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ARGUMENTS Question of law1. How an account with liquid security can be treated as NPA. RBI/2011-12/66 DBOD.No.BP.BC.12 /21.04.

048/2011-12 July 1, 2011 Master Circular - Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs and life policies need not be treated as NPAs, 2. How legal action can be initiated when there is full scope of REHABILITATION. Ref. DBS.FID No.C-3/ 01.02.00 / 2003- 04 Date: Jul 17, 2003 Slippage of Non-performing assets Preventive measures

Legal action may be initiated once the Banks/FIs are convinced and have reached the conclusion that rehabilitation is not possible and there is no other way out. Question of Fact1. Why the surplus security in the form of LIC Policies has not been released ? RBIS Educational Loan Scheme RPCD.PLNFS.BC.NO.83/06.12.05/2000-01 April 28, 2001 7. SECURITY : Upto Rs.2 lacs Above Rs.2 lacs : Collateral security equal to 100% of the loan amount or guarantee of third person known to bank for 100% of the loan amount. : No security

2. Why the maturity proceeds of Rs.2,18,657

received from LIC has been appropriated in Educational loan account WHERE THERE IS NO OVERDUE and which is under MORATORIUM ? RBI/2011-12/66 DBOD.No.BP.BC.12 /21.04.048/2011-12 July 1, 2011 Master Circular - Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances 3.3.2 banks should adopt an accounting principle and exercise the right of appropriation of recoveries in a uniform and consistent manner. 4.2.12 Loans with moratorium for payment of interest . 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.



EDUCATIONAL LOAN A/C 1. Course completion date23-12-09

2. RBIs moratorium upto3. Extended moratorium upto( by Ministry of Finance)

23-12-10 23-12-11

Hence the repayment could start only from Jan.12 OD A/C ( limit Rs.7 lacs )

The account was opened more than SEVEN YEARS back and was quite regular right up to Aug.10 when an online-complaint was lodged by me on 14-8-10 following non-release of our LIC policies(worth Rs.7 lac approx.) and thus we were only constrained to stop the operations in this a/c UNDER DURESS which became overdue only from Sept.10 as under1st Aug.10 - Rs.6, 99,774 1st Sep.10 - Rs.7, 07,961 1st Oct.10 - Rs.7, 14,763 1st Nov.10 - Rs.7, 21,640 27th Dec.10 Rs.7,30,332 (at the time of issuing 13(2) notice)

Moreover the bank has appropriated the maturity amounts received from the LIC office ( Rs. 2,18,657) in the EDUCATIONAL LOAN A/C where there is no overdue and thus could have been credited in the OD A/C.