head on
case to case basis and not on the basis of above fees structure. If ZO/FGM
desires to engage the service of Recovery Agents for the specific action in any account,
on negotiation they may pay fees up to the maximum as specified below considering the
security value, salability & criticality of the case.
Particulars of the Job to be completed Property in Metro Property in other
in all respects Areas than Metro Areas
For identification of properties where Rs.5000/- Rs.2000/-

branch officials are not able to identify the
property or the property is not demarked.
For assisting the Authorized Officer for Rs.5000/- Rs.2000/-
taking Symbolic possession of Property
For assisting the Authorized Officer for Rs.25000/- Rs.25000/-
taking Physical possession of Property
including obtaining permission from
DM/CMM for police protection
For mobilization of Purchaser 1.5% of Reserve 1% of Reserve Price
Price plus 5% of the plus 5% of the sale
sale amount above amount above the
the reserve price reserve price
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Note: Above charges are to be adjusted out of the total commission payable on
total recovery amount, subject to aggregate of these stage wise/action wise fee
(advance) paid is not greater than the fee payable on percentage basis from start
to finish engagement.
Fees/service charges finalized by Bank will be inclusive of all charges/expenses

incurred by Recovery Agent. Payment (Fees/Service charges) will be made preferably
on recovery of entire Bank dues and on declaration of exhausting all efforts by the
Recovery Agents in recovery in a particular account on amount recovered by them &
accepted by the Bank.
Recovery Agents will submit the bill for payment of his fees/service charges directly to
the Branches as per Annexure-44, which they after proper scrutiny & checking will
forward the same to Zonal Office for sanction. Zonal Office will once again check &
scrutinize & will sanction the bill in terms of above guidelines & communicate the same
to the respective Branch. Only on the receipt of the said sanction, fees / service charges
will be paid by the branches to the respective Recovery Agent by debiting appropriate
heads towards Commission paid to Recovery Agents & GST on it (as per HO IC
No.15884/GEN AC/2018-19/07 dated 27/08/2018). Payment will be made after
deducting all the taxes which are applicable & same will be paid either through direct
credit in Recovery Agents account (by transfer/through NEFT/RTGS) or through
Bankers Cheque.
Branches will keep the record of above payments account-wise in a separate Register.
The said expenditure will be claimed / incorporated as legal expenses in all demand
notices and also while considering compromise proposal & filing recovery suit at any
court / submission of suit claim to DRTs etc if so warranted in respect of any account.
4 B.Bank’s Retired Employees as Recovery Officers (RERO)

I. Payment of commission/fee/remuneration by the bank will depend upon size /
outstanding in NPA account, Age of NPA & actual recovery made by RERO in NPA
accounts allotted to RERO for recovery purpose by the Bank. The following shall be
the commission/fee/remuneration structure:
Sl. Ledger Balance Outstanding If age of NPA is up If age of NPA is
to 3 years above 3 years
1 For Ledger Balance of up to Rs. 8.00% of amount 10.00% of amount
1 lakhs recovered recovered
2 For Ledger Balance above Rs. 7.00% of amount 9.00% of amount
1 lakh and up to Rs. 50 lakh recovered recovered
3. Above Rs. 50 lacs & 6.00% of the amount 8.00% of amount
up to Rs. 1 crore recovered recovered
II. In all the above categories there will a cap of Rs. 1lac per borrower towards
commission/fee/ remuneration. Any other statutory levies will be deducted by Bank. All
inflow (Cash Recovery) into the allotted NPA account after 15 days from date of
allocation will be construed as inflow by the REROs and commission/fee/
remuneration will be paid accordingly.
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III. Fee payable to RERO will be finalized by the Zonal Head with RERO before entrusting
any of the above jobs. Fees/service charges agreed with RERO for each account will
be mentioned in relevant Authorization letter to be issued to RERO, by Zonal Office.
Please note Fees/service charges once finalized cannot be changed.
IV. Fees/service charges finalized will be inclusive of all charges/expenses of RERO.
Payment (Fees/service charges) will be made preferably on recovery of entire Bank
dues & RERO’s declaration of exhausting all efforts in recovery in a particular account.
V. Fee bill will be paid in accordance with the agreed terms and after deducting TDS, as
per prevailing IT Rules..
For resolution /recovery of accounts expenses for taking possession, Insurance
charges, Valuation & Security charges after taking the possession by Bank/Official
Liquidator/DRT Receiver, legal expenses on eminent Counsel in High Courts and
charges relating to auction shall be borne and paid directly to the concerned agency by
the Bank. In exceptional circumstances, when a counsel of eminence is appointed for
High Court/ Supreme Court matters where the reputation of the Bank is at stake, the
additional expense may be approved by the Bank.
4 C. Asset Reconstruction Companies (ARCs) to act as Resolution cum

Under noted fee structure is suggested by Ministry of Finance, Department of Financial
Services vide their letter No.23/4/2012-DRT dated 07.05.2012.Board has already
approved the under noted fee structure in their meeting held on 25.06.2012.
 The commission payable to the ARCs will have 2 parts, fixed and variable.
 The fixed portion will be capped at 5% of the total amount recovered, and will be
decided by the GM (Recovery) in each tranche of such allotment.
 The detailed structure of calculation of the variable component of fee is as follows:
VARIABLE COMPONENT
S.No. Distress value of security Recovery up to Recovery above Recovery
90% of principal 90% and up to above principal
principal
1. Cases with distress value of 5% of the
tangible security more than recovery in
principal amount No incentive excess of
principal
2. Cases with distress value of
tangible security between
50% to 90% of principal No incentive 6% of recovery in excess of 90% of
amount principal
3. Cases with distress value of
tangible security less than
50% of principal amt. 7% of any recovery
4. Cases without tangible 10% of any recovery
security
 All statutory expenses, like expenses for security and preservation of assets,
insurance charges, valuation expenses and expenses relating to enforcement of
security, will be reimbursed by the Bank on actual basis and on production of relevant
receipt/bills etc by ARC to the Bank ( all these services will be engaged by ARCs only
after getting instructions /approval from the respective FGM
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 No advocate fees will be reimbursed. However, when the ARC in consultation with the
Bank, feels the need to appoint eminent counsel, their fees will be reimbursed.
Fees/service charges will be paid by Bank after deducting TDS, as per prevailing IT
Rules.
5. Procedure for payment of fee
5 A. Recovery Agents

incurred by Recovery Agent. Payment (Fees/Service charges) will be made preferably
on recovery of entire Bank dues and on declaration of exhausting all efforts by the
Recovery Agents in recovery in a particular account on amount recovered by them &
accepted by the Bank.
Recovery Agents will submit the bill for payment of his fees/service charges directly to
the Branches as per Annexure-44, which they after proper scrutiny & checking will
forward the same to Zonal Office for sanction. Zonal Office will once again check &
scrutinize & will sanction the bill in terms of above guidelines & communicate the same
to the respective Branch. Only on the receipt of the said sanction, fees / service
charges will be paid by the branches to the respective Recovery Agent by debiting
appropriate heads towards Commission paid to Recovery Agents & GST on it (as per
HO IC No.15884/GEN AC/2018-19/07 dated 27/08/2018). Payment will be made after
credit in Recovery Agents account (by transfer/through NEFT/RTGS) or through
Bankers Cheque.
The maximum service charges payable to the SPs on account of recoveries effected in
accounts allotted to SP/SRA/Bank Mitra (BM) afresh or by renewal/extension of period
of existing allotted accounts through their effort shall be payable as per schedule
mentioned in Annexure 47.
It may be noted that Sharing of Commission among Service Providers & Bank
Mitras shall be at 20:80 basis. Payment of commission to Specified Recovery
Agents shall be borne by Service Providers. Branch shall ensure records of such
recovery in the System.

incurred by the Specified Recovery Agent. Payment (Fees/Service charges) will be
made preferably on recovery of entire Bank dues and on declaration of exhausting all
efforts by the Specified Recovery Agents in recovery in a particular account on amount
recovered by them & accepted by the Bank.
Processing of Bills-
SPs will submit the Branch wise monthly bill for payment of his fees/service charges
directly to the Branches as per Annexure-47, for proper scrutiny & checking and
recommend the checked copy of the bill to Zonal Office for payment. Zonal Office will
147
once again check & scrutinize & recommend the bill for payment in terms of above
guidelines & communicate the same to Financial Inclusion Department, Head Office
under Copy to the Branch. On the receipt of the said bills/invoice at Head Office
(Financial Inclusion Department), fees/ service charges will be paid by the Head
Office to the respective Service Provider by debiting Charges A/c Commission to
Recovery Agents of respective Zones & applicable GST on it shall be paid to the
debit of Charges Account GST Paid on commission paid to Recovery Agents.
Payment will be made after deducting all the taxes which are applicable & same
will be paid either through direct credit in Bank Mitra accounts after getting
mandate from the Service Providers. Branch/ Zonal Office will have no authority to
pay commission to SP/SRA/Bank Mitras (BMs)
Process Flow – Monthly Bills raised by SPs  Branch ZOHead Office

Payment to SP and BMs on 20:80 basis by HO, FI through existing centralized
payment system.

REROs will submit bills for payment of their commission directly to the branches as per
Annexure-45 concerned. After proper scrutiny the branches will forward the bills to
Zonal Offices with their recommendation. At Zonal Offices the bills will be scrutinized,
and sanctioned as per guidelines in force in the policy. Only on the receipt of the said
sanction, fees / service charges will be paid by the branches to the respective RERO by
debiting appropriate heads towards Commission paid to RERO & GST on it (as per HO
IC No.15884/GEN AC/2018-19/07 dated 27/08/2018). Payment will be made after
credit in RERO account (by transfer/through NEFT/RTGS) or through Bankers Cheque.

REA after recovering the amount in NPA accounts allotted to them will submit the bill as
per prescribed format (Annexure-46.) to the concerned Zonal Office for onward
submission to FGMO. Zonal Office after proper verification of the bill and confirming
actual recovery in the account from the branch will forward the bill to FGMO with their
due recommendations. Zonal Office has to ensure that claim amount in the bill is in
accordance with the terms & conditions laid down in the account allotment letter issued
by FGMO to REA. FGMO will scrutinize the bill and Deputy General Manager (in
his absence Assistant General Manager/ Chief Manager) is authorized to approve
the bill/ payment in terms of approved guidelines. Bill will be paid at FGMO by
debiting appropriate heads towards Commission paid to REA & GST on it (as per
HO IC No.15884/GEN AC/2018-19/07 dated 27/08/2018). Payment will be made after
deducting all the taxes which are applicable & same will be paid either through
direct credit in REA account (by transfer/through NEFT/RTGS) or through
Bankers Cheque.
COMMON GUIDELINES:
 Due Diligence of prospective Recovery Agents
Zonal Office will do/conduct proper due diligence of those Recovery agents whose
applications were found eligible for empanelment of Recovery Agents as per bank’s
guidelines for empanelment of recovery agents & those who were found success full in
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above referred interview/interaction/ discussion. 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,
Zones should ensure that Recovery Agencies carry out verification of the antecedents
of their Employees /Agents engaged by them for recovery of bank dues as a matter of
abundant caution. This verification will include pre-employment police verification.
Empanelled Recovery Agencies will provide the documents related to Police verification
to the Zonal Offices.
 Issuance of Authorization letter to Recovery Agents
Zonal Head after selection of NPA account for deployment of Recovery Agent for
recovery of Bank’s dues will issue Letter of Authority to the Recovery agent entrusting
them with the job of recovery in loan accounts as per Annexure-37. Zonal Head will
endorse copy of this letter to the branch for subsequent follow up with the Recovery
Agents including settlements / partial recovery etc.
 Training for Specified Recovery Persons (SRA)/ Bank Mitras
(BM)/Recovery Agents
Specified Recovery Persons (SRA)/ Bank Mitras (BM)/Recovery Agents should
acquire mandatory 100 hrs training certificate from IIBF. The specified Recovery Agents
may engage Bank Mitra in the command areas of the Branch/Zone up to maximum
number of 50 Bank Mitras on their behalf and Bank Mitras would be required to undergo
training and complete Certification as per Recovery Management Policy of the Bank
issued from time to time.
 All Specified Recovery Agents must ensure that all the Bank Mitras undertaking
the role of Recovery Agents under his control are properly trained to handle with
care and sensitivity, their responsibilities, in particular aspects like hours of
calling, privacy of customer information etc.
 To this effect Zonal Offices must also ensure that all the Specified Recovery
Agents empanelled have under gone required mandatory 100 hours training &
obtained requisite certificate from Indian Institute of Banking and Finance (IIBF)
and ensure to keep a copy of this certificate on record.
 However, RBI on the request of IBA has approved the proposal for nine months
window for new engaged Debt Recovery Agents (DRAs) for completion of the
mandatory training of 100 hours and certification by IIBF subject to the following
conditions:
 Service Providers engaged by banks may engage Specified Recovery

Agents having mandatory 100 hours training certificate by IIBF. The SRAs
may undertake 100 hour minimum training conducted by IIBF or institutions
accredited by IIBF within 30-45 days of their engagement.
 These Specified Recovery Agents (SRA) should pass the examination
conducted by IIBF and complete the certification within a further period of
six months from the date of completion of the training. In any case, the SRA
would not be allowed more than a maximum of nine months from the date of
engagement for completion of certification.
 During this period the SRA may not be allowed to work independently but
along with / under a person who has completed the training successfully
and passed the IIBF examination.
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In case of unsuccessful completion of the mandatory training and failure to pass the
IIBF examination, the bank / service provider engaged by the bank must terminate the
SRA forthwith and inform the customers also, if required
 Intimation to Borrower / Guarantor about authorization of Recovery Agent

for recovery of their dues payable to Bank
Along with above Authorization letter to Recovery Agents, Zonal Head will also issue
Letter to the borrowers/guarantors about engagement of Recovery Agents for recovery
of bank’s dues from them as per format in Annexure-38. The delivery of this letter shall
be ensured either through registered post or through a messenger under
acknowledgement of the borrowers/ guarantors.
To ensure due notice and appropriate authorization, Zonal offices should 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 if the agent also carries
a copy of the notice and the authorization letter from the bank along with the identity
card issued to him by the bank or the agency firm / company. Further, where the
recovery agency is changed by the Zonal offices during the recovery process, 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.
 The notice and the authorization letter should, among other details, also include the
telephone numbers of the relevant recovery agency. Zonal offices/branches should
ensure that there is a tape recording of the content / text of the calls made by recovery
agents to the customers, and vice-versa. Zonal offices/branches may take reasonable
precaution such as intimating the customer that the conversation is being recorded, etc.
 Functional Areas
Recovery Agents will deal in the following matter:
I. The Recovery Agents will have to make first attempts for recovery of Bank’s entire
dues.
II. In case Recovery Agents feel that entire banks dues cannot be realized despite all
efforts then they will discuss the matter with concerned branch head & will impress
upon the borrowers / guarantors for Compromise Settlement with the bank and
subsequently they will assist the field functionaries in recovering the agreed
compromise sum as per terms of settlement approved by the bank.
III. In case of NPA Accounts where Bank has filed suit for recovery of its dues in
Courts /DRTs or Decree Execution is in progress the Recovery Agents should first
make attempt of recovering banks dues as claimed in recovery suit or awarded in
decree .Like above if they feel that such dues cannot be recovered after putting all
efforts then after discussion with concerned branch head they should bring the
borrowers / guarantors for compromise settlements with the Bank and to get the
Joint Compromise Petition approved by the Courts / DRTs and thereafter they will
assist the field functionaries in recovering the approved compromise sum as per
terms of settlement.
IV. In accounts where notices have been issued under SARFAESI Act, 2002, the
Recovery Agents will assist the field functionaries at the first instance in recovering
the full dues from the borrowers / guarantors. In case they feel that banks entire
dues cannot be recovered after taking all steps including sale of all the charged
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assets then after discussion with concerned branch head they should, impress
upon borrowers / guarantors for compromise settlement with the banks. However,
in case the Authorized Officer decides to go for possession of assets, sale of assets
etc. Recovery Agents should assist the Authorized Officer in possession of assets,
mobilizing prospective purchaser / bidder for auction and to materialize sale of
assets.
V. In accounts where sale of assets through auction under SARFAESI Act, 2002 had
been taken up earlier but the same failed in absence of participation from any
bidder, at the first instance Recovery Agent will first make efforts for recovering the
full dues from the borrowers / guarantors. In case the Authorized Officer decides to
go for resale then Recovery Agent will assist finding/ mobilizing prospective
purchaser / bidder for auction and to materialize sale of assets.
VI. In suit filed & decreed cases in different Courts / DRTs where Orders have been
passed for sale of assets and the sales are in operational stage and / or the earlier
auctions have failed in absence of any participation from the bidders. In case the
Court/DRT/Recovery Officer decides to go for resale then Recovery Agent will
assist finding/ mobilizing prospective purchaser / bidder for auction and to
materialize sale of assets.
VII. In failed compromise cases where recoveries are not forth coming despite mutual
agreement and the borrowers / guarantors have not honored their commitment as
per terms of settlement The Recovery Agents will help the Bank in revival of failed
compromise cases with delayed period interest as per circularized instruction of the
Bank.
VIII. To locate the present whereabouts of the borrower/guarantor who are found not
traceable at the address recorded with the Bank.
IX. To locate the properties charged to the Bank and to locate other personal
uncharged properties belonging to the borrower(s) & guarantor(s).
X. To assist the Authorized Officer for taking physical possession with the help of
police assistance or for obtaining orders from CMM/District Magistrate/ concerned
authorities for taking physical possession.
XI. To assist the Authorized Officer in preparing panchnama, inventory of the property
both moveable & immovable as per the procedure & in the forms prescribed under
the Act/Rules.
XII. To arrange on behalf of the Authorized Officer for storage, maintenance,
preservation & locking up arrangement as appropriate, of the movable/
fixed/immovable assets taken over.
XIII. To arrange on behalf of Authorized Officer for security, insurance, protection
and/or any other action required to ensure safety of the assets taken over.
XIV. To assist the Authorized Officer in taking over the management of the secured
assets from the borrower &/or guarantor & to manage the secured assets, the
possession of which has been taken over by the Bank.
XV. To assist the Authorized Officer to send notice to the debtors of the borrower & to
follow up the collection from the debtors of the borrower.
XVI. To assist the Authorized Officer in getting the valuation of the movable &
immovable properties secured in compliance of the Act/Rules.
XVII. To assist the Authorized Officer in arranging for the sale of the assets as per any
of the modes prescribed under the Act/Rules.
XVIII. To assist the Authorized Officer to receive sale proceeds & for issuance of sale
certificate & all other necessary formalities under the Act/Rules.
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XIX. There can be other functions not enumerated but related to enforcement &
recoveries.
 Display of panel of Recovery Agents on Banks website
In compliance of RBI guidelines, Head Office Recovery Department on receipt of above
referred list of empanelled Recovery Agents or information of de-empanelment of any
Recovery Agent from Zonal Offices will post/ update it on the bank’s website
 Periodical review of performance of Recovery Agents (RA/REA/RERO/BC) &

feed back to RBI
All the Branches availing services of Recovery Agents for recovery of Banks’ dues in
NPA accounts will submit monthly progress report on Recovery Agents as per
Annexure-39/43/48. Zonal Head should periodically (at least quarterly) review account
wise performance of all the Recovery Agents empanelled by them for recovery of Banks
dues in NPA accounts. They will compile the evaluation report & submit its brief to
FGMO under copy to Head Office Recovery Department on Quarterly basis
.
Where ever Zonal Heads gets the information from any branch or he himself feels that
concerned Recovery Agent is not taking active part in recovery of Banks dues in respect
of those accounts allotted to him & or not adhering to BCSBI Code& various guidelines
issued by RBI/ Government of India/Bank, then as advised above matter will be
immediately referred to above mentioned committee who will decide about continuance
of empanelment of said Recovery Agent .If that committee decides for cancellation of
empanelment then their empanelment will be cancelled with immediate effect under
intimation to concerned borrower/guarantor &FGMO/ Head Office.
Zonal offices are advised that while submitting periodical review report on performance
of Recovery Agents, they shall also mention their experience, to effect improvements,
so that same shall be brought to the notice of the Reserve Bank of India. Head Office
Recovery Department will compile above referred experiences and also add their
experiences & will report to RBI for the purpose as mentioned above. Head Office
Recovery Department will place this report before the Board on yearly basis (after
expiry of each financial year).Head Office Recovery Department will upload the list of
the Recovery Agents engaged by the Bank in the Bank’s internet site.
 Grievances / complaints lodged by the borrower / guarantor against Third
party agencies engaged for recovery of dues of the bank/ recovery process of
the bank.
 Where a grievance/ complaint has been lodged, Zonal offices/branches should not
forward cases to recovery agencies till they have finally disposed of any grievance /
complaint lodged by the concerned borrower. However, where Zonal offices/branches is
convinced, with appropriate proof, that the borrower is continuously making frivolous /
vexatious complaints, it may continue with the recovery proceedings through the
Recovery Agents even if a grievance / complaint is pending with them. Zones are
advised to put on record with justification the reasons of disagreement with the
complaints of the borrower & their decision of continuance of the services of recovery
agents in that particular NPA account. In cases where the subject matter of the
borrower’s dues might be sub judice, Zones should exercise utmost caution, as
appropriate, in referring the matter to the recovery agencies, depending on the
circumstances.
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 Zonal Offices & branches are advised to ensure that they & Recovery Agents /Recovery
Agency firms / companies engaged by them strictly adhere to the guidelines/codes on
loan recovery process as mentioned in RBI Circular numbers (a)
DBOD.Leg.No.BC.104/ 09.07.007 /2002-03 dated May 5, 2003 regarding Guidelines on
Fair Practices Code for Lenders (b) Circular DBOD.No.BP. 40/ 21.04.158/ 2006-07
dated November 3, 2006 regarding outsourcing of financial services (c) Master Circular
DBOD.FSD.BC.17/ 24.01.011/2007-08 dated July 2, 2007 on Credit Card Operations
(d) paragraph 6 of the "Code of Bank's Commitment to Customers" (BCSBI Code) and
(e) latest guidelines issued/to be issued by RBI pertaining to collection of dues.
 It has been reiterated by RBI vide their letter dated May 4, 2009, referred to herein
above, lenders/Recovery Agents should not resort to undue harassment such as
persistently bothering the borrowers at odd hours & in terms of RBI guidelines on
Outsourcing, the Bank and their agents should not resort to intimidation or harassment
of any kind either verbal or physical against any person in their debt collection efforts,
including acts intended to humiliate publicly or intrude the privacy of the debtors’ family
members.
 It may please be noted that Banks, as principals, are responsible for the actions of their
Recovery Agents. Hence, Zonal offices/branches should ensure that Recovery Agents
engaged for recovery of Banks dues should strictly adhere to the above guidelines and
instructions, including the BCSBI Code, while engaged in the process of recovery of
dues.
 Reserve Bank of India has categorically stated that complaints regarding violation of the
above guidelines and adoption of abusive practices followed by banks’ Recovery
Agents would be viewed seriously & Reserve Bank may consider imposing a ban on a
bank from engaging Recovery Agents in a particular area, either jurisdictional or
functional, for a limited period. In case of persistent breach of above guidelines,
Reserve Bank may consider extending the period of ban or the area of ban. Similar
supervisory action could be attracted when the High Courts or the Supreme Court pass
strictures or impose penalties against any bank or its Directors/ Officers/ agents with
regard to policy, practice and procedure related to the recovery process.
 Therefore Zonal offices/branches should ensure that their own staff members &
Recovery Agents engaged by them strictly adhere to the above guidelines during the
loan recovery process so that there is no cause of any adverse action against our bank
by RBI as stated above.
Disposal of grievances/ complaints lodged by the borrower/ guarantor regarding

recovery agents/ recovery process of the bank
Branch, Zonal Office, FGMO& Head Office can receive the complaint from Borrower
/guarantors against Recovery agents / recovery process of the bank. All the four offices
will properly maintain the proper record of receipt & disposal of such complaints. These
complaints will be dealt in the following manner at different levels.
a) Branch Level
If any branch receives any type of complaint from borrower / guarantor against Bank’s
staff member or Recovery Agents engaged by them/ Zonal Offices or against recovery
process adopted by Bank’s staff member /Recovery Agent then besides its early
redressal, they must forward copy of the said complaint and Action Taken Report on it
to their respective Zonal Manager.
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b) At Zonal Office Level
Zonal Office can receive complaint/ grievances directly or through their branches. Such
complaints will be scrutinized /investigated /dealt by the Recovery Agent Selection
Committee of Zonal Office. This committee will dispose-off the complaint/ grievances
within 15 days of its receipt under advice to complainant. In case they found that
complaint is not genuine or complaint has been made only with an intention to delay the
recovery process, then they will submit the details to FGMO for taking final view in the
matter
c) At FGM Office Level
FGM Office can receive complaint/ grievances directly or through their branches. Such
complaints will be scrutinized /investigated /dealt by them. This committee will dispose-
off the complaint/ grievances within 15 days of its receipt under advice to complainant.
In case they found that complaint is not genuine or complaint has been made only with
an intention to delay the recovery process, then they will submit the details to Head
Office for taking final view in the matter
d) At Head Office Level
Head Office can directly receive complaint/ grievances or through FGMOs. Such
complaints will be scrutinized /investigated /dealt by the Head Office Recovery
Department within 15 days of its receipt. General Manager (Recovery) will take the final
view in the matter under advice to Zonal Office and concerned complainant.
 Inspection/Audit of Empanelment of Recovery Agent &Commission/Service
Charges paid to third party agencies:
All the record pertaining to engagement of Recovery Agent and Commission/Service
Charges paid to Recovery Agents is subject to Inspection/Audit by the Head Office
Inspectors/Zonal Office Officials/Management Auditors/Other external Auditors. If any
discrepancy is observed by any of the above referred Auditor/Inspector, then it has to
be immediately brought to the knowledge of FGMO under copy to Head Office
Recovery Department which would later initiate action in the matter.
 Compliance of guidelines issued by IBA /RBI/ Government by Third Party
Agencies engaged for recovery while discharging their duties for recovery
of Bank’s dues.
Once again all Zonal offices/branches are advised that they have to ensure strict
compliance of RBI Instructions contained in circulars DBOD No.BP.40 /21.04.158 /
2006-07 dated November 3, 2006 relating to “Guidelines on Managing Risks and Code
of conduct in Outsourcing of Financial Services by banks”, DBOD.No.Leg.BC.75 /
06.07.005 / 2007-08 dated 24-04-2008 on ‘Recovery agents engaged by banks’, DBOD.
Leg. BC. 104 / 09.07.007 /2002-03 dated May 5, 2003 relating to “Guidelines on Fair
Practices Code for Lenders”, BCSBI’s Code of Bank’s commitment to customers” –
August 2009, IBA’s “Model Policy on collection of Dues and Repossession of Security”,
any latest guidelines issued/to be issued by RBI,IBA etc.
CODE OF CONDUCT /GUIDELINES TO BE FOLLOWED BY THIRD PARTY

AGENCIES ENGAGED FOR RECOVERY
The Recovery Agents authorized to recover the Bank’s dues shall have to comply &
adhere to the following guidelines / code of conduct in the spirit of Best Practices Code
prescribed for the Bankers to avoid any untoward incidents :-
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I. Borrowers/guarantors would be contacted ordinarily at the place of their choice and
in the absence of any specified place at the place of their residence in case of retail
customers, for others either in place of their business or their residence as the case
may be.
II. Identity and authorization of the Recovery Agents along with telephone & mobile
numbers would be made known to the borrowers/guarantors at the first instance.
III. Customers’ privacy would be respected.
IV. Interaction with the borrowers/guarantors would be in their familiar language
V. Customer’s calling time / meeting time would be between 07.00 hours and 19.00
hours unless the special circumstances of the borrower’s business or occupation
demands otherwise.
VI. Customers’ requests to avoid calls at a particular time or at a particular place would
be honored as far as possible.
VII. Time and number of calls / the personal visits to the borrowers/ guarantors and
contents of conversations would be documented / recorded.
VIII. Provision for Tape recording of the content / text of the calls made by recovery
agents to the customers, and vice-versa, will be made and borrower/guarantor will
also be intimated that the conversation is being recorded, etc.
IX. Borrowers/guarantors would be provided with all the information regarding total dues
payable to the Bank.
X. Copy of the demand notice issued by bank and the authorization letter from the bank
along with the identity card issued by the bank (if any) or by the agency firm /
company will be carried by Recovery Agents.
XI. Guidelines/codes on loan recovery process as mentioned in RBI Circular numbers (a)
DBOD.Leg.No.BC.104/ 09.07.007 /2002-03 dated May 5, 2003 regarding Guidelines
on Fair Practices Code for Lenders (b) Circular DBOD.No.BP. 40/ 21.04.158/ 2006-
07 dated November 3, 2006 regarding outsourcing of financial services (c) Master
Circular DBOD.FSD.BC.17/ 24.01.011/2007-08 dated July 2, 2007 on Credit Card
Operations (d) paragraph 6 of the "Code of Bank's Commitment to Customers"
(BCSBI Code)and (e) any latest guidelines issued/to be issued by RBI pertaining to
collection of dues will be meticulously adhered to.
XII. For recovery of Banks dues & or seizure of assets charged to the bank (including
vehicles & other moveable assets) only legal remedies as defined by Supreme Court
& other Courts will be relied upon/used/enforced. While enforcing security or sale/
auction of charged assets all the rules / regulations / procedures under the relevant
statutes & also mentioned in the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the
Security Interest (Enforcement) Rules, 2002 will be strictly adhered to.
XIII. Reserve Bank of India / Ministry of Finance Officials / any Government official can
inspect the books of accounts /all records of the outsourced agencies /empanelled
Recovery Agents/Agencies by the Bank.
XIV. All guidelines to be issued by IBA / RBI /Government of India / Bank from time to time
during the period of empanelment will be strictly complied with.
Other terms and conditions to be observed by Recovery Agents

XV. No borrower /guarantor will be promised /assured for approval of compromise sum
offered by him, release of charge on security & issue of no dues certificate without
getting approval of compromise sum from the competent authority of the Bank.
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XVI. The borrowers/ guarantors will not be relinquished on behalf of bank in any way from
their liability towards bank
XVII. The borrowers/ guarantors will be asked to make all payment towards recovery
directly to the branches where the loan account is maintained against valid receipts
and acknowledgement. No amount in cash or in any manner will be collected from
the borrowers / guarantors.
XVIII. The bank will not be held liable to bear any cost, expenditure in the event of any
untoward incidents leading to litigation etc on account of illegitimate/ coercive action,
if any, by the Recovery Agents & or borrower/ guarantor.
 Taking possession of property mortgaged / hypothecated to banks:-

In a recent case which came up before the Hon’ble Supreme Court, the Hon’ble Court
observed that we(citizens) 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 Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the
Security Interest (Enforcement) Rules, 2002 framed there-under 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 banks rely only on legal remedies available under the relevant statutes
while enforcing security interest without intervention of the Courts. Therefore all the
Recovery Agents may please be advised to adhere to above mentioned guidelines
while taking possession of property mortgaged / hypothecated to banks.
Where ever re-possession clause incorporated in the contract with the borrower and
rely on such re-possession clause for enforcing their rights, Zonal Office/branches
should ensure that the repossession clause is legally valid, complies with the provisions
of the Indian Contract Act in letter and spirit, and ensure that such repossession clause
is clearly brought to the notice of the borrower/guarantor at the time of execution of the
contract. The terms and conditions of the contract should be strictly in terms of the
Recovery Policy and should contain provisions regarding (a) notice period before taking
possession (b) circumstances under which the notice period can be waived (c) the
procedure for taking possession of the security (d) a provision regarding final chance to
be given to the borrower for repayment of loan before the sale / auction of the property
(e) the procedure for giving repossession to the borrower and (f) the procedure for sale /
auction of the property. Therefore all the Recovery Agents may please be advised to
adhere to above mentioned guidelines on re-possession clause.
Guidelines for empanelment of Process / Transaction Advisors:
Bank has a large number of high value NPA accounts wherein resolution / recovery can
happen through (i) identification of strategic/ financial investors and change of
ownership, (ii) identification and disposal of assets, either in whole or on piece meal
basis through concerted efforts (iii) mobilization of OTS proposals from the existing
management and follow up of the same till implementation (iv) restructuring and
consequential upgradation in viable units. These actions require continuous and
concerted efforts and negotiations with the existing management / possible investors /
other lenders in case of consortium or multiple banking arrangement, which can be
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effectively handled by Process/ Transaction advisors well versed in such deals and also
have potential investors in hand.
Eligible Accounts:
1. NPA Accounts with a ledger balance of Rs.25 crore. However, accounts with lower
exposure can also be considered for allotment to Process/Transaction advisors wherein
the total exposure of all consortium /MBA lenders is Rs.100 crore or above.
2. Viable NPA accounts / going concerns with low level of activity which can be turned
around subject to infusion of fresh equity / investment.
3. Litigant borrower companies delaying recovery measures by bank.
4. Availability of high value security enforcement/ disposal of which requires specialized
focus on marketing the asset and finding investors/ bidders.
5. Accounts in which the existing management has offered an unviable OTS and has
not improved the same despite rejection of the same by the bank.
6. Any other account on case to case basis.
Eligibility criteria for empanelment:

1. A firm/ company/LLP/ group of individuals.
2. Process/Transaction Advisor should have specialized knowledge, past experience (at
least 1 year with any bank/empanelled/appointed by any bank), capabilities, expertise
and infrastructural support for resolution/recovery in high value NPA accounts through
(i) identification of strategic/ financial investors and change of ownership, (ii)
identification and disposal of assets, either in whole or on piece meal basis through
concerted efforts (iii) mobilization of OTS proposals from the existing management and
follow up of the same till implementation (iv) restructuring and consequential
upgradation in viable units and (v) asset sale to ARCs.
3. The past performance of the Process/ Transaction Advisor with other banks/FIs in
resolving high value NPA accounts will be an added advantage.
4. Process/ Transaction Advisor’s accessibility in the area of operation.
Process for empanelment of Process/ Transaction Advisors:
a) Authority for empanelment: The HLCCED at Head Office shall be empowered to

approve the panel of Process/Transaction Advisors. Presence of General Manager
(Recovery & Law) shall be mandatory for completing the quorum for approval of the
aforesaid panel by the Committee.
The committee shall also decide on the final eligibility criteria, identification of accounts
for allotment to Process/Transaction Advisor, finalization of application inviting RFRP,
documents required for submission along with application and timelines for completion
of empanelment.
a) Advertisement: The SAM Vertical, Head Office shall invite applications from eligible
Process/Transaction Advisors for empanelment with the Bank for rendering their
services. Such advertisement shall be published as per CVC guidelines on Bank’s
website and two national dailies, one each in English and Hindi.
b) Application: Interested firms/companies/ LLPs/ group of individuals may submit

application for empanelment on prescribed format to be devised by the SAM Vertical,
157
Head Office, directly to SAM Vertical at Head Office. Upon scrutinizing the credentials/
documents/ facts mentioned in the application, SAM Vertical, HO shall place the
proposed list of panel for final approval by HLCCED.
Fees payable to Process/Transaction Advisors: The Advisor will be paid a success

fee as percentage of the amount recovered upon resolution of the account. During the
empanelment, the intending Process Advisors will be asked to quote the success fee
and the Bank will select the lowest quote for empanelment. The percentage of success
fee will also be decided by HLCCED on case to case basis. No fee shall be paid till the
account is resolved/ recovered. However, HLCCED may consider mutually agreed
retainer fee to enable the Advisor to meet the establishment expenses depending upon
the location of assets of the borrower/ guarantor/ efforts needed to mobilize the
investors etc.
Periodicity of empanelment: The empanelment will be valid for a period of one year.
The period of empanelment may be extended by another six months or till finalization of
fresh panel, whichever is earlier.
Only those Process/Transaction Advisors shall continue to be on the Bank’s panel

whose performance is found to be satisfactory. However, any irregularity/ misconduct
found during the intervening period / review by the Bank shall entail for the Advisor’s de-
panelment forthwith.
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CHAPTER 11
GUIDELINES FOR EMPANELMENT OF DETECTIVE AGENCIES & UTILISATION OF
THEIR SERVICES FOR SUPPLEMENTING RECOVERY ACTIONS
Bank has been utilizing services of the Recovery Agents, Retired Employees Recovery
Officers (RERO) as well as Resolution Enforcement Agencies (REAs) for effecting
recoveries/ resolution of NPA accounts. Their success rate directly related to the
traceability of such borrowers/ guarantors and availability of charged and other known
securities to the bank.
In the last few years, there has been sharp increase in number of accounts in which
either the borrowers/ guarantors are not traceable and/ or the securities available are
not known and/ or the documents related to secured assets are not enforceable in the
court of law. To deal with such situation, it has become all the more important to engage
outside specialized agencies, i.e., Detective Agencies to find out the borrowers/
guarantors, search their uncharged assets etc so that the same may be brought to the
knowledge of relevant court/ authority for finding early solution in the account.
Private Detective Agencies (Regulation) Bill 2007 was introduced in Parliament of India,
Rajya Sabha on 13.08.2007 and was granted extensions for presentation of Report, last
being 15.03.2009. However, till date no law has been finalized and passed by the
Parliament to govern the conduct of Detective Agencies.
Based on the feedback received from the field functionaries and difficulties faced by
them in tracing the uncharged assets, the MCBOD in its meeting held on 23.06.2017
approved guidelines for engagement of Detective Agency and utilizing their services to
supplement efforts of the field functionaries in recovering bank’s dues in NPA accounts.
A. Scope of Work for Detective Agencies
The Services of the Detective Agencies may be availed for the following purposes –
a. To locate the borrower(s)/ co-borrower(s)/ guarantor(s)/ mortgagor(s),(in/ outside
India) including their legal heirs who are either untraceable or not available at the
addresses given in Bank’s records.
b. For ascertaining latest information about their present address(es)/
occupation(s), business(es), income streams, details of all their assets, whether
charged or uncharged, their location (in India or abroad), value and ownership,
etc.
c. Finding and submitting details of bank accounts maintained by the defaulting
borrower(s)/guarantor(s), including their legal heirs.
d. Give details of credit facilities availed/ to be availed by defaulting borrower(s)/
guarantor(s) from other Banks.
e. Confirm present state of ownership of the secured assets by personal
visit(s)/market report, duly confirmed by the documents.
f. Gather any other information which the Bank cannot access by utilizing normal
channels like CIBIL/ internet/ local enquiries and which may be considered
necessary by the Bank for recovery of the Bank’s dues.
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B. Authority for Empanelment & Engagement of Detective Agency
1. Eligibility criteria for allocation of accounts to Detective Agencies-
NPA accounts under any category i.e Sub-Standard, Doubtful and Loss category
(whether non-suit filed, suit filed or decreed) shall be covered where engagement
of detective agency is deemed appropriate, as per the requirement.
2. Competent Authority for Empanelment of Detective Agency
FGMLCC will be the competent authority for empanelment of any Detective
Agency as per procedure detailed in D below. After Empanelment of Detective
Agencies, the FGMO will communicate contact details of the Agencies to the
Zonal Offices under their jurisdiction for further conveying to the branches for
utilization of their services.
3. Competent Authority For Assignment of work
Once an Agency has been empanelled, the ZLCC will be the competent authority
to assign any work to the Detective Agencies, based on the recommendations
received from the Branches depending upon the requirement and exigencies.
More than one Detective agency may be engaged for one account with different
scope/ allocation of work/ task.
Zonal Office must ensure that while assigning any work to detective agency, a
letter must be given to that Detective Agency clearly stating the nature of
work/ task and the fees which will be payable on completion of assigned
work, to avoid any dispute/ complaint at a later stage.
4. While giving an assignment to the Detective Agency, it should be ensured that

the agency is fully capable in executing the required work in terms of infra-
structure and competence so as to get better results.
C. Eligibility Criteria for Detective Agencies
Agencies (Partnership Firms, Companies, Corporations etc.) with sufficient
means/ resources/ field experience will be considered for empanelment. Since
there are no regulatory and statutory guidelines for Detective Agencies,
preferably the Agencies must be member of “Association of Private
Detectives & Investigators” of India (APDI).
The Agency must have minimum 3 years of experience in this activity.
Further, the following factors are also to be looked into for empanelment-:
a. The applicant should have permission to operate as Detective Agency and
for carrying such type of activity from state/ local/ police authorities as may
be applicable.
b. Past experience and competence to perform the task which can be assigned
over the contracted period.
c. Financial soundness and ability to service commitments even under adverse
conditions.
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d. Business reputation and culture, compliance, complaints and outstanding or
potential litigation.
e. External factors like political, economic, social and legal environment of the
jurisdiction in which the service provider operates and other events that may
impact service performance.
f. Wherever possible, the bank shall obtain independent reviews and market
feedback on the service provider to supplement its own assessment.
g. It should be ensured that the Agencies carry out verification of the
antecedents of their employees, which may include pre-employment police
verification, as a matter of abundant caution.
h. It shall also be ensured that the service provider’s employees maintain same
high standard of care in performing the services as would have been
maintained by the Bank as if the activities were conducted within the Bank.
i. Agencies will put its best efforts to provide the services assigned to them and
will function in such a manner that it will not cause any business loss to the
Bank or entail any legal or other responsibility/ liability to the Bank or its
officials.
j. Observe the highest professional and ethical standards.
k. Adhere to the instructions and guidelines provided by the Bank from time to
time and not adopt or resort to any method, conduct or procedure in
contravention of any Law/ Act/ Rules/ Fair Practices Code/ Code of Conduct
which may be issued from time to time by the Government/ RBI/ Indian
Bank’s Association or any other authority.
l. Comply with RBI’s Guidelines on Fair Practices Code for Lenders and
Guidelines on Managing Risk & Code of Conduct in Outsourcing of Financial
Services by Banks.
m. The Agency shall not resort to use of coercive methods or commit any
wrongful act or offence against person/ property of the borrower(s),
guarantor(s) or any other liable party(ies), while collecting the information.
The guidelines issued by the Govt/ RBI/ Court in this regard shall be
meticulously followed by the Agency. The Agency should unconditionally
agree that the Bank’s decision in this respect shall be final and binding in
regard to the Agency’s compliance.
D. Procedure for Empanelment

i. Applications would be invited from interested parties through advertisements to
be placed in two local newspapers by the FGMO, one of which should be
vernacular and also placed on the Bank’s website
“http://www.allahabadbank.in”.
Applications shall be obtained as per the Annexure- 86. The application shall
be accompanied with self attested photocopies of their academic qualifications,
proofs of experience, PAN Number, TAN Number, Complete Address of their
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Office along with Address Proof and proof of membership of Association of
Private Detectives & Investigators of India (APDI) (wherever available) etc and
conform to KYC norms.
ii. Applications for empanelment would be received and processed at the FGMO.
iii. Senior most 2nd line Officer at the FGMO shall co-ordinate all the activities
relating to empanelment and review.
iv. Due Diligence & Recommending Committee - A Committee comprising 3
Officers of Scale III and above, including Asstt General Manager/ Chief Manager
(Recovery) as Chairman of the Committee posted in second line shall scrutinize
the applications received from Detective Agencies and interview the applicants
and if found in order, recommend the eligible agencies to FGMLCC for
empanelment. Before recommending for empanelment, an official from the
FGMO shall visit the site/office of the Agency, to conduct due diligence to verify
their address and infra-structure so that Bank’s interest is not jeopardized.
v. Final Approval and Issue of Letter of empanelment - FGMLCC shall be the
Competent Authority to approve empanelment of the Agencies and any decision
in this regard would be final and letter of empanelment will be issued by FGMO.
The letter of empanelment must categorically mention that the Agency will
function in such a manner that it will not cause any business loss to the Bank or
entail any legal or other responsibility/ liability to the Bank or its officials and
abide by different Laws/ Acts/ Rules/ Fair Practices Code/ Code of Conduct
which may be issued from time to time by the Government/ RBI/ Indian Bank’s
Association or any other authority.
vi. Tenure of Empanelment - Detective Agency shall be engaged by FGMO for a
period of one year, which may be further extended on yearly basis, subject to
satisfactory performance as per feedback received from Zonal Office.
Performance of the Detective Agencies will be reviewed by the ZLCC on half
yearly basis and reported to FGMO.
vii. Agreement for Empanelment - Each Agency, if approved for empanelment,
shall be required to sign an ‘Agreement’ as per format given as Annexure - 87.
Such an agreement shall be signed by Asstt. General Manager/ Chief Manager
in the 2nd line posted at FGMO. The documents will be kept on record at the
FGMO level.
E. Assignment of work to Detective Agencies empanelled by other FGMOs
In case in a particular account, branch requires services of Detective Agency(ies)
other than those empanelled by their FGMO, the matter shall be forwarded to
their ZO. ZLCC will recommend it to FGMO and the FGMLCC will be the
competent authority to take final decision in the matter looking into the exigencies
and merits of the case.
F. Submission of Reports by the Detective Agencies

i. The empanelled agencies will submit their report on affidavit along-with the
supporting papers, documents, photographs, etc., if any, in support of their
statement.
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ii. A time frame of maximum 60 days will be allowed to the Agency for
submission of report.
iii. In emergent circumstances, further extension of 30 days may be permitted by
the Zonal Head, keeping in view complexity of the case. Such extension of
time beyond stipulated 60 days shall be reported to FGMO.
G. Authority for Payment of fees and settlement of disputes
Branch Head shall be the competent authority to finalize the bill/claim on
appropriate rates (as per Bank’s extant guidelines), submitted by the Detective
Agencies and its payment. The fees will be paid on completion of the work as
per terms and conditions mentioned in the letter issued by the Zonal Office while
assigning the work, including amount of fee payable. In case of any dispute,
Zonal Head may take the final decision, considering facts of the case and in case
the dispute is not resolved at the Zonal level, matter may be referred to FGMLCC
for settlement of disputes.
H. Code of Commitment of Detective Agencies
i. Agency will function in such a manner that it will not cause any business loss
to the Bank or entail any legal or other responsibility/ liability to the Bank or its
officials.
ii. The Detective Agency appointed by the Bank shall ensure that no coercive
method is used while collecting the information.
I. Fees payable to the Detective Agencies
The Agency will be paid fees on the following rates:
S.No. Nature Of Task Assigned Fee Payable
1. On receipt of information about whereabouts of the Rs. 7,500/- per person subject to
missing/absconding borrower/ guarantor/ co-borrower/ maximum fee of Rs. 30,000/- under
director etc. subject to production of documentary this category, per account.
proof/evidence.
2. For locating properties other than details of which are Rs. 20,000/- for each property
available in Bank’s records and not also mortgaged with located, subject to maximum fee of
other Banks/ FIs, which may lead to attachment of the Rs. 1.50 lacs under this category
same along-with the documentary proof. per account.
(All the properties in one title deed to be considered
as one property).
3. For providing any other information, which may be Rs. 2,500/- per piece of
helpful for recovery of Bank’s dues e.g information about information, with maximum
other businesses, credit facilities from other banks, amount of Rs. 10,000/- per
accounts with other banks including verification of account.
present position of properties as per Bank’s records,
subject to production of documentary proof/
evidence.
4. Payment of reasonable out of pocket expenses may also be sanctioned subject to maximum of
Rs. 10,000/- per account. Zonal Head will be the competent Authority to take a decision for
payment of such out of pocket expenses. The Detective Agency shall submit details of visits/
proof of expenditure.
5. In case the Detective Agency fails to trace the Maximum fee of Rs. 3,000/- per
borrower/ guarantor etc. account can be paid.
6. In case the Detective Agency fails to trace the Maximum fee of Rs. 7,000/- per
property. account.
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a. In exceptional circumstances, keeping in view complexities of the case, in case
Detective Agencies brings to the notice of the Zonal Head beforehand, any
special efforts/ expenses required, the Zonal Head may consider sanction of
maximum of 25% extra fees/ reimbursement of expenses.
b. The above rates are inclusive of all taxes, whatsoever may be applicable.
c. The fees will be paid by the branches to the debit of appropriate heads towards
Commission paid to Recovery Agents & GST on it (as per HO IC No.15884/GEN
AC/2018-19/07 dated 27/08/2018). The expenditure incurred shall be part of the
memoranda dues and will be charged to the borrower.
d. In case of consortium advances cost of assignment of work to Detective
Agencies will be shared amongst the member banks, which must be discussed
during the JLMs. In case of multiple banking, endeavour must be made for
sharing of cost.
Monitoring/review of Performance
Performance of Detective Agencies shall be monitored and reviewed by the ZLCC on
half yearly basis and reported to FGMO.
The panel of Detective Agencies shall be reviewed by the Recommending
Committee of Officials at the FGMO on annual basis and place the
recommendations to the FGMLCC for final approval, by taking the feedback from
the Zones under their jurisdiction. However, bank has right to terminate the contract at
any time without assigning any reason.
ZO will submit progress report on Detective Agencies to FGMO on quarterly basis as
per Annexure-88 and inter alia FGMO shall send a consolidated statement to Head
Office, Recovery Department. The progress report so received will be placed to the GM
(Recovery) on quarterly basis.
Up-dation of All India List of Detective Agencies

FGMO shall inform the list of approved Detective Agencies (name, address &
telephone numbers) every year to HO Recovery Department for placing the same
on Bank’s Website so that other Zonal Offices may also utilize their services, wherever
required.
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CHAPTER 12
Seizure and Sale of Vehicles

The credit facilities extended for purchase of vehicles (cars, trucks, buses, tractors,
earth movers and others) constitute a significant proportion of total advances of the
Bank. It is observed that in this sector the NPA is due to a number of attributes like non
accrual of adequate income, break down of the vehicles and deliberate default by the
borrower etc. Prompt and corrective action is required for resolution of these accounts
to minimize the stress level in this vertical. There are also a good number of accounts
running irregular and may turn to NPA in near future.
2. To deal with the situation a systematic and time bound approach is required. We
need to seize the vehicles immediately after declaration of NPA as per the laid down
provisions in the loan documents. Further the vehicles should be sold in a transparent
and fair manner for crediting the proceeds to the loan account of the borrower and also
realizing the expenses involved therein.
3. On the basis of irregularity of loan account, the borrower should be served with
notices for immediate regularization of the account and to avoid legal action initiated/to
be initiated against him/her.
4. The Bank can take possession of the vehicles as per extant hypothecation
agreement executed by the borrower, also under the provisions of SARFAESI Act 2002.
While taking possession under SARFAESI Act, all provisions/guidelines under the act
has to be invariably be followed. The repossession of the vehicle should be taken as
last resort, not with any whimsical intention of depriving the borrower of the
security/vehicle.
5. Besides the usual notices, a 15 days’ notice (as per Annexure–89) should be served
in writing to the borrower and also the guarantor calling upon to regularize the account/
repay the overdue. It shall also intimate that in the event of failure to do so in the
prescribed time period the Bank shall be entitled to seize the vehicle and go ahead with
sale of it for realization of the dues.
6. In the event of persistence of the default in the account, another possession-cum-

sale notice of 15 days (as per Annexure–90) shall be given to the borrower/ guarantors
in writing informing the date of taking possession of the vehicle. It should also be
intimated that the intention of the Bank is to sale the vehicle on the date specified in the
notice.
7. In the eventuality of the borrower/ guarantor repaying the dues well before the date of
sale given in the notice, the process of sale should be stopped and the vehicle may be
handed over to them.
8. The vehicle should be valued well before sale date and the estimated sale value
should be notified to the borrower/ guarantor (as per Annexure–91). The vehicle shall
be sold by public Auction/ Tender/ Quotations and/or through a private contract at sole
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discretion of the Bank in a fair and transparent manner, where borrower will be advised
to remain present. The realizable value of the vehicle should be estimated by obtaining
the valuation report of an empanelled Surveyor/ true valuer. In case the vehicle is taken
possession under SARFAESI Act, the surveyors have to be empanelled from the Board.
Field functionaries can avail the services of surveyors those are empanelled by Public
Sector Banks and Insurance Companies for which they will take empanelment copy
from the concerned surveyor and get it verified from the issuing authority.
9. The sale proceeds of the vehicle shall be credited to the NPA account after
realization of the expenses incurred for recovery of the loan. The excess amount, if any,
should be refunded to the borrower and in case of deficit normal recovery action should
be initiated. A notice to this effect should be issued immediately (as per Annexure-92).
10. It is not mandatory on the part of the bank to communicate police authorities
regarding seizure of the vehicle; however, for information sake we may intimate them
well before the seizure process.
11. In case the borrower refuses to acknowledge the memo/document of seizure after
taking physical possession, a copy of the document must be sent through registered
post/speed post with acknowledgement due. After taking possession of the vehicle the
branch should inform the local police authorities immediately.
12. On taking physical possession, immediate sale process must be initiated to dispose
of the vehicle and the process must not exceed 60 days of time. In case the process
fails the vehicle should be restored to the borrower.
13. In order to facilitate the field offices in the entire seizure and sale process, they may
take the help of Seizure and Disposal Agents (SADA) empanelled at Zone level. Head
Office may consider empanelling SADA having pan India presence for convenience of
all. MD & CEO is authorized to approve the selection parameters/ criteria for
empanelment of Seizure and Disposal Agents (SADA). A SADA Selection Committee
headed by one Executive Director and three General Managers will be the authority for
empanelment/ renewal/cancellation of SADA at Head Office. For engagement of the
Seizure and Disposal Agents the Zonal Offices may adopt the following procedure:
i) Eligibility: Individual persons, a firm, a company or a group of individuals having

adequate infrastructure, expertise, skill, storage space, and past experience may be
eligible for empanelment. Existing Recovery Agents and Resolution cum Enforcement
Agents may also be considered keeping a view on the above criteria.
ii) Selection Committee: A five member team comprising the Zonal Head as head of
the committee and the Executive, next to him along with Departmental Heads of
Recovery Department, Credit Monitoring Department and Inspection Department will be
formed. Minimum quorum will be 4 members, out of which Zonal head and
Departmental Head of the Recovery Department are must.
Iii) Collection of application: The Zonal Offices may take references from the nearby
Banks working in that area. Applications may also be invited through newspaper
publication in English and vernacular languages.
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iv) Scrutiny and Final Selection: The applications must be verified for their
genuineness as per Bank’s guidelines. The agents shortlisted should be called for
interview before the committee. The documents required for Police verification should
be done and kept in file. The agents finally selected by the committee should be
intimated. Undertaking need to be obtained by way of affidavit for compliance of Best
Practice Code during recovery efforts and all other terms and conditions of assignment
including fees/ service charges payable to them
v) Circulation of Panel: After finalization of list of Seizure and Disposal Agents (SADA)
the Zonal Office will circulate it among the branches under their control. The list should
also be intimated to their FGMO and Head Office, Recovery Department for information
vi) Validity: The validity of the panel of SADA will be for one year only. All other
guidelines as enumerated in the Recovery Management Policy for Third Party Agencies
will be applicable here also.
vii) While engaging the seizure and disposal agent and valuers the field functionaries
have to follow the outsourcing policy of bank.
14. The MD & CEO of the Bank is authorized to decide the fee structure for payment to
Seizure and Disposal Agent for rendering various services.
15. The Zonal Offices and FGMOs will submit a statement on quarterly basis to Head
Office, recovery Department (as per Annexure-93).
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CHAPTER 13
HOLDING OF RIN MUKTI SHIVIR (RECOVERY CAMP) & LOK ADALAT
A) HOLDING OF RIN MUKTI SHIVIR (RECOVERY CAMP)

Rin Mukti Shivir (Settlement cum Recovery Camp) is not a special Scheme but it is an
innovative idea for settlement of OTS proposals in various small NPA loans in Priority
Sector / Govt. Sponsored cases and others (inclusive of written off debts and NRAC
dues). Such Loans are normally disbursed in clusters.
Branches / Offices have been advised to organize Rin Mukti Shivir (Settlement cum
Recovery Camp) for such clustered NPA accounts on predetermined date and venue.
Notices must be issued before hand to the concerned borrowers and guarantors and
wide publicity for Bank’s OTS modules as also for Settlement Camps are to be made
through local mass media.
List of NPA/written off /NRAC borrowers, their dues, Benchmark sum, relief/ concession
that may be provided should be assessed beforehand and kept ready by the branches/
Zonal Offices/ARMBs.
While conducting Rin Mukti Shivirs, following aspects have to be observed:
1) All branches should participate in the Rin Mukti Shivirs.
2) The news that bank is going to conduct Rin Mukti Shivirs has to be given wide
publicity well in advance in the command area of the branches. Banners should be
displayed announcing that the Bank is going to hold Rin Mukti Shivirs.
3) Recovery agents have to be given prior intimation and advised to mobilize
compromise proposals.
4) The location where the Rin Mukti Shivirs are being conducted may be
communicated to Head Office, so that Head Office representatives can participate in
the Rin Mukti Shivirs.
5) In the Rin Mukti Shivirs, all members of the Zonal Level Credit Approval Committee
(ZLCC) have to be present at a central location to take on the spot decision.
6) On the day of Rin Mukti Shivirs, Field General Manager may be contacted over
phone to dispose compromise proposals beyond the authority of ZLCC. For
proposals falling under various authorities at Head Office level, FGM will contact the
General Manager (Recovery) on the same day.
7) All applicable/ necessary stationery (compromise application, process note, sanction
letter, no lien letter and various agreements, cash/ transfer vouchers/branch/ office
seals etc.,) be made available at the camp site.
8) To make provision for collection of cash and cheque on the spot.
9) Branches after holding the Rin Mukti Shivirs will submit the information to the
respective Zonal Office as per Annexure-49 Zonal Office will submit the
consolidated report to Head Office through e-mail ho.recovery@allahabadbank.in /
Fax followed by hard copy after holding of Rin Mukti Shivirs /Mega Rin Mukti Shivirs
by their branches and as well monthly progress report on recovery camps on the
same annexure (Annexure-49).
The proposals can be mobilized/ negotiated / settled / recovered in situ. No
Separate Delegated Authority for such Rin Mukti Shivirs /Recovery Camp/
Settlement Camp is proposed. It will be in terms of delegated authority of the
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branches as also the ZLCC for OTS approval subject to fulfillment of Benchmark
Sum (For details of Delegated Authority kindly refer the relevant chapter of this policy).
B) HOLDING OF LOK ADALATS
Lok Adalat is now one of the popular modes of compromise settlements for both suit
filed & non-suit filed accounts. NALSA along with other Legal Services Institutions
conducts Lok Adalats. Lok Adalat is one of the alternative dispute redressal
mechanisms, it is a forum where disputes/cases pending in the court of law or at pre-
litigation stage are settled/ compromised amicably. Lok Adalats have been given
statutory status under the Legal Services Authorities Act, 1987. Under the said Act, the
award (decision) made by the Lok Adalats is deemed to be a decree of a civil court and
is final and binding on all parties and no appeal against such an award lies before any
court of law. If the parties are not satisfied with the award of the Lok Adalat though there
is no provision for an appeal against such an award, but they are free to initiate litigation
by approaching the court of appropriate jurisdiction by filing a case by following the
required procedure, in exercise of their right to litigate.
There is no court fee payable when a matter is filed in a Lok Adalat. If a matter pending
in the court of law is referred to the Lok Adalat and is settled subsequently, the court fee
originally paid in the court on the complaints/petition is also refunded back to the
parties. The persons deciding the cases in the Lok Adalats are called the Members of
the Lok Adalats, they have the role of statutory conciliators only and do not have any
judicial role; therefore they can only persuade the parties to come to a conclusion for
settling the dispute outside the court in the Lok Adalat and shall not pressurize or
coerce any of the parties to compromise or settle cases or matters either directly or
indirectly. The Lok Adalat shall not decide the matter so referred at its own instance,
instead the same would be decided on the basis of the compromise or settlement
between the parties. The members shall assist the parties in an independent and
impartial manner in their attempt to reach amicable settlement of their dispute. Govt of
India in consultation with RBI has increased the ceiling and advised the banks to
consider OTS proposal up to Rs.20.00 lac through Lok Adalat. The Hon’ble
Supreme Court also observed that loans, personal loans, credit card loans and housing
loans with less than Rs.10.00 lac can be referred to Lok Adalat. Reserve Bank of India
in their circular DBOD.No.Leg.BC.21/09.06.002/2004-05 dated 03.08.2004 also advised
the Banks to use the forum of Lok Adalat organized by Civil Courts for recovery of
loans. Court/DRT/ Consumer Forum are entertaining the cases with different ceiling of
amount. The matters in Lok Adalats are being decided on mutual consent basis
between bank and borrower/guarantor and the award of Lok Adalat can be executed
like a decree of Court/RC of DRT and there is no provision of appeal against the award
of the Lok Adalat as it is made based on mutual consent. No Court fee in non-suit filed
cases and no extra court fee in suit filed cases is payable by the
bank/borrower/guarantor. Branches have been advised to use Lok Adalat to a maximum
extent.
Nature of Cases to be Referred to Lok Adalat

1. Any case pending before any court.
2. Any dispute which has not been brought before any court and is likely to be filed
before the court.
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Provided that any matter relating to an offence not compoundable under the law
shall not be settled in Lok Adalat.
Levels and Composition of Lok Adalats:

At the State Authority Level -
The Member Secretary of the State Legal Services Authority organizing the Lok
Adalat would constitute benches of the Lok Adalat, each bench comprising of a
sitting or retired judge of the High Court or a sitting or retired judicial officer and any
one or both of- a member from the legal profession; a social worker engaged in the
upliftment of the weaker sections and interested in the implementation of legal
services schemes or programmes.
At High Court Level -

The Secretary of the High Court Legal Services Committee would constitute
benches of the Lok Adalat, each bench comprising of a sitting or retired judge of the
High Court and any one or both of- a member from the legal profession; a social
worker engaged in the upliftment of the weaker sections and interested in the
implementation of legal services schemes or programmes.
At DRT level:-
Banks can take up matters where outstanding exceed the ceiling of Rs. 20 lac, with
Lok Adalats organized by the Debt Recovery Tribunals / Debt Recovery Appellate
Tribunals.
At District Level -
The Secretary of the District Legal Services Authority organizing the Lok Adalat
would constitute benches of the Lok Adalat, each bench comprising of a sitting or
retired judicial officer and any one or both of either a member from the legal
profession; and/or a social worker engaged in the upliftment of the weaker sections
and interested in the implementation of legal services schemes or programmes or a
person engaged in para-legal activities of the area, preferably a woman.
At Taluk Level -
The Secretary of the Taluk Legal Services Committee organizing the Lok Adalat
would constitute benches of the Lok Adalat, each bench comprising of a sitting or
retired judicial officer and any one or both of either a member from the legal
profession; and/or a social worker engaged in the upliftment of the weaker sections
and interested in the implementation of legal services schemes or programmes or a
person engaged in para-legal activities of the area, preferably a woman.
National Lok Adalat

National Level Lok Adalats are held for at regular intervals where on a single day
Lok Adalats are held throughout the country, in all the courts right from the Supreme
Court till the Taluk Levels wherein cases are disposed off in huge numbers.
Permanent Lok Adalat

The other type of Lok Adalat is the Permanent Lok Adalat, organized under Section
22-B of The Legal Services Authorities Act, 1987. Permanent Lok Adalats have been
set up as permanent bodies with a Chairman and two members for providing
compulsory pre-litigative mechanism for conciliation and settlement of cases relating
to Public Utility Services. Here, even if the parties fail to reach to a settlement, the
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Permanent Lok Adalat gets jurisdiction to decide the dispute, provided, the dispute
does not relate to any offence. Further, the Award of the Permanent Lok Adalat is
final and binding on all the parties. The jurisdiction of the Permanent Lok Adalats is
up to Rs. One Crore. Here if the parties fail to reach to a settlement, the Permanent
Lok Adalat has the jurisdiction to decide the case. The award of the Permanent Lok
Adalat is final and binding upon the parties. The Lok Adalat may conduct the
proceedings in such a manner as it considers appropriate, taking into account the
circumstances of the case, wishes of the parties like requests to hear oral
statements, speedy settlement of dispute etc.
Mobile Lok Adalats are also organized in various parts of the country which travel
from one location to another to resolve disputes in order to facilitate the resolution of
disputes through this mechanism.
Action Points
a) Lok Adalats are being organized by Court/DRT/Consumer Forum etc on regular basis.
Court includes the magistrate courts. Although the Magistrate Courts are criminal
courts, they are also empowered to hold Lok Adalats relating to recovery matters.
Zonal Offices and branches should maintain a constant rapport with these authorities
so that the dates of holding of Lok Adalat are known to them well in advance and they
can be prepared accordingly. Such Lok Adalat can be held for our Bank exclusively
also. For this purpose Zonal Office has to take a lead and contact the concerned
authorities (State Legal Services Authority & DRT)
b) Wide publicity of the Lok Adalat to be made through drum beating/distribution of
leaflets/publication in News Paper/contact village Panchayat etc.
c) Notices are issued by Lok Adalat to the respective borrowers/ Guarantors. For prompt
service of the same branches are advised to collect the same from Lok Adalat and
ensure service of the same on the concerned borrower/ guarantors. Branches can
serve these notices through Registered Post/by hand.
d) Eligible proposals are to be referred to Lok Adalat.
e) Minimum Benchmark Sum as per different compromise modules given in this Policy
for each proposal is to be assessed well in advance.
f) Field functionaries have to note that there is no special or exclusive delegated
authority for settlement of cases in Lok Adalat. All the proposals will be settled/
approved by the field functionaries as per their delegated authority given
against each compromise module in this Policy booklet
g) Branch representative must attend the Lok Adalat with necessary stationery as
aforesaid. If Mega Lok Adalat or Lok Adalat exclusively for our Bank is organized by
the concerned authorities then Zonal Head must be present in the Lok Adalat to take
on the spot decision on the compromise settlement within his delegated authority.
h) If in Lok Adalat any compromise settlement is arrived at which does not carry approval
of the competent authority and is beyond the authority of the officer /executive
representing our bank in the Lok Adalat, then representative of the Bank has to
immediately contact the Zonal Head/ FGM/General Manager (Recovery) (as per
requirement) over telephone/mobile (giving full particulars for the settlement) and seek
their decision in the matter. Zonal Head / FGM/ General Manager (Recovery) will
discuss the matter with the members of the competent committee and convey the
same to the representative taking part in the Lok Adalat. In case Zonal Head/ FGM/
General Manager (Recovery) conveys approval of the competent committee over
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telephone/ mobile then bank’s in principle approval is to be communicated in the Lok
Adalat and same is got to be ratified later on by submitting the full proposal on the
same day through fax/e-mail to the competent Office (ZO/HO as the case may be).
i) In case our representative in the Lok Adalat feels /observes that the discussion held in
the Lok Adalat is not in conformity with the Bank’s Policy guidelines on compromise
settlement, then our representative must get recorded bank’s objections and may
request Lok Adalat for adjournment or may agree settlement subject to approval by
Bank’s Competent Authority.
j) Consent Decree to be obtained specifying the terms of sanction with default clause for
payment of entire dues of the Bank.
k) Please note under no circumstances ongoing recovery suit/ EP/RC will be withdrawn
till realization of settled amount as per terms of settlement. However, relevant
Court/DRT may be apprised of the settlement arrived at in Lok Adalat and necessary
application be moved to keep the ongoing recovery suit / EP/RC in abeyance till
realization of settlement amount.
l) If bank has initiated action under SARFAESI Act 2002 & settlement has been arrived
at in Lok Adalat then in terms of settlements its full detail will be mentioned & it will be
specifically mentioned that in case of default, Bank reserves its rights to restart the
action from the stage at which the SARFAESI action reached at the time of settlement.
m) In case of failure of payment of settled amount, Consent Decree is to be executed.
Submission of Progress Report on Cases Settled in Lok Adalats.

Branches after taking part in Lok Adalat will submit the information to the respective
Zonal Office as per Annexure-51 and Zonal Office will submit the consolidated report to
Head Office and as well quarterly progress report on Lok Adalat on Annexure - 50.
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CHAPTER 14
MONITORING OF NPA ACCOUNTS
After declaration of any account as NPA, branch will first put its best efforts for its
recovery/up gradation. In case, it is not up graded /closed by the month end, then
branch will submit account wise Status Note on all fresh slippage of NPA to their
respective Zonal Offices as per under noted Annexures.
 All Fresh slippage below Rs.10.00 Lac in tabular form as per Annexure-52
 Account wise fresh slippage of Rs.10 .00 Lac & above as per Annexure-53
 When any account having outstanding balance of Rs. 50.00 lac & above, slips in NPA
category its Review Sheet on prescribed format (Annexure-54) has to be
immediately forward to Zonal Office & Head Office.
Review of NPA accounts
All the Branches & Zones will review the performance of recovery measures taken in all
the NPA accounts on quarterly basis. The following is the delegated authority for review
of NPA accounts and reporting to the next higher authority.
NPA A/c Review authority Report to

Upto Rs.10 lakhs Branch Head Zonal Office
>Rs.10 lakhs to <Rs.5 crore Zonal Head FGMO, under copy to SAMV, HO
Rs.5 crore to <Rs.25 crore FGMO SAMV, HO
Rs.25 crore and above SAMV, HO GM (R&L)
The reporting format will be as per Annexure 54 and Annexure 55 of Recovery

Management Policy. The reporting authorities, upon receipt of review sheets, will
monitor the implementation of action points mentioned and suggest any further
recovery/resolution action to be taken towards a meaningful resolution / recovery in the
account. The reviewing authority will report to the next higher authority within 5 days of
the next quarter.
1. All fresh NPA accounts with outstanding balance of Rs.5.00 crore and above
slipped in NPA category in each month will be reviewed by Branch/ZO/FGMO
within 7 days in next month itself and will be reported to MD & CEO through
SAMV, Head Office within 15th of the next month.
Review by HO Inspectors/Concurrent Auditors: During the course of Branch

Inspection / concurrent audit, the HO Inspector/ Concurrent Auditors should also
review the NPA portfolio of the branch in respect of OTS sanctions by the
branch, up-gradations effected during the period of review and compliance of
norms thereof, and various recovery actions taken by the branch.
2. Top 300 NPA accounts of the Bank (100 accounts under each category of NPA
i.e. Substandard, Doubtful & Loss) having outstanding balance less than Rs. 5.00
crore (as on 31st March) are to be reviewed on monthly basis. Head Office
Recovery department will send the list of such accounts to respective Zonal
Offices in the beginning of the financial year itself. Branch/ Zonal office will
review these accounts on monthly basis & submit the details to Head Office.
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Management Committee of the Board (MCBOD) will review these top 300 NPA
accounts with outstanding balance below Rs. 5.00 crore (100 accounts each of
SST, DF & Loss category). Each such account will be reviewed once in a year. In
each quarter minimum 75 of such accounts will be reviewed by MCBOD. For that
Head Office Recovery Department will place the departmental note accordingly.
3. Big Ticket NPA accounts will be reviewed by the Board of the Bank on monthly
basis. Board of the Bank may decide from time to time the cut off limit of
outstanding balance of NPA account & number of cases to be put up before them
for review. For that Head Office Recovery Department will place the
departmental note accordingly.
4. If any branch recovers more than Rs.1.00 Crore in any NPA account, it has to be
reported to Zone/Head Office on the same day itself along with present status of
the account. Head Office, Recovery Department will apprise to the Board about
such recoveries with status of the relevant account in the next Board meeting.
5. Branches/Zones have to give special attention towards the recovery in written-off

accounts as recovery in such accounts will be directly added back to the bottom
line of the Bank. Branches & Zonal Offices will review the progress of recovery in
such accounts on weekly basis. They will submit the monthly progress report
(account wise) to Head Office. The Board will be apprised about the recovery in
this portfolio by Head Office Recovery Department on Half Yearly basis (June &
Dec).
6. In case of all the loss assets, Branches/Zones have to give more importance for
recovery as Bank has already made 100% provision for the same. We have to
take all recovery measures in these accounts including filing of suits. In these
accounts Zonal office has to review the progress of recovery on monthly basis.
They have to ensure that these accounts should not become time barred.
Wherever necessary permission for waiver of legal action is to be obtained from
the competent authority. In case of all the loss assets with balance of Rs. 10.00
lac & above outstanding for more than two years & where legal action has not
been initiated by the Bank has to be specially reviewed by the Zonal offices on
monthly basis & have to submit their report as per Annexure-28 to Head Office
Recovery Department, who in turn will place the progress report to the Audit
Committee of the Board on Half Yearly basis (Sep & Mar)
7. Review of Sick units (MSME) nursed by the Bank are to be reviewed by the
respective branches and Zonal Offices on monthly basis and submit the report to
Head Office SME Department. Efforts are to be made for their up gradation at the
earliest. Head Office SME Department will put up the report on monthly basis
before the Board of the Bank.
8. Branches / Zonal Offices has to strongly deal with Willful Defaulters & have to
ensure that all available legal actions are taken against them. They have to
submit a monthly action taken report on Willful defaulters to Head Office. Audit
Committee of the Board will be apprised of such action taken report on quarterly
basis by Head Office Recovery Department.
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9. Filing of Suits costs to the Bank. Therefore Branches & Zones have to ensure
that cases pending at various Courts/DRTs are followed up/attended by the
dealing advocate invariably with full preparation so that Court/DRT may pass the
order at the earliest. To monitor the progress on suit filed accounts Branches/
Zones have to submit the following statistical reports to Head Office.
a. Statement of Suit filed in civil courts (other than DRT/DRAT) by the bank
for recovery of bank's dues (As per Annexure-30) at the end of each
quarter to their respective Zonal offices & in turn Zonal Office will
consolidate the position of its Zone on same format (Annexure-30) &
submit it to FGMO and in turn FGMO will submit the consolidated
position to Head Office, Recovery department within 15 th day of
succeeding quarter.
b. Statement of Suit filed /Recovery application in DRT (other than civil
courts) by the bank for recovery of bank's dues (As per Annexure-31) at
the end of each fortnight to their respective Zonal offices & in turn Zonal
Office will consolidate the position of its Zone on same format (Annexure-
31) & submit it to FGMO and in turn FGMO will submit the
consolidated position on same format (Annexure-31) to Head Office,
Recovery department within 7th day of succeeding fortnight.
10. Action under SARFAESI Act 2002 has to be initiated immediately on the next day
when account becomes NPA (wherever applicable). Respective Branch / Zonal
Head has to ensure passing of full details of such NPA accounts to concerned
Authorized Officer of the bank for initiation of such action Branch will submit
Monthly Progress Report (as per Annexure-27) on action under SARFAESI ACT
2002 to Zonal Office who in turn submit the same to FGMO and in turn FGMO
will submit the consolidated position on same format (Annexure-27) to Head
within 5th day of succeeding month. Monitoring /review of actions under
SARFAESI Act, 2002 will be done by Zonal Offices, FGMOs and Head Office on
monthly basis.
11. Number of State Governments (U. P., M.P., Bihar, Jharkhand, West Bengal,
Rajasthan & others) have introduced Act for recovery of Banks’ dues as their
revenue recovery (commonly known as RC). Branches are advised to use this
act for recovery of Banks’ dues & must file promptly requisite application with
concerned authorities. They must follow with the respective State Government
Officials for its execution/ follow up. Wherever our Lead District Managers are
posted they have to specially take care about execution of RC. If need be they
can take the matter with District Authorities & also at DLCC & Block Level
Bankers meetings. Branches/ LDMs/ Zonal Heads have to strictly follow up &
reconciliation of pending RRC/RC. Branch/ Zones have to submit its Quarterly
Progress Report as per Annexure-21.
Establishment of Stressed Asset Management Verticals:
The Government of India has laid down certain parameters under Enhanced Access
and Service Excellence (EASE) framework for compliance by Public Sector Banks for
Capital Infusion under Reforms Agenda. As per the suggestions of the Ministry of
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Finance, Government of India, the Bank has to create a separate Stressed Asset
Management Vertical (SAMV) for focused recovery efforts through a dedicated
specialized and motivated team for enhanced and timely recovery, under a Board
approved policy delineating its scope, roles and responsibilities.
In compliance of the above directives, Bank has formed the following verticals at Head
Office and Field levels:
At Head Office level:

a) SAM-Large: To deal with NPA accounts with outstanding Rs.25 crore and above
and all NCLT cases. For effective monitoring, all group accounts of a concern
even if having outstanding below Rs.25 crore also will be dealt with by the
vertical.
b) SAM: To deal with NPA accounts with outstanding between Rs.1 crore to less
than Rs.25 crore.
The SAM-Large and SAM verticals at Head Office will be responsible for taking all
actions in the accounts towards recovery. Proposals for holding on operations/
restructuring/ extension of repayment period or modification of sanction terms / any
other action proposed to be taken where financial analysis is required, etc., will be dealt
with by the Credit /SME /Retail Credit/PSC Departments, Head Office, as applicable.
At Field level:
a) At Metro centres i.e., New Delhi, Mumbai and Kolkata. SAM- Large branches
have been created as independent entity for effective monitoring/dealing with
NPA accounts with outstanding Rs.25 crore and above.
b) SAM-Large branches: Will be dealing exclusively NPA accounts of Rs.25.00
crore and above (including NCLT accounts and group NPA accounts with
outstanding less than Rs.25 crore).
c) SAM branches: The existing nine ARMBs have been converted into SAM
branches and will be dealing with NPA accounts having outstanding balance of
Rs.1 crore to less than Rs.25 crore (including NCLT accounts and group NPA
accounts with outstanding less than Rs.1 crore).
In addition to the above nine SAM branches, three new SAM branches at
Ludhiana, Ahmedabad and Hyderabad are also set up on account of
concentration of NPAs under the above categories.
SAM branches will also deal with NPA accounts with outstanding balance of
Rs.25 crore and above where transfer of such accounts is not feasible to any
SAM – Large branch and the account belongs to the same centre. Once any
NPA account with above cut-off balance is transferred to SAM-Large/SAM
branch, that NPA account will be dealt with by that respective branch till its
liquidation/ closure. If the NPA account is upgraded and the financial position of
the unit is improved sustainably, then this upgraded account will be transferred to
its parent branch if the customer requests for it.
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At FGMO level, one SAM-Large vertical/cell has been set up for close monitoring of
NPA accounts with outstanding of Rs.25 crore and above.
Similarly at Zonal Office, one SAM vertical/cell has been set up for close monitoring of
NPA accounts with outstanding of Rs.1 crore to below Rs.25 crore.
For its effective functioning, the SOP approved by ORMC will be followed.
Implementation of PARTH (Portal for Asset Resolution Through Hot chase)

With sharp increase in number of high value NPA accounts it became difficult to keep
track on recovery measures taken in such accounts manually. To enable follow up and
guidance on real time basis, a Portal for Assets Resolution Through Hot chase
(PARTH) has been developed and implemented by the Head Office Recovery
Department. Link of which is available in App Store->NPA Related..
Various Recovery measures taken in the account including SARFAESI Action,

developments in Suit filed accounts etc should be updated by the field functionaries on
regular basis. System generated SMS alert is forwarded to concerned Zonal Head &
Executives one day before the due date of various SARFAESI Action, Date of hearing
etc for taking necessary proactive action and also one day after the due date for
updating the developments in the Portal.
Through this Portal Top management/executives in Head Office Recovery Department

review the account wise recovery measures taken & give directions for further action
required to be taken with time line.
Performance Review – Reduction/Recovery of NPA

The Bank has directed maximum efforts towards reduction of NPA to improve recovery
ratio. In order to bring down the level of NPA, aggressive recovery budget is fixed in
consultation with the respective Zonal Offices as also the Branches.
The recovery budget, thus fixed, is then segregated in Quarterly/Monthly/ Daily

Recovery Target and the performance is reviewed by Zonal Office/Head Office from
time to time.
Details of Action Points are to be chalked out & adopted to ensure budgeted NPA
reduction target achieved during the financial year. High incidence NPA Zones are
allocated to the General Managers at Head Office for close follow up.
Our CBS Project Office is providing a “Data Bank on NPA” on daily basis. On its perusal
on daily basis Branches/Zones/Head Office can know accounts likely to slip in NPA,
accounts slipped to NPA category, NPA accounts up graded to standard category, NPA
accounts closed & reduction in outstanding balance in NPA accounts etc. Branches
/Zones are advised to use the data provided by CBS Project Office for close monitoring
of PNPA & NPA accounts.
A Status - cum - Review Note on reduction in NPA as also NPA position of the Bank is
placed before the Board of the Bank in its every meeting. The Note covers reduction in
NPA, steps taken / to be taken, important accounts where recovery has taken place etc.
While perusing the said note, the Board of the Bank directs for adoption of certain
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specific measures to improve the performance as also to ensure budgeted NPA
reduction which is complied with.
Monthly/ Quarterly Review Meetings with the FGMs /Zonal Heads are held at Head
Office as also in the Zonal Offices wherein Recovery Target vis-a –vis performance is
analyzed with Branch Heads and suitable directions are given.
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CHAPTER -15
GUIDELINES ON WILLFUL DEFAULTERS

1. Introduction :
Pursuant to the instructions of the Central Vigilance Commission for collection of
information on willful defaults of Rs.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 willful defaulters. Since then guidelines pertaining to
declaration of borrower as willful defaulter has been revised by Reserve Bank of India
from time to time last being vide their Master Circular No RBI/2015-16/
100DBR.No.CID.BC.22/20.16.003/ 2015-16 dated 01.07.2015.
Purpose:
To put in place a system to disseminate credit information pertaining to willful defaulters
for cautioning banks and financial institutions so as to ensure that further bank finance
is not made available to them.
Application:
To all Scheduled Commercial banks (excluding RRBs) and All India Notified Financial
Institutions
2. Guidelines on Wilful Defaulters

2.1 Definitions of ‘Lender’, ‘Unit’ and ‘wilful default’
2.1.1 Lender: The term ‘lender’ 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, guarantees and letters of credit.
2.1.2 Unit: The term ‘unit’ includes individuals, juristic persons and all other forms of
business enterprises, whether incorporated or not. In case of business enterprises
(other than companies), banks / FIs may also report (in the Director column of Annex 1)
the names of those persons who are in charge and responsible for the management of
the affairs of the business enterprise.
2.1.3 Wilful Default: 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 utilized the finance from the lender for the specific purposes for which
finance was availed of but has diverted the funds for other purposes.
(c) The unit has defaulted in meeting its payment / repayment obligations to the lender
and has siphoned off the funds so that the funds have not been utilized for the specific
purpose for which finance was availed of, nor are the funds available with the unit in the
form of other assets.
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(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 for the purpose of securing a term loan without the knowledge of the bank /
lender.
NOTE :
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 categorized as wilful must be
intentional, deliberate and calculated.
2.2 Diversion and siphoning of funds

2.2.1 Diversion of Funds: The term ‘diversion of funds’ referred to at paragraph
2.1.3(b) above, should be construed to include any one of the undernoted occurrences:
(a) utilization 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;
(c) transferring borrowed 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-à-vis the amounts disbursed / drawn and the
difference not being accounted for.
2.2.2 Siphoning of Funds: The term ‘siphoning of funds’, referred to at paragraph

2.1.3(c) above, should be construed to occur if any funds borrowed from banks / FIs
are utilized for purposes unrelated 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 judgment of the lenders
based on objective facts and circumstances of the case.
2.3 Cut-off Limits

While the penal measures indicated at paragraph 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 Rs.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 Rs.25 lakh or more, would attract the
penal measures stipulated at paragraph 2.5 below. This limit of Rs.25 lakh may also be
applied for the purpose of taking cognizance 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
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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. For ensuring
end-use of funds, branches should refer various circulars/ circular letters on
credit policy, credit monitoring.
The following are some of the illustrative measures that could be taken by the
branches 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;
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.
The list of measures is only illustrative and by no means exhaustive.
2.5 Penal Measures

The following measures should be initiated by the banks and FIs against the wilful
defaulters identified as per the definition indicated at paragraph 2.1.3 above:
a. No additional facilities should be granted by any bank / FI to the listed wilful
defaulters. In addition, such companies (including their entrepreneurs / promoters)
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, Financial Institutions,
NBFCs, for floating new ventures for a period of 5 years from the date of removal of
their name from the list of wilful defaulters as published/disseminated by RBI/CICs.
b. The legal process, wherever warranted, against the borrowers / guarantors and
foreclosure for 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 to which the banks / FIs have
given funded / non-funded credit facility, should be incorporated by the banks / FIs to
the effect that the borrowing company should not induct on its board a person whose
name appears in the list of Wilful Defaulters and that in case, such a person is found to
be on its board, it would take expeditious and effective steps for removal of the person
from its board.
Note :
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.
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e. Publication of Photograph- In view of the sensitivity involved and need to prevent
the publishing of photographs of defaulting borrower/ guarantor in an indiscriminate
manner, it has been decided as under –
i)Bank can consider publication of photographs of only those borrowers, including
proprietors/ partners/ directors/ guarantors of the borrower firms/ companies, who
have been declared as willful defaulters. This shall not apply to non whole time
directors who are exempted from being considered as willful defaulter unless the
special conditions are satisfied.
ii)Such decision to publish photographs in Newspapers of Wilful Defaulter shall be
taken by Executives not lower than the Field General Manager.
2.6 Guarantees furnished by individuals, group companies & non-group

companies :
While dealing with wilful default of a single borrowing company in a Group, the banks /
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.
In connection with the guarantors, in terms of Section 128 of the Indian Contract Act,
1872, the liability of the surety is co-extensive with that of the principal debtor unless it is
otherwise provided by the contract. Therefore, when a default is made in making
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. This treatment of non-group corporate and individual
guarantors was made applicable with effect from September 9, 2014 and not to cases
where guarantees were taken prior to this date. Banks/FIs may ensure that this position
is made known to all 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.
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.
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In addition to the above, 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 borrower’s auditors. However, this cannot substitute a bank’s basic minimum own
diligence in the matter.
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 the offices / branches .
Reporting of Action Taken Report on Willful Defaulters to Willful Defaulters

Review Committee of the Board:
Head Office Recovery Department will place a Action Taken Report ( ATR ) on willful
defaults on quarterly basis before the Willful Defaulters Review Committee of the Board.
2.9 Reporting to Credit Information Companies
(a) RBI has advised to furnish the list of willful defaulters of Rs.25.00 Lac & above for
both suit filed accounts and non-suit filed accounts of Rs. 25 lakhs and above on a
monthly or a more frequent basis to all the four Credit Information Companies (CIC),
namely
i. Experian Credit Information Company of India Private Limited

ii.Equifax Credit Information Services Private Limited
iii.CRIF High Mark Credit Information Services Private Limited, and
iv.Credit Information Bureau (India) Limited (CIBIL)
This would enable such information to be available to the banks/FIs on a near real time
basis.
Note;
It is clarified that banks need not report cases where
(i) outstanding amount falls below Rs.25 lakh and
(ii) in respect of cases where banks have agreed for a compromise settlement and
the borrower has fully paid the compromised amount.
Branches will provide the latest status of accounts classified as willful defaulters as at
the end of every month to their respective Zonal Offices who in turn after proper
checking will submit the same to Head Office Recovery Department in the prescribed
format. (Annexure-77)
3. Mechanism for identification of Wilful Defaulters

Bank has adopted under noted transparent mechanism /procedure for identifying willful
defaulters:
3.1 Willful Defaulter Identification Committee (WDIC)

3.1.1 With a view to imparting more objectivity in identifying cases of willful default,
decision to classify the borrower as willful defaulter has been entrusted to a Committee
headed by an Executive Director.
Members of the Committee constituted for identification of willful defaulter at Head
Office are as under-
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1.Executive Director(Chairman of the committee)
2.General Manager (Inspection)
3.General Manager (Credit Monitoring)
4.General Manager (FA)
5.General Manager (PSC)
6.General Manager (Credit)
The Executive Director with two General Managers out of above five will constitute the
committee. The General Manager (Recovery) will act as the Convener of the above
committee.
i) 3.1.3 Show-Cause notice :The evidence of wilful default on the part of the borrowing
company and its promoter/whole-time director at the relevant time should be examined
by the above Committee. If the above Committee concludes that an event of willful
default has occurred, it shall issue a Show Cause Notice to the concerned borrower, the
promoter/whole-time director and guarantors and call for their submissions.
3.1.4 Personal hearing: An opportunity should be given to the borrower, the
promoter/whole-time director and the guarantors for a personal hearing if the
Committee feels such an opportunity is necessary.
3.1.5 Order: After considering their submissions / hearing , if it is confirmed that
an willful default has occurred then the Committee will issue an order recording
the fact of willful default and the reasons for the same.
3.2 Willful Defaulter Review Committee (WDRC) of the Board
The above order of the Willful Defaulter Identification Committee should be reviewed by
another Committee headed by the Managing Director & Chief Executive Officer.
The Members of the Review Committee are as under-
A. Managing Director & Chief Executive Officer (Head of the Committee)
B. Two Independent Directors of the Bank(To be nominated by the Board from time
to time)
3.3 Status of Non -Promoter/ non-whole time director as wilful defaulter:

As regard a non-promoter/non-whole time director, it should be kept in mind that
Section 2(60) of the Companies Act, 2013 defines an officer who is in default to mean
only the following categories of directors:
(i) Whole-time director
(ii) where there is no key managerial personnel, such director or directors as specified
by the Board in this behalf and who has or have given his or their consent in writing to
the Board to such specification, or all the directors, if no director is so specified;
(iii) every director, in respect of a contravention of any of the provisions of this Act,
who is aware of such contravention by virtue of the receipt by him of any proceedings
of the Board or participation in such proceedings and who has not objected to the
same, or where such contravention had taken place with his consent or connivance.
Therefore, except in very rare cases, a non-whole time director should not be
considered as a wilful defaulter unless it is conclusively established that
I. he was aware of the fact of wilful default by the borrower by virtue of any
proceedings recorded in the Minutes of the Board or a Committee of the Board and
has not recorded his objection to the same in the Minutes, or,
II. the wilful default had taken place with his consent or connivance.
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The above exception will however not apply to a promoter director even if not a whole
time director.
(iv) As a one-time measure, while reporting details of willful defaulters to the Credit
Information Companies may thus remove the names of non-whole time directors
(nominee directors/ independent directors) in respect of whom they already do not have
information about their complicity in default/ willful default of the borrowing company.
However, the names of the promoter directors, even if not whole time directors, on the
board of the willful defaulting companies cannot be removed from the existing list of
willful defaulters.
4. Criminal Action against Wilful Defaulters

4.1 JPC Recommendations
Reserve Bank of India 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 End-Use of Funds
In reference to Para 2.4, it is advised that Branches should closely monitor the end-
use of funds and obtain certificates from borrowers certifying that the funds are utilized
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
Section / provisions/Rules under different Acts prescribing offences & penalties :
A. Under Companies Act,2013
Section 447 of the Companies Act 2013 (Punishment for Fraud)
Without prejudice to any liability including repayment of any debt under this Act or any
other law for the time being in force, any person who is found to be guilty of
fraud 1[involving an amount of at least ten lakh rupees or one per cent. of the turnover
of the company, whichever is lower] shall be punishable with imprisonment for a term
which shall not be less than six months but which may extend to ten years and shall
also be liable to fine which shall not be less than the amount involved in the fraud, but
which may extend to three times the amount involved in the fraud:
Provided that where the fraud in question involves public interest, the term of
imprisonment shall not be less than three years.
1[Provided further that where the fraud involves an amount less than ten lakh rupees or
one per cent. of the turnover of the company, whichever is lower, and does not involve
public interest, any person guilty of such fraud shall be punishable with imprisonment for
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a term which may extend to five years or with fine which may extend to twenty lakh
rupees or with both.]
Explanation.—For the purposes of this section—
(i) “fraud” in relation to affairs of a company or anybody corporate, includes any act,
omission, concealment of any fact or abuse of position committed by any person or any
other person with the connivance in any manner, with intent to deceive, to gain undue
advantage from, or to injure the interests of, the company or its shareholders or its
creditors or any other person, whether or not there is any wrongful gain or wrongful loss;
(ii) “wrongful gain” means the gain by unlawful means of property to which the person
gaining is not legally entitled;
(iii) “wrongful loss” means the loss by unlawful means of property to which the person
losing is legally entitled.
Section 448 of Companies Act 2013

(Punishment for False Statement)
Save as otherwise provided in this Act, if in any return, report, certificate, financial
statement , prospectus , statement or other document required by, or for, the purposes
of any of the provisions of this Act or the rules made there under, any person makes a
statement,— (a) which is false in any material particulars, knowing it to be false; or
(b) which omits any material fact, knowing it to be material, he shall be liable under
section 447.
A. Under Indian Penal Code :

Section 403 IPC
(Dishonest Misappropriation of Property)
Whoever dishonestly misappropriates or converts to his own use any movable property,
shall be punished with imprisonment of either description for a term which may extend
to two years, or with fine, or with both.
Section 405 IPC

(Criminal Breach of Trust)
Whoever, being in any manner entrusted with property, or with any dominion over
property, dishonestly misappropriates or converts to his own use that property, or
dishonestly uses or disposes of that property in violation of any direction of law
prescribing the mode in which such trust is to be discharged, or of any legal contract,
express or implied, which he has made touching the discharge of such trust, or wilfully
suffers any other person so to do, commits “criminal breach of trust”.
Section 415 IPC

(Cheating)
Whoever, by deceiving any person, fraudulently or dishonestly induces the person so
deceived to deliver any property to any person, or to consent that any person shall
retain any property, or intentionally induces the person so deceived to do or omit to do
anything which he would not do or omit if he were not so deceived, and which act or
omission causes or is likely to cause damage or harm to that person in body, mind,
reputation or property, is said to “cheat”. Explanation.—A dishonest concealment of
facts is a deception within the meaning of this section.
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Section 418 IPC
(Cheating with knowledge that wrongful loss may ensue to person whose interest
offender is bound to protect)
Whoever cheats with the knowledge that he is likely thereby to cause wrongful loss to a
person whose interest in the transaction to which the cheating relates, he was bound,
either by law, or by a legal contract, to protect, shall be punished with imprisonment of
either description for a term which may extend to three years, or with fine, or with both.
Section 420 IPC

(Cheating and dishonestly inducing delivery of property)
Whoever cheats and thereby dishonestly induces the person deceived to deliver any
property to any person, or to make, alter or destroy the whole or any part of a valuable
security, or anything which is signed or sealed, and which is capable of being converted
into a valuable security, shall be punished with imprisonment of either description for a
term which may extend to seven years, and shall also be liable to fine.
Section 467 IPC

(Forgery of valuable security, will, etc.)
Whoever forges a document which purports to be a valuable security or a will, or an
authority to adopt a son, or which purports to give authority to any person to make or
transfer any valuable security, or to receive the principal, interest or dividends thereon,
or to receive or deliver any money, movable property, or valuable security, or any
document purporting to be an acquittance or receipt acknowledging the payment of
money, or an acquittance or receipt for the delivery of any movable property or valuable
security, shall be punished with 1[imprisonment for life], or with imprisonment of either
description for a term which may extend to ten years, and shall also be liable to fine.
Section 468 IPC

(Punishment )
Whoever commits forgery, intending that the document or electronic record is forged &
shall be used for the purpose of cheating, shall be punished with imprisonment of either
description for a term which may extend to seven years, and shall also be liable to fine.
Section 471 IPC
(Using as genuine a forged [document or electronic record]
Whoever fraudulently or dishonestly uses as genuine any [document or electronic
record] which he knows or has reason to believe to be a forged [document or electronic
record], shall be punished in the same manner as if he had forged such 1[document or
electronic record]
Field Functionaries are required 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 RBI instructions and also 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.
Steps to be taken by Field functionaries for initiation of Criminal Action against
the Wilful Defaulters.
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4.3.1 Steps for approval for initiation of Criminal Action
i. Branch Head / Zonal Head after receipt of the approval of declaration of the borrowal
account as Willful Defaulter from the Competent Authority & issuance of required
intimation letter/ notice by him to the concerned borrower , will analyze the act of the
borrower with a view for initiation of criminal action under above mentioned provisions of
IPC.
ii. Branch Head / Zonal Head has to examine whether the offence committed by the
borrower is cognizable or non-cognizable.
iii. It is essential that offence of breach of trust or cheating or dishonest misappropriation
of property construed to have been committed in the case should be clearly defined /laid
down in the complaint.
iv. Criminal action can be initiated against willful defaulters or act of wrong certification
by borrowers, wherever considered necessary, based on the facts and circumstances of
each case.
v. In case Branch Head intends to initiate Criminal Action under above provisions of IPC
then he will prepare draft of the FIR with the help of empanelled advocate.
vi. Branch Head will submit the complete proposal with full details & draft of FIR to
their respective Zonal Manager/FGM as per the reporting authority for seeking approval
in the matter.
vii. Zonal Head/FGM will once again scrutinize & analyze the proposal for initiation of
criminal action.
viii. In case Zonal Head/FGM agrees with the views of the Branch Head then he will get
the draft of the FIR vetted by Manager (Law) or the Law retainer attached to their office.
ix. Zonal Head /FGM will permit the Branch Head for lodgment of FIR with concerned
Police Authorities (draft finally approved by ZO- Manager (Law) or the Law retainer
attached to Zonal office)
ii. Filing of FIR by Branch Head

i. Branch Head has to lodge the information (FIR-as per draft approved by Zonal Office/
FGMO) relating to the commission of an offence (cognizable or non-cognizable, as the
case may be) with the officer in charge of the police station.
ii. In case of refusal on the part of the officer in charge of the police station to record
such information then Branch Head has to lodge the FIR with the Superintendent of
Police in consultation & assistance of Bank empanelled Local lawyer.
iii. In case Superintendent of Police also refuses to lodge the FIR then Branch Head has
to lodge the case/complaint with the Competent Court of CJM/Judicial Magistrate.
iv. Whenever a Public Prosecutor is defending Bank, it is in practice to engage an
Advocate to assist the Public Prosecutor for follow up and pursuing the case
considering that the Public Prosecutor need to understand the modalities of the
offenses committed in respect of the Banking Transactions.
Note:
All the above actions as required will be taken by the Branch Head in consultation
& assistance of Bank empanelled Local lawyer after getting the approval from
their concerned Zonal Office/ FGMO. Branch Head has to obtain a copy of FIR &
kept on record).
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4.3.3 Follow up of FIR lodged/ Criminal Case filled by the Branch
i. With a view to get the end results in the action initiated by the Bank against the Willful
Defaulter. it is advised that Brach Head must follow the progress on FIR lodged with
the Police Authorities/Complaint case filed with CJM/Judicial Magistrate
ii. It is in practice to engage an Advocate to assist the Public Prosecutor for follow up
and pursuing the case considering that the Public Prosecutor need to understand the
modalities of the offenses committed in respect of the Banking Transactions
iii. Zonal Office must monitor the progress made by the Branch & dealing advocate in
above criminal case initiated by the Bank.
5. Reporting
5.1 Need for Ensuring Accuracy
Bank discloses information on non-suit filed and suit filed accounts to RBI/CIBIL
respectively as reported by the branches/ Zones and responsibility for reporting correct
information and also accuracy of facts and figures rests with the concerned Zonal
Office/ FGMO. Therefore, Zonal Office/FGMO should take immediate steps to update
their records on monthly basis on Annexure – 77 and ensure that the names of directors
are correctly reported. Branches may also ensure the facts about directors, wherever
possible, by cross-checking with Registrar of Companies
5.2 Position regarding Guarantors

Branches may take due care to follow the provisions set out above in identifying and
reporting instances of wilful default in respect of guarantors also. While reporting
such names to RBI, branches may include “Guar” in brackets i.e. (Guar) against the
name of the guarantor and report the same in the Director column.
5.3 Government Undertakings

In the case of Government undertakings, it should be ensured that the names of
directors are not reported. Instead, a legend ‘Government of -------- undertaking’ should
be added.
5.4 Inclusion of Director Identification Number (DIN)

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.
Note:
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.
6. Operational Guidelines for Identification & Declaration of Wilful Defaulter

The evidence of willful default on the part of the borrowing company and its
promoter/whole-time director at the relevant time should be examined by the branch.
After getting the evidence of willful default on the basis of prescribed criteria the
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branches will submit the proposals on the prescribed format (Annexure 58) to their
respective Zonal Office who in turn submit to FGMO.
Zonal offices/FGMOs have to ensure that proposal for declaring the identified accounts
as Willful defaulter is submitted to Head Office Recovery Department on the prescribed
format duly completed in all respects on Annexure-58 and their summary position on
Annexure-59 for easy reference and quick disposal of the proposal.
Standard Operating Procedures (SOP) for Declaration of Wilful Defaulters:
Bank’s guidelines and steps to be taken by Branch/Zone/FGMO at different level for
declaration of an account /borrower (NPA account) as willful defaulter are furnished
below:
Sl Particulars Guidelines/steps to be taken

No
1 Cut off limit Aggregate Rs. 25.00 Lac & above ledger balance outstanding in
NPA account.
2 Criteria of willful default A. The unit has defaulted in meeting its payment/repayment
obligations to the lender even when it has the capacity to honor
the said obligations.
B. The unit has defaulted in meeting its payment/repayment
obligations to the lender and has not utilized the finance from
the lender for the specific purposes for which finance was
availed of but was 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 utilized for the specific purpose for
which finance was availed of nor are the funds available with
the unit in the form of other assets.
D. The unit has 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
for it for the purpose of securing a term loan without the
knowledge of the bank/lender.
(PLEASE NOTE THAT FOR DECLARING AS WILFUL
DEFAULTER, WE HAVE TO SELECT ANY ONE/ MORE OF
APPROPRIATE CRITERIA OUT OF ABOVE MENTIONED FOUR
CRITERIA ONLY)
3 Precise reason for Branch has to properly analyze the conduct of the account & has to
identification as willful identify the specific reason /Criteria (out of above mentioned only)
default for identification of an account as willful defaulter. Please note
reasons for identification have to be supported by un-disputed
documental evidence & have to be enclosed with the proposal.
4 Responsibilities of Field Once the account became NPA , it is the responsibility of the
functionaries to ensure following field functionaries to ensure examination of the willful
examination of willful default angle within 30 days of declaration of NPA as noted below :
Defaulter a) Branch Head up to Sc-III : Upto O/s Rs.75.00 lacs.
b) Branch Head Sc-IV : Upto O/s Rs.2.00 crores.
c) Branch Head Sc-V & above : Upto O/s Rs.10.00 crores.
d) Directly reporting Br to FGMO. : Upto O/s Rs.50.00 crores.
e) Zonal Head: Above the Authority of the branches under their
control and up to Rs.50.00 cr.
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f) FGM : NPA with O/s balance of Rs.50.00 cr. & above.
The above authorities have to ensure the examination of Wilful
default angle in each NPA accounts within 30 days. If they do not
perceive any willful default in the NPA account, they should furnish
a certificate to their next higher authority within 45 days of account
being declared as NPA. However, if they perceive that there is
willful default, then they should submit the proposal for declaring
willful defaulter with the cogent reasons and evidences to the next
higher authority within 45 days of the account being declared as
NPA.
5 Submission of proposal Branch has to submit the proposal for declaration of an
for declaration of an account/borrower as willful defaulter on a prescribed format (Blank
account/borrower as format enclosed as Annexure-58).
willful defaulter by the In proposal form against point no-8, the reason for identification
branch to the Zonal /classification as willful defaulters should be clearly spelt out
Office/FGMO. for which the borrower has been identified as willful defaulter vis-à-
vis RBI guidelines.
Issue of Demand Notice for repayment of Bank’s Dues :

a) Borrowers/ Promoters/ Directors :
Once the account becomes NPA and after finding the cogent
reasons for willful default , the branch has to issue a notice to the
borrowers/ promoters/ directors demanding repayment of bank’s
dues and also calling for explanation on the reasons for willful
default ( viz. disposal of assets , conducting unauthorized
transaction with other banks, not depositing sale proceeds into the
designated account, mis-utilisation/ siphoning of funds etc. ) within
15 days from the receipt of the notice, Please note , as & when ,
even before the account declared as NPA, the above serious
irregularities committed by the borrowers comes to the notice of
the branch manager during monitoring/ review/ unit visit , then
immediately a notice should be served calling for explanation of the
borrower . In case any satisfactory reply is not received, the branch
should proceed for declaring willful defaulter immediately after
account slips into NPA.
a) Guarantors ( both Individual / corporate ) :

Once the account becomes NPA , branch has to issue a demand
notice to the guarantors demanding repayment of loan amount
within 15 days of receipt of the notice. In case repayment of the
loan amount is not received , the branch has to proceed further in
declaring willful defaulter provided the guarantor has the capacity
to repay the loan.
6 Processing of above The Zonal Office/FGMO on receipt of above proposals (Annexure-

proposal at Zonal 58)from branches/Zones respectively, will properly scrutinize and
Office/FGMO verify the contents and evidence & then forward it with their detailed
comments/views/recommendations to Head Office Recovery
Department along with summary of all the proposals sent in one lot
on the prescribed format (enclosed as Annexure-59).
7 Processing of above i. Head Office Recovery Department will scrutinize the proposal &
proposal at Head Office place the proposal before the Willful Defaulter Identification
Level for placing before Committee.
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the Willful Defaulter ii. The above committee will examine the evidence of willful default
Identification Committee on the part of borrowing company.
(WDIC)& Issuance of iii. If the said committee concludes that an event of wilful default
Show Cause notice for has occurred, it shall issue a Show Cause Notice (as per
declaration of an Annexure-60 with appropriate changes to be made in the
account/borrower as willful format as per requirement) to the concerned borrower and the
defaulter promoter/whole-time director/ guarantor and call for their
submissions and/ or for personal hearing, if required, within 15
days of receipt of Show Cause notice. The committee may
direct DGM/ AGM of Recovery Department , HO to convey the
show-cause notice to all concerned.
8 Service of Show Cause The above Show Cause notice will be sent to the concerned branch
Notice issued by the for onward servicing to the concerned borrower and the
above Committee promoter/whole time Directors and guarantor. Branch has to first
try to serve this notice personally to the concerned borrowers and
also to obtain its proper acknowledgment on its second copy. In
case it is not feasible to serve the notice personally, then to send it
through Registered A.D post only. Branch must properly preserve
the duly acknowledged notice/AD card. If proper service of Show
cause notice could not completed either through registered notice
or by hand delivery or otherwise, the branch shall publish a notice in
local newspapers including one in a vernacular language intimating
the borrower/ guarantor/ directors/ partners/ proprietor as applicable
for collecting the show cause notice from the concerned branch.
9 Handling of 1. In above notice 15 days time is given to the borrowers/ guarantors
representation, if any, for submission of their representation against such decision, and
received from the also for personal hearing. In case Bank (Branch/Zonal
borrower/director/guaranto Office/FGMO/Head Office) receives any written representation from
r in response to above the borrower then same is to be sent to the concerned branch.
notice. Branch Head will analyze the explanation / submission/
representation made by the borrower/guarantor against each of the
allegations/ charges of the bank in tabular form and will submit the
same to their Zonal Office/FGMO, who in turn will re-examine and
send it to Head Office Recovery Department with their due
recommendations for placement before the above referred Willful
Defaulter Identification Committee at Head Office Format of table to
be used for analysis of reply is enclosed as Annexure-61.
2. The said committee will re-examine their submission and if
any borrower/ director/ guarantor has requested for personal
hearing, an opportunity shall be given to him for a personal hearing
if the Committee feels such an opportunity is necessary. After
considering their submission /personal hearing, if the charges for
willful default are established, the committee will issue an order
recording the fact of willful default and the reasons for the same.
3. In case Bank does not receive any explanation/ submission/
representation from the borrower/director/guarantor within
stipulated 15 days notice period, the committee shall issue an order
recording the fact of willful default and the reasons for the same.
10 Review of order declaring 1. The Order of the Identification Committee should be placed
the account before the Review Committee for review and the Order shall
/borrower/director/guarant become final only after it is confirmed by the said Review
or as willful defaulter Committee.
2. In case above referred committee finally decides to declare the
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borrower/guarantor and the promoter/whole-time director as willful
defaulter then the order for declaring willful defaulter will be
communicated to the borrowers / guarantors through concerned
Branch/ZO/FGMO (Annexure-62).
11 Standard Operating Once the borrower / guarantor is declared as willful defaulter by the
procedure for initiating Competent Authorities, the field functionaries should initiate the
Penal & Recovery action following action immediately against them :
against willful Defaulter
i) Submission of information to CIBIL ;
After completing above exercise branch will submit the required
information about declaration as willful defaulter to CBS Project
Office on Credit Information Bureau’s required form (enclosed as
Annexure-63) for updation of information on their server/site.
Zonal Office has to supervise it & will ensure that all formalities are
completed at the earliest.
Note:
This Information is to be sent to Credit Information Companies
through e-mail (duly signed scanned copy) through our CBS
Project Office Mumbai under copy to Head Office Recovery
Department.
ii) Filing FIR for Criminal Action :
Field functionaries should examine appropriate provisions of IPC in
consultation with the empanelled advocate and file complaint for
registry of FIR with the concerned Police Authority after getting duly
permission of the Competent Authority. Similarly, action can be
initiated under appropriate provisions of companies act.
iv) Publication of Photograph :
Photograph to be published in newspaper, after taking due
permission from FGMO, and one must be in vernacular language.
Photograph also to be displayed in the notice board of concerned
branch as also concerned Zonal Officers to shame the reputation
of the borrower.
v) SARFAESI Action :
SARFAESI Action should be initiated , if not already done, for sale /
auction of charged securities .
vi) Filing Suit :
Suit to be filed in the concerned DRT for recovery of bank’s dues, if
the same is not already done.
vii)Referring to NCLT :
The account to be referred to NCLT, as appropriate , for early
resolution of the account.
viii) Initiation of penal action :
Responsibility lies with the field functionaries to initiate appropriate
penal action against willful defaulters.
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CHAPTER 16
GUIDELINES ON SALE OF FINANCIAL ASSETS TO ARCS/ASCS
(Based on Latest RBI Master Circular No.DBOD.No.BP.BC.9/21.04.048/2014-15 dated
July 1, 2014 & subsequent circular no. DBR.No.BP.BC.9/21.04.048/2016-17 dated
Sept 1, 2016)
Bank can Sell/assign their Financial Assets for reconstruction/securitization under the
Securitization and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002. The guidelines to be followed by banks while selling/assigning their
financial assets to ASC/ARC/Banks under the Act and investing in bonds/ debentures/
security receipts offered by the ASC/ARC/Bank has been prescribed by Reserve Bank
of India. The Board of the bank has approved the said Policy Guidelines and the
following operational aspects have been enumerated for effective implementation of the
Policy as also for sale of Financial Assets.
1. Assets Eligible For Sale to ARC/ASC
a) Non Performing Loan Assets including non-performing Bond/Debentures whether they
exist in live ledger, recalled or fully written off/NRAC advances etc will be eligible for
sale under the scheme. Any of the following eligibility criteria for considering sale of
any loan asset to ASC/ARC will be reckoned:
i) The borrowers are chronic defaulters (Doubtful) and the Bank’s remedial measures
either through Restructuring/Rescheduling/and other procedures have been of no
avail.
ii) Accounts in which wilful default has been declared.
iii) The securities cannot be readily enforced and are litigated. There are also
oppositions from the factory workers for selling the unit.
iv) The cases are protracted in legal proceedings.
v) The borrower/guarantor poses stiff opposition in selling the assets.
vi) The Bank is incurring cost since long for engaging security guards and by sale of
the assets to ASC/ARC, the expenses can be avoided.
vii) Cases where revival of the unit either by extending of fresh finance or change in
Management is not possible.
viii)Cases where the infrastructural facilities are abundant and the intrinsic worth of the
factory/unit is more than the cognizable value of securities available but could not
be run due to unscrupulous/doubtful integrity of the Promoter Directors.
ix) The consortium cases where 50% of the lenders (by value) have opted for sale of
the assets to ASC/ARC without taking any other action. The accounts where there
is threat of possible disorder/loss of securities in the near future will be reckoned for
sale to ASC/ARC.
x) In case of group accounts/ assets having common securities/ guarantees, if the
main account having major exposure is eligible for sale, then other accounts of the
group/related parties/having common securities/guarantees can be considered for
sale to ARC in a basket.
xi) It may be preferable to test SARFAESI action including one auction before sale of
assets to ARCs. In consortium/multiple banking accounts, conducting auction of
charged securities depends on other consortium lenders. In such accounts where
Bank is not leader of consortium, Bank should prefer conducting auction of
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exclusive mortgaged properties before sale of accounts to ARCs. However, GMSC
can allow sale of any asset to ARCs without conducting e-auction on case to case
basis, where conducting e-auction is not feasible such as securities having pari-
passu charge/second charge, delay in obtaining physical possession for more than
six months, stay on auction by DRT/Court, problem of demarcation/identification,
tenancy issue, properties at disadvantageous location etc.
xii) In case of NCLT referred accounts where resolution/liquidation is delayed/ going to
be delayed due to various reasons, these accounts can be selected for sale to ARC
without even taking any other action.
xiii) Small NPA accounts having outstanding below Rs.1 crore can be selected for sale
to ARC on the basis of portfolio/ basket/ sector/ geography where accounts are
classified as Doubtful/ Loss category and reasonable efforts for recovery under
SARFAESI Act/ suit filing/ OTS have failed to yield any results.
xiv) Any account that has been declared fraud is not eligible for sale to ARCs/ASCs.
xv) In case of loan accounts where the bank has invested in equity/ debentures/ other
type of investment as a part of restructuring/ resolution mechanism, such
investment portfolio will also be assigned/ sold to the ARC/Buyer.
Bank may sell investment held in security receipts issued by ARCs in accounts
sold/assigned on Cash cum SR basis. Security receipts will be identified for sale to the
recognized Investment Company/ Foreign Fund/ ARC provided the fulfilment of criteria
viz. (i) age of investment more than 3 years, (ii) redemption received is negligible (iii)
legal hurdles causing delay in resolution of underlying assets and (iv) Bank has fully
provided for i.e., no additional provision required.
b) Standard Assets where:
i) the asset is under consortium / multiple Banking arrangements.
ii) at least 75% by value of the asset is classified as Non-Performing asset in the
books of other Banks / FIs and
iii) at least 75% (by value) of the Banks/FIs who are under consortium/multiple
Banking arrangements agree to sell the assets to ASC/ARC.
c) Special Mention Account (SMA)
The assets under Special Mention Account (SMA) category are eligible for sale to
ARC/ASC. However if restructuring has been decided as the corrective action plan
(CAP) then the bank cannot sell such asset to ASCs/ARCs, without arranging its
share of additional finance to be provided by a new or existing creditor.
2. A) Identification of Assets/Accounts for sale to ARC:
As per RBI guidelines, preferably at the beginning of the year, all the accounts eligible
for sale are to be identified by Branch/ZO/FGMO/Recovery Department, Head Office
and the list of such accounts has to be prepared and placed before GMSC for vetting.
After the vetting, such list of accounts/ assets will be placed before Board for approval
for showcasing and selling these accounts during that financial year. However,
depending upon the need/ urgency, few accounts identified for sale would be placed
before the Board for approval at any time.
B) Valuation procedure to be followed:

a) The Bank will make its own assessment of market value of the financial assets.
Primarily the Branch Managers/Zonal Offices will check the stock/Book debt position
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and the market valuation thereof and other securities held with the Bank. In case of
closed unit, valuation of assets is to be entrusted to a valuer to be selected from the
panel of valuers already approved by the Bank. In case of running unit having ledger
balance Rs.10 crore and above, to sell as a going concern for which services of IBBI
registered valuer has to be obtained.
b) Two independent Enterprise valuation reports must be obtained in case of exposures
(fund based + non-fund based) of Rs. 50 crore & above for a running unit. Valuation
of immovable securities should not be more than one year and it has to be done by
two empanelled valuers for properties having value above Rs.50 lakh. In case recent
valuation is not possible on account of any reason, the valuation done by any
Consortium member/ the valuation report not more than three years old available
with the bank would be re-worked by the panel valuer with eye estimation/ market
reports/ sources from estate office/ revenue authority etc.
c) The value of the charged securities should be the indicative value/price which the
securities would fetch in the ordinary course of business/transaction, ongoing
concern basis. Distress sale value shall not be taken into consideration for the
purpose of evaluation of financial asset
d) In case of Consortium Advances:
 Primary Security: Pro-rata share of the value of securities would be taken up.
 Collateral Security (1st pari- passu): Pro-rata share of the value of securities
would be taken.
 Collateral Security (2nd pari-passu) : Pro-rata share of the available value of
securities in excess of the aggregate outstanding of 1 st charge holder would be
taken.
e) When the consortium Lead Bank has undertaken the valuation of the financial assets,
independent valuation need not be carried out by the Bank. In cases where transfer
of financial assets to ASC/ARC by other lenders has already taken place, our Bank
may use the same value or equivalent haircut as a Benchmark for sale to ASC/ARC.
f) In cases where ASC/ARC has taken up valuation of assets independently after
valuation job is completed by the approved valuer of the Bank and if there is some
divergence in the two values, further negotiation will be made based on the valuation
done by the Bank (HO) and a logical conclusion will be arrived at after mutual
consent.
g) While assessing the value of the mortgaged property or at the time of fixing the
reserve price, a logical assessment has to be made keeping in view the actual
realisability of securities under the given scenario. On the contrary, the sacrifice to be
made by the bank has to be assessed after critical analysis of the asset, its
realisability in the longer perspective etc.
h) The security value of all the loan accounts will be certified by respective Branch
Head, ZLCC and FGMLCC.
i) Value of security receipts will be assessed on the basis of earlier Cash cum SR
structure, upside recovery structure, age of security receipt, percentage of
redemption received by the Bank and value of underlying securities, its external
rating undertaken by the ARC.
As per RBI guidelines, upon sale of asset to ARCs/ASCs, the financial asset should be
taken off the books of the bank and after sale there should not be any known liability
devolving on the bank. However, contingent liabilities like letter of credit, guarantee
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issue, DPG etc have not been addressed in the guidelines. As the
ARCs/ASCs/FIs/NBFCs are not authorized to purchase any contingent liabilities
standing live (not devolved/invoked) as on the date of sale and RBI expects knocking off
of the asset from bank’s books upon sale to ARCs/ASCs, the bank shall provide 100%
for balance of such contingent liabilities upon sale of the asset in order to take care of
any eventualities in future from the sale proceeds.
Besides the amount outstanding, Bank shall notify details of any un-devolved LCs/BGs
yet to be invoked/instalments of DPGs, which are not yet due, in respect of the assets
being offered for sale by the Bank. The Bank shall retain pari-passu charge on the
securities relating to un-crystallized non-funded facilities.
In case of crystallization of non-funded facilities after the sale, that portion (converted
into funded after deducting margin, if any) will also be sold by the bank to the same
ARC/Buyer who will give acceptance for the same through offer letter/supplementary
agreement/assignment agreement. However, the un-devolved LC and un-invoked BG
limits backed by 100% margin by way of FDs will not be offered for sale to
ARCs/NBFCs/FIs etc.
3. FIXATION OF RESERVE PRICE OF SECURITY RECEIPTS ISSUED BY ARCS:
Security Receipts as identified above will be put on sale on Cash basis only. Reserve
price of these security receipts will be calculated on the basis of underlying securities,
remaining maturity period of trust, recovery range as mentioned in NAV reports of SR,
redemption percentage received by the Bank, and Cash Reserve Price of the trust will
be arrived on the basis score card given below.
Reserve Price will be evaluated by GMSC & approved by CAC as stipulated for
stressed assets.
Score card for calculation of cash reserve price of trust
Sl Key Parameter Slab wise score Maximum
Score
Security coverage of Trust % <=25 26-50 51-75 76-100 >100
= Latest FMV of charged
1 40
securities/Face value of Score 5 15 25 35 40
existing SR (Bank+ARC)
Remaining maturity period of No of Year <=2 3 4 5 >5
2 security receipt (considering 20
Score 5 7 10 15 20
maximum tenor of 8 years)
Recovery Range on the basis % <=25 26-50 51-75 76-100 >100
3 15
of last rating report Score 2 5 8 12 15
Redemption % received by % <10 10-24 25-49 50-75 >75
4 10
Bank Score Nil 4 6 8 10
Bank’s share in the trust Bank’ share % >90 84-89 75-83 50-74 <50
5 10
through security receipts Score 10 8 4 2 Nil
Bank’s existing share in % <10 10-24 25-49 50-75 >75
6 5
upside recovery Score Nil 2 3 4 5
Total 100
Total score arrived <=40 41-50 51-60 61-70 71-90 >90
Reckoning factor (A) 20% 30% 40% 50% 60% 70%
Cash Reserve Price = Present Face value of Bank’s share in existing SR X ‘A’
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4. FIXATION OF RESERVE PRICE FOR SALE OF FINANCIAL ASSETS TO ARC/ASC
A. Pricing of Assets-Discounted Value of Security Method
To ascertain the value of assets charged to bank we will follow Discounted Value of
Security Method (DVSM). Under this method first the secured assets is segregated
into separate categories on the basis of type and nature of securities, such as liquid
securities, stocks & receivables, plant & machineries, and mortgaged properties
(Rural/ Urban & Commercial/Residential, etc). Present market value of the financial
asset worked out in the Preliminary Information Memorandum (PIM) shall be reckoned
by applying under noted factors depending upon the type of security to arrive at the
reckoning value of the assets.
i. Nature of Securities & Reckoning factor

Type of Security Reckoning factor
Movable Security
Pledge of NSC/KVP/LIP/TDR, etc 100%
Pledge of shares/Debentures If traded, 100% of traded value; if not, face
value/acquired value
Stocks/ House hold goods/ other items 50% if less than 6 Months old otherwise 10%#
(for Saral/Personal Loan)
Receivables 50% if less than 3 Months old
25% if 3 – 6 months old
0% if more than 6 months old #
Immovable Securities
Plant & Machinery/ Car/Four wheelers/ a) 60% if valuation is not more than 1 year old
Commercial Vehicles b) 50% if valuation is not more than 2 year old.
c) 40% if valuation is more than 3 year old.
Industrial Shed & Structure a) 60% if valuation is not more than 1 year old.
b) 50% if valuation is more than 1 year old.
Other Fixed Assets a) 50% if valuation is not more than 1 year old.
other than Land & Building, Plant & b) 40% if valuation is more than 1 year old.
Machinery etc & where fixed assets are not
clearly specified
Land only
Agriculture/ Rural Land 50%
Factory Land 60%
Urban Land 75%
Land & Building (Urban)
Commercial 70%
Residential/ House Property/ Flats 75%
Land & Building(Rural)

a) Commercial 60%
b) Residential/ House Property 70%
Tea Gardens/ Coffee & other plantation 40%
Intangible Securities
Intangible Securities like Personal/ 0%
Corporate Guarantee, Trade Mark,
Copyright, Goodwill etc
Enterprise value as a going concern: 80%
Liquidation value in case of liquidation: 80%
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# For going concern, if Stock/book debt statement has not been received even
during last six months, last stock audit report/balance sheet/stock statement has to
be taken with reckoning factor of 30% both for stock & book debts
ii. Calculation of Net Present Value of the asset

After applying all the above mentioned reckoning factors, expected realizable amount
from the actual value of the charged securities will be arrived at. Accrual will depend
upon the stage of our resolution action and final time taken for realization. For this
purpose, we have to calculate the Net Present Value (NPV) of the each asset with
discounting factor at one year MCLR and penalty and time taken for resolution in
number of years. For resolution period, undernoted assumptions are considered:
Circumstances Expected period for realization

One SARFAESI sale failed / SARFAESI sale One year
not conducted
Two SARFAESI sale failed Two years
NCLT: Resolution / under liquidation Two years
Consortium accounts / Company accounts Three years
DRT/other Court litigation is taking place four years
Defective security/ tenanted properties/ 5 years
SARFAESI sale failed 2 times or more
iii. Fixation of Reserve Price
a) Based on Discounted Value of Security Method
 The price arrived at on the above DVS method will be the reserve price for
sale of assets on Cash cum Security Receipt (15:85) basis.
 For calculation of Reserve Price for sale on cash basis, the reserve price
arrived at by observing the above for sale on cash cum SR (15:85) basis will
be further discounted at one Year MCLR Rate considering the redemption
period of SR of 5 years & other factors.
 For calculation of Reserve Price for sale on Cash cum Security Receipt
(51:49/40:60/25:75 or any other ratio), the reserve price arrived at for Cash
cum Security Receipt (15:85) will be discounted at one Year MCLR Rate and
for redemption period of 5 years for difference of SR portion to have equal
NPV for reserve price in Cash cum SR basis.
 In accounts where there is no security, the reserve price on Cash cum SR
basis (15:85) may be fixed at minimum 10% of Notional dues (Ledger
Balance plus latest uncharged interest).
b) Based on rating reports of external rating agencies approved by RBI

Bank will carry rating of accounts from RBI approved Credit Rating Agencies
for discovery of realizable amount in accounts having ledger balance above
Rs. 50 Lac. Reserve Price for 15:85 cash cum SR basis will be calculated on
the basis of rating score and Notional dues (Ledger Balance plus latest
uncharged interest). In case of rating reports received in specified range,
median value of rating will be considered. Reserve Price for other different
Cash cum SR structure or cash basis will be derived considering period of 5
years for redemption of SR at the rate of 1 Year MCLR. The accounts which
were rated earlier but remained unsold need not be rated again and earlier
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report will be taken into account. Empanelment of such RBI approved
external rating agency will be done by Recovery Department, HO for the
period of two years through paper publication and will be approved by
HLCCED.
c) Based on OTS (failed/declined/under negotiation)

During the period of last one year if OTS was approved by the Bank but failed
or declined by the Bank or which are received in writing may be considered
for arriving reserve Price on Cash basis. When OTS offered/approved is
payable in instalment in more than one year, Bank will calculate NPV of OTS
amount discounting with prevailing 1 Year MCLR rate for one year which will
be fixed as Cash reserve price. The reserve price for different Cash cum SR
structure will be derived considering period of 5 years for redemption of SR at
the rate of 1 Year MCLR.
d) Consortium Accounts sold by other banks:

If any consortium member bank or more banks have sold any asset/account
having exposure more than 50% to any ARC at any price/hair cut at a
particular sale structure (cash or different SR structure), the Reserve Price for
our exposure will be fixed at a price considering the highest price as the base
price and its equivalent NPV taking into discounting factor of 1 year MCLR
and redemption period of 5 years.
e) In case of NPA accounts having ledger balance of Rs.50 crore and above,
the Bank can invite indicative price by sealed cover from all RBI registered
ARCs through proper notification in order to make price discovery.
Reserve price of assets put on sale to ARCs will be higher of above a, b, c, d and e but
in no case reserve price will be less than 10% of Notional dues (Ledger Balance plus
latest uncharged interest) for Cash cum SR (15:85).
iv. Refixation of Reserve Price in case of sale failure:

In case sale of any asset through bidding process fails due to non-receipt of any bid etc,
the reserve price of that asset will be reduced by 10% from the previous Reserve Price
for its subsequent sale through fresh bidding process and equivalent reserve Price for
Cash basis or Cash cum SR (15:85/51:49/40:60/25:75 etc) adopting NPV method
considering discount factor of 1 year MCLR and redemption period of 5 years will be
arrived. Reserve price of other Bank will be taken when underlying securities are
common having pari-passu charge. Concerned branch/ZO/FGMO will provide such
reserve price fixed by other Bank.
In case where asset sale has failed twice & irrespective of the ledger balance
outstanding, the bank can invite indicative price from all registered ARCs through proper
notification. After getting the highest indicative price, the bank can put that asset for sale
to ARCs with that highest indicative price as base price under Swiss Challenge Method.
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B. Pricing of Assets - Reserve Price/ valuation procedure for the Assets financed
under Consortium/ multiple banking arrangements where other lenders/ banks
have already sold/ assigned their share of debt to ARCs/ ASCs
I. Assets Eligible:
a) Where 75% (by value) of the banks/FIs have already been sold/assigned
their share of a financial asset to any ARC/ASC at an offer, Bank will be
obligated to accept that offer even if the RP as calculated above is more than
the offer amount.
b) For all the accounts financed under consortium/multiple banking
arrangement, Bank will fall in line with decision of the consortium or any of the
consortium lenders who have already sold/ assigned to any ARC or will sell in
future jointly with us.
II. Valuation Procedures to be followed:

When the consortium leader/major share-holder has undertaken the valuation of
the financial assets, independent valuation need not be carried out by the Bank.
In cases where transfer of financial assets to ASC/ARC by other lenders has
already taken place, our Bank may use the same as a Benchmark for sale to
ASC/ARC. If their assets have already been sold in past, then the Net Present
Value of the assets/ sale proceeds to be received by us should be worked to be
at par with them.
III. Fixation of Reserve Price:
The Reserve price has to be fixed considering the Net Present Value (NPV) of
the sale proceeds at the hair cut taken by other banks at the time of sale to ARC
on certain commercial terms and conditions which should be at par with the Net
Present Value of the total proceeds to be received by our bank in comparison to
our sale terms & conditions.
C. COMMITTEE FOR RECOMMENDING FIXATION OF RESERVE PRICE

The Reserve Price will be calculated by the Recovery Department as per Bank’s policy
& placed before General Managers Screening Committee (GMSC), the same committee
which is screening the compromise proposal at HO falling under the authority of
EDHLCC/CAC/MCBOD, for evaluation. The Committee will evaluate and recommend
the Reserve Price of the assets for sale to ARC as well as decide which asset to be sold
on “individual asset” basis or as “basket of assets” to ARCs. Similarly, this committee
will also evaluate & recommend the Reserve Price of security receipts for sale to any
investment fund/ARC/others.
The Reserve Price shall be finally approved by the Credit Approval Committee (CAC).
5. Norms and Procedures for sale of Assets/Standard Operating Procedure:
The SARFAESI Act, 2002 allows acquisitions of financial assets by ASC/ ARC. The Act
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 ASC / ARC, as well
as on “with recourse” basis, i.e. subject to unrealized part of the asset reverting to the
seller bank/FI. However, Banks / FIs have been directed by RBI to ensure that the effect
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of the sale of the financial asset 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. Hence, following procedures will be adopted while taking a decision to sell
the assets to ASCs/ ARCs:-
i) The Assets, sought to be sold to ARCs / Banks, will be short listed by the respective
branch/ZLCC/FGMLCC and they will send the list along with Preliminary Information
Memorandum (as per Annexure-64) to Head Office with their recommendation for
the said purpose.
ii) But it has to be ensured that fraud as well as wilful defaulter angle has been
examined in all selected accounts. The Field General Manager/Zonal Heads before
making such recommendation will ensure that staff accountability in these accounts
has been examined & concluded /crystallized in accordance with the Policy
Guidelines on Examination of Staff Accountability.
iii) The total dues will be arrived at by adding the outstanding ledger balance in all the
accounts of the concerned borrower plus uncharged interest up to the cut-off date
along with legal and other admissible expenses which have not been debited in the
account including accrued and payable expenses but not actually paid. In case of
Non fund exposures (BG/LC), only the crystallized amount will be added for arriving
at the total dues.
In case of prudentially written off debts, the adjustment of provision is purely internal
arrangement. In such cases the net book value may be less, but while fixing reserve
price, both outstanding and provision amount should be increased/ adjusted
notionally for assessment of total dues as also reserve price.
iv) Similarly in case of accounts, where DICGC/ ECGC/CGTMSE claims have been
received and adjusted in the accounts, the ledger outstanding/ NBV amount are
reduced, but on sale of the asset, the corporation’s share has to be refunded.
Therefore while assessing reserve price; the above points are to be considered.
v) After identification of accounts, Recovery Department will place the list of accounts
before GMSC for their recommendation and then seek in-principle approval from
Board for list of stressed assets (including SMA) identified for sale to
ARC/ASC/BANK/NBFC etc, twice a year i.e. in June and December quarters which
will be valid for that financial year only. In case need arises in other quarter for sale
of any account/s, Recovery Department will seek in-principle approval from the
Board. The Board will also approve the general terms and conditions of the asset
sale.
vi) However, in case of any emergent circumstances, if a need arises for sale of some
accounts and/or some offer is received from a prospective buyer for purchase of
accounts, which were not got approved from the Board during identification process,
the Credit Approval Committee, may be authorized to take a decision regarding
modification/addition in the said list.
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vii) The Department shall also seek prior approval for commencement of process of sale
& specific terms & conditions & process of sale of Assets along with specific list of
accounts to be put on sale from Credit Approval Committee.
viii)For participating in the sale process ARC/ASC/NBFC etc. shall execute a Non
Disclosure Agreement (NDA). Draft of NDA/ Power of Attorney etc. shall be
executed by ARC/ASC etc in the format after vetting from Head Office Legal
Department. If any change is required the same will be done in consultation with
Legal department and will be approved by General Manager (Recovery & Law).The
NDA executed by the ARC/ASC will be valid for 1 year from the date of Execution for
taking participation in future asset sale process.
ix) Publication of Sale notification/ Offer:
Publication of Sale notification/ Offer: After approval for commencement/ initiation

of sale process by the competent authority (CAC), the bank shall invite bids through
publication of offer on bank’s website and through e mails to registered ARCs/ASCs.
Bank may also decide to publish the offer in two newspapers to give an open public
offer to have wider reach and fetch better sale price. While placing the invitation on
the Bank’s website, list of accounts will also be up-loaded which are being offered
for that particular sale process. Bank will prefer to use e-auction platform for
bidding, Services of empanelled E-auction service provider will be utilized for e-
bidding, which will be approved by General Manager (Recovery). For price discovery
in case of accounts having ledger balance of Rs.50 crore and above, the Bank may
go for publication for inviting indicative price.
x) Final Sale Approval: Although the Board has approved in principle the list of
accounts for sale to ARCs during the financial year, but the final approval for sale of
any particular asset to any ARC/ eligible agency is entrusted with MCBOD.
xi) Threshold limit for review of Non Performing Assets- At a minimum, all assets
classified as NPA above a threshold amount of Rs.1.00 Cr (Accounts not
declared as Fraud) shall be reviewed by the Board/ Board Committee on half yearly
basis and a view, with documented rationale, is to be taken on exit or otherwise.
The assets identified for exit shall be listed for the purpose of sale as
indicated above.
xii) Withdrawal of accounts from the sale process: In case obligant(s) & co-
obligant(s) come forward, for OTS, before finalization of sale process, the concerned
account may be withdrawn from the sale process considering account specific
merits, provided the party regularizes the account/deposits 10% cash as upfront
immediately and remaining as per the terms of compromise approved by the
competent authority.
The Bank may also withdraw any account put up for sale from the sale process/
cancel the entire process at any time with approval of the competent authority
(CAC).
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xiii)Types of Asset Sale Process- Bank may go for sale of Stressed Assets through
the following modes –
a. Invitation of Bids for specific accounts through Open Public Offer Process-
1) The final list of Assets to be put up for sale to ARC/ASC/BANK shall be approved by
the CAC.
2) Specific terms & conditions of Sale & Bid Process and structure i.e. Cash/Cash cum
SR (15:85/51:49/40:60/25:75 or else) will be approved by the Credit Approval
Committee (CAC).
3) The schedule (dates) of activities, such as date of publication of AD, commencement
& closure dates of Due Diligence by ARC/ASC/BANK/ ASC /Banks, date of e-
bidding etc will be finalized with the approval of the Credit Approval Committee
(CAC).The General Managers’ Screening Committee at Head Office, with General
Manager (Recovery & Law) as the convener, will recommend, which assets are to
be sold as single assets and which are to be sold in baskets.
4) The Reserve Prices of the Assets will be calculated by adopting Discounted Value of
Security Method (DVSM), rating reports of external rating agency and OTS amount.
Reserve Price so worked out will be evaluated by the above referred General
Managers’ Screening Committee & finally approved by the Credit Approval
Committee (CAC).
5) Publication of Advertisement of “Offer for Sale of Stressed Asset” will be hosted on
Bank’s website & information about commencement of our sale process to
ARC/ASC/BANKs through e-mail will be done. The offer may also be published in
two newspapers.
6) An Executive of Head Office Recovery Department will be designated as Nodal
Officer for entire Sale process by General Manager (Recovery). He /She will be the
sole in charge of the sale process & Bank’s representative for correspondence /
single point contact with ARC/ASC/BANK.
7) Draft of Non Disclosure Agreement (NDA)/ Deed of Assignment/Assignment
Agreement/Offer Document/Trust Deed for execution with ARC/ASC/BANK may be
the same as used in previous year sale process after vetting from Head Office Legal
Department. If any change is required the same will be done in consultation with
Legal department and will be approved by General Manager (Recovery & Law).
8) ARC/ASC/BANK which will be interested in taking part in our Bid Process will have
to execute NDA which is valid for 1 year from the date of execution.
9) In urgent circumstances ARC/ASC/BANK can submit duly signed scanned copy of
Non Disclosure Agreement (NDA) through email and later on its original copy by
Registered post to Head Office.
10)For the purpose of easy and early completion of Due Diligence of assets proposed
for sale and inspection of documents Bank will create Data Rooms which will be
located at strategic places (our Branches/Zonal Offices) across the country. The list
of Data Rooms and allocation of accounts (preferably Zone wise) Data Room wise
will be approved by the Executive Director.
11)After the approval of list of Data Rooms and allocation of accounts, concerned
Zones & Branches will be advised to send the photo copies of security documents
and other documents/letters/etc of assets under proposed sale to their respective
Data Rooms.
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12)ARC/ASC/BANK who properly executed Non Disclosure Agreement (NDA) will be
authorized for Due Diligence of assets and inspection of documents of proposed
financial assets for sale. Names of such eligible ARC/ASC/BANK will be
communicated to concerned ARC/ASC/BANK and all the Data Centers.
13)Before allowing Representatives of ARC/ASC/BANK to take part in e-bidding
process, Bank will collect authorization letter/Power of Attorney from the
representatives & put them safely on record.
14)As per schedule, ARC/ASC/BANK, which have executed NDA will be allowed to
submit the Bid & take part in the Bid Process. ARC/ASC/BANK can authorize their
Representatives to take part in our Bid process.
15)The MCBOD is empowered to approve the final sale of Assets to
ARC/ASC/BANKs/NBFC etc.
16)Executive Director & in his/her absence or preoccupation, the General Manager (R &
L) will designate the name of the Executive who will sign & execute the Deed of
Assignment along with authorized representative of ARC/ASC/BANK
17)After seeking approval of the MCBOD concerned ARC/ASC/BANK will be advised to
pay the amount through RTGS only, execute the Deed of Assignment/Assignment
Agreement & collect the Original Security documents & other documents/letters/etc
of assets sold/assigned to them from the respective branches.
18)If assets are sold/ assigned on Security Receipt (SR) basis to ARC/ASC/BANK then
details of such assets/transactions will be advised to FCTM Branch. Concerned
ARC/ASC/BANK will be advised to pay the cash portion of the bid offered to Trust
account specially opened for the purpose through RTGS. FCTM branch will remit the
Bank’s portion to the said account. After receiving full amount the Trustee will remit
total amount to Head Office, Recovery Department. ARC Trustee will deliver the
Security Receipt to FCTM branch.
19)Head Office Recovery Department on receipt of entire sale proceeds as stated
above will send the credit advices to respective branches for credit in concerned
account sold /assigned to ARC/ASC/BANK (or HO will credit the amount in their IBR
account-99999) & advise the branches to deliver the Original Security documents &
other documents/letters/etc of assets sold/assigned to authorized representative of
respective ARC/ASC/BANK against their due acknowledgement. Head Office may
also advise branch to deliver Original Security documents & other
documents/letters/etc of financial assets at Data Room where initially they have sent
the photo copies of the documents for due diligence purpose.
20)Concerned branch will respond the Credit Advice / credit received in their IBR
account (99999) from Head Office, close the account & update the relevant
information in CBS system after strictly following closure Menu as detailed in CBS
Manual.
21)On request of ARC/ASC/BANK the concerned branches (Branch Head only) will
complete the formalities related to substitution of name of ARC/ASC/BANK (to whom
concerned asset is sold) in place of our Bank in record of Registrar of Companies
(ROC), ongoing Suit/OA at DRT /Court and etc.
22)No asset shall be sold below reserve price
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b. Swiss Challenge Method where offer have been received for purchase of
specific asset on cash basis or Cash cum Security Receipt basis
In order to bring down the stock of NPAs sold and to enable faster debt aggregation by
ASCs/ ARCs, Swiss Challenge Method (SCM) may be adopted for sale of Stressed
Assets to ASCs/ ARCs/ NBFCs/ other Banks etc. For execution of sale/ assignment
through Swiss Challenge Method, following guidelines shall be complied-
1. The Bank shall have an approved list of accounts identified for Sale to ASCs/
ARCs/ NBFC/ other banks.
2. The offer amount must be equal/above the reserve price arrived in terms of
Bank’s guidelines.
3. The Bank shall call for counter bids through public e-bidding from other
prospective buyers on comparable terms.
4. On receipt of bids through e-bidding process, the Bank shall first invite the ASC/
ARC, if any, which has already acquired highest significant stake (~25 to 30%) to
match the highest bid. Ceteris Paribus (all the other thing being equal), the order
of preference to sell the asset shall be as follows-
a. The ASC/ ARC which already has acquired highest significant stake;
b. The Original Bidder
c. The highest bidder during the counter bidding process.
5. The Bank shall have the following two options-
a. Sell the asset to winning bidder, as determined above;
b. Not to sell the asset to winning bidder, in which case bank shall make
immediate provision on the account to the extent of the higher of:
i. The discount on the book value quoted by the highest bidder; and
ii. The provisioning required as per extant asset classification and
provisioning norms.
c. Through bilateral negotiation for specific stressed assets for sale in cash as
well as Cash cum SR basis.
1. If a specific portfolio or a specific asset is decided to be sold as a Single

Asset, it may be sold to any ARC/ASC (except with our sponsored ARC i.e.,
M/s ASREC ARC) with bilateral negotiations provided Assets are sold without
any sacrifice in outstanding ledger balance including virtual write off balances
(if any) & amount of claim received from DICGC / ECGC/CGTMSE (if any)
credited in the account. This outstanding balance will not cover uncharged
interest & other expenses incurred by the Bank. However, endeavor should
be made to realize maximum amount of uncharged interest and other
expenses incurred by the bank.
2. If sale of one asset or portfolio has failed in any bidding process due to non-
receipt of bid or receipt of bid offer lower than the Reserve Price fixed, then
bank can go for next sale through bilateral negotiation with any ARC/ASC
(except with our sponsored ARC i.e., M/s ASREC ARC) who is offering
amount up to 10% lower than the Reserve Price fixed during the last bid
process
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xiv) Debt Aggregation- First Right of refusal:- As advised by RBI, to enhance debt
aggregation of the SCs/RCs, first right of refusal will be given to the SC/RC, which
has already acquired the highest and at the same time a significant share (~25% -
30%) by matching the highest bid for acquiring the asset for which invitation through
auction may be publically solicited and will be up-loaded on Bank’s website also.
The winning bidder will be decided as per Swiss Challenge Method (SCM).
xv) Before bidding for the stressed assets, minimum period of two weeks will be
given to the prospective buyer to complete their Due Diligence Exercise.
xvi) Terms & conditions of Sale & Bid Process will be approved by the Credit
Approval Committee (CAC).
xvii) In the Bid Documents the following points shall be incorporated so as to
make it more transparent:-
a) Clauses for non acceptance of bids.
b) Disclosure of the Reserve Price
c) Terms & Conditions of the Bid
d) If the highest bid received is above the Reserve Price and a minimum of 50 per
cent of sale proceeds is in cash, and also fulfils the other conditions specified in
the Offer Document, acceptance of that bid would be mandatory.
xviii) General Managers’ Screening Committee (GMSC), constituted at Head Office
for the purpose of OTS settlement, will take a decision as to what Assets are to be
sold as single Asset or what assets have to be sold in baskets.
xix) Since this process is not an OTS settlement exercise, the concurrence of
Settlement Advisory Committee (SAC) is not required.
xx) The schedule (dates) of activities, such as date of publication of Advertisement,
commencement & closure dates of Due Diligence by ARC/ASC , date of e-bidding
etc will be finalized with the approval of the Credit Approval Committee (CAC).
xxi) In 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 obliged to
accept the offer.
xxii) The MCBOD is empowered to approve final sale of Assets to ARCs.
xxiii) Agreement of Assignment with the successful Bidder will be executed by the
Executive/office nominated by the Executive Director & in his/her absence the
General Manager (Recovery)
xxiv) OTHER TERMS & CONDITIONS OF BID/SALE
a) In accounts/baskets where bids are received in both options i.e. Cash basis as well
as Cash cum SR basis, successful bidder will be finalized on the basis of highest
NPV of bid amount considering expected redemption period of Security Receipt at
fifth year and Bank’s 1 Year MCLR as on the date of bidding.
b) It will be prerogative of the Bank to accept or cancel/reject any bid without
assigning any reason.
6. Accounting Procedure:
(i) When the bank will sell its financial assets to ASC/ARC, on receipt of the payment
from the ASC/ARC, the same will be removed from the books as NPA. Bank may
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receive cash / Security Receipts / Pass Through Certificates (PTC) / bonds or
debentures as sale consideration for the financial asset sold to the ASC/ ARC.
(ii) The Security Receipts, PTCs, Bonds and Debentures issued by the ASC / ARCs
and received by the Bank will be classified as investments in the books of the
Bank.
(iii) If the sale to ASC/ARC be at a price below the net book value (NBV) i.e. book
value less provision held, the short fall will be debited to the Profit & Loss A/c of
that year. Bank can also utilize the 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).
(iv) For assets sold on or after February 26, 2014, bank 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.
When the bank invests in the security receipts/pass through certificates issued by
ASC/ARC in respect of the financial assets sold to them, the sale shall be recognized in
the books of the bank at the lower of :
 The redemption value of the security receipts / pass through certificates and
 The NBV of the financial assets.
The above investment should be carried in the books of the bank at the price as
determined above till its sale or realization, and on such sale or realization, the loss or
gain must be dealt with in the same manner as at (iii) & (iv) above.
7. Terms & Conditions of sale/assignment of financial assets against securities
(bonds and debentures) offered by ASC/ARC
The offer should satisfy the following conditions:-
a) The securities must not have a term in excess of six years.
b) The securities must carry a rate of interest which is not lower than 1.5% above the
Bank Rate in force at the time of issue.
c) The securities must be secured by an appropriate charge on the assets transferred.
d) 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.
e) The commitment of the ASC/ARC to redeem the securities must be unconditional
and not linked to the realization of the assets.
f) Whenever the security is transferred to any other party, notice of transfer should be
issued to the ASC/ARC.
g) Other terms & conditions will be as per assignment agreement.
8. Terms & Conditions of sale/assignment of financial assets against Security

Receipts (SR) offered by ASC/ARC
The offer should satisfy the following conditions:-
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1. Bank may ask ARCs/ASCs to submit offer or bid for single asset/basket/portfolio
basis and on Cash or Cash cum Security Receipt basis. At the time of informing
outstanding balance as on Cut Off date, Bank will intimate the type of bidding
(single asset/basket/portfolio) to be invited along with the format for bidding.
2. Security Receipt will have pari passu redemption.
3. Tenure of SR shall not exceed 5 years. Extension of tenure is subject to RBI
guidelines.
4. ARC/ASC shall invest a minimum of 15% (or as prescribed /change by RBI up to
the date of submission of the Bids) of SRs on ongoing basis till the redemption of
all SRs issued. Preference will be given to those ARCs/ASCs which will offer
higher NPV of bid amounts considering expected redemption period of Security
Receipt at fifth year and Bank’s 1 Year MCLR as on the date of bidding. Bank
can offer sale on different structures of SR basis such as 15:85, 20:80, 25:75,
30:70, 40:60, 51:49, 60:40, 70:30, 80:20, 90:10 etc as cash cum security receipt
basis. Bank can decide SR structure considering NBV of the individual asset/
basket/ portfolio and market demand for higher cash offer. For any asset sale on
SR basis, the management fees shall be calculated as maximum annual fee of
2% on the Net Asset Value (NAV) at the lower end of the range of the NAV
specified by the Credit Rating Agency (CRA), provided the same is not more than
the acquisition value of the underlying asset & it is payable till the NAV is
positive. However, management fees are to be reckoned as maximum annual fee
on the actual outstanding value of SRs, before the availability of NAV of SRs.
Taxes payable on such fee, if any, would accrue to the Trustee on a quarterly
basis. The same shall be payable out of the Trust fund forthwith upon any
recovery or realization of the financial asset forming a part of the Trust Fund.
Realization & appropriation of Management Fee will be governed by the
guidelines issued by RBI from time to time. The Credit Approval Committee
(CAC) is authorized to take a decision regarding the amount of management fee
to be paid annually during each asset sale process depending on the prevailing
market conditions & quality of assets put on sale.
5. Bank will offer incentive on early redemption of SR up to maximum 5% for 1st five
years and its year wise breakup will be decided by CAC as per the prevailing
market condition.
6. Excess recovery/ upside over & above the value of the SRs shall be shared by
the Bank & ARC/ASC on not less than 80:20/70:30/50:50/40:60 basis for assets
assigned on 15:85/25:75/40:60/51:49 Cash cum SR basis respectively. In case of
other structure of Cash cum SR, share of upside recovery will be derived
accordingly. ARC/ASC will have to provide on quarterly basis, a report on the
value realized from each asset/ basket in Bank’s prescribed format.
7. Expenses incurred after acquisition of assets on the formation of the trusts,
stamp duty, registration, etc. which are recoverable from the trust, should be
reversed, if these expenses are not realized within 180 days from the planning
period. Such un-realized expenses are also subject to verification by Bank.
Planning period means a period not exceeding six months allowed for
formulating a plan realization of nonperforming assets (in books of originator)
acquired for the purpose of reconstruction) or downgrading of Security receipts
(SRs) (i.e., Net Asset Value (NAV) is less than 50% of the face value of SRs)
whichever is earlier. Realization & appropriation of post acquisition cost will be
governed by the guidelines issued by RBI from time to time.
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8. Upon any revocation of the Trust (other than any revocation of the Trust on
account of adverse tax consequences) or upon any termination of the Trust by
Security Receipt Holder or upon appointment of any person other than
purchasing ARC as the Trustee, breakage cost at a specified rate of the value
of the Trust Fund as determined for the purpose of the most recent declaration
of NAV, shall be payable to the Trustee. The specified rate of breakage/
termination cost may be decided on case to case basis & on mutual terms & it
will be approved by the MD & CEO and in his absence, the ED.
9. All cost and expenses, charges incurred for or in connection with acquisition,
resolution, realization, recovery, protection, preservation and insurance of Assets
and other assets forming part of the Trust Fund including expenses on rating of
Security Receipts and audit expenses will be treated as “Reimbursable Costs
and Expenses” and payable from the recovery of the underlying assets. The
reimbursable cost and expenses incurred, defrayed and paid by the
Trustee shall be a liability of the Trust recoverable by the Trustee along
with interest at a specified rate per annum on the Reimbursable Costs and
Expenses outstanding from time to time for the period commencing from the
date of their incurrence, defrayal or payment as the case may be and ending on
the date of its reimbursement from the Trust Fund to the Trustee. Realization &
appropriation of reimbursable cost and expenses will be governed by the
guidelines issued by RBI from time to time. The specified rate of interest
payable on reimbursable cost and expenses may be decided on case to
case basis & on mutual terms & it will be approved by the MD & CEO and in
his absence, the ED. Bank will conduct verification of statement of account,
expenses/fees/incentives claimed and calculation of NPV of SRs.
10. All sales shall be ‘without recourse’ to the Bank. In the event of non-realization
of amount out of secured assets, the bank will not be liable to refund anything in
part or full.
11. The sale is on” As is where is basis”.
12. The reserve price of the assets put on sale will be disclosed before e-bidding
process. If the highest bid received is above the Reserve Price and a minimum of
50 per cent of sale proceeds is in cash, and also fulfils the other conditions
specified in this offer letter, acceptance of that bid would be mandatory.
13. The Bank reserves the right to withdraw any NPA account from the sale process
or reject and/ or cancel or defer the entire sale process of the non-performing
assets without assigning any reason.
14. Bank reserves the right to add/ modify/delete any of the terms & conditions at its
sole discretion.
15. Whenever the SR is transferred to any third party, notice of the transfer shall be
given to the ARC/ASC.
16. In those cases where, the ECGC/CGTMSE, etc claim has been received and
credited in the account, any recovery made in the accounts has to be
proportionately refunded as per the terms of claim settlement by the assignor to
the concern agency. Similarly in those case where above claim has been lodged
& is receivable by the Assignor, when such claim is received by the assignor
from the concerned agency, the claim amount shall be retained by the assignor &
proportionately refunded to ECGC/CGTMSE, etc. on recovery by redemption of
SRs, or otherwise.
17. Other terms & conditions will be as per assignment agreement.
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18. The Credit Approval Committee is authorized to change above conditions to
match with the terms and conditions prevailing at that this for sale of assets to
ARC/ASC on SR basis offered by other Banks.
19. Purchasing ARC must open trust account with our Bank. In consortium/multiple
banking accounts, such account of trust should be opened either with our Bank
or other consortium bank from where exposures of the respective account have
been acquired earlier.
20. Purchasing ARC would provide a report on the value realized from each
asset/basket in Bank’s prescribed format on quarterly basis.
21. Audit report of each trust will be sent to Bank within two months of completion of
audit.
22. ARC may realize various expenses from the trust account only after approval
from the Bank or as per the guidelines mutually agreed.
23. An official from Bank will be trustee in the said trust and he will oversee the
process of sale/recovery process of assets by the concerned ARC.
24. Bank may put on sale exposure in investment in security receipts, which will be
communicated through Bank’s notification/letter.
25. Group exposure / related party disclosure: In EOI, ARCs/NBFCs/FIs will
provide undertaking that “after submission of bid in any account/basket, they will
furnish an undertaking confirming that they having no group exposure/related
party/conflict of interest in such account/basket”. Scanned copy of certificate will
be sent by ARCs through mail and thereafter Bank will confirm sale of the
account/basket after approval from MCBOD.
9. Other terms of Transfer/Sale of Asset:

(a) A financial asset may be transferred to ASC/ARC or on Agency Basis U/S.10(1) of
the SARFAESI Act, 2002.
(b) The financial asset should be sold to ASC/ARC in such a manner so as to ensure
that the effect of the sale is such that the asset is taken off from the books of the
Bank and after the sale there would be no known liability devolving on the Bank in
accordance with RBI Guidelines.
(c) For Contingent Liabilities RBI guidelines prescribe that upon sale of asset to
ARCs/Banks, the financial asset should be taken off the books of the bank and after
sale there should not be any known liability devolving on the bank. However,
contingent liabilities like letter of credit, guarantee, DPG etc have not been
addressed in the guidelines. As the ARCs/Banks/FIs/NBFCs are not authorized to
purchase any contingent liabilities standing live (not devolved/invoked) as on the
date of sale and RBI expects knocking of the asset from bank’s books upon sale to
ARCs/Banks, the bank shall provide 100% for balance of such contingent liabilities
upon sale of the asset in order to take care of any eventualities in future. The Bank
shall retain pari-passu charge on the securities relating to un-crystallized non-funded
facilities and in case of crystallization of non-funded facilities after the sale, that
portion (converted into funded after deducting margin, if any) will also be sold by the
bank to the same ARC/Buyer who will give acceptance for the same through offer
letter/supplementary agreement/assignment agreement. However, the un-devolved
LC and un-invoked BG limits backed by 100% margin by way of FDs will not be
offered for sale to ARCs/NBFCs/FIs etc.
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(d) It will be ensured that subsequent to sale of the financial assets to ASC/ARC, the
Bank does not assume any operational, legal or any other type of risks relating to
the financial assets sold.
(e) Under no circumstance, transfer of asset to ASC/ARC will be made at a contingent
price whereby in the event of shortfall in realization by ASC/ARC, the Bank would
have to bear the shortfall, if any.
(f) While the ASC/ARC will provide in cash, debentures or Bonds or Security
Receipts/PTCs for the sale of assets so effected, the Bank will prefer to receive the
proceeds in cash rather than in other modes of payment to the extent possible.
(g) The Bank will subscribe to the Bonds/Debentures/Security Receipts/PTCs issued by
ASC/ARC in respect of financial assets acquired or proposed to be acquired. Such
investment will be treated as Non-SLR Securities as per RBI Guidelines. These
securities will also be classified as investments in the books of banks.
(h) Wherever considered necessary, Bank may enter into agreement with ASC/ARC to
share in agreed proportions (authority: Head Office), any surplus realized by the
ASC/ARC on the eventual realization of the concerned asset. In such cases the
terms of sale should provide for a report from the ASC/ARC to the bank on the value
realized from the asset. No credit for the expected profit will be taken by bank until
the profit materializes on actual sale
10. Investment in debentures/ bonds/ security receipts/ Pass-through certificates

issued by ASC/ ARC
All instruments received by the bank from ASC/ARC as sale consideration for financial
assets sold to them and also other instruments issued by ASC/ARC in which banks
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 bank’s investment in
debentures/ bonds/ security receipts/PTCs issued by ASC/ARC. However, if any of the
above instruments issued by ASC/ARC is limited to the actual realization of the financial
assets assigned to the instruments in the concerned scheme the bank shall reckon the
Net Asset Value (NAV), obtained from ASC/ARC from time to time, for valuation of such
investments.
With effect from April 1, 2018, where the investment by a bank in SRs backed by
stressed assets sold by it, under an asset securitization, is more than 10% of SRs
backed by its sold assets and issued under that securitization, the provisions held in
respect of these SRs will be subject to a floor, this floor shall be progressive
provisioning as per extant asset classification and provisioning norms, notionally
treating book value of these SRs as the corresponding stressed loans, assuming these
had remained without recovery of principal, on the bank's books. In effect, provisioning
requirement on SRs will be higher of the:
a) provisioning rate required in terms of net asset value declared by ARCs; and
b) provisioning rate as applicable to the underlying loans, assuming that the loans
notionally continued in the books of the bank;
11. Exposure Norms
Banks’ investments in debentures/ bonds/ security receipts/PTCs issued by ASC/ARC
will constitute exposure on the ASC/ARC. As only a few ASC/ARC are being set up
now, banks’ exposure on ASC/ARC through their investments in debentures/
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bonds/security receipts/PTCs issued by the ASC/ARC may go beyond their prudential
exposure ceiling. In view of the extra ordinary nature of event, banks are allowed, in the
initial years, to exceed prudential exposure ceiling on a case-to-case basis.
12. Disclosure Requirements

As per Reserve Bank of India guidelines, the Bank have to make the under noted
disclosures in the Notes on Accounts to their Balance sheets: pertaining to details of the
financial assets sold during the year to ASC/ARC for Asset Reconstruction
a. No. of accounts
b. Aggregate value (net of provisions) of accounts sold to ASC/ARC
c. Aggregate consideration
d. Additional consideration realized in respect of accounts transferred in earlier years
e. Aggregate gain / loss over net book value.
In addition to existing disclosure requirement, the Bank shall also make following
disclosures pertaining to investments in SRs:
Disclosure of Investment in SRs

Particulars SRs issued SRs issued more SRs issued
within past 5 than 5 years ago more than 8
years but within past 8 years ago
years
(i) Book value of SRs
backed by NPAs sold by
the bank as underlying
Provision held against (i)
(ii) Book value of SRs
backed by NPAs sold by
other banks /financial
institutions/ non-banking
financial companies as
underlying
Provision held against (i)
Total (i) + (ii)
13. Related Issues
a. ASC/ARC will also take over financial assets which cannot be revived and which,
therefore, will have to be disposed of on a realization basis. Normally the ASC/ARC
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 but realizations as and when received will be credited to the asset
account. Provisioning for the asset will continue to be made by the bank in the
normal course.
GUIDELINES ON SALE OF NON PERFORMING ASSETS TO BANKs/ FIs/ NBFCs
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
securitization companies and reconstruction companies are not involved, guidelines
have been issued by RBI on sale of Non Performing Assets to banks/FIs/NBFCs. Since
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the sale 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 of NPAs proceeds on smooth
and sound lines. Accordingly under noted guidelines on sale of non performing assets
have been formulated by RBI.
Scope
1. These guidelines would be applicable to sale of non performing assets to Banks, FIs
and NBFCs (excluding asset securitization companies/ asset reconstruction
companies).
2. A financial asset, including assets under multiple/consortium banking arrangements,
would be eligible for sale in terms of these guidelines if it is a non-performing
asset/non performing investment in the books of the bank.
3. The reference to ‘bank’ in the guidelines would include financial institutions and
NBFCs.
Structure
The guidelines have been grouped under the following headings:
1) Procedure for sale of non performing financial assets by bank including valuation
and pricing aspects.
2) Provisioning norms for the bank selling non performing financial assets.
3) Disclosure requirements
Procedure for sale of non performing financial assets, including valuation and
pricing aspects
The policies and guidelines cover inter alia,
a) Identification of Non performing financial assets that may be sold
b) Norms and procedure for sale of such financial assets
c) Valuation procedure and pricing aspect
d) Delegation of powers of various functionaries for taking decision on the sale
of the financial assets
Other Parameters
1) While selling NPAs, Bank will 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 The bank will sell non-performing financial assets to other banks only on
“without recourse” basis, i.e., the entire credit risk associated with the non-
performing financial assets should be transferred to the purchasing bank. The bank
shall 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 and after the sale there should not be any
known liability devolving on the bank.
2) Bank should ensure that subsequent to sale of the non performing financial assets to
other banks, it does 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.
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3) Bank will make its own assessment of the value offered by the purchasing banks for
the financial asset and decide whether to accept or reject the offer.
4) 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 bank
would have to bear a part of the shortfall.
5) A non-performing asset in the books of the bank shall be eligible for sale to other
banks without any initial holding period.
6) Bank shall sell non-performing 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 bank only on receipt of the entire sale consideration.
7) Bank may also decide to sell homogeneous pool within retail non-performing
financial assets, on a portfolio basis provided each of the non-performing
financial assets of the pool has remained as non-performing financial asset for
at least 2 years in the books of the bank. The pool of assets would be treated as
a single asset in the books of the purchasing bank.
8) The bank shall pursue the staff accountability aspects as per the existing instructions
in respect of the non-performing assets sold to other banks.
Prudential norms for sale transactions:
Bank shall follow the same procedure as applicable to “sale of Assets to ARCs &
ASCs”.
Books of selling bank
a) When the bank sells its non-performing financial assets to other banks, the same
will be removed from its books on transfer.
b) 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.
c) If the sale is for a value higher than the NBV, the excess provision will be credited
to the profit and loss account of that year. assets.
Disclosure Requirements
The Bank which sells non-performing financial assets to other banks shall be required to
make the following disclosures in the Notes on Accounts to its Balance sheets:
Details of non-performing financial assets sold:
(Amount in Rupees crore)
1. No. of accounts sold
2. Aggregate outstanding
3. Aggregate consideration received
IDENTIFICATION OF ELIGIBLE NPAS FOR SALE TO BANKs/ FIs/ NBFCs :
In order to explore the emerging potential market for sale of assets to Banks/FIs/NBFCs
the following guidelines will also be observed for identification, valuation, reserve price
and discretionary authority.
The eligibility for considering sale will be reckoned on the following points:-
 The borrowers are chronic defaulters and the Bank’s remedial measures through
Restructuring/Rescheduling/and other procedures have been of no avail.
 The willful defaulters where the borrowers are not repaying the bank’s dues
despite having repayment capacity to pay off their dues.
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 The cases are pending due to protracted legal proceedings.
 The borrower/guarantor poses stiff opposition in selling the assets or there are
oppositions from the factory workers for selling the unit.
 The Bank is paying huge amount for engaging security guards.
 Cases where revival of the unit even by extending of fresh finance is not found
viable.
 Cases where the infrastructural facilities are abundant and the intrinsic worth of the
factory/unit is more than the cognizable value of securities available but could not be
run due to unscrupulous/doubtful integrity of the Promoter Directors.
 The consortium cases where other lenders have opted for sale of the assets to
ARC/ASC or to other banks/FIs/NBFCs.
 The accounts where there is threat of possible disorder/loss of securities in the near
future.
The accounts where fraud/RFA/malfeasance has been reported and /or is under
investigation will not be taken up for sale.
All other terms & conditions applicable to sale of Assets to ARCs will be also
applicable in this case too.
Evaluation and Pricing of Financial Asset
This will be the same as applicable for sale of assets to ARCs/ASC described above.
GUIDELINES ON PURCHASE OF NON PERFORMING FINANCIAL ASSETS
(NPFAs) FROM BANKs/ FIs/ NBFCs
Coverage:
1. The reference to ‘banks’ in the guidelines would include financial institutions and
NBFCs.
2. These guidelines would be applicable to purchase of non performing financial assets
from Banks.
3. A financial asset, including assets under multiple/consortium banking arrangements,
would be eligible for purchase in terms of these guidelines if it is a non-performing
asset/non performing investment in the books of the bank.
The guidelines have been grouped under the following parameters:
1. Procedure for purchase of non performing financial assets including valuation and
pricing aspects.
2. Delegation of Powers/ Discretionary Authority for approval
3. Accounting Policy
4. Compliance to Prudential norms in the following areas:
a) Asset Classification norms
b) Provisioning norms
c) Accounting of recoveries
d) Capital adequacy norms
e) Exposure norms
5. Disclosure requirements
Selection of NPAs for purchase from Banks / FIs / NBFCs:
The selection for considering purchase will be broadly reckoned on the following points:-
a) Cases where restructuring/ rehabilitation are continuing as per terms of sanction.
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b) Cases where revival of the unit are found viable.
c) Cases where the infrastructural facilities are abundant and the intrinsic worth of
the factory/unit are more than the cognizable value of securities available.
d) The consortium cases where other lenders have opted for sale of assets to ARCs.
e) Cases where locational advantages of assets are potential in terms of alternative
utilization.
f) Cases where realizable values of assets are substantial and action under
SARFAESI Act, 2002 can be taken up.
g) Bank shall ensure that selling bank has examined the staff accountability aspects.
However, the cases where fraud/malfeasance has been reported leading to problem of
enforceability of documents will not be taken up for purchase.
Norms and Procedure for purchase of financial assets including valuation &
pricing aspects:
1. A Nodal Cell comprising of the Deputy General Manager (Credit), Deputy General
Manager (R), Chief Manager (Credit), Chief Manager (R)/Assistant General
Manager (R) & Chief Manager (Law)/Assistant General Manager (Law/Recovery) or
as decided by the Managing Director & Chief Executive Officer will be formed at
Head Office level for identification of assets for purchase from Banks/FIs/NBFCs on
the basis of specific information in this regard from intending seller bank.
2. The Nodal Cell will take decisions on appointment of competent professionals for
due diligence in areas like enforceability of documents, visit of units, charged
securities, estimated cash flows, valuation of financial assets etc. If need be, the
members of the Cell will visit the asset site, collect impressionistic views, hold
dialogue with the valuer to adjudge the reasonableness of the valuation. The
services of bank’s empanelled professionals may be obtained in this regard.
3. The Nodal Cell as above will ascertain the Benchmark sum in each account as per
benchmark system already approved by the bank for determining compromise sum.
It may be mentioned here that the benchmark system has been structured on six
parameters of a non-performing assets viz. present status of the unit/business
operation, realizable value of assets i.e distress sale value, present net worth of the
borrowers/guarantors, age of NPA, legal enforceability and reasons for turning the
account NPA etc. Based on Benchmark sum, the probable pricing / quote prices with
a maximum ceiling for each account or for each basket will be arrived with the
approval of the Credit Approval Committee (CAC) headed by Managing Director &
Chief Executive Officer well in advance before participating in the Bid.
4. If required, bank may participate in further negotiation with the selling bank even
after opening of the bid. Such negotiation with the Banks/FIs/NBFCs will be taken up
by a negotiating committee headed by Deputy General Manager (Credit), Chief
Manager (Credit) Chief Manager (R)/Assistant General Manager (R) & Chief
Manager (Law)/Assistant General Manager (Law/Recovery) or as decided by the
Managing Director & Chief Executive Officer. The above committee members will
also represent the bank during auction/bid/ participation in negotiation etc.
5. In case during negotiation the negotiating team offers prices beyond the maximum
ceiling approved by the Credit Approval Committee (CAC) headed by Managing
Director & Chief Executive Officer, the same should immediately be placed before
the Credit Approval Committee (CAC) with cogent reasons for post facto
confirmation.
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6. Bank many also explore the possibility of housing the ‘purchased assets’ to SPV i.e.
Trust with a tie up with any Asset Reconstruction Company (ARC) and may remain
invested in Security Receipt of the Trust in order to avoid the hit in its books of
account in terms of NPA & provisioning if permissible within the ambit of law and
guidelines from Reserve Bank of India.
7. If the bid is finally knocked in favor of the bank the requisite approval will be obtained
from MCBOD before release of fund.
8. The Nodal Cell will take care of all requisite documentation including assignment of
debt in favor of the bank during release of fund.
9. On purchase / assignment of debt in favor of the bank, the non performing assets
will be parked either to Asset Recovery Branches or to the Zones which are nearer
to the place of activity or found convenient in terms of supervisory requirements,
vigorous follow up, chances of restructuring, monitoring of suit and other
administrative reasons.
Other Parameters:
1. Banks shall purchase non-performing financial assets from other banks only on cash
basis.
2. 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.
3. The purchase of non-performing financial assets from other banks is on “without
recourse” basis, i.e., the entire credit risk associated with the non-performing
financial assets will stand transferred to the purchasing bank.
4. A non-performing financial asset purchased by the bank should be held in its books
at least for a period of 12 months before it is sold to other banks. Bank should not
sell such assets back to the bank, which had sold the Non-performing financial
assets (NPFA).
5. Bank may purchase NPFA either on individual account basis or on basket/portfolio
basis. Bank may also go for purchase of homogeneous pool within retail non-
performing financial assets, on a portfolio basis. The pool of assets would be treated
as a single asset in the books of the purchasing bank 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.
Delegation of powers for taking decision on Purchase of financial assets:
1. As this is a new phenomenon all purchase of assets from banks/FIs/NBFCs
irrespective of outstanding balance, asset value and acquisition cost either on
individual account basis or on basket/portfolio basis will be placed before MCBOD
for approval.
2. The proposal to MCBOD will be placed through the Screening Committee of General
Managers comprising of General Manager (Credit), General Manager (F&A), the
General Manager (Recovery), General Manager (RMD) & General Manager
(Investment) of which three will be the quorum.
3. However specific permission/ approval will be obtained from the Credit Approval
committee (CAC) headed by Managing Director & Chief Executive Officer by the
General Manager (Recovery) for going ahead with such purchase, initiation of due
diligence, appointment of competent professionals, determining quote prices,
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participation in negotiation, formation of Nodal Cell & Negotiating Committee and
other requirements as and when required.
Accounting Policy:
In CBS system a separate head (BGL) will be opened for only operation by Head Office
under name and style of “Acquisition of Debts (NPFAs) from other Banks”. After the
approval of the Competent Authority for purchase of NPA from other Banks this BGL will
be debited with all types of cost/expenses on acquisition during purchase of non
performing financial assets from other banks. Any recovery in respect of non-performing
financial asset purchased from other banks shall first be adjusted against its acquisition
cost. Recoveries in excess of the acquisition cost shall be recognized as profit.
Other Operational Guidelines:
1. In case of suit filed/ decreed accounts the information on purchase of financial
assets will be duly informed to the DRTs/High Courts/other courts as applicable. The
purchase of asset will not change the suit/ decreed status of the account and the
same will stand transferred in the name of the purchasing bank.
2. In case of consortium advances, the information on purchase of financial assets will
be duly informed to other consortium members.
Prudential norms for Purchase Transactions

(A) Asset classification norms
1. The non-performing 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 to undernoted requirements.
“The estimated cash flows are normally expected to be realized 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”.
2. The asset classification status of an existing exposure (other than purchased
financial 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.
3. Where the purchase 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 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.
4. Any restructure/reschedule/rephrase of the repayment schedule or the estimated
cash flow of the non-performing financial asset by the bank shall render the account
as a non-performing asset.
(B) Provisioning norms

The asset shall attract provisioning requirement appropriate to its asset classification
status in the books of the bank.
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(C) Accounting of recoveries
Any recovery in respect of a non-performing asset purchased from other banks should
first be adjusted against its acquisition cost. Recoveries in excess of the acquisition cost
can be recognized as profit.
(D) Capital Adequacy
For the purpose of capital adequacy, banks should assign 100% risk weights to the non-
performing financial assets purchased from other banks. In case the non-performing
asset purchased is an investment, then it would attract capital charge for market risks
also.
(E) Exposure Norms
The bank will reckon exposure on the obligor of the specific financial asset. Hence the
bank 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.
(F) Disclosure Requirements
In terms of RBI guidelines, Bank which after purchase of non-performing financial
assets from other banks shall make the following disclosures in the Notes on Accounts
to its Balance Sheet:
Details of non-performing financial assets purchased:
1. (a) No. of accounts purchased during the year

(b) Aggregate outstanding (Amounts in Rupees Crore)
2. (a) Of these, number of accounts restructured during the year

(b) Aggregate outstanding (Amounts in Rupees Crore)
(G)Reporting of purchase of asset to RBI & CICs

The bank shall furnish all relevant reports to RBI, and all the Credit Information
Companies whose membership has been taken by the bank. in respect of the non-
performing financial assets purchased by it.
(H)Evaluation and Pricing of Financial Asset
The benchmark will be calculated as per process described in sale of assets to ARCs.
However, in case of purchase of NPAs from banks, the price bid to be given by the
Bank may be kept higher than the benchmark sum worked depending upon the
competitors in bidding process & quality of the asset offered for sale, as mentioned
above final bid price to be offered by the Bank will be decided by the competent
authority which will be considered on case to case basis.
GUIDELINES ON SALE/ASSIGNMENT OF BORROWAL ACCOUNTS OF HONG

KONG BRANCH:
Bank will sell/assign accounts of Hong Kong branch to ARCs/NBFCs/FIs/Banks in India
on Cash basis as well as Cash cum SR basis as mentioned above. However, sell of
borrowal accounts to Banks & FIs operating in Hong Kong will be restricted to Cash
basis only.
Bank will adopt process of sale/assignment prevailing in Hong Kong and adopted by
other Banks, which will be obtained from Hong Kong branch whenever required (viz
showcasing of accounts, due diligence process, inviting expression of interest & bids,
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completion of assignment agreement). Identification of accounts, approval of terms &
conditions, fixation of reserve price & basket and confirmation of bid will be carried as
mentioned for other borrowal accounts.
GUIDELINES ON MONITORING OF INVESTMENT MADE IN SECURITY RECEIPTS

DUE TO SALE/ASSIGNMENT OF BORROWAL ACCOUNTS ON CASH CUM
SECURITY RECEIPT BASIS:
During sale/assignment of borrowal accounts to ARCs on Cash cum Security Receipt
basis, investment in security receipts issued by purchasing ARCs is carried by FCTM
Mumbai. Keeping in view substantial exposure in security receipts, it is required to
formulate policy guidelines to be adopted by Head Office & FCTM Mumbai to enhance
monitoring tools for management of security receipts. These guideline are based on
suggestion received from Central Vigilance Commission vide MOF, GOI letter
F.No.14/2/2019/Vig/DV dated 14.02.2019 and past experience of monitoring of security
Receipts.
For Head Office:

 Quarterly meeting with ARCs will be conducted to evaluate recovery measures
initiated in respective accounts. Meetings will be convened at Mumbai/New
Delhi/other centres as per convenience of Bank& respective ARCs.
 Quarterly progress in accounts assigned by the Bank will be placed before
MCBOD for review.
 Bank will conduct audit of live trusts floated by ARCs to verify various charges
claimed by ARCs viz Management Fee, Incentive charged on recovery, other
expenses and redemption shared between Bank & ARC. Expenses incurred after
acquisition of assets for the formation of the trusts, stamp duty, registration, etc
which are not realized within 180 days from the planning period, will also be
verified during aforesaid audit.
 Such audit will be conducted annually through any official, who will send his/her
report on Annexure – 97 to ARC Cell, Recovery Department, Head Office for
further scrutiny. GM (Recovery) will arrange completion of such audit by deputing
suitable officials.
 If any deficiency observed in the report received from Inspecting Officials,
concerned ARC will be advised to rectify the same immediately.
 Compiled Report of audit carried out by Inspecting Officials will be placed before
Audit Committee of the Board for review.
For Nominated Officer:
 Bank will nominate an official (scale IV or above) as trustee (or as observer in the
meetings of Trust in case ARC is not agreeable) in the trust floated by ARCs,
which will be approved by General Manager (Recovery & Law). Nominated
official will oversee the process of sale recovery process of assets by the
concerned ARC along with evaluation of other expenses claim by the ARC.
For FCTM Mumbai
FCTM, Mumbai will look after management of security receipts viz maintenance of
records of trust wise NAV/ balance/redemption, maintenance of required provision,
quarterly reversal of excess provision, booking of depreciation, Audit of security portfolio
and other aspect as mentioned in various guidelines of the Bank.
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CHAPTER 17
ADOPTION OF e-AUCTION PROCEDURE & UPLOADING OF ALL AUCTIONS ON
GOVERNMENT TENDER WEBSITE FOR SALE OF ASSETS UNDER SARFAESI
ACT 2002
Ministry of Finance, vide their letter dated 13.06.2012, has directed introduction of e-
auction procedure for sale of assets under SARFAESI Act 2002 by the Authorized
Officers of the Bank/DRT. For conduct of e-auction, the Bank is adopting the
procedures provided by Ministry of Finance for empanelment of e-Auction Service
Providers.
Details of the terms & conditions entered with the Service Providers and Duties &
Responsibilities of Service Provider & Bank for smooth conduct of e-Auction are
mentioned respectively in enclosed Annexure-65 & 67. All the field functionaries are
advised to properly note and comply with the same meticulously.
The criteria, authority & procedures for empanelment of e-auction service providers
have been furnished below:
A. Eligibility criteria for empanelment of e-Auction Service Provider:
1. The e-auction service provider (vendor) must be a registered firm/ registered as a
company in India as per Company Act 1956 and should have been in operation for
a period of at least 2 years as on the date of empanelment.
2. The Vendor should be an ISO 27001 certified company for e-auction service.
3. The Vendor should have minimum annual turnover of Rs. 2.00 Crore during the
last 2 financial years.
4. The vendor should have registered profit (after Tax) for the last two financial years.
5. The Vendor must have their own office in at least three out of the seventeen cities
viz. Kolkata, Mumbai, New Delhi, Chennai, Bangalore, Hyderabad, Lucknow,
Varanasi, Patna, Ranchi, Chandigarh, Ahmedabad, Bhopal, Raipur
Bhubaneshwar, Guwahati and Jaipur.
6. The Vendor’s own establishment having infrastructure for providing the e-auction
service solution should be located in India
7. The Vendor must have successfully provided e-auction service in at least 2(two)
PSUs/Banks in India during the last 3 years.
8. The Vendor should have provided the similar services to any PSU/Bank in India for
minimum 100 cases during last/current financial year.
9. The Vendor should provide a recent (current financial year) satisfactory service
certificate from any Public Sector Bank.
10. The e-auction solution to be provided by the Vendor and related systems should
conform to the requirements of the amended IT ACT 2000 as well as to the Central
Vigilance Commission guidelines in this regard.
11. The Vendor shall have complete IPR (Intellectual Property Rights) to the software.
An affidavit stating the same and certifying that there is no other legal claims on the
software or the IP have to be submitted along with the application.
12. The Vendor should provide documentary evidence confirming that their software is
staged on excellent infrastructure and have been providing comprehensive support
to the online event and supplier / buyer helpdesk on the following parameters :
i. Number of staff on tech helpdesk.
ii. Locations supported in India - Online and Offline.
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iii. Concurrent Location Support in India - Online and offline.
iv. Number of concurrent events that can be conducted.
v. Contact address list of offices across the country
13. The Vendor should provide a declaration that they have never been debarred and/
or black listed by any organization
14. The Managing Director & Chief Executive Officer is authorized to amend/change/add
any criteria for eligibility of the e-auction service provider.
B. Authority for empanelment of e-auction service provider & its renewal &
cancellation:
A committee headed by Executive Director is empowered to accord approval of fresh
empanelment of e-auction service providers as well as renewal & cancellation of any
existing empanelled service provider. The other members of the committee are
1. GM (Recovery) – Convener,
2. GM (Credit Monitoring),
3. GM ( Plg & Dev)
4. GM (Inspection)
5. GM (IT)
The quorum will be with any three members out of above five
C. Procedures for empanelment & documentation:
a) The period of engagement will be for a period of two years. In case it is felt
necessary Bank may extend the arrangement for further period of 2 years on
review of their performance.
b) The services of the existing vendors are renewed for further period of 2 years
with the existing terms & conditions.
c) Bank will have minimum two e-auction service providers at any point of time and
can engage more vendors depending upon the requirement of the bank.
d) Bank can empanel any e-auction service provider without any bidding process if
any vendor agrees to provide the service with the existing payment terms & other
conditions on individual application and /or inviting application on paper
advertisement complying CVC guidelines.
e) In case no vendor agrees to work with the existing payment terms & conditions,
Bank may go for fresh empanelment of e-auction service provider through
bidding process.
f) Bank shall have the option of terminating the contract anytime during the contract
period by giving one month notice.
g) The service agreement vetted by the Legal Department, H.O. will be executed by
the service provider and the Bank. On behalf of the Bank the agreement will be
signed by the General Manager (Recovery).
The procedures to be followed for e-auction, uploading of sale notices issued under
SARFAESI Act 2002 on Government Tender Site & Bank’s Internet site, arrangement
for Facilitation centers, etc are described below:
D. PROCEDURE TO BE FOLLOWED BY THE FIELD FUNCTIONARIES FOR E-
AUCTION:
1. Preparation of Notice of Sale under SARFAESI Act 2002
Authorized Officer after collecting all the relevant information, will prepare Notice of
Sale for publication, its draft is enclosed as Revised Annexure-68. Please note that
the contents of Notice of Sale must match with bank’s record. In case of need
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Authorized Officer may take the assistance of Law Officer/ Law Manager/Panel
Advocates for preparing Notice of Sale for e-auction.
2. Publication of Notice of Sale in News Papers
The advertisements for sale of assets valued less than Rs I.00 crore may be
published in local newspapers having wide circulation, and for assets valued Rs.1.00
Crore & above the advertisements may be placed in national newspapers.
Government guidelines for publication of notices in Official Language have to be
meticulously followed.
3. Hosting of Notice of Sale on Government Tender Web Site and Bank’s Web Site
As advised in our earlier Head Office Instruction Circular No.11664/Recovery/2011-
12/04 dated.02.12.2011 all Notices of Sale under SARFAESI Act 2002 besides their
publication in News Paper have also to be uploaded on Government Tender Web
site (www.tenders.gov.in) and Bank’s Web site (www.allahabadbank.com). In this
regard Field Functionaries are advised to follow the guidelines/ procedures, the
details of which are explained below in Para (B) and they have to adhere to the
procedure described therein. Now in addition to copy of Notice of Sale, Process
Compliance Form (blank format enclosed with this circular as annexure-69) has
also to be hosted on Bank’s website, so that intending Bidders may down load
copies of same.
4. Selection of Service Provider for e-auction
Authorized Officer can select any of the HO approved e-Auction Service Providers in
consultation with their respective Zonal Heads. But it has to be kept in mind that
Service Provider has required infrastructure in the City/ Place where our Authorized
Officer is stationed. In case at particular location more than one Service Provider
have sufficient infrastructure, then efforts are to be made for equal distribution of
work amongst them. In case any deficiency is found in discharge of duties and
responsibilities of any of the Service Providers, same has to be reported by the
Authorized Officers to their respective Zonal Managers who in turn will report the
matter with their recommendation to Head Office Recovery Department for taking
further action in the matter.
5. Submission of information of e-auction to Service Provider by the Authorized
Officer of the Bank/Recovery Officer of DRT
Authorized Officer of the Bank/Recovery Officer of DRT has to submit undernoted
information /items to e-Auction Service Provider at least 7 (seven ) days before e-
Auction date :-
a. Information related to each e-Auction on the format enclosed with this circular as
Annexure-66, Please note that it has to be filled up with due care as the Service
Provider will act as per the directions /contents of this format only.
b. PDF files of Notice of Sale published in News Papers
c. jpeg/jpg images of photograph of the asset under sale.
d. After expiry of the time prescribed in the Notice of Sale for submission of EMD and
Process Compliance Form by the intending bidders, the Authorized Officer of the
Bank/ Recovery Officer of DRT has to submit the List of eligible bidders to the
concerned Service Provider on prescribed format enclosed with this circular as
Annexure-70. Please note contents of this statement (Annexure-70) and information
provided by the intending Bidders in their respective Process Compliance Forms
must match and also note that Service Provider will allow to participate in e-auction
to only those bidders whose names are appearing in the above list of eligible bidders
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and their details are matching with the information fed/entered by Intending Bidders
while registering with the Service Provider for participation in e-auction.
Please note all the above information has to be provided to the respective Service
Provider only through e-mail on mail I.D. mentioned above. Hard copies of all the
correspondences with Service Provider and all other records are to be kept with the
relevant file duly signed by the Authorized Officer.
6. Arrangement of inspection of Property/Asset under e-Auction
Authorized Officer has to ensure for the proper arrangement for inspection of the
property/asset under sale by all the desired intending bidders. In case Notice of sale is
issued by Recovery Officer of DRT then these arrangement are to be made by the
Branch Head whose Asset is under sale by DRT.
7. Important tips for Branches/ Authorized Officer to educate/ reply to queries of
Intending Bidder/ Purchaser regarding e-Auction.
a) Platform for e-Auction will be provided by our e-Auction service provider, whose
details will be mentioned in the Notice of Sale.
b) For the purpose of participation in e-auction, the bidder must have a valid Digital
Signature Certificate (DSC-Class II & above). Any intending bidder, presently not
having DSC may procure it from any Licensed Certifying Authority authorized under
Section 24 of the Information Technology Act 2000 (CA).
c) The intending participants of e-auction may download free of cost copies of the Notice
of Sale, Terms & conditions of e-auction, Help Manual on operational part of e-Auction
& blank Process Compliance Form (PCF) related to e-Auction from the web site of
Service Provider. Intending Bidders should be advised to properly down load these
documents, read and follow them strictly. In case of any difficulty or assistance is
required before or during e-Auction process, then they may contact Authorized
Representative of our e-Auction Service Provider whose details will be mentioned in
the Sale Notice.
d) Interested bidders may first login on the e-auction portal of the Service Provider as
mentioned in Notice of Sale & on line register as one of the participants for e-Auction,
download Process Compliance Form (PCF) & after filling it properly may submit the
same along with EMD with the concerned authorities as mentioned in the Notice of
Sale OR intending Bidder may first directly approach the Branch/ Authorized Officer.
In that case Branch/Authorized Officer has to explain the intending Bidder about
complete procedure of e-auction and may provide them blank format of PCF & also
advise them to submit the duly completed Process Compliance Form for participating
in e-auction along with EMD with the concerned authorities as mentioned in Notice of
Sale & at last on line register as one of the participants for e-Auction with the
concerned Service Provider as mentioned in the notice of sale.
e) Process Compliance Form should be duly filled in & signed by the authorized person
of the bidder only. It must contain i) Name ii) Address iii) valid e-mail id and Mobile
No., Contact No. (registered/ to be registered with above referred e-Auction Website)
f) After on line registration, Intending Bidder may request our concerned Service
Provider for imparting training on operational part of e-auction. This training will be
free of cost.
g) Earnest Money Deposit (EMD) and further payments of balance amount of bid quoted
by them during e-Auction is to be made as mentioned in the Notice of sale. Cheques
will not be accepted towards payment of EMD or subsequent payments.
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h) Bidders, who will not deposit the EMD & Process Compliance Form as per schedule
mentioned in Notice of sale, will not be allowed to participate in the e-auction even if
they have on line registered with the relevant Service Provider.
i) The intending Bidders /Purchasers are required to participate in the e-Auction Process
at e-Auction Service Provider’s website only & e-Auction will be conducted as per
schedule mentioned in the Notice of Sale.
j) During the e-auction bidders will be allowed to offer higher bid in inter-se bidding over
and above the last bid quoted and the minimum increase in the bid amount (Minimum
Increment Value) over the last higher bid of the bidders must be in accordance with
the amount mentioned in Notice of sale. Ten minutes time will be allowed to bidders to
quote successive higher bid and if no higher bid is offered by any bidder within ten
minutes to the last highest bid, the e-auction shall be closed
k) Our concerned Service Provider after finalization of e-Auction by the Recovery
Officers of Debt Recovery Tribunals/ Authorized Officers of the Bank (as the case may
be), will inform to only successful bidder through SMS/ email (on mobile no/ email
address entered by the Bidder while online registering with the concerned Service
Provider) about finalization of sale in their favour and will also advise them to deposit
the balance Bid amount quoted by them, in the manner mentioned in Notice of Sale.
E. ACTIVITIES ON THE DAY OF e-AUCTION
i). Related to Service Provider
a) To ensure that programming/Parameter setting in their server has been done in
accordance with terms & conditions mentioned in Notice of Sale & information
provided by Recovery Officers of Debt Recovery Tribunals/ Authorized Officers of the
Bank (as the case may be) in Annexure-66.
b) Concerned Bank/DRT officials are having valid Class II and above Digital Signature
Certificate (DSC) from any authorized Licensed Certifying Authority (CA). In case they
are not having then concerned Service Provider has to provide the same free of cost
to them.
c) Concerned Bank/DRT officials & intending Bidders who have requested for training
about operational part of their e-auction have been imparted required training (free of
cost).
d) Their authorized representatives are readily available on Mobile & Telephone numbers
whose details are mentioned in Notice of Sale.
e) Their Help Desk is properly operational.
f) Only those bidders are authorized to access the e-Auction site whose details are
provided by Recovery Officers of Debt Recovery Tribunals/ Authorized Officers of the
Bank (as the case may be) in Annexure-70.
g) Their authorized representatives have to be in constant touch with Authorized Officer
of the Bank/Recovery Officer of DRT.
h) e-Auction process has to be stopped as per prescribed schedule & after that
undernoted reports have to be submitted to the Authorized Officer of the
Bank/Recovery Officer of DRT through e-mail (as per e-mail ID provided /advised by
Authorized Officer of the Bank/Recovery Officer of DRT) and followed by hard copies
of the same by hand /post.
 Masking report
 complete auction log details/audit trails
 Ranking details of participated bidders with their final price and name
 Any other report required by Bank/DRT generated from the system
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i) On receipt of conclusion/ approval/ finalization of e-Auction from Authorized Officer of
the Bank/ Recovery Officer of DRT (as the case may be) to inform the successful bidder
on the day of e-auction itself through SMS/ e-mail (On mobile no/ email address entered
by the Bidder while online registering with the concerned Service Provider) about the
decision of e-auction in their favour & also to advise bidder to deposit the balance
payment of the bid amount quoted by them in accordance with the terms specified in
Notice of Sale. Copy of this message is also to be sent through SMS/ email to
concerned Authorized Officer of the Bank/Recovery Officer of DRT.
Authorized Officer/ Branch Head whose assets are under sale are advised to keep all
the reports (hard and soft copies) received from Service Provider intact for record &
inspection.
ii) Related to Authorized Officer of the Bank/Recovery Officer of DRT
a) They must possess Class II and above Digital Signature Certificate (DSC) issued by
any authorized Licensed Certifying Authority (CA).
b) To seek confirmation from Service Provider about readiness of activities of Service
Provider mentioned above at S. No. 8(i) (a) to 8(ii) (g).
c) Branch head and Authorized Officer of the Bank has to contact pre-mobilized
intending bidders & request them to participate in the e-Auction as per schedule
mentioned in Notice of sale.
d) In case any bidder contacts them for operational assistance during e-Auction
process then to immediately contact the authorized representative of the concerned
Service Provider & to request them to provide required help to the bidder.
e) To watch the progress of on line e-auction.
f) On receipt of reports mentioned above at S. No. 8A (h) from Service Provider, to
finalize /approve the e-Auction & accordingly inform the Service Provider through e-
mail for onward intimation to Successful Bidder.
g) To ensure that Highest /Successful Bidder is properly informed by the Service
Provider through SMS/ email (On mobile no/ email address entered by the Bidder
while online registering with the concerned Service Provider) about decision of e-
auction in their favor & to deposit the balance payment of bid amount quoted by
them in accordance with Notice of Sale.
h) To inform the Highest /Successful Bidder through e-mail about decision of e-auction
in their favor & advise them to deposit the balance payment bid amount quoted by
them in accordance with Notice of Sale, otherwise EMD & or other payments
deposited by them toward e-Auction will be forfeited in accordance with the Notice of
Sale.
F. Payment Terms & Payment of Bills of Service Provider

 The Branches shall pay HO approved rate per e-auction plus GST to the Service
Provider. Any other statutory levies will be deducted by the Bank.
 Bank will have to pay the bill of the Service Provider as per above mentioned rate
even when no bidder visits the e-auction site of the Service Provider for participation in
the bid process.
 The fees shall be payable by the Bank to the Service Provider within Sixty days after
completion of individual E-auction projects on receipt of invoice / bill from the Service
Provider, after successfully conducting the e-Auction.
227
 Since DRT / Bank, as the case may be, has right to accept / reject or cancel any bid or
e-auction without specifying any reason and in that eventuality, the Bank shall pay the
fee as above - per event to the Service Provider.
 Authorized Officer (in case of sale of asset under SARFAESI)/ Branch Head (in case
of sale of asset is conducted on order of Recovery Officer of DRT) on receipt of the
Bill/Invoice related to e-auction will scrutinize and approve the bill for payment to
Service Provider in terms of agreement. Payment will be released only through
Account Payee Banker’s Cheque/ Draft or through NEFT/RTGS directly in the account
of Service Provider within the stipulated period.
 Fee amount mentioned in the bill of the Service Provider will be debited to the
Charges Account Legal Expenses GST on it will be debited to the appropriate head as
per HO IC No.15884/GEN AC/2018-19/07 dated 27/08/2018. These amounts (Fee &
GST on it) will be debited to Charges Account of that branch whose assets are under
sale.
 Account wise details of above expenditure will be kept properly and whenever any
compromise or suit is to be filed or full amount is to be claimed from the borrower,
then, it has also to be included in the total claim amount.
Penalty
 If the e-Auction is cancelled due to any fault, technical fault / failure on part of the
Service Provider or for any reason attributable to the Service Provider, no fee shall be
payable by the Bank and the Service Provider as per directions of the DRT/
Authorized Officer of the Bank shall reimburse all expenses borne by the Bank for
conducting the said e-auction including publication of Notice of Sale in the
newspapers etc within 15 days of receipt of such directions/demand from the Bank.
 If such failure occurs, penalty if any, imposed by DRT / DRTs shall also be payable by
the Service Provider.
Miscellaneous
 All the above information & letters have to be sent to the e-Auction Service Provider
on their registered e-mail id only & print out of the same has to be kept properly in
bank’s record duly signed by the Authorized Officer of the Bank.
 For any clarification field functionaries may refer Manual on SARFAESI Act 2002
circulated by Head Office Legal Department (HO Instruction Circular
No11337/Legal/2010-2011/06 dated 25.03.2011). Bank has only adopted electronic
procedure (e-Auction) for Auction /Sale of assets in place of traditional submission of
sealed bids.
 Where e-auction is conducted on orders of Recovery Officer of DRT, then Branch
Head whose assets are under sale will have to coordinate with Recovery Officer of
DRT and Authorized Representative of the e-Auction Service Provider and he/she has
to ensure smooth conduct of e-auction as per Bank’s Circularized instructions.
G) PROCEDURES FOR UPLOADING OF ALL AUCTION/SALE NOTICES ISSUED
UNDER SARFAESI ACT ON GOVERNMENT TENDER WEBSITE
“www.tenders.gov.in”
The Department of Financial Services, Ministry of Finance, Government of India has
directed that all the auction/sale notices issued by the PSBs/FIs under SARFAESI Act
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has to be uploaded on the Government website (www.tenders.gov.in) minimum 30
days before auction/sale date to give more publicity for getting better response. It is in
addition to the existing rule/guidelines of publishing the auction/sale notice in two
leading newspapers (at least one in vernacular) having sufficient circulation in the
locality. As such all the Field Functionaries/Authorized Officers are advised to fix up the
auction/sale date in such a way that time taken for transmission of soft copy/ uploading
of the same on the above referred Government website is taken care.
If the mode of auction/sale of movable/immovable charged assets is decided either by
inviting tenders, public auction/e-auction, the Field Functionaries/Authorized Officers
should upload the sale notices on the Sale Notice Module of the Bank’s Intranet
Website http://10.11.24.51:8093/apps/sale/default.aspx. In this connection please refer
to Head Office Instruction Circular No.13450/Recovery/ 2014-15/02 dated 05.12.2014
for detailed guidelines.
Field Functionaries are further advised to take note of the following:
1. Every auction/sale/ corrigendum/ postponement/ cancellation notices is to be properly
numbered (Financial year wise) and its record is to be maintained in a register.
2. Guidelines for filling up of above referred Basic Information Sheet is given in last
column of enclosed Annexure-71 itself.
3. Product Category of Secured assets under auction /sale is to be mentioned against
item No. 5 after selecting from the list of the products given in Annexure-72.
4. Information given in Annexure-71 and auction/sale notice must be same.
5. Format/ Structure of Annexure-71 is not to be changed under any circumstances.
6. In case in auction/sale notice more than one property/asset is mentioned, then
Annexure-71 has to be filled up separately for each property/asset under
auction/sale.
7. Hard/ soft/ pdf copies, Tender/Auction/Sale notices and Annexure-71 are to be
properly checked and then only they are to be sent to Head Office for uploading
/display on Government tender site.
8. Before giving the copies of auction/sale notice for publication in newspapers
Authorized Officers of the bank must ensure about upload of auction/ sale/
corrigendum/ postponement/ cancellation notices on the above referred
Government website.
9. Any discrepancy in the auction/sale notice displayed in Government website is to be
immediately informed by the Authorized Officer to Head Office Recovery Department
and DIT Department for carrying out necessary amendments.
10. Auction/ sale notices are to be invariably sent to Head Office DIT for display on
Bank’s website.
11. The Authorized Officer will solely be responsible for the correctness of the
Auction/Sale notice displayed on above referred Government and Bank’s website and
published in news papers.
12. Printouts of Auction/Sale notice displayed on above referred Government site is to be
kept on record along with news papers clipping (Ad given in news papers).
13. In case there is any amendment in the published sale notice / cancellation or
postponement of auction /sale then also pdf copy of said corrigendum /
postponement / cancellation notices are to be sent to Head Office Recovery
Department through email, over FAX and by post for display on above referred
Government website. Head Office Recovery Department will pass on the email / soft
229
copies .of auction / sale / corrigendum / postponement / cancellation notices received
from Authorized Officer to Head Office DIT for upload/display of the same on
Government website and Bank’s website.
H. PUBLIC SHORT NOTICE IN NEWS PAPERS FOR SALE OF IMMOVABLE &
MOVABLE PROPERTIES UNDER SARFAESI ACT, 2002. (E-AUCTION)
In order to minimise the expenses on account of publication of a full-scale Notice of
Sale in news papers and to high light the salient features of assets under sale so that
maximum number of bidders can be attracted, it has been decided to publish a short
notice on the specified format (Annexure-73) of Notice of Sale for the purpose of
publication in leading News Papers. However the Branches/Authorised Officer shall
continue to up load the complete Notice of Sale Revised Annexure-68 on web portal of
Government of India (www.tenders.gov.in), Bank’s Web site
http://www.allahabadbank.in and that of the e-Auction Service Provider which can be
easily downloaded by the intending bidders/any interested party. For the convenience of
the field functionaries a sample of e-auction Notice to be published in News Papers has
been provided in Annexure-74). It is to be noted that it is a sample only.
I. FACILITATION CENTRES IN RURAL AREAS FOR e-AUCTION
To enable the prospective buyers in rural areas who may be interested for the bidding
through e auction, it has been suggested by Ministry of Finance in a meeting of the
General Managers of PSBs, Recovery Officers of DRTs convened on 27.05.2013, that
in rural areas the Banks are required to make arrangements for the Facilitation
Centres in their branch nearest to the location of the property proposed to be sold, to
provide all assistance to the prospective bidders. The following action points are to be
taken by Zones/branches in this regard.
I. Zonal Offices/ Branches/ ARMBs are advised to establish Facilitation Centres at the
nearest branch/es and/or suitable locations of the property/ies while fixing e-auction
of properties in individual cases.
II. The details of such Facilitation Centre should also be provided to the Recovery
Officer of the DRT as and when e auction is conducted through DRT.
III. The name, location, communication address etc. of the Facilitation Centres has to
be included in the Sale Notice.
IV. Such Facilitation Centers should have proper infrastructure and logistics like
computers / laptops with internet connectivity for logging in the site of e-Auction
Service Provider and to facilitate the intending bidders / purchasers to enable them
to get registered as bidders with the Service Provider, deposit of EMD, taking part in
bid process and completion of all other formalities required for e-Auction.
V. The Facilitation Centre shall also provide all assistance to the prospective bidders to
participate in the e-Auction process on the date of the e-auction till end of the
auction process. In case of e-Auction is conducted by DRT, then the Nodal Officer of
the Bank for DRT will co-ordinate for establishment of Facilitation Centre and will
ensure smooth functioning thereof.
VI. The Zonal Office whose charged asset is being put to sale, shall identify the
Facilitation Centre and the Zonal Office in whose jurisdiction the Facilitation Centre
falls (if falls in other Zone), shall extend necessary support required for
establishment of Facilitation Centre in consultation with e-Auction Service Provider.
Both such Zonal Offices will work in proper coordination for mobilizing the bidders,
230
extend necessary guidance to the intending bidders to participate in the e-Auction
process and ensure that the Facilitation Centre functions properly & smoothly.
VII. In the form of Sale Notice (Annexure 68) point number 21 is to be added in the sale
notice only in cases where charged assets under sale are located in rural areas.
J. ADOPTION OF PROCEDURE OF AUCTION AS PER DIRECTIONS OF DRT

FOR SALE OF ASSETS LOCATED IN RURAL AREAS:
The Department of Financial Services, Ministry of Finance, Government of India

advising has advised that in light of the observations of the Hon’ble High Court of
Punjab & Haryana in its judgment dated: 26.02.2014 in the case of Dr. Mandeep Sethi
VS. Union of India (CWP NO. 21862 of 2012), the above guidelines in connection with
e-auctions have been revised to the extent that in cases of properties situated in rural
areas, where the response is not adequate or for any other reason, if, the Tribunals
deemed it necessary such other method may be adopted as the Tribunal may consider
appropriate for sale of the property of the defaulters. All field functionaries are advised
to ensure that proper arrangements are made for execution of the method of Sale as
directed by DRT with respect to Sale of Assets located in Rural Areas in pursuance of
the above Instructions of Ministry regarding Sale Assets in Rural Areas.
231
CONCLUSION
1. This Recovery Management Policy is meant for only private circulation to our Bank’s
branches and offices. These guidelines are only indicative and not exhaustive.
Modifications/introduction of new schemes may be done from time to time with the
approval of the Board to suit the changing requirements and such amendments shall
be advised to branches/ zones through HO Instruction Circulars/ Circular Letter by HO
Recovery Department.
2. As far as possible, there should not be any material deviation from the general
principles as laid down in the policy guidelines. There could, however be situations
and cases where it is expedient in the interest of the Bank to deviate from the specific
provisions of this policy. The appropriate authority to approve the deviations from the
specific provisions or any changes particularly with respect to financial & approval
authority level of this policy shall be the Board, non-financial matters including change
in constitution of committees by the Managing Director & Chief Executive Officer and
in his/her absence Executive Director or by the specific Competent Authority as
mentioned in the policy. The Operational Risk Management Committee of the Bank is
authorized to approve various standard operating procedures as required to be
adopted for smooth functioning and effective implementation. After implementation of
this policy any guidelines/ circulars/ instructions issued by RBI/Govt. of India/any
statutory authority will supersede the relevant provisions/guidelines of this policy. The
General Manager (Recovery) is authorized to modify/ change the existing review
formats/Annexures/Performa/ manual or introduce new Performa/ manual/Annexures
for effective implementation of this Recovery Management Policy as and when
required. All the documents, the contents of which are legally binding on the bank/
borrower/ guarantor/ third party should be vetted by HO Legal Department or by legal
panel advocate/retainer. All formats/Performa mentioned in this Policy document with
specific Annexure number would be / are available in the Bank’s intranet site for
reference and use of the field functionaries.
3. The entire recovery management policy of the Bank is formulated with the aim of
effective NPA management so as to bring the gross NPA %, net NPA %, provisioning
requirement, provision coverage ratio etc. to the internationally acceptable level. The
policy has outlined various measures for effectively reducing the NPAs from the books
of the bank which are causing severe strain on the bottom line of bank’s financial
indicators. The menace of NPA in a financial sector, such as banking cannot be simply
eradicated, but all our efforts should be aimed at containing the same within
manageable level and these policy guidelines are aimed at achieving this goal.
4. When the loans and advances become NPA and do not generate any yield (Interest/
Commission income) it becomes a severe strain on the whole functioning of the
Bank vis a vis its profitability. Over a period of time, the RBI had been tightening
the IRAC norms by progressively reducing the delinquency norms (presently 90 days),
shortening of parking period in initial stages of NPA (presently 12 months in
substandard category) and progressively increasing the provisioning requirement.
With the present guidelines, an account reaches Doubtful - 3 categories in 48 months
from the date of first becoming NPA and the provision requirement at this stage is
100% of the outstanding dues irrespective of the value of security. Thus an NPA in
232
Doubtful - 3 category needs 100% provision (which is a drain on bank’s P & L a/c)
without contributing any receipts to its P & L a/c apart from incurring additional
carrying cost. The cost of carrying these NPAs in the books of the bank over a period
of time, increases many folds, thus making a severe dent in the profitability of the
Bank.
5. Please note that every recovery in an NPA account results in release of provision
already held or obviates the need for additional provision due to aging, which is a
direct contribution to the Bank’s profitability.
6. Thus prevention of NPA, by taking remedial measures before the accounts slip to NPA
category, is the best way of keeping up the profitability of each Branch at a micro level
and the Bank as a whole in the macro level. If an account has become NPA (due to
various factors), it is of paramount interest that we try to bring back the account to
performing status at the earliest either by way of recovering the overdue amount/
effect recovery by compromise/ legal action or invocation of SARFAESI Act, 2002/
Insolvency & Bankruptcy Code so that the resulting NPA is wiped out from the books
of the bank and the loss due to carrying cost of provision can be averted.
7. For recovery of NPA field functionary can opt for number of actions (constant contact
/follow up with the borrower and guarantor for regularization of the account, issuance
of legal notice, filing of Recovery/Civil Suit at Civil Court/DRT, refer the case to Lok
Adalat, initiation of action under SARFAESI Act 2002, issuance of Recovery
Certificate as per State Law’s (whichever is appropriate), declaration of borrower as
Willful Defaulter & go for Compromise where it is observed that value of the charged
assets is less than Bank’s dues or sale of the charged asset is difficult for realization
of Bank’s dues. Field functionaries have to choose the appropriate recovery action &
execute the same strictly in compliance of Bank/Govt./RBI/IBA guidelines.
8. Further, the written off accounts are to be considered as ‘hidden treasure’ for the
bank, since any recovery made in written off account directly adds to bank’s bottom
line. Therefore, the branches should maintain record of such accounts in a very
organized and systematic manner so that the recovery drives may be taken up in each
such account by the field functionaries. The Zones should maintain a database of
written off accounts branch wise and must ensure regular follow up and monitoring in
this vital area with record of track of recovery.
**********
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Allahabad Bank Recovery Management Policy

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Allahabad Bank Recovery Management Policy

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Instruction Circular No: 16440/Recovery/2019-20/02 Date: 01.04.

RECOVERY MANAGEMENT POLICY

Instruction Circular No: 16440/Recovery/2019-20/02 Date: 01.04.2019

RECOVERY MANAGEMENT POLICY: 2019-20

After release of Recovery Management Policy 2018-19, certain important

The Annexures/ formats/ specimen/ drafts of various reports, working sheets,

Hindi version of this circular will follow.

2. Out of Order status

An account shall be classified as Non-performing Assets (NPA) for various types

n. Accounts with temporary deficiencies

RULES OF COMPUTATION OF UNCHARGED INTEREST IN NPA ACCOUNTS IN

B) Written off accounts

C) Prudential Written off accounts

II. Doubtful Assets

a. Doubtful Assets (DF I)

b. Doubtful Assets (DF II)

c. Doubtful Assets (DF III)

III. Loss Assets

Accounts, where guarantee from ECGC/CGTMSE are available, should not be

A NPA need not to go through various stages of classification in cases of serious

GUIDELINES FOR CLASSIFICATION OF ASSETS

1. Accounts regularized near about the balance sheet date

2. Upgradation of loan accounts classified as NPAs

iii. Derivative Contracts

5. Advances under Consortium Arrangements

6. Accounts where there is erosion in the value of security/ frauds committed by

7. Advances to Primary Agricultural Credit Societies (PACS)/ Farmers’ Service

8. Advances against Term Deposits, National Savings Certificates (NSCs), Kisan

9. Loans with moratorium for payment of interest

10. Agricultural advances

11. Government guaranteed advances

(B) Project Loans

(C) Project Loans for Infrastructure Sector

a. Infrastructure Projects involving court cases

Particulars Provision Requirement

(E) Other Issues

(iii) Project Loans for Commercial Real Estate

(F) Income recognition

b) Conversion into equity, debentures or any other instrument:

13. Change in ownership

14. Takeout Finance

15. Post shipment Supplier's Credit

16. Export Project Finance

(FOR LATEST GUIDELINES ON ASSET CLASSIFICATION/ IRAC NORMS PLEASE

17. Transactions Involving Transfer of Assets through Direct Assignment of Cash

A. If our Bank is Originating Bank:

Period for which the advance Asset IRAC Code Provision

Note: Valuation of Security for provisioning purposes

6. Prudential norms on creation and utilization of floating provisions

As a countercyclical measure, on February 7, 2014, banks were permitted by RBI to

7. Additional Provisions for NPAs at higher than prescribed rates

8. Provisions on Leased Assets

iii) Loss assets

I. In respect of advances under rehabilitation package approved by BIFR/term lending

Provision required to be made

g) Reserve for Exchange Rate Fluctuations Account (RERFA)

h) RBI guidelines for Provisioning for country risk

v) In terms of the Discussion Paper on Introduction of Dynamic Loan Loss Provisioning

12. RBI Guidelines on Security Value in NPA Loan Accounts:

The Realisable Value should be estimated on realistic basis. It is to be assessed by the

Other related concepts/ guidelines:-

Types of approved Valuers:

Valuation by Bank Officials:

Valuation of different types of Securities: