Npa Management

NPA MANAGEMENT POLICY
NPA Management Policy

Strictly Confidential
NPA MANAGEMENT POLICY

INDEX
Contents Page No.
1. SECTION 1: Introduction 3–5

2. SECTION 2: Management of Distressed Accounts 6 - 10
3. SECTION 3: General Guidelines – Management of NPAs 11-22
4. SECTION 4: Restructuring of NPA Accounts 23-24
5. SECTION 5: Recovery through Settlement (OTS/NS) 25-61
6. SECTION 6: Recovery through action under SARFAESI Act 62-83
7. SECTION 7: Sale of financial assets to ARCs/ BANKs/ FIs/ 84-86
NBFCs
8. SECTION 8: Policy on Collection of Dues and Repossession of 87-91
Security
9. SECTION 9: Legal Measures for Recovery (Suit file) 92-99
10. SECTION 10: Other Measures for Initiating Recovery 100-113
10.2 Identification & attachment of un-encumbered assets of 100-102
Promoter/Guarantor
10.4 Classification and Declaration of Borrowers, its Directors & 103-107
Guarantors as Wilful defaulters
10.5 Classification and Declaration of Borrower as Non-cooperative 107-110
borrower
10.6 Initiation of prosecution: Section 138 Negotiable Instruments Act, 110-111
1881 (NI Act) & Section 25 of the Payment & Settlement System
Act, 2007
10.7 Red Flagged Accounts 111-112
10.8 External Agency 112-113
11. SECTION 11: Recovery through Lok Adalat 114-118
12. SECTION 12: Credit Card NPA 119-120
13. SECTION 13: Physical Write-Off of NPA accounts 121-123
14. SECTION 14: Prudential/Technical Write-off of NPA accounts 124-124
15 SECTION 15: Review of NPA / TWO Accounts 125-129

SECTION 1
Introduction
1.1 Maintaining high asset quality, almost synonymous with sustainability of profitable
asset creation, is one of the most important and core business objectives of the
Bank. Stress in asset portfolio and impairment dents earning, saps capital and in
extreme conditions impact credit and reputation risk. All efforts are aimed at
ensuring that Non Performing Asset (NPA) portfolio of the Bank is maintained at
an acceptable level. In a competitive credit market where the interest spreads are
wafer thin, Bank can ill afford to allow overhang of stressed assets in the portfolio,
save alone slippage in quality of assets. Therefore, the Bank has been adopting a
two pronged strategy i.e., stricter underwriting regime to contain incidence of fresh
slippage and prompt action for orderly resolution / recovery of NPAs. While
incidence of NPAs as a part of business risk cannot be fully eliminated, following a
roboust stressed asset management regimen, it is possible to limit the overall
distressed and NPA portfolio within a manageable level. This NPA Management
Policy document covers Bank’s policies to achieve the above objectives.
1.2 RBI's regulatory framework on Income Recognition & Asset Classification (IRAC)
emphasizes the need for monitoring, containment and reduction of NPAs in the
portfolio to maintain healthy financial position of Banks.
1.3 RBI has advised all Banks to place before their Board of Directors, a Recovery
Policy, which lays down the manner of recovery of dues, targeted level of reduction
in NPAs, norms for permitted sacrifice / waiver, factors to be taken into account
before considering waivers as per Delegated Authority, and monitoring of write-
off/ waiver cases etc. Accordingly, the Bank has a Board approved NPA
Management Policy in place. The policy was last reviewed by the Board in its
meeting held on January 31, 2018.

1.4 The guidelines prescribed under NPA Management Policy are not Subordinate
legislation nor are they administrative instructions enforceable in courts of
law. They are merely executive instructions of commercial nature. The
guidelines under the Policy do not create any vested right either under law or
under equity in favour of borrowers or any other party.
1.5 The existing NPA Management Policy is reviewed and updated based on the
experience, developments in the Regulatory Framework and the need for
operational simplifications to sub serve the overarching objective of
identification and containment of stressed assets and NPAs.
1.6 This policy is applicable to all the Retail and Corporate advances of the Bank
subject to sector specific relaxations/ modifications, which will be
communicated through circulars to be issued from time to time by the Bank.
1.7 Objective
The objective of the NPA Management Policy is to lay down framework for
containment of fresh slippages, resolution and recovery from non-performing
accounts through a structured, pro-active approach by adopting timely and
simultaneous action.
This entails constant monitoring and follow-up of accounts indicating incipient

sickness to address the cause of stress and evolving a suitable remedial measure
like rationalization of facility, restructuring, extension of need based assistance etc.
If a reasonable solution is not available, recovery or exit option shall also be
adopted.
An account classified as non-performing shall be subjected to close monitoring,

constant follow-up and a suitable proactive corrective action plan shall be drawn up
including but not limited to:

 Engagement with the borrower to assess the viability of the business under
stress with a view to draw up and implement a revival plan, if feasible
 Recovery by way of sale of Secured Assets under SARFAESI Act, 2002.
 Recovery through DRTs/Civil Courts
 Enforcement of Liquid Securities like Pledged Shares, MF Units, LIC
Policies, Margin Money held in Fixed Deposits / Current Accounts etc.,
 Exit strategy including One Time Settlement (OTS), Negotiated Settlement
(NS) and Sale of Financial assets / Assignment of Debt (AoD) to Asset
Reconstruction Companies (ARCs)/ Banks/ FIs/ NBFCs.
1.8 The regulatory guidelines as issued by RBI from time to time regarding Asset
Classification, Provisioning and Recognition of Income with respect to NPA
accounts shall be strictly adhered to.
1.9 In the event of revision/ modification in the prescribed norms/ guidelines of

Reserve Bank of India or any other Statutory/ Regulatory authorities or instructions
from the Govt. of India, the policy prescriptions would automatically stand
amended (a suitable circular would be issued internally), which would subsequently
be incorporated in the next review to be put up to the Board.
1.10 The policy shall be subjected to annual review by the Board. MD & CEO may
approve any changes to the policy necessitated due to change in regulatory /
statutory provisions or other market developments.

SECTION 2
Management of Distressed Accounts
2.1 The Bank will continue focused approach on monitoring of all accounts so as to
identify build up of imminent stress in the account and take immediate corrective
actions.
2.2 In view of the enactment of the Insolvency and Bankruptcy Code, 2016 (Code),
RBI has introduced a Revised Framework for Resolution of Stressed Assets vide
circular RBI/2017-18/131/DBR.No.BP.BC101/21.04.048/2017-18 dated February
12, 2018. With the introduction of aforesaid framework RBI has withdrawn the
extant instructions on resolution of stressed assets such as Framework for
Revitalising Distressed Assets, Corporate Debt Restructuring Scheme, Flexible
Structuring of Existing Long Term Project Loans, Strategic Debt Restructuring
Scheme (SDR), Change in Ownership outside SDR, and Scheme for Sustainable
Structuring of Stressed Assets (S4A).
2.3 RBI directed all the lenders to put in place Board-approved policies for resolution of
stressed assets under the revised framework, including the timelines for resolution.
Accordingly, Bank formulated a policy and the same has been approved by Board
at its meeting held on March 21, 2018 and was circulated vide circular 2018-
19/20/CBG/SS-CB/01 dated April 02, 2018.
2.4 Early Identification
 The Bank shall identify incipient stress in loan accounts, immediately on default
(definition of default as per 2.5), by classifying the stressed assets as special
mention accounts (SMA) as per the following categories.
SMA Sub-categories Basis of classification - Principal or interest payment or
any other amount wholly or partly ovedue between
SMA-0 1-30 days
SMA-1 31-60 days
SMA- 2 61-90 days

2.5 The Default is defined as under
 For Term Loans – Non-payment of debt when whole or any part of the
instalment of the amount of debt has become due and payable and is not repaid
by the Debtor or Corporate Debtor as the case may be.
 For revolving facilities like cash credit, default would also mean, without
prejudice to the above, the outstanding balance remaining continuously in
excess of the sanctioned limit or drawing power, whichever is lower, for more
than 30 days.
2.6 Steps/Actionables on identifying default
 The Bank shall call for a Resolution Plan (RP) from the borrower within 15
days from such default in case of Sole Banking Arrangement, or in Multiple
Banking Arrangement where IDBI Bank has the largest exposure or where in
Consortium IDBI Bank in the lead. In other cases, the Bank would request the
lead lender/largest lender to hold Joint Lenders Meeting so as to start
formulating a RP, within 15 days from such first default.
 In all cases where RP would need to be worked out, preferably in the first JLM
itself, consent of all lenders would be taken for carrying out the fresh TEV
study, asset valuation and Stock and Receivables Audit. Carrying out a Forensic
Audit and Enterprise Valuation shall be considered on case-to-case basis
 As soon as there is a default in the borrower entity’s account, the Bank (singly
or jointly) shall initiate steps to cure the default. The RP may involve any
actions / plans / reorganization including, but not limited to, regularisation of the
account by payment of all over dues by the borrower entity, sale of the
exposures to other entities / investors, change in ownership, or restructuring.
The RP shall be clearly documented by all lenders (even if there is no change in
any terms and conditions).
 A RP shall be deemed to be implemented only if (i) the borrower entity is no
longer in default with any of the lenders, (ii) all related documentation &
creation/perfection of security are completed by all lenders, and (iii) new capital

structure, including changes in the terms of sanctions of the existing loans, get
duly reflected in the books of all the lenders & the borrower.
2.7 The accounts falling under SMA categories require enhanced attention and action
for early resolution. All credit sanction/review/renewal/modification notes shall
mandatorily indicate the SMA status of the account with our Bank and also with
other Bank. Apart from reporting requirements (as per 2.8) and Actionables (as per
2.6) under the regulatory guidelines, such accounts shall be subjected to the
following supervisory regime:
2.7.1 SMA-0 Accounts
The account featuring in SMA-0 shall be subjected to monitoring so as to avoid

further deterioration. The client engagement to evolve suitable revival / action plan
depending on case specific parameters shall include the following:
 Take up the unit visit/ collateral visit and address deficiencies if any
 Appoint Stock / Debtors Audit, if unit visit throws up any deficiency or debtors
show an increasing trend or higher ageing or increasing collection period
 Cash flow in the account shall be monitored. In large credit exposures (above
Rs 250.00 crore) if deemed necessary, Agencies for Specialized Monitoring
(ASMs) may be engaged.
 The documents shall be verified for re-confirming their genuineness and
enforceability.
 The security perfection, the registration with ROC/CERSAI/Others shall be
verified and re-confirmed.
 To contact/visit major debtors and suppliers to evaluate any emerging concerns
or business distress
With the above follow-up and intense engagement with the customer a clear action
plan for revival/re-structuring/ phased exit shall be drawn up and followed through.
Wherever, the default is on account of temporary problems, suitable support shall
be extended to ensure that the account comes out of SMA status at the earliest.

2.7.2 SMA-1- Accounts
SMA 1 classification indicates a tipping point/ inflection point in the movement of

asset from standard category to non-performing category. SMA-1 category gives
little breathing time to conclude and implement any possible Resolution plan.
Accordingly SMA-1 accounts shall be subjected to focused attention, intense
monitoring and follow-up and persistent client engagement to draw up
 A clear strategy for sustainable revival or
 Structured exit or
 Initiation of necessary action plan for early recovery.
In addition to actions under SMA-0 accounts all SMA-1 accounts (GPO of Rs. 10
crore and above) may be subjected to following actions:
1) Examination of symptoms leading to red-flagging and consequent actions

2) Examination of any repeated instance of non-cooperation and classification as
non-cooperative borrower.
3) A fresh revival letter/ acknowledgement of debt shall be obtained.
2.7.3 SMA-2- Accounts

If an account is classified as SMA-2, in addition to action indicated under SMA-0
and SMA-1, the following actions shall be initiated:
1) Issue a legal notice of default with copy of notice to personal/corporate
guarantors seeking rectification of accounts/clearance of dues.
2) Ensure that the assets charged to the Bank are adequately insured and insurance
is valid and current
3) In SMA-2 accounts where the revival is perceived to be difficult and the
outstanding principal is Rs.50 crore and above, the pros and cons of referring the
account to NCLT may also be examined and suitable action be taken, wherever
necessary (NCLT does not require the account to be classified as NPA).

4) If any account is reported as SMA2 by any other Bank but Standard with IDBI
Bank, the account should be monitored with same intensity and rigor as applicable
for Bank’s SMA-2 accounts.
2.7.4 Review of SMA:
All accounts featuring under Special Mention Account shall be subjected to
periodical review as prescribed under the Credit Monitoring Policy, Credit Policy
and other guidelines issued from time to time.
2.8 Reporting of SMA Accounts
 Central Repository of Information on Large Credits (CRILC) has been set up by

RBI to collect, store and disseminate credit data on borrowers. Bank is required
to furnish credit information to CRILC on the borrowers having aggregate fund-
based and non-fund based exposure of Rs.5 Crore and above.
 Bank reports, among others, the SMA status (SMA-0, SMA-1, SMA-2) of the
borrower to CRILC on monthly basis.
 In addition, the Bank shall report to CRILC, all borrower entities in default
(with aggregate exposure of Rs.5crore and above), on a weekly basis, at the
close of business on every Friday, or the preceding working day if Friday
happens to be a holiday.
 Bank shall report to CRILC, default of borrowers (i.e. moved in) and borrowers
moving out of default during the week ending every Friday (reporting date)
clearly indicating the date of default / date of moving out of default.
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SECTION 3
General Guidelines – Management of NPAs
3.1 Managing NPAs within the acceptable level is the sine qua non of NPA
Management Policy. Towards this objective, the basic approach shall be pragmatic
and depend on circumstances and characteristics of each case. The emphasis shall
be on timely action whether it is for recovery of NPAs or legal action. It is
recognized that any delay in decision making could impact the chances of recovery.
3.2 All NPAs need not be on account of borrower’s inefficiency and mis-management.
The other imparting factors also require adequate attention. All credit facilities are
required to be followed up and monitored in terms of both external and company
specific factors impacting the business to take necessary action to contain slippages.
However in the event of delinquency, immediate action shall be initiated to
accelerate and maximize recovery.
3.3 The course of action like preventive /corrective /enforcement / legal actions need to
address the contributory factors and challenges faced. Accordingly suitable, quicker
and more effective course of action among available options need to be adopted. It
would also be required to embark on multiple approaches simultaneously to exert
necessary pressure for early Resolution / Recovery of NPA.
3.4 Various courses of action available for resolution of NPAs depending on the Nature
of Facility, Potential for Continuation and / or Revival of the Business, Security
Available and its Valuation, Third Party Guarantees & Comforts etc., shall include:
 Engagement with the borrower to assess the viability of the business, draw-
up and implement a revival plan.
 Implementation of Resolution Plans (RP) for stressed assets under the
Board approved policy. The RP may involve any actions / plans /
reorganization including, but not limited to, regularisation of the account by
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payment of all over dues by the borrower entity, sale of the exposures to
other entities / investors, change in ownership, or restructuring.
 Recovery through Legal Remedies (Enforcement of Security under
SARFAESI Act / DRT /Civil Courts/ IBC etc).
 One Time Settlement (OTS)/ Negotiated Settlement (NS)
 Recovery through Lok Adalat
 Sale of NPAs to ARCs/ Banks/ FIs/ NBFCs
3.5 Recovery Process:

The recovery process shall be multi-pronged to avoid any loss of time and to ensure
early resolution / realization. Accordingly the following steps shall be followed:
 Recall & Invocation of personal/corporate guarantee - Recall the
financial assistance and invoke the guarantees.
 Encash the liquid securities like margin money (in the form of FD /
amount under lien etc.), units of mutual funds, assigned policies etc.
 Invocation of Pledge of Shares and encashment: Wherever, the promoters
have pledged shares of other listed companies, including their own group
companies, the same may be encashed (after giving statutory notice to the
pledgors and the defaulting borrower). In case, the borrower approaches for
not selling such shares, proper assessment shall be made within reasonable
time if any mode of resolution is clearly visible. If not, sale of shares must
be proceeded with.
 Initiate Action under SARFAESI Act, 2002: Initiate immediate action for
issuance of SARFAESI notice after identifying eligible assets by assessing
the value and nature of security (both fixed and current assets) charged by
way of hypothecation / mortgage to the Bank. Subsequent follow-up actions
under the provisions of the Act shall be undertaken without delay.
 Filing suit / recovery application before DRT/Court: Initiate timely action
and while filing suit/recovery application before DRT, additional prayer for
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seeking declaration of assets ( not charged / mortgaged) by the borrower /

guarantor under oath to be made a part of the suit / recovery application.
 Revival / Restructuring package: Engage with the borrower
simultaneously to work out any possible revival plan / restructuring package
if on due diligence, the unit is found to be viable. If revival / restructuring is
not worked out within 6 months of account turning NPA, the action under
SARFAESI act may be continued in order to exert necessary pressure on the
borrower. In case of finalisation of the package, Bank may withdraw/ defer
/keep in abeyance the SARFAESI action. If the package cannot be worked
out, the Bank would have saved valuable time and can proceed to realize the
security under SARFAESI Act.
 Other hard recovery measures: Declaring the company/
promoter/guarantor as wilful defaulter, non-cooperative borrower, initiation
of insolvency proceeding, publishing the photographs of
promoter/guarantors declared as wilful defaultersin the newspaper and
initiation of winding up proceedings after complying with extant law, rules
& regulations, can also be considered to bring the borrower to the
negotiating table. Further, Private Detective Agencies (PDA) may be
engaged for identifying unencumbered assets of borrower/guarantor for
attachment of the same through legal process.
 Recovery through Settlement - OTS / NS would be another option for
resolution of NPAs & address time value of money and shall be considered
even when the SARFAESI action is underway, revival package is in force or
DRT case is in progress, as it would expedite resolution. Such settlement
would also release provision amount and increase income to the extent of
interest recovery.
 Attachment of assets of Guarantor: Along with exhausting of recovery
from the available securities and other assets of the borrower/guarantor
charged to the Bank, Bank shall proceed against the individual guarantors /
corporate guarantors and their unencumbered assets, if any, for realization of
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entire dues, except in case of settlement of the account under OTS / NS or

the guarantee is limited to the assets offered as security.
 Sale of NPAs to ARCs/ Banks / FIs / NBFCs: In accordance with the
Policy for sale of financial assets to ARCs/ Banks / FIs /NBFCs, shall also
be explored.
 Reference under Insolvency and Bankruptcy Code, 2016 (IBC):
Reference of the account under IBC to NCLT/DRT, as the case may be ,
may also be examined and suitable action taken, wherever
applicable/necessary.(Refer:Circular no. IDBI Bank/2017-
18/637/CBG/NMG/66 dated March 31, 2018 for Standard Operating
Procedure on IBC,2016)
3.6 Timelines for Recovery Actions :

1) On incidence of an NPA, the following actions, within the prescribed
timelines shall be initiated with the approval of the delegated authority.
Recovery Action In Non-Restructured In Restructured
accounts and all Sole accounts
Banking cases
Recall of Loan with Within 10 days from Within 30 days from
notice period not the date of NPA the date of NPA
exceeding 15days to
clear the dues
If the dues are not cleared within the notice period :
Invocation of Personal / Within 25 days from Within 45 days from
Corporate Guarantees the date of NPA the date of NPA
Pledge of shares – Within 25 days from Within 45 days from
Notice to Pledgor / the date of NPA the date of NPA
Borrower
(with notice period not
exceeding 7 days)
Invocation of pledge of Within 35 days from Within 55 days from
shares* date of NPA the date of NPA
*In case of request by the borrower to withhold sale of shares but non-
receipt of viable mode of resolution, within reasonable time – not
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Recovery Action In Non-Restructured In Restructured

accounts and all Sole accounts
Banking cases
exceeding 1 week – sale of shares must be proceeded with.
Issue of notice under Within 25 days from Within 45 days from
Section 13(2) of the date of NPA the date of NPA
SARFAESI Act and
further actions$
Issue of notice under On 61st day but not On 61st day but not
Section 13(4) of later than 75th day from later than 75th day
SARFAESI Act and the date of issue of from the date of issue
further actions$ notice under section of notice under
13(2) section 13(2)
Filing of suit under Within 40 days from Within 60 days from
DRT/Civil Court the date of NPA the date of NPA
The above time lines may be relaxed by 30 days for all Home Loan
and Mortgage Loan cases
Date of NPA shall mean the date of account being classified as NPA
without reckoning retrospective effect, if any.
$All further actions under the provisions of SARFAESI Act shall be
initiated in a time bound manner.
2) The time lines as above shall be strictly adhered to.

3) Any of the above action may be deferred/delayed for specific period
based on justification with the written approval of the Delegated
Authority.(Ref para 3.13)
4) Legal action may be waived in specific case with GPO not exceeding
Rs.3.00 lakh subject to justification and necessary approval of delegated
authority.(Ref para 3.14)
5) Even while initiating the above immediate actions, efforts shall be made to
bring the borrower for negotiation and settlement to avoid loss of precious
time in protracted legal action.
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6) The specific timelines mentioned for the cases covered under the framework
of ‘Review of NPA/TWO accounts’ shall prevail for such cases over the
general timelines mentioned above.
3.7 Verification and Valuation of Security:

When an account is classified as NPA, the resolution/ recovery of the account
generally depends on the securities (primary & collateral – current assets / fixed
assets) charged to the Bank. The following actions shall be initiated to preserve and
realise the value of securities, immediately on an account slipping to non-
performing category:
1) Review of Security documents: The security documents shall be reviewed to

confirm the adequacy and enforceability thereof. Corrective action required, if
any shall be undertaken immediately.
2) Unit/Site visit: Unit / site visit shall be undertaken to assess the primary &
collateral securities - Even in consortium and multiple banking arrangements
Bank should undertake unit visit without delay and pursue vigorously with
Lead and other lenders for effective action and early recovery.
3) Fresh Legal opinion in disputed securities: In case of dispute pertaining to the
mortgaged immovable properties including disputed possession, a fresh opinion
may be obtained from the empanelled advocate (other than previous one) or
Bank’s Legal department.
4) Valuation of the securities:

a) Valuation of collateral / primary Security charged to the Bank shall be
undertaken as per the extant guidelines for recovery under settlement
(OTS/NS), action under SARFAESI Act, Sale of NPAs to
ARC/Bank/FIs/NBFC (Assignment of Debt), Policy on Collateral
Management as applicable. In case of multiple banking or consortium
banking, valuation obtained by the Lead or other lending bank, may also be
accepted.
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b) Value of the securities for action under SARFAESI Act shall be reckoned as
per the guidelines provided in Section 6 of the Policy
c) Value of the securities for Recovery through settlement (OTS/NS) proposals
shall be reckoned as per guidelines provided in Section 5 of the Policy.
3.8 Insurance of Securities:
1) In general, it shall be ensured that the assets charged to the Bank are adequately
insured.
2) In the event of the Borrower failing to take or renew the insurance cover, Bank
shall insure the asset adequately to safe guard the interest of the Bank at the
borrowers cost and in all these policies, Bank’s name is recorded as “Loss
Payee”.
3) Especially when the assets mortgaged/hypothecated to the Bank, are taken
possession by the Bank, it has to be ensured that these assets are adequately
insured without any delay.
4) In case of closed units, the assets (other than current assets) can be covered
under Master Insurance Plan (MIP) of General Insurance Company which is
taken by the bank on centralized basis in order to minimise the cost to the Bank.
The said MIP is renewed on year on year basis and covers cases referred for
coverage under MIP to NMG, Corporate office
5) Major Parameters under MIP:
a) The assets of closed units are covered under MIP.
b) Plant & Machinery, Building and collateral properties mortgaged to bank
and immovables are covered under MIP.
c) Current assets are not included under MIP.
d) Mortgaged Residential property - should not be occupied for being eligible
for inclusion under MIP
e) The value of the assets for coverage &basis for calculation for payment of
Insurance premium, should be taken after considering depreciation and
present valuation etc.
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f) Risk Coverage – MIP would cover Burglary Insurance and Standard Fire
and Standard Peril Insurance (fire, lightning, explosion/implosion, aircraft
damage, riot, strike, malicious and terrorism damage, storm, cyclone,
typhoon, tempest, hurricane, tornado, flood and inundation, subsidence and
landslide including rock slide, earthquake etc.) with silent risk subject to
clauses/exceptions/terms and conditions as per policy document
g) The validity of period for all cases covered under MIP shall uniformly be
for one year subject to annual renewal.
h) Pro-rata share of insurance premium should be recovered from banks in
respect of assets insured including on behalf of other banks under
consortium//multiple banking arrangement.
i) In case of claim under the MIP–
 The Bank (Insured) shall within 14 days of an event likely to give rise to
a claim, give written notice of the same to the Insurance company and
specify the grounds of such belief;
 The Bank shall immediately lodge a complaint with the police detailing
the items lost and/or damaged and in respect of which the bank intends to
claim, and provide a copy of that written complaint, the First Information
Report and/or Final report to the Insurance Company.
 The Bank shall expeditiously provide the Insurance company and its
representatives and appointees with all the information, assistance and
documentation that they might reasonably require.
j) On disposal of mortgaged assets by the Bank (by sale under SARFAESI
Act/through DRT or OL/settlement under OTS/NS etc. ) covered under
MIP, Dealing group/Branch is required to update the details to NMG,
Corporate office for removal of the same from MIP . This will enable the
bank to claim refund of proportionate share of Insurance Premium from
the Insurance Company in respect of such assets.
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3.9 Quick Mortality:
Quick Mortality as far as Loans and Advances is concerned shall mean the advance
becoming NPA within one year from the date of last disbursement of the loan. In
the case of Term loans the reference period is reckoned from the date of last
disbursement of the loan and in the case of Cash credit or Over draft accounts the
reference period is reckoned from the date of first disbursement (release of facility).
It is the endeavor of the Bank to ensure quality of the credit portfolio. Therefore in
respect of slippage in the quality of the asset, particularly, in a new account and
high value accounts, dealing group shall promptly identify those accounts and
verify the causes of slippage for initiating suitable remedial measures including
determining staff accountability, if any, for the same.
3.10 Upgradation of NPA accounts to Standard Category:
1) In the case of loan accounts (Other than restructured accounts) classified as

NPAs , if entire arrears of interest and principal are paid by the borrower and
regularized, the account shall no longer be treated as non-performing and may
be classified as ‘standard' account.
2) 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’ during the ‘Specified period’ as per the extant RBI/Internal
guidelines.
3) 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 ‘Resolution of
Stressed Assets’ issued by RBI, subject to respective guidelines.
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3.11 Counter Claims
1) There may be instances where deficiency of services, negligence, inadequate

finance, delay in sanction and disbursement of loan, charging excessive
interest, act of omission/ commission in transactions relating to customers etc.,
which may lead to claims by the parties
2) Such claims if not addressed in time, may lead to litigations involving cost and
adverse effect on the image of the Bank. Hence, such claims are to be
examined on priority and the same shall be addressed on merits. Where Bank
has got a strong case, the same shall be contested to ensure that no liability
devolves on the Bank.
3) Wherever, borrowers / guarantors have dues with the bank and if such parties
make claims or counter claims in the pending suits, then while negotiating for
settlement of Banks dues, the sustainability/probability of such claims or
counter claims of the parties is to be examined legally and the same has to be
factored in while arriving at OTS/NS amount.
4) Unconditional withdrawal of suit/case/claims of the borrowers / guarantors
against the Bank shall be a pre-condition before / while settling the dues to the
Bank under OTS/NS.
3.12 Abeyance of legal action
The time lines for various recovery actions as stipulated in the policy have to be
strictly complied with.
In case due to circumstances (case under Restructuring / Settlement (OTS/NS)
proposal approved, any other reason) any of the legal actions – Recall, Guarantee
invocation, invocation and encashment of pledged shares etc., action under
SARFAESI act, filing original suit in DRT/Court etc. – either completely or
partially - is proposed to be kept in abeyance , then Branch should place details of
the case and the reason for keeping the specific recovery action in abeyance for a
20

specified period (keeping in view possible expiry of Limitation period) and obtain
prior approval of the Delegated Authority.
3.13 Waiver of legal action
1) Every endeavor shall be made to recover the dues in the ordinary course.
2) However, in exceptional situations, Bank may consider waiver of legal

action subject to the GPO not exceeding Rs.3 lakh:
i) Where securities are not available to realize Banks dues and

ii) borrowers/guarantors are not having any assets or means to repay the
dues
iii) Chances of recovery in the normal course/ by settlement (OTS/NS)
are remote and
iv) Initiating legal action for recovery is not prudent.
3) By waiving legal action, bank does not vitiate its right of appropriation of
the amount received in the ordinary course of business or other recovery
measures. Hence, recovery steps in the normal course should be
continued even after waiver of legal action.
4) Branches shall submit the proposals for ‘waiver of legal action’ with
reason/justification, sufficiently in advance, before the date of limitation
sets in and obtain approval of the Delegated Authority.
3.14 Income Recognition and Reversal of Provision on Settlement / Recovery/

Realization:
1) Interest recovered on NPAs is reckoned as income.

2) In the absence of a clear agreement between the bank and the borrower for the
purpose of appropriation of recoveries in NPAs (i.e. towards principal or
interest due), the amount realized will be first appropriated towards interest
and then for principal/ installment.
21

3) The provision held against the account, may be reversed in case the account is
upgraded and in case of recovery /settlement, provision may be reversed
proportionately.
3.15 Staff Accountability
Staff accountability shall be examined in respect of all NPAs as per the extant guidelines
on staff accountability. The exercise of Staff Accountability examination needs to be
carried out in a time bound manner. Normally, the matter should be referred for Staff
Accountability (SA) examination after 90 days (cooling period) from the date of
classification of the account as Non-performing asset. However, in fraud and Quick
Mortality cases, examination of SA shall be carried out immediately without waiting for
the cooling period.
3.16 Review of NPA Accounts

All NPA accounts shall be subjected to regular reviews at various levels viz.,
Regional / Zonal / Corporate /Board level. The Bank would, from time to time,
formulate suitable operational guidelines for review of these accounts including
frequency of review, etc.
22

SECTION 4
Restructuring of stressed/NPA Accounts
4.1 As per the Policy on revised RBI guidelines for Resolution of Stressed Assets,
Restructuring is an act in which a lender, for economic or legal reasons relating to
the borrower's financial difficulty (as given at 4.2), grants concessions to the
borrower.
4.1.1 Restructuring would normally involve modification of terms of the advances /
securities, which may include, among others,
(i) alteration of repayment period
(ii) alteration of repayable amount
(iii) alteration of the amount of instalments
(iv) alteration of rate of interest;
(v) roll over of credit facilities;
(vi) sanction of additional credit facility;
(vii) enhancement of existing credit limits; and,
(viii) compromise settlements where time for payment of settlement amount
exceeds three months.
4.2 The Non – Exhaustive Indicative List of Signs of Financial Difficulty includes
 Irregularities in cash credit/overdraft accounts such as inability to maintain
stipulated margin basis or drawings exceeding sanctioned limits, periodic
interest debited remaining unrealised;
 Failure/anticipated failure to make timely payment of instalments of principal
and interest on term loans;
 Delay in meeting commitments towards payments of installments due,
crystallized liabilities under LC/BGs, etc.;
 Excessive leverage;
 Inability to adhere to financial loan covenants;
23

 Failure to pay statutory liabilities, non- payment of bills to operational creditors,

etc.;
 Non-submission or undue delay in submission or submission of incorrect stock
statements and other control statements, delay in publication of financial
statements and adversely qualified financial statements;
 Steep decline in production figures, downward trends in sales and fall in profits,
margin erosion etc.;
 Elongation of working capital cycle, excessive inventory build-up;
 Significant delay in project implementation;
 Downward migration of internal/external ratings/rating outlook.
4.3 In the case of stressed/NPA accounts, Bank shall engage with the borrower
simultaneously to work out any possible revival plan / restructuring package if on
due diligence, the unit is found to be viable. The Bank may restructure NPA/TWO
accounts if the financial viability is established with reasonable certainty of
repayment based on realistic cash flow assessment
4.4 Resolution Plans including Restructuring Packages shall be drawn keeping in

view the extant RBI and internal guidelines in the matter from time to time.
24

SECTION 5
Recovery through Settlement (OTS/NS)

Policy on Recovery through Settlement
5. 1 Policy Objective
One Time Settlement (OTS) / Negotiated Settlement (NS) is one of the

resolution mechanisms for faster resolution of Non-Performing Assets (NPA), sans
protracted legal process and potential value erosion.
OTS/NS is one of the many actions to be taken for recovery of NPAs
including Technically Written off (TWO) accounts and hence simultaneous,
multipronged, time bound action shall be initiated in all cases unless settlement
terms are approved by the delegated authority and are duly accepted by the
borrower / guarantors.
Accordingly, with the overarching objective of swift NPA resolution through
quick recovery and to maximize value of recovery, the OTS policy lays down the
framework and guiding principles for entering into settlement with the borrower /
guarantors.
This may be construed as only a mechanism to formulate the base for
negotiation of settlement amount and shall not confer any obligation on the bank
nor any right with the borrower to demand settlement of dues relying only on this
policy. The framework under this policy does not tantamount to any
waiver/modification to the contractual obligations with regard to loan/facilities.
Therefore, no benefit shall accrue to the borrower/guarantor by virtue of the
provisions under this policy in any forum.
5.2 Key components of OTS Policy
The OTS Policy encompasses following key elements:

1) Formulation of OTS
The success factor of an OTS proposal is ingrained in formulation of a
proposal that is aligned to Bank’s NPA resolution policy objectives. An OTS
25

proposal would invariably require an analysis of the case, which in conclusion

substantiates for settlement as a resolution mechanism, within the framework and
guidelines of this policy.
2) Key Guiding Principles:
The key guiding principle for entering into OTS/NS is the criticality of time
value of money which can be deployed and channelized to generate income while
reducing the NPA impact.
Other key guiding factors [non-exhaustive] for adopting recovery under
OTS/NS mode are listed below.
(a) where a corrective action plan through financial restructuring is not likely to
succeed and / or previous efforts have failed;
(b) where settlement is expected to result in an early and optimal recovery vis-à-
vis through alternate options with attendant process risks and uncertainty
factors both in time and value terms;
(c) where early exit is a preferred option on account of various developments
that has exacerbated risks beyond acceptable levels relating to promoters,
management and industry;
(d) where the loan asset is classified as doubtful, loss category with attendant
high provisioning requirement or technically written off cases;
(e) where recovery through legal route could be a challenge due to various
infirmities including but not limited to defective documentation / charge
non-enforceability/ restrictions on enforcement / complexities etc. and
(f) where the business continuity is severely impacted and early exit would
maximize recovery such as
 business failure arising out of commercial or technical reasons,
 strain on the viability of the unit due to change in Government policies,
 adverse impact on the business continuity due to Court Orders,
 management failure including sudden vacuum due to demise/ exit of
principal promoter,
26

 depletion of securities, termination of major contracts affecting viability

etc.
3) Parties to Negotiate OTS/NS proposal:
(a) All OTS/NS offers should be received in writing.
(b) In respect of PSUs/ Government undertakings, this requirement may be
waived on a case to case basis by the sanctioning authority.
(c) Based on a written proposal further negotiation shall be held in good faith
with counter party viz.
i. Borrowers and / or such designated person / entity authorized by the
borrower,
ii. Guarantor/s who may be willing to settle in full/ part,
iii. Parent Company and
iv. Other stake holders like drawee /drawer of bills, legal heirs, purchaser of
charged assets of the bank (subsequent buyers), tenants, etc.
v. Any third party subject to the consent of the borrower
(d) At each stage, the outcome of negotiation as far as possible shall be
documented and kept on record.
4) Applicability
 The policy shall be applicable to all NPA/TWO cases irrespective of other

recovery actions initiated, category of NPA ( Substandard, Doubtful, Loss,
Technically Written off ) or the nature of advance ( Corporate/ Retail, Priority /
Non-priority or sole banking/consortium banking/ multiple banking
arrangement). This policy will also be applicable for settlement of MSME
advances. However, current status of the account and progress of other recovery
actions shall be kept in view while entering into settlement.
 The policy shall also be applicable for Standard Assets as on date but are facing
stress and likely to become non-performing (SSA/Doubtful / Loss).
 Staff Accountability Examination: Before submission of any OTS/NS proposal
to the sanctioning authority, staff accountability shall be examined, including in
27

cases of settlement in Standard assets. In cases where the staff accountability

had not yet been examined, it should be initiated prior to taking up the OTS/NS
proposal. Cases prima facie suspected of fraud should not be considered for
OTS/NS before conclusion of staff accountability. In OTS/NS proposals where
Staff accountability is in process, it should be concluded expeditiously.
 Compromise settlement proposals for advances with Gross Principal outstanding
above Rs.10 lakh should be examined as per the policy guidelines in ‘Part A’ and
the advances with Gross Principal Outstanding of up to Rs.10 lakh should be
examined as per the policy guidelines in ‘Part B’.
5. 3 List of General terms used in the Policy:
1) One Time Settlement (OTS): Settlement proposals for payment of the
settlement amount within a period not exceeding 90 days
2) Negotiated Settlement(NS):Settlement proposals for payment of the
settlement amount over a period generally not exceeding 12 months
3) Total Dues (TD) is all monies due and payable by the Borrower as per the
terms of contract (financing document) as on Cutoff Date comprising
(i) Gross Principal outstanding (including funded interest, if any)
(ii) Interest dues including penal interest charges like interest/further interest/
additional interest/penal interest and
(iii) Expenses & charges.
4) Notional Dues (ND): ND is the
Summation of
(i) Gross Principal outstanding as on the date of NPA,
(ii) Outstanding interest as on the date of NPA
(iii) Simple interest @ 1 Y MCLR or contracted rate whichever is lower
calculated on the outstanding principal from the date of NPA to the cutoff
date
(iv) Expenses and Charges
28

(In the event of addition to NPA on account of any

devolvement/invocation of NFB or otherwise, similar calculation to be
made on such addition and added to the summation)
LESS
(v) the amount recovered after the account was classified as NPA.
5) Cut off Date (CoD) :Cutoff date is the date on which the Total Dues, Notional
Dues and consequently Total waiver and Notional waiver are to be calculated
for OTS/NS proposal. Cutoff date should be taken as 1st day of the month in
which the OTS proposal is presented to E- SAC or Sanctioning Authority (in
case the proposal need not be referred to E-SAC).
6) Total Waiver – The difference between Total Dues (TD) and Settlement
Amount (SAM) comprising Principal write off and waiver of Interest and other
dues.
7) Notional Waiver - The difference between Notional Dues (ND) and
Settlement Amount (SAM) comprising principal write off and waiver of
interest and other dues.
8) V-Sec – Estimated realizable value of security as per the computation
methodology under the Policy
9) NPV-Sec – Net Present Value of the security being V-Sec, discounted over the
estimated period for realization
10) ESAM – Estimated Settlement Amount worked out based on the BSA scoring
model and the security valuation (NPV-Sec) or other guidelines in this policy
subject to maximum of ‘Total Dues’
11) Settlement Amount (SAM) – The amount envisaged as payment under the
OTS/NS proposal. The settlement amount (SAM) is the total amount agreed to
be paid by the borrower in full settlement of the liability. This would be
aggregate of the cash realization & value of the assets, if any, taken over in
satisfaction of dues.
12) Net Principal Outstanding (NPO) – NPO is the difference between Gross
Principal Outstanding and Provision (as on Cutoff date)
29

5.4 Preliminary Scrutiny& Valuation of securities: While the Bank shall always
maintain valid & enforceable documents and value the assets as per required
periodicity, it is necessary to revisit and ensure the following through a preliminary
scrutiny:
(a) The security documents shall be reviewed to confirm the adequacy and
enforceability thereof. Corrective action required, if any shall be taken
immediately.
(b) Unit / Site visit shall be undertaken.
(c) In case of disputes pertaining to the mortgaged immovable properties
including disputed possession, a fresh opinion may be obtained from the
empanelled advocate (other than the previous one) or Bank’s Legal
Department.
(d) Valuation of securities
i. Valuation of collateral / primary security charged to the Bank should not be
more than 1 year old (as on COD) for reckoning under the Settlement
process.
ii. If Valuation of collateral / primary Security charged to the Bank is more
than 1 year old, fresh valuation shall be obtained from an empanelled
valuer of the Bank. However, if fresh valuation is not practically possible
(property under attachment, company under receiver, details of current
assets / book debts not accessible etc.,) an estimated value may be obtained.
iii. Valuation report to clearly indicate Fair Market Value (FMV), Realizable
Sale Value (RSV) and Distress Sale Value (DSV).
iv. Valuation report to clearly indicate the value of Land and Building
separately.
v. Valuation report in case of machineries to clearly indicate the condition of
the machinery and potential use.
vi. Valuation of Security value of Rs.10 crore and above: Two independent
valuations should be obtained from the Bank’s empanelled valuer in cases
where value of each specific security is Rs.10 crore and above. In case of
30

two valuations, the higher of the two RSV or the higher of the 2 DSV shall
be considered as relevant under guidelines for determination of Value of
Security in the policy. In case the difference between the two valuations is
more than 15%, then a third valuation may be undertaken and the average
of the higher 2 valuations amongst 3 valuations may be reckoned for
settlement purposes.
vii. Comparison of current valuation with immediately previous valuation:
In all cases where latest valuation obtained indicates wide divergence to the
earlier valuation (the immediately previous valuation), reasons for such
divergence may be assessed considering factors that affect value of the
security (like shelf life in case of current assets, depreciation in case of
plant & machinery, building, vehicles etc.). Proper justification may also be
obtained from the Valuer for such variations and recorded accordingly.
viii. In case of multiple banking or consortium banking, valuation obtained by
the Lead or other lending banks may be accepted subject to the report being
less than 1 year old.
5.5 Determination of Value of Security
Generally, there are multiple securities of various types which are charged to the
Bank for the facilities granted. For enabling negotiation and assessment of
Estimated Settlement Amount [E-SAM], the value of all such assets has to be
reckoned. The applicable security value for OTS/NS for various types of securities
is listed below.
(i) Value of all immovable fixed assets of the unit including plant & machinery
Industrial unit in operation Realizable Sale Value (RSV)
Closed industrial unit Distress Sale Value (DSV)
31

(ii) Value of all immovable fixed assets other than unit assets
Real estate securities including Distress Sale Value (DSV)
residential buildings, plot of land,
commercial spaces, etc. of the borrower
and collateral securities (other than
agricultural land as security)
Agricultural land as security Government rate / circle rate /
guideline value should be taken as
DSV and there is no need for
valuation
(iii) Current Assets
Closed units Nil.
Units in operation 50% of value of ‘Stock and book
debts’
(i) In case of stock statement, it
should be less than 6 months old as
on COD
(ii) In case of stock audit/valuation
report, it should be less than 1 year
old as on COD
Units in operation on job work basis Nil
(iv) Pledged shares etc. **

Pledged shares Listed shares –Based on last 6 months
market trend and trading volume.
Unlisted shares – value as identified
as per the records filed with the RoC
and discussions with borrower/
pledgor.
32

** Liquid assets like shares and mutual funds may be liquidated after serving the
due notice to the concerned parties on the account being classified as NPA. In case
these are not liquidated, at the time of OTS/NS negotiation, they should be included
under the assets available as security.
(v) Intangibles like charge over the rights, licenses, brands, Intellectual property
rights and others
Intangibles – charged to the bank Value assessed by valuation agencies
having experience in valuing such
intangible assets.
(vi) Other aspects in assessing value of Securities:

Statutory Dues: Only those statutory dues having prior charge / lien over specific
asset charged to the Bank which may affect the value / salability of the asset should
be deducted from the value to be reckoned.
(vii) Large Infrastructure projects:
In Large Infrastructure Projects with Banking Sector exposure exceeding Rs.1000
crore, which are stalled and not completed and where it would be extremely
difficult to evaluate the value of the asset, a ‘Liquidation value’ could be obtained
(as per procedure under CIRP process) which may form the basis for settlements,
instead of individual asset valuation.
For other assets charged to the Bank (other than such stalled project assets), the
valuation of such security shall be by the normal method outlined in the policy.
(viii) Value of Personal Guarantor/Corporate guarantor:
 Personal guarantees: In case of personal guarantee, net worth based on latest
CA certified asset liability statement or notarized affidavit of the Guarantor
shall be considered and a value equivalent to minimum 10% of net worth
(excluding the value of assets charged to the Banks) shall be considered. The
asset liability statement should not, ordinarily be, more than one year old.
Higher weightage can be ascribed depending on the known resourcefulness and
33

market standing of guarantors. In case net worth is negative, no value shall be

ascribed.
 Corporate Guarantee: In case of corporate guarantees, if there are no
operations in the guarantor company and net worth is negative then no value is to
be ascribed. In case the company is in operation and net worth is positive 10% of
the Net worth to be ascribed for the corporate guarantee.
 The value derived as given above for personal/corporate guarantors shall be
added to the NPV Sec of the securities for arriving at estimated settlement
amount in BSA scoring model.
5.6 Framework for Evaluation of Settlement Amount

i) The endeavor of the Bank should always be to recover the Total Dues as per the
contracted terms. Based on the above stated guiding principles and inputs,
compromise settlement (OTS/NS) is taken as a business decision and as one of
the appropriate measures for recovery and resolution of the case.
ii) An acceptable estimated settlement amount is required to be arrived at to
facilitate the dealing officials/negotiating teams and the sanctioning levels to
evaluate compromise settlement (OTS/NS) proposals.
iii) In order to arrive at an estimated settlement amount on an objective basis, a
scoring model i.e., Basic Settlement Assessment scoring model (BSA Scoring
Model) is designed.
iv) The Value derived from the BSA scoring model (V-BSA) shall be compared
with the NPV of Security value (NPV-Sec) and based on other factors,
Estimated Settlement Amount (E-SAM) shall be arrived at.
v) The assessment through BSA scoring model for arriving at ESAM will apply to
all compromise settlement cases wherein the Gross Principal Outstanding is
more than Rs.10 Lakh and the procedure stipulated in Part A shall apply
vi) For compromise settlement Cases with Gross Principal Outstanding up to Rs.10
lakh, the ESAM shall be arrived at based on the procedure stipulated in ‘Part B’.
34

vii) Before start of negotiations for OTS/NS or in order to consider any proposal
for settlement received from the borrower, Estimated Settlement amount ( E-
SAM) shall be computed
5.6.1 Methodology for Computing Estimated Settlement amount (E-SAM)

5.6.2 Part A for cases with Gross Principal Outstanding more than Rs.10 lakh
Steps for Computation of Estimated Settlement Amount [E-SAM] through
BSA scoring model:
The Estimated Settlement Amount (E-SAM) shall be arrived at as follows:
 Computation of Total Dues(TD) & Notional Dues(ND),
 Computation of Value of Security and Net Present Value of security
(NPV-Sec) as detailed hereafter.
 Assessment of Net worth of the borrowers/guarantors [GNW].
 Computation of ‘BSA Score’ based on ‘BSA Scoring Model’ and V-BSA
 Assessment of Estimated Settlement Amount(ESAM)
 Working out Total Waiver and Notional Waiver based on actual amount
negotiated for settlement i.e Settlement Amunt (SAM)
5.6.3 Step1– Computation of TD/ND – In order to assess the OTS/NS proposal,
Total dues and Notional dues (reference Clause 5.3) have to be computed.
5.6.4 Step 2- Valuation of Security, Estimation of Cost of Realization, Computation
of V-Sec.
5.6.4.1 Valuation of Securities: In the evaluation of the compromise proposal
(OTS/NS), all the securities (multiple securities of various types) which are
charged to the Bank for the facilities granted should be valued properly as per the
guidelines in (clause 5.4 and clause 5.5) for ‘Determination of value of Security’
and valuation process, for enabling negotiation and assessment of Estimated
Settlement Amount [E-SAM].
5.6.4.2 Estimation of Cost of Realization: Bank has to incur various cost / expenses/
charges such as advocate fee, expenses for publication of notices, valuation
charges, fees payable to DRTs and other costs if Bank decides to recover the NPA
35

through litigations in Court or under SARFAESI Act which is termed as Costs

attributable to realization. Accordingly, the cost of realization as per standard rate
indicated below, shall be calculated & arrived at for the value of security arrived at
(a) Where the security value is upto Rs.100 lakhs: 10%
(b) Where the security value is more than Rs.100 lakhs and upto
Rs.1000 lakhs: 5%
(c) Where the security value is more than Rs.1000 lakhs: 2%
5.6.4.3 Determination of Value of Security [V-Sec]
Against Value of each security, the estimated cost of realization applicable to
such security shall be adjusted. The resultant value i.e., Value of the Security less
the estimated cost of realization) shall be the ‘V-Sec’ for various computations
under this policy.
5.6.5 Step 3 - Computation of Net Present Value of V-Sec [NPV-Sec]
 In line with the RBI guideline, the NPV of Value of available securities should
be assessed objectively. Where the Bank has enforceable securities, the OTS/NS
amount should not be generally less than the NPV-Sec.
 Net present value of each of charged security shall be calculated by applying
discounting factor for the discounting period as detailed here after and total of
such NPVs shall be the NPV of Securities [‘NPV-Sec’].
 Exception: if in any case OTS proposed to be accepted is less than the NPV-
Sec, the rationale thereof should be justified.
5.6.5.1 Discount rate for calculation of NPV-Sec
 Discount rate for calculation of NPV-Sec should be reckoned at 1 year MCLR
of the Bank as on the cut-off-date.
5.6.5.2 Assessing the Discount period for calculation of NPV-Sec
 The ability of the Bank in driving the process of realization is subject to a
number of influencing factors which would impact the duration of realization.
The time factor i.e. Discount Period may be considered based on the status of
recovery actions in the NPA account. Broad guidelines for applying the
discount period are as under:
36

Particulars Attributed time period

for realization
 Loan account is under consortium or multiple 5 years
banking and Bank’s share is less than 10% and exclusive
collateral coverage is low
 Loan account is standard in some other banks and
standalone action by the Bank cannot drive SARFAESI
process.
 If SARFAESI action is not initiated and/ or security is
not enforceable under SARFAESI and /or DRT case is
not filed/ not more than 1 year old.
 SARFAESI action has been initiated. However,
physical possession of security is not with the Bank due
to various reasons including legal challenge etc.
 Loan accounts where unit is working and physical
possession under SARFAESI is resisted by the workers.
 Loan accounts where SARFAESI action has led to a
stalemate due to claims from other banks or from other
lenders or third parties on the secured assets.
 Assets / properties eligible under SARFAESI auction 3 years
other than House / Residential Properties / Plots
 Loan account where SARFAESI action is in progress
and physical possession of security is with the Bank, but
the process is facing legal challenge from borrower /
third parties
 Loan accounts where Bank has obtained Recovery
Certificate and unencumbered assets of
borrowers/guarantors are available.
 Loan accounts where auction under SARFAESI has
37

Particulars Attributed time period

for realization
failed and OTS from the borrower is forthcoming
 Agricultural Lands where suit is decreed
 House / Residential Properties / Plots in cities &
towns
 All types of assets not covered above
5.6.5.3 Computation of NPV-Sec – For each of the security the V-Sec computed shall be
discounted based on the discount rate and discount period based on attributable
time period for realization:
NPV-Sec =
When there are different types of securities available in the same borrower
account, NPV Sec shall be calculated by applying the relevant discounting rate
and relevant discounting period for the respective securities and the sum of the
different NPV Sec shall be the NPV Sec in the account for further process.
5.6.6 BSA Scoring model -

Before start of negotiations for OTS or in order to consider any proposal for
settlement received from the borrower, Basic Settlement Assessment Score Card
(BSA score card) shall be drawn up and the Estimated Settlement Amount [E-
SAM] should be computed. E-SAM shall be kept in view and regarded as the
estimated settlement amount to facilitate negotiations for settlement to be
conducted with the borrower.
Computation of BSA Score
38

A BSA scoring model applying attributes based scaling shall be adopted to derive a
score called ‘BSA Score’. The BSA score is a composite score designed to capture
the deterministic influence of identified key variables on value of the available
securities charged to the Bank that forms the basis of negotiating an OTS/NS.
The marketability of the security is dependent on various factors and some of these
factors are discussed below which bring in the focus on ease of realization of these
security.
5.6.6.1 Step-4 Ease of realization- Value statement metric
Various laws meant for protection of agriculturalists /tribal people govern
security in the form of Agricultural Land. In that case ease of monetization of
property would be a function of: (i) getting permission from Collector (ii)
availability of purchasers from tribal communities (iii) restrictions on sale to non-
agriculturalists etc.
There may be cases, where (i) security is heavily tenanted and vacant possession
is practically impossible (ii) security is a subject matter of litigation between the
borrower and paramount title holder (iii) security is subject to planning,
environment, forest law restrictions (iv) security may be subject to expropriation
proceedings due to violation of user conditions etc.
 Valuers may not be in a position to factor the effect of above issues while
ascribing a value to the property. In the opinion of a panel advocate on legal
issues, if it is very difficult to disentangle the security from legal issues, the ease
of realization is considered as weak.
39

For the purpose of awarding score, based on ease of realization, following value
based criteria [non exhaustive] to be followed shall be as per the table below:
Score Value based criteria [non-exhaustive]
Ease of realization– Residential/commercial premises located in Metro/Urban/

Hi semi-urban/ or prime locality
Ease of realization – Tenanted premises or Industrial Land/Building

Average General purpose Plant and Machinery
Ease of realization – Non-exhaustive list
Lo  Agricultural land in villages
 Lands affected by forest laws or environment laws or
lands in no development zones.
 Lands, buildings near areas prone to heavy pollution.
 Building/flats in possession of third parties/anti-social
elements.
 Building/flats located in areas that are considered
sensitive or impacted by non-conducive surroundings.
 Mortgage / documents are defective and / or subject to
legal challenge
 Current assets including book debts
 Sophisticated / Specific use machineries.
 Furniture, Fixtures, Computers and other block assets
not specified otherwise.
40

5.6.6.2 Step 5- Determination of Guarantor Net Worth [GNW] for reckoning in BSA
scoring mode
 Whenever a settlement is proposed, the Networth of the Corporate
guarantor/personal guarantor shall also be considered for settlement and the
borrower/ guarantor shall furnish Assets and Liabilities statement, duly certified
by a Chartered Accountant.
 In the absence of such net worth statement certified by CA in the case of Personal
Guarantors, a notarized affidavit shall be obtained from the Personal Guarantor.
 The assets and liabilities charged to the banks shall not be included in Assets and
liabilities for Networth computation.
 The total Net worth, which is an assessment of the aggregate means of the
borrowers / guarantors, so computed shall be compared with the ‘Notional dues’
for reckoning in BSA scoring model.
5.6.6.3 Step 6 – Computation of ‘BSA score’ based on ‘BSA Score parameters’:

Under the ‘BSA scoring model’ the scores are based on multiple factors. The
comparison of V-Sec against the Notional Dues(ND) indicates the coverage. This
is combined with the Ease of Realization of the security based on the value
statement metric stated above. Based on the combinations of these two factors
appropriate BSA Score is assigned in Part 1 of the scoring module.
Another factor taken into consideration is the Guarantor Net Worth (GNW), which
is an assessment of the aggregate means of the borrowers / guarantors. Based on
this factor, appropriate BSA Score is assigned in Part 2 of the scoring module.
SlNo. BSA scoring parameters Score
Part 1
I V Sec is more than ND
VSec more than 150% of ND
Ease of realization – Hi 24
Ease of realization – Average 20
41


Ease of realization – Lo 17
V-Sec is more than 100% of ND but less than or equal to

150% of ND

V Sec is less than ND
1 100% of ND≥-Sec> 75% of ND
( V-Sec is more than 75% of ND but less than or equal to
100% of ND)
75% of ND≥V-Sec> 50% of ND
(V-Sec is more than 50% of ND but less than or equal to 75%
of ND)
50% of ND≥V-Sec> 25% of ND
(V-Sec is more than 25% of ND but less than or equal to 50%
of ND)
42


V Sec is less than ND
‘V-Sec≤ 25% of ND
(V-Sec is less than or equal to 25% of ND)
Part Total value of Guarantor Net Worth [GNW](Ref 5.6.6.2)
2
More than 50% of ND 3
50% of ND≥GNW>30% of ND 2
GNW≤ 30% of ND 1
No Guarantor 0
BSA Score shall be the sum of scores under Part 1 and Part 2 of the scoring
model.
5.6.6.4 Step7- Computation of V-BSA amount
Based on the above noted calculations of BSA scoring parameters, the Estimated
settlement amount (E-SAM) is to be computed in 2 stages as stated below.
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Stage I Value from scoring model [V-BSA] shall be arrived at based on the BSA
score as per the table below:
BSA Scoring BSA Scoring model value (V-BSA)
parameters Total
Points scored
25 to 27 100% of Notional Dues
20 to 24 100% of Gross Principal outstanding*
Plus 70% to 90% of interest of ND [In incremental steps
of 5 percentage points for each point.]
plus expenses & charges
12 100% of Gross Principal outstanding*
6 to 11 70% to 95% of Gross Principal outstanding*[In
incremental step of 5 percentage points for each point.]
4 to 5 50 % to 60% of Gross Principal outstanding* with
incremental step of 10 percentage points for each point.
2 to 3 30 % to 35% of Gross Principal outstanding* with
incremental step of 5 percentage points for each point.
0 to 1 25% of Gross Principal Outstanding* plus expenses &
charges.
*Gross Principal Outstanding: Principal component as reckoned for
computation of ND
44

Stage II Ageing Factor discount: The V- BSA calculated as above shall be

discounted by the Ageing factor discount as given below:
Asset Category as on cut-off date Ageing Discount Factor on V BSA

Technically Written off/Loss Assets/ 20%
DAIII
DAII 10%
DA I 5%
Sub-standard Nil
5.6.6.5 Estimated Settlement Amount [E-SAM]
The Estimated Settlement Amount shall be computed as follows:

I. NPV sec of the Securities + Net worth of Personal/Corporate Guarantor
(Ref 5.5 Determination of Value of Security clause (viii))
II. VBSA value less discount for aging factor
The higher of I or II shall be reckoned as ESAM

In respect of OTS/NS proposals in cases declared as “Fraud”, the estimated
settlement amount or GPO as on COD whichever is higher shall be considered as
ESAM.
45

5.6.7 Part B - Compromise settlement for Advances with Gross Principal

outstanding up to Rs.10 lakhs:
In respect of Advances with Gross Principal Outstanding up to Rs. 10.00 lakh, the
estimated settlement amount which shall be the guidance amount and the process
for approval of such proposals is stated here below:
(a) The Notional dues and Total dues as on Cut-off-Date shall be calculated.
(b) Net worth (NW) of the borrower and guarantor need not be reckoned for
these accounts for considering compromise settlement proposal
(c) In case of advances covered by cash collaterals or liquid securities like OD
against FD, Gold loan (including Agri Gold loan), Loan against securities,
NFB with 100% cash margin etc., the securities shall be fully realized and
appropriated. OTS/NS shall be entered into only for short fall in the
outstanding, if any.
Such cases can be broadly divided into following 2 categories:

(a) Educational Loans (with GPO up to Rs.7.50 lakh), Personal loans,
Agricultural Loans (except Agri Gold loans) and Advances without
collateral security.
(b) All other cases with GPO up to Rs. 10.00 lakh.
5.6.7.1 Educational Loan (GPO up to Rs.7.50 lakh), Personal loans, Agricultural

Loans (except Agri Gold loans) and other Advances without collateral
security(except Housing Loan/Mortgage loan/Property power or similar
products)
In case of the above stated loans, Estimated Settlement amount is to be calculated
as under:
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Category (Age of NPA) Settlement Amount

Sub standard 80% of GPO
Doubtful DA1 70% of GPO
Doubtful DA 2 50% of GPO
Doubtful DA3 / Loss / Technically written off 30% of GPO
With respect to OTS/NS proposals, in case of accounts declared as “Fraud” the

estimated settlement amount (ESAM) shall be reckoned as amount as per
calculations above or Gross Principal Outstanding whichever is higher.
5.6.7.2. All other Advances with GPO up to Rs.10 lakh
The estimated settlement amount for all other advances with GPO up to Rs.10 lakh
and not complying with the criteria in paragraph 5.6.7.1 above shall be calculated
as under:
The NPV-Sec of the securities shall be computed as per the methodology in policy.
The Estimated Settlement Amount (ESAM) shall be computed as the higher of the
NPV-Sec or amount calculated based on the classification of NPA as on the cut-off
date as indicated in the table below:
Particulars Settlement amount calculation
Substandard 90% of ND
DA-1 80% of ND
DA-2 70% of ND
DA-3 / Loss / TWO 40% of ND
With respect to OTS/NS proposals, in case of accounts declared as “Fraud” the

estimated settlement amount (ESAM) shall be reckoned as amount as per
calculations above or Gross Principal Outstanding whichever is higher.
47

5.7 OTS/NS proposal & Delegation for approval of the settlement proposal
 While the primary effort is to recover the entire dues, the actual settlement
amount negotiated shall ordinarily be not below the estimated settlement
amount arrived at either as per Part A or Part B as applicable.
 Even though the E-SAM is estimated as per policy, all out effort needs to be
made to negotiate and maximize actual recovery over and above E-SAM, as far
as possible.
 Wherever the Settlement amount offer from borrower is less than the estimated
settlement amount (E-SAM), then the proposal shall, after due consideration, be
submitted to the delegated authority with the clear justification.
 In the proposal for approval to Sanctioning Authority, the ‘Total Dues’ should be
mentioned and approval for ‘Total Waiver’ amount should be obtained from the
Sanctioning Authority.
 The OTS/NS proposal should be placed before the respective committee based on
the Gross Principal outstanding, Notional Waiver, Net Principal Outstanding
(NPO) and E-SAM as per extant DOP as amended from time to time.
 The Proposals for OTS/NS that are required to be referred to Committees at
Corporate Office and Executive Committee (EC) should be submitted with the
recommendation of External Settlement Advisory Committee (E-SAC).
 OTS/NS proposals of Promoters/Borrowers/Guarantors classified & declared as
Wilful Defaulters and Borrowers or accounts declared & reported as ‘Fraud’
shall be considered with the approval of Delegated Authority.
5.7.1 Source of funds for settlement under OTS/ NS :

 The OTS/NS proposal should have satisfactory arrangement as to the source of
funds and timelines for making payment of OTS/NS amount.
 The sources from which the borrower/guarantors will raise funds particularly in
cases of settlement in installments are to be identified and confirmation obtained
in writing from the borrower / counterparty for settlement of the OTS/NS.
48

 Where funds are to be raised by disposal of fixed assets the entire sale proceeds
by way of lump sum payment must be insisted upon. In case the amount by way
of disposal of assets is not sufficient for full settlement, proper installments
should be fixed depending on the other sources of borrower / guarantor (s) for the
remaining amount.
5.7.2 OTS/ NS – Schedule of Payment and other Settlement terms:
5.7.2.1 Schedule of Payment and other Settlement terms

a) One Time Settlement (OTS) shall be for a period not exceeding 90 days with
OTS amount payable without interest in a lump sum or multiple installments.
b) Negotiated Settlement (NS) shall be payable in installments over a period
generally not exceeding 12 months (extendable for longer periods depending
upon the merits of each case). The installments should be paid together with
simple interest @1Y MCLR for the period beyond 90 days.
c) Upfront amount of at least 10% of the OTS amount should be insisted upon. But,
in exceptional cases the upfront amount can be relaxed up to 5% of OTS amount.
The upfront amount shall be collected before communicating the sanction letter.
However, in cases declared as Wilful Default or Fraud, upfront payment of
at least 10% of the OTS/NS amount shall invariably be collected prior to
submission of the proposal to the E-SAC for recommendation to the
appropriate delegated authority.
d) The last/final date of payment as stipulated under the OTS/NS package shall be
treated as ‘Expiry date’ of the OTS/NS package.
e) If the settlement amount is not fully paid by the Expiry date of the package, the
OTS/NS shall automatically stand revoked unless the delegated authority grants
extension of payment period.
f) Post-dated cheques wherever possible, to be obtained for each installment of
settlement (full amount in case of bullet payment).
49

g) Filing of consent terms : Any settlement spread over a period of more than six
months, consent terms may be filed with DRT/Court wherever legal proceedings
have already been preferred (Ref para 9.7)
h) In case of failure of the OTS/NS, the package should be revoked, original dues
restored and part payments received , if any, should be adjusted towards dues.
i) In the event of any action on the borrower under Insolvency and Bankruptcy
Code (IBC) resulting in imposition of moratorium and incapacitating the
borrower to honour the OTS/NS in full, the OTS/NS package shall be deemed
revoked unless the Bank exercises the option to keep the OTS/NS alive.
j) If the settlement amount is not paid as per the approved schedule i.e., paid
with delay but before the ‘Expiry Date’ of the OTS/NS package, delayed
period interest @ 1 year MCLR ( as on COD date ) + 2% calculated on
simple interest basis shall be payable for the delayed period on such
installments.
5.7.2.2 Settlement terms – Extension of OTS/NS payment period / Revival /

Restoration of OTS/NS package:
a) Extension of OTS/NS Payment Period (During the sanctioned OTS/NS
tenor):
 Extension of OTS/NS payment period beyond the stipulated payment schedule/
‘Expiry date’ to be mostly avoided as it incentivises the borrower to be lax in
honoring the commitment besides delaying the recovery.
 But, in case of genuine reasons, the delegated authority may grant extension of
time. Such extension shall be obtained prior to Expiry date of OTS/NS package
and shall attract simple interest @ 1YR MCLR plus 2% p.a. (for the period from
the final due date for payment of OTS/NS till the actual date of payment.)
b) Revival & Restoration of OTS /NS Package :
50

 The Sanctioning authority may revive / restore the OTS/NS package within a
maximum period of 6 months from the date of expiry of settlement package
subject to such conditions as may be stipulated by the Sanctioning authority.
 Beyond the period of 6 months from the date of expiry of the settlement
package, revival / restoration of the existing OTS/NS proposal shall not be
granted. Such proposals shall follow the due process for resubmission and
approval similar to that of a fresh OTS/NS proposal.
5.7.3 Appropriation of OTS/NS amount :

5.7.3.1 Appropriation of Settlement amount depends on the mode of payment for
settlement amount as per the terms of sanction
Settlement amount by way of
 Cash recovery (net of any expenses or statutory dues etc., as the case may be)
on receipt/ realization of such funds
 Assigned value of assets (equity/ preference shares / debentures / immovable
property etc.) acquired as part of settlement on completion of formalities and the
assets being lawfully transferred in the name of the Bank should be appropriated
as per the terms of settlement
5.7.3.2 The settlement amount on realization shall be applied in the following sequence:
(i) Principal dues, (ii) expenses and charges and (iii) interest viz Interest, penal
interest.
5.7.3.3 Treatment of ECGC/CGTMSE/Other claim settled account when OTS/NS is
sanctioned & Back end subsidy
In respect of ECGC/CGTMSE/ others claim settled accounts, share of

ECGC/CGTMSE/others at settled rate shall be remitted on recovery of the
compromise amount after deducting all admissible expenses pending for recovery.
Bank’s share of ECGC/CGTMSE claim available after remitting their share shall be
adjusted to Bank’s dues
51

Where ever Back end subsidy is available and is eligible for appropriation to loan
account the same may be reduced from the Gross principal outstanding before
computing other aspects.
On finalization of OTS/NS, wherever required, the ECGC/CGTMSE/Others shall
be intimated about the settlement.
5.8 Release of security under OTS/NS:

5.8.1 Release of Security on payment of entire dues as per the terms of OTS/NS
sanction
The proposal for approval of OTS/NS shall contain all details in regard to the
existence of other direct / indirect liabilities, extension of securities charged,
common guarantors, group liabilities, DRT/Court directions (if any related to the
borrowal account or securities held by the Bank) action under SARFAESI act and
all other relevant issues.
Suitable conditions should be stipulated regarding release of securities / guarantors
/ progressive release of securities etc. in the terms of sanction of OTS/NS wherever
other direct/indirect liabilities exist.
On payment of entire OTS/NS dues and on compliance of all terms and conditions
as per the OTS/NS sanction, delegated authority can release the relevant securities
charged to the Bank and issue No Due Certificate after completing the necessary
formalities.
5.8.2 Partial Release of securities /issuance of NOC for sale of security charged to
the Bank under OTS/NS package:
Under the OTS/NS proposal, if partial release of securities or issuance of NOC for
disposal of security to arrange funds for settlement under OTS/NS is envisaged , the
same should be specifically proposed and specific directions for issuance of NOC/
52

release of such properties should be obtained from the delegated

authority/committee. On compliance of the terms and conditions stipulated for
issuance of NOC or partial release of securities, the NOC/release of security may be
completed by delegated authority as per the extant DoP.
Care may be exercised to ensure that the most valuable security is not released
initially, there by maintaining pressure on the borrower to pay entire settlement
amount.
Branches should ensure strict compliance with terms and conditions of
sanction for release of securities.
5.9 Guarantor Settlement: Settlement Proposal by third party Guarantors
( other than Promoter / Partner / Borrower )
Guarantors (other than Promoter / Partner / Borrower ) who have extended
guarantee with or without any tangible / intangible assets extended to secure the
facility may seek release of their guarantees &/or securities thereof, without closure
of the loan / facility under Guarantor settlement proposal. Such proposals may be
considered subject to the following:
(a) Efforts shall be to recover entire dues or complete settlement as per settlement
policy, wherever possible otherwise,
(b) Based on Latest Net Worth Certificate, certified by Chartered accountant (or
an affidavit signed by the guarantor) and based on the due diligence, such
proposals for release of guarantee where no assets have been extended by the
guarantors to secure the facility may be considered.
(c) Where assets have been extended by the guarantors, minimum of the value of
Realizable Sale Value(RSV) of such assets needs to be recovered, based on the
norms for valuation of assets under this policy. (Also refer to terms for
valuation, release of part security detailed in the policy.) Where part release of
security along with personal guarantee of the owner/mortgagor of the property
is proposed, value for both(i.e., value of the security and guarantor’s networth)
should be considered together for evaluating the acceptable settlement amount.
53

(d) Where the third party guarantee is for a specified value, proposals from such
guarantors to be considered to the extent of liability of guarantors under the
Letter/ Deed of guarantee.
(e) As the case is not being closed, the recovery action against the residual
charged assets and the borrower and other guarantor/s, should be continued for
recovery of the balance Total dues.
(f) On payment of entire settlement amount, as agreed, under the guarantor
settlement proposal - only the specific assets and the liability of the guarantor
entering into settlement shall be released.
(g) In case any one or more of the guarantors settle the entire outstanding liability
through a settlement process, all the rights and securities under the facility
shall be transferred to such guarantor/s settling the facility, after the entire
settlement proceeds is received and appropriated.
5.10 OTS/NS in accounts with Non-Fund Based outstanding dues:
1) The settlement process for NFB Outstanding shall be over and above the
settlement process as per ‘Part A’ or ‘Part B.’
2) If there are expired guarantees issued by the Bank, steps must be immediately
taken to get the guarantees cancelled and reverse the entries in the Books.
3) In accounts where there are outstanding unexpired guarantees issued by the
Bank or Bank Guarantees/LC/NFB Liability under litigation or there are other
Non-Fund based(NFB) liabilities still pending, the settlement of NFB limit
shall have the following terms forming part of the OTS proposal :
a) Margin between 20-50% may be collected and maintained in an interest
bearing deposit account under lien till the maturity of each instrument
(LC/BG).
b) In case of NFB backed by cash margin, no OTS/NS proposal for
reductions in such margins shall be allowed
c) If the liability devolves on the Bank, the margin amount shall be
appropriated against the devolved amount.
54

d) After appropriation of the entire margin against devolved amount, the

balance amount shall be written off. (which amount shall be clearly
indicated in the approval note under settlement of NFB facility)
e) In case the instruments expire without devolvement and original
instrument is returned, unutilized margin money after expiry of all
outstanding NFB liability (if entire OTS/NS terms for other than NFB has
been fully satisfied) may be returned.
55

5.11 OTS/NS proposal in respect of Borrowers/Promoter/Guarantor classified as

Willful Defaulter/ in Fraud cases:
5.11.1 OTS/NS proposals in cases declared as Fraud: In case of accounts declared as
Fraud, complaint with the appropriate investigating authority is required to be filed
by the Bank. However, in such cases, recovery action does not end just by
initiating criminal proceedings against the borrowers/guarantors and all requisite
steps for recovery, normally taken otherwise in such cases, should necessarily be
initiated, including filing suits before Civil Court / Debt Recovery Tribunals, action
under SARFAESI / IBC etc., apart from initiating criminal proceedings.
Settlements may be negotiated and sanctioned in NPA cases reported as fraud,
subject to compliance of the following:
i. It is important that the Bank endeavors to recover its dues from Fraud cases
and therefore, this Policy on Recovery through Settlement is applicable to such
cases as well, independent of criminal proceedings and without prejudice to the
criminal case against the borrower/guarantor(s)
ii. The settlement (OTS/NS) proposal shall generally be submitted only after filing
the complaint with the appropriate enforcement authority.
iii. Investigating / enforcement authority prosecuting the case should be informed in
writing by Registered post/courier about the proposed settlement and if
objections, if any, are not received within 30 days, settlement shall be proceeded
with.
iv. Post-settlement, criminal case shall not be withdrawn by the Bank. All the
assistance required or called for by the Investigating agency or the Court to take
the case to its logical conclusion should be provided by the Bank.
v. After the settlement, files relating to the account should not be destroyed or sent
to old records but should be kept safely and properly till the conclusion of the
criminal proceedings.
vi. In all cases of settlement with Fraud cases, the sanction communication shall
incorporate the following clause :
56

“Sanction / acceptance of OTS / NS by the Bank and / or payment of part or full

of the amount under OTS/NS and/or issue of No Due Certificate by the Bank
shall not in any manner affect or impair or prejudice the criminal proceedings
already initiated or likely to be initiated or which may be initiated at a later date,
whether on a cause of action already known to the Bank or under investigation
against the borrower(s), the promoter(s), director(s), guarantor(s) or any other
person”.
5.11.2 OTS/NS proposal in respect of Borrowers / Promoter / Guarantor classified as

Wilful defaulter:
All OTS /NS proposals of Promoters / Borrowers / Guarantors classified and
declared as Willful Defaulters shall be processed on the same lines as in the case of
other accounts and submitted to delegated sanctioning authority as per DoP
5.12 OTS/NS from Vendors under Line of Credit of corporate- Vendor finance
Programme:
1) Under Vendor Finance Programme, as per the underlying documents, the

Vendor (as per Facility Confirmation letter) has been identified as “Principal
Debtor” and as the Corporate has undertaken the responsibility to repay through
MOA/MOU and/or Corporate Guarantee, is identified as “Guarantor”.
2) In cases where the Vendor Bill discounting is under the line of credit of the
Corporate, generally the cases are settled with Corporates. But in case the
corporate is under stress/NPA and the Vendor proposes settlement, the same
may be considered and processed with due approvals.
3) In all these cases the settlements with Vendors under VBD shall be as per the
guidelines in ‘Policy on Recovery through Settlement’ by treating the
outstanding of Individual vendor as the sanction / facility (distinct from overall
limit on exposure of Corporate).
57

4) On payment of approved settlement amount the account of vendor shall be

closed and vendor’s name removed from CIC/CIBIL etc. as per extant
guidelines
5) Consequent to payment by Vendor as per the approved terms of settlement, with
the discharge of the Vendor, the Corporate also shall stand discharged to the
extent of exposure of that specific vendor (VBD).
5.13 OTS/NS proposal in cases with overseas branches and facilities in foreign
currency
The process and procedure, terms and conditions as per the Policy on recovery
through settlement’ shall be applicable for OTS/NS proposals for facilities in
foreign currency with overseas branches except for the variations noted below:
a. The OTS/NS proposal shall be processed in foreign currency as applicable to
the subject case under settlement process.
b. For seeking approval as per the extant Delegation of Power the foreign currency
value shall be converted to INR, for reference purposes only, based on the
conversion rate as applicable
c. In all instances ((i)Notional dues calculation/(ii) NPV sec discount rate /(iii)
Interest on payment terms beyond 90days (1 YEAR MCLR+ 2%) /(iv) delayed
payment interest (1 year MCLR +2%)) wherein ‘1 year MCLR’ is referred,
‘LIBOR’ rate as on COD plus the spread – both ‘LIBOR periodicity’ and
‘spread’ as per terms of sanction’ shall be applicable.
d. In the calculation of NPV Sec of securities, the discount period shall be
reckoned based on the various factors like status of recovery action, type of
security which impact the duration of realization etc. A non-exhaustive list of
stages and period attributable for realization to arrive at the time factor for
discounting is as follows:-
i. 3 Year bucket:
58

 Loan is under multiple banking arrangement and/or the exclusive

collateral coverage is sufficient and/or bank has pari-passu charge and
consent of other charge holders are available for legal recourse.
 Loan accounts where Legal action has been initiated /where the case has
been registered by relevant Court and process is underway.
 Loan accounts where charge is created by way of mortgage registered with
Land Department
ii. 5 year bucket:
 Loan accounts where Legal action is not yet initiated/where the case is
not yet registered by relevant Court.
 Loan accounts where charge/legal rights are disputed by the
borrowers/other banks.
 Loan accounts where the charge is created by any means other than
mortgage registered with Land Department
e. For the purpose of awarding score based on ‘Ease of Realization’ following
value based criteria (non exhaustive) for reckoning under BSA scoring model
shall be as follows
i. Ease of realization – High
 Residential/commercial properties where mortgage is created and is
registered with Land Department.
ii. Ease of realization – Average
 Plant and machinery, and other assets which are created by way of Asset
Pledge
iii. Ease of realization – Low
 Wherever security is created by way of assignments, undertakings,
negative lien, and through means other than Mortgage and asset pledge.
f. Valuation of assets: Instead of obtaining valuation of assets on the basis of
FMV/RSV/DSV, ‘Market value’ as provided by the valuer shall be reckoned for
all purposes under the policy.
g. The stipulation of filing of consent terms at DRT shall not be applicable
59

5.14 Granting of Fresh credit facilities to OTS/NS beneficiaries:

As per the extant guidelines, Bank will not extend credit / fresh loans to those
borrowers, whose credit facilities were, settled under OTS/NS, for 3 years from the
date of final payment of settlement amount..
5.15 Counter offer policy of the Bank for OTS :
1) The Counter Offer policy shall apply
a) Wherever the bank received an OTS offer in writing from the
Borrower/guarantor, which is not acceptable to the Bank and the Gross
Principal Outstanding (GPO) is Rs.10crore and above.
b) The Counter offer policy shall also apply where there are directions from the
Court/Tribunal to give the offer of the Bank
2) If the dealing group is of the opinion that a settlement would be possible by
extending a counter offer instead of protracted negotiation, the following
guidelines may be adopted
3) The guidelines are :
a) This Counter offer policy is not applicable only to cases declared as wilful
defaulters or fraud cases.
b) The guidelines of ‘Policy on Recovery through Settlement’ shall be
applicable for arriving at the ‘Counter Offer’. The value of the security,
NPV, net worth of the guarantors, etc has to be considered as per policy
before arriving at the Counter Offer.
c) The Sanctioning Authority for approving Counter Offer, shall be the
delegated authority if such offer was to be the settlement amount
d) The Sanctioning Authority shall approve the terms and conditions of the
Counter Offer
e) The acceptance of ‘Counter offer’ shall not be open for indefinite period, it
shall be for a defined limited period and shall be in writing:
4) The letter conveying Counter Offer should contain the following:
a) Date by which the borrowers/guarantor should accept the Counter offer
60

b) If the borrowers/ guarantors fail to accept the Counter Offer within the time
stipulated therein, Counter offer shall stand withdrawn / cancelled.
c) The date by which the amount specified in the Counter offer should be paid
d) If borrowers / guarantors do not remit the amount within the time stipulated
in the Counter offer, the offer given by the bank shall stand cancelled and
borrowers/guarantors shall be liable to pay the original dues
e) The counter offer given by the Bank shall be without prejudice to the rights
of the bank to claim damages towards any injury, loss, damage, claim,
expenses, costs suffered / that may be suffered by the bank under any
circumstances, in connection with failure of borrowers/ guarantors to
perform the terms under the Counter Offer.
f) The Counter offer given by the bank shall be without prejudice to the
contention / stand taken by bank before the Courts/Tribunals.
5.16 Reversal of Provision:
Provision made in the accounts where OTS/NS has been sanctioned will be
reversed to the extent of recoveries as per guidelines, during the period in which the
recovery has been booked.
5.17 Reporting of Progress of OTS/NS approved.

Monthly report of OTS/NS cases approved during the month and progress in
already approved cases consolidated at Zonal office/ Vertical shall be reported to
Recovery Review Committee.
In case of default, the major reasons for default and action taken thereof shall also
be reported
61

SECTION 6
Recovery through action under SARFAESI Act
6.1 The Securitisation and Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002 (SARFAESI Act) empowers the Banks/ Financial
Institutions (FIs) to enforce the securities created by the borrower (s) / guarantor(s)/
mortgagors and realize their dues, without intervention of the Court.
Enforcement of security under the SARFAESI Act should be completed as early as
possible.
It has to be ensured that the provisions of the SARFAESI Act and the Rules made
there under are strictly adhered to in order to avoid any challenges to the
SARFAESI action initiated by the Bank.
Any deferment of the action under SARFAESI Act shall be only with the prior
approval of the delegated authority, except in cases where, the borrower has
obtained order of injunction (stay) restraining Bank from proceeding with
SARFAESI action. In such eventuality, all efforts shall be made to obtain early
vacation of the stay and further action under SARFAESI Act shall be taken
immediately thereafter.
6.2 Recovery through SARFAESI Action
Bank shall initiate SARFAESI action in all eligible cases classified as NPA except
in the following cases where in provisions of SARFAESI Act does not, inter alia,
apply:
 Lien on any goods, money or security (under the Indian Contract Act, 1872 or
the Sale of Goods Act , 1930 or any other law for the time being in force) ;
 Pledge of movables (within the meaning of Sec 172 of the Indian Contract Act,
1872);
 Creation of any security in any aircraft (as defined in Aircraft Act, 1934);
 Creation of any security interest in any vessel (as defined in Merchant Shipping
Act, 1958);
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 Any security interest for securing repayment of any financial asset not
exceeding Rs.1 lakh ; and
 Any security interest created in agricultural land;
 Any case in which the amount due is less than 20% of the principal amount and
interest thereon etc.
6.3 Issuance of notice under Section 13(2): Assess the Security (both fixed and
current assets/immovable and movable) charged by way of hypothecation /
mortgage to the Bank and identify assets that could be taken possession of and sold
under the SARFAESI Act (eligible secured assets).
Bank shall initiate action under SARFAESI Act (issuance of notice under Section
13(2)) in all eligible cases within 25 days from date of NPA in Non-Restructured &
sole banking Accounts and within 45 days from date of NPA in Restructured
Accounts. However, the cases which are time barred can’t be enforced under
SARFAESI Act.
6.4 Bank shall issue notice to the borrower(s)/mortgagor(s)/guarantor(s) (who has

created security interest in favour of the Bank) (copy to be addressed / endorsed to
all the security providers) through its Authorized Officer(AO) under Section 13(2)
of SARFAESI Act, to discharge in full his liabilities/dues to the Bank within 60
days from the date of the notice and also notify him that in the event of his failure
to do so, it may exercise the following right:
 Take possession of the secured assets including the right to transfer by
way of lease, assignment or sale for realizing the secured assets or
 Take over the management of the business of the borrower including the
right to transfer by way of lease, assignment or sale for realizing the
secured asset.
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 Transfer by way of lease, assignment or sale of the business of the

borrower only if substantial part of the business of the borrower is held as
security for the debt. Provided further that where the management of
whole of the business or part of the business is severable, Bank shall take
over the management of such business of the borrower which is relatable
to the security for the debt.
 Appoint any person to manage the secured assets, the possession of which
has been taken over or
 Demand the amount in writing from any person who has acquired any of
the secured assets from the borrower and from whom any amount is due
or become due to the borrower, so much of the money as is sufficient to
pay the secured debt.
 In the Demand Notice under Section 13(2) of SARFAESI Act, the

Borrower may also be informed of the provisions of section 13 (8) of the
SARFAESI Act, in terms of which the time available to the borrower to
redeem the secured assets is mentioned.
6.5 Reply to representation by borrower/mortgagor/guarantor under Section
13(3A): On issuance of notice under section 13(2) of SARFAESI Act, if any
representation/objection under section 13(3A) of SARFAESI Act is received from
the borrower(s) / mortgagor(s)/guarantor(s), a reply has to be issued by the Bank
within 15 days from the date of receipt of such representation / objection.
6.6 Issuance of notice under Section 13(4) - Process for possession of

moveable/immovable assets: Wherever, notice has been issued by the Bank under
section 13 (2) of SARFAESI Act, due care shall be exercised to take recourse to
any of the measures mentioned in Section 13 (4) of the SARFAESI Act including
taking possession of the assets immediately on expiry of the statutory notice period
(presently 60 days).
1) Moveable assets:
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 Prepare panchanama duly witnessed by two persons (in the prescribed

format)
 Draw inventory (in the prescribed format)
 Give a copy of the panchanama to the borrower(s)/
mortgagor(s)/guarantor(s) or his representative against acknowledgement. If
borrower/his representative refuses to accept the same, it shall be sent
through registered post with acknowledgement.
 Borrower shall be intimated by a notice, enclosing the panchnama drawn and
the inventory made in the prescribed formats
 Possession Notice may also be served upon the borrower through
electronic mode of service in addition to other modes prescribed.
 Keep the assets properly secured and duly insured.
 Obtain valuation only from the valuer empanelled with the Bank
 Fix Reserve Price, if considered necessary
 Issue 30 days’ notice of sale to the borrower/guarantor (who has created
security interest).
 Thereafter, the sale can be effected either by obtaining quotations from
parties, or by inviting tenders from public or by holding public auction
(through e-auction wherever possible) or by private treaty adhering to the
provisions of the SARFAESI Act and the rules made thereunder.
 In the case of public auction, the sale notice shall be published in 2 leading
newspapers, one of which should be in vernacular language, having
sufficient circulation in that locality by laying out the terms of sale,
including Reserve Price fixed as applicable.
 The sale by any methods other than public auction or public tender
shall be on such terms as may be settled between the Bank and the
proposed purchaser in writing.
 Certificate of sale shall be issued to the successful bidder on receipt of bid
amount. (in the prescribed format).
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2) Immovable assets/property:
 Possession notice shall be given to the borrower(s), mortgagor(s) and
guarantor(s) (who has created security interest) and proper
acknowledgement to be obtained.
 If the borrower(s)/mortgagor(s)/guarantor(s) refuses to accept the possession
notice, Authorised Officer can send the said possession notice under
registered post acknowledgement due to borrower(s), mortgagor(s) and
guarantor(s). Affix the possession notice on the outer door or at a
conspicuous place of property.
 Possession notice should be published in 2 leading news papers , one of
which should be in vernacular language having sufficient circulation in that
locality within 7 days of taking possession.
 The Possession notice may also be served upon the borrower through
electronic mode of service in addition to other modes prescribed
 Keep the assets properly secured and duly insured.
 30 days’ notice for sale of immovable assets/property should be given to the
borrower(s) and mortgagor(s), a copy of sale notice may be marked to the
guarantor(s) also.
 Obtain valuation only from the valuer empanelled with the Bank.
 Fix reserve price of the property
 Thereafter, the sale can be effected either by obtaining quotations from
parties, or by inviting tenders from public or by holding public auction
(through e-auction wherever possible) or by private treaty adhering to the
provisions of the SARFAESI Act and rules made thereunder.
 In the case of public auction, the sale notice shall be published in 2 leading
newspapers, one of which should be in vernacular language, having
sufficient circulation in that locality by laying out the terms of sale,
including Reserve Price fixed
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 The sale by any methods other than public auction or public tender,
shall be on such terms as may be settled between the Bank and the
proposed purchaser in writing.
 Certificate of sale shall be issued to the successful bidder on receipt of bid

amount. (in the prescribed format).
 As per provision under Section 194-IA of Income Tax Act, 1961, TDS has
to be deducted by the buyer of any immovable property(other than
agricultural land) sold under the provisions of SARFAESI Act subject to
other terms and conditions (detailed instructions as per circular IDBI
Bank/2018-19/403/FAD/TAXATION/17 dated December 13, 2018)
6.7 Application against measures taken by the Bank/ secured creditor under
Section 13(4) of SARFAESI Act:
 Any person (including the borrower), aggrieved by any measures /actions of
the secured creditor may make an application to the DRT having jurisdiction
in the matter (within the local limits of whose jurisdiction the cause of
action, wholly or part arise; or the secured asset is located; or the branch or
any other office where account of the bank related to the debt is maintained
for the time being) within 45 days from the date on which such
measure/action has been taken by the Bank.
 Any application made by the borrower(s)/ mortgagor(s)/guarantor(s) is

required to be disposed off by the DRT within 60 days from the date of such
application. However, the maximum period of pendency of the application
with the DRT shall not exceed four months from the date of application. If
the application is not disposed off within a period of four months, the Bank
may file an application before the Appellate Tribunal (DRAT) for a direction
to the DRT for expeditiously disposing the application (Ref circular no.
IDBI Bank/2018-19/94/CC/Legal-28 dated 21.05.2018).
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6.8 Filing of Caveat before DRT/Court: On a case to case basis, the Bank may lodge
caveat before DRT/ Court, where any application or appeal, challenging the Bank’s
actions under Section 13(4) of SARFAESI Act, is expected to be filed by the
borrower(s)/ mortgagor(s)/guarantor(s) or any aggrieved party.
6.9 Filing of Application for DM/CMM assistance : In cases, where any resistance is
apprehended in peaceful possession of the secured asset, an application
accompanied with an affidavit duly affirmed by the Authorised Officer of the Bank
declaring all the aspects as mentioned in Section 14 of SARFAESI Act, shall be
filed before the District Magistrate (DM) / Chief Metropolitan Magistrate (CMM),
as the case may be, seeking assistance to obtain peaceful possession of the secured
asset (as Bank is not authorised to break open the lock without DM/CMM orders)
In terms of the SARFAESI Act/Rules, the DM / CMM is required to pass orders

within a period of 30 days, extendable up to 60 days for the reasons to be recorded
in writing, as per the (Ref circular no. IDBI Bank/2016-17/515/CC/Legal/106
dt.20.02.2017). The DM/CMM can authorize any subordinate officer for taking
possession of assets and related documents and forwarding such assets and
documents to the Bank. In case of delay in taking over the possession of the
secured asset, the matter shall be followed up vigorously through higher level
intervention to ensure early possession.
6.10 Process for sale of security:
 Compliance to all the procedural guidelines as prescribed under SARFAESI

act including ‘Notice for Sale’ to the borrower(s)/mortgagor(s) and
guarantor(s), fixing Reserve Price, EMD and terms of sale, hosting of Bid
document, publication in newspaper etc shall be ensured.
 In the case of sale of Moveable secured assets:
a) The terms of sale set out may include :
i. Details about the borrower and the secured creditor
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ii. Description of secured assets to be sold with identification marks or

numbers, if any, on them
iii. Reserve price, if any, and the time and manner of payment
iv. Time and place of public auction or time after which sale by any other
mode shall be completed
v. Depositing earnest money as may be stipulated by the secured creditor
vi. Any other thing which the authorized officer considers it material for a
purchaser to know in order to judge the nature and value of moveable
secured assets.
b) Issue of Sale certificate – sale of movable secured assets
i. Where movable secured assets is sold, the sale price of each lot shall be
sold as per the terms of the public notice or on the terms as may be
settled between the parties as the case may be, and in the event of default
of payment, the moveable secured assets shall be liable to be offered for
sale again.
ii. On payment of sale price, the AO shall issue a certificate of sale in the
prescribed form and the same shall be prima facie evidence of title of the
purchaser.
 In the case of sale of Immovable secured assets –
a) The terms of sale set out in the Bid document may include :
i. Details about the borrower and the secured creditor
ii. Description of secured assets to be sold including details of
encumbrances’
iii. Secured debt for recovery of which the property is to be sold
iv. Reserve price, below which the property may not be sold
v. Time and place of public auction or time after which sale by any other
mode shall be completed
vi. Depositing earnest money as may be stipulated by the secured creditor
vii. Any other thing which the authorized officer considers it material for a
purchaser to know in order to judge the nature and value of property.
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viii. Every notice of sale shall be affixed on a conspicuous part of the

immovable property and may, if the Authorised Officer deems it fit put
on the website of secured creditor on the internet.
b) Time of Sale, issue of Sale certificate and delivery of possession etc –
Immovable secured assets:
i. The sale shall be confirmed in favour of the purchaser who has offered
the highest Sale price in his bid or tender or quotation or offer to the
Authorised officer ( and subject to the confirmation by the Secured
creditor provided no sale under rule 9 shall be confirmed if the amount
offered by Sale price is less than the Reserve Price )
ii. On every sale of immovable property the purchaser shall immediately ie
on the same day or not later than next working day, as the case may be,
pay deposit of 25% of the amount of the sale price, which is inclusive of
EMD, to the Authorised Officer conducting the sale and in default of the
such deposit the property shall be sold again.
iii. The balance amount of purchase price payable shall be paid by the
purchaser to the Authorised Officer on or before the 15th day of
‘Confirmation of sale’ of the property or such extended period ( as may
be agreed upon in writing between the purchaser and the secured creditor
in any case not exceeding three months)
iv. In default of payment within the period mentioned above, the deposit
shall be forfeited and the property shall be resold and the defaulting
purchaser shall forfeit (to the secured creditor) all claim to the property
or to any part of the sum for which it may be subsequently sold.
v. On confirmation of sale, by the secured creditor and if the terms of
payment have been complied with, the AO exercising the power of sale
shall issue a certificate of sale of the immovable property in favour of the
purchaser.
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vi. Sale certificate as per the Statutory Format shall be issued which shall
be stamped and registered as per local laws, if necessary, cost of which
shall be borne by the purchaser.
vii. As per provision under Section 194-IA of Income Tax Act, 1961, TDS
has to be deducted by the buyer of any immovable property(other than
viii. Encumbrances in the Immovable Secured Assets
In case of immovable secured assets, the AO shall include the details of
known encumbrances, if any, in the Sale notice and in the Bid document.
6.11 In case, sale / auction process fails,

1) Fresh attempts may be made with reduction in Reserve Price (RP) on a case
to case basis, with the approval of the delegated authority. However, the
valuation considered for such re-auction should not be more than 1 year old.
2) If sale of secured assets by any mode fails in the first instance and sale is
required to be conducted again, for second and subsequent sale/auction,
notice period of 15 days would suffice (The Security Interest (Enforcement)
Rules, 2002 Rule 6 (2) & 9(1)).
3) No sale shall be confirmed if the sale price is below the Reserve Price
fixed by the Bank. However, an asset can be sold below the Reserve Price
with the consent of the Borrower(s)/Mortgagor(s) (and the secured
creditor(s), if any).
4) The Bank shall also evaluate its option to acquire the asset by participating in
any subsequent bidding process (at the Reserve Price fixed for the last failed
auction) through its official duly authorised to exercise the said right. Bank
shall not hold any such immovable property acquired, beyond the period as
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stipulated under the Banking Regulation Act, 1949, except for those assets
acquired for its own use. (ref details in clause 6.16 below)
5) Private Treaty may be considered without resorting to other methods if all
the dues of the Bank in the case are being fully recovered. Same being not the
case, sale through private treaty can be considered where the auction has
failed once in cases with asset value up to Rs.1 crore and twice in cases with
asset value more than Rs.1 crore. Reserve price for private treaty shall not be
less than last failed auction reserve price. (ref details in clause 6.15 below)
6.12 Valuation of securities for action under SARFAESI Act:
1) In case of SARFAESI action, as per extant SARFAESI rules, valuation should be

obtained immediately after taking possession.
2) The valuation report should
(i) Indicate clearly: Fair Market Value (FMV), Realisable Sale value (RSV) and
Distress Sale Value (DSV).
(ii) Indicate the value of Land and Building separately.
(iii) Indicate the government land rate /circle rate / guideline value (if
applicable) for the area, for reference purposes.
(iv) Indicate clearly in case of machineries, the condition of the machinery and
potential use.
3) For fixing Reserve Price for sale under SARFAESI Act, if the existing valuation
of collateral / primary Security charged to the Bank (obtained during SARFAESI
action or afterwards) is more than 1 year old, fresh valuation shall be obtained
from an empanelled valuer of the Bank,
4) Applicable security value for fixing Reserve price for sale under SARFAESI
shall be as under:
I All immovable fixed assets of the unit including plant and machinery
Industrial units in Operation Realisable Sale Value (RSV)
Closed industrial unit Distress Sale Value (DSV)
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II All immovable fixed assets other than unit assets

Real estate securities including Realisable Sale Value (RSV)
residential buildings, Non
Agricultural plot of land, commercial
spaces, etc. of the borrower and
collateral securities
III. Current Assets

All current assets including debtors Distress Sale Value (DSV)
and other recoverables
5) Two independent valuations are required to be obtained from the Bank’s

empanelled valuer in the following circumstances:
a) Reserve Bank of India has prescribed that the Banks should obtain two
independent valuation reports for properties valued at Rs.50 crore and above.
However, in view of the IBA guidelines and market practice, two
independent valuation reports shall be obtained in cases where value of each
specific security is Rs 10 crore and above for fixing reserve price for sale
under SARFAESI Act.
b) In case 2 valuations are obtained, the average of the 2 shall be
considered
c) Comparison of current valuation with immediately previous valuation:
i. In all cases where latest valuation obtained indicates divergence (more

than 15%) to the earlier valuation (the immediately previous valuation),
reasons for such divergence may be assessed considering factors that
affect value of the security (like shelf life in case of current assets,
depreciation in case of plant & machinery, building, vehicles etc.).
Proper justification may also be obtained from the Valuer for such
variations and recorded accordingly.
ii. However, in cases where the immediate previous valuation is a valuation

carried out by the Bank after SARFAESI action and there is wide
73

divergence between these valuations (50 % or above) and the current

valuation of each specific security is more than Rs 1.00 Crore (i.e
properties valuation between Rs. 1.00 Cr to Rs 10.00 Cr), as an
exceptional case, another valuation may be obtained and the average of
the two valuations may be considered for fixing the reserve price for sale
under SARFAESI Act.
6.13 Action under SARFAESI Act – related aspects

1) Disputes pertaining to Mortgaged Assets: In case of disputes pertaining to
the mortgaged immovable properties including disputed possession, a fresh
Title Investigation Report (TIR) shall be obtained from the empanelled
advocate (other than the previous one) after conducting searches in the
concerned SRO/Revenue office.
2) Case under process of Revival plan/ Restructuring Package: In case any
revival plan / restructuring package cannot be worked out within 6 months
from the date of NPA, the action to enforce securities under SARFAESI Act
may be continued subject to having requisite mandate in case of securities
shared among multiple lenders including Second charge holders. This would
exert necessary pressure on the borrower, and bring the borrower to the
negotiating table. In case of finalization of any revival plan / restructuring
package Bank may withdraw the SARFAESI action.
3) Case under Settlement Process(OTS/NS) : Action under SARFAESI Act
must be continued even when settlement proposal (OTS/NS) is under
discussion. OTS/NS would be another option for resolution of NPAs as it
would expedite recovery. In case of finalization of any settlement proposal
[Settlement Letter of Approval (LoA) duly accepted by the borrower along
with stipulated payment under the approval], Bank may keep in abeyance the
SARFAESI action. If the settlement terms are not adhered to and the package
is revoked, the Bank would have saved valuable time and can proceed to
realize the security under SARFAESI Act.
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4) Enforcement of Security Interest on Tribal Land under SARFAESI Act:

The provisions of State Legislation of certain states restrict the transfer of
ownership of immovable properties mainly those owned by the scheduled
tribes to non- tribal persons. This has a bearing on the enforcement of
mortgage created on immovable properties situated in such States. As per
recent Supreme Court of India judgment (in matter of UCO Bank v Dipak
Debbarma & Others), the provisions of SARFAESI Act, do not contain any
embargo on the category of persons to whom mortgaged property can be sold
by the bank for realization of its dues and will prevail over the provisions of
the State legislation. (Ref Circular No. IDBI Bank /2016-
2017/412/CC/Legal/87 dt.07.12.2016)
5) Filing before DRT- After sale of secured assets under SARFAESI Act and
appropriation of sale proceeds, the statement of account duly certified under
the Bankers’ Book Evidence Act, 1891, has to be filed before the DRT, in the
cases where the recovery application is pending. If the dues of the Bank are
not fully satisfied by appropriation of sale proceeds of secured assets, Bank
shall take steps for recovery of balance amount of outstanding dues from the
borrower(s) and guarantor(s) by pursuing application filed before the
concerned DRT.
6) Case admitted by NCLT under IBC– In case an application has been made
against the debtor under the Insolvency and Bankruptcy Code, 2016 and the
same has been admitted under NCLT, on account of moratorium on any legal
action against the corporate debtor, the action under SARFAESI Act shall be
suspended till the Insolvency resolution process is completed. The moratorium
declared against the borrower/ company shall not be applicable to the
guarantors or assets of the guarantors and other assets not belonging to the
borrower company. Those assets can be continued to be pursued under
SARFAESI or other mode.
7) Tenancy of Secured asset –Enforcement of security interest created on the
tenanted properties has become extremely challenging and difficult. Hon’ble
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Supreme Court while discussing rights of protected tenants qua the secured
assets has held that –‘Once tenancy is created, a tenant can be evicted only
after following the due process of law, as prescribed under the provisions of
the Rent Control Act. A tenant cannot be arbitrarily evicted by using the
provision of SARFAESI act (Vishal N Kalsaria v Bank of India & Ors.
20.01.2016)’. For action on such security, branch/dealing group may be guided
by circulars issued in this regard (IDBI Bank/2015-2016/534/CC/Legal/109
dated January 30, 2016 and IDBI Bank/2015-16/424/CC/Legal/86 dated
26.11.2015) and also obtain necessary guidance from Legal Department.
6.14 Action under SARFAESI Act - under Consortium/ Multiple banking

arrangement
1) Bank may issue notice under Section 13(2) of SARFAESI Act on assessment of
eligible assets on case-to-case basis.
2) As per the SARFAESI Act, any secured lender is not entitled to exercise the
power of enforcement of Securities under Section 13(4) of the Act unless
Secured Creditors representing not less than 60% in value of the amount
outstanding including second charge and subsequent charge holders (the total
amount due to be payable as on ‘record date’) agree/consent for such action
under Section 13(9) of the Act. This consent is required only at the stage of
taking possession and further proceedings and not at the stage of issuance
of Demand Notice under Section 13(2).
3) As per the decision under JLM a consent letter may be issued to lead bank for
taking up further action under SARFAESI Act starting from issuance of 13(4)
notice onwards.
4) Bank should pursue with the Lead bank/Lenders through direct communication
and through the Lenders forum, for time bound action process to unlock the
economic value of the assets at the earliest.
5) Under consortium arrangement, the securities are charged between the Member
banks /lenders according to the pattern of finance either as Working Capital or
76

Term Loan or both and on first charge or second charge basis. In the case of
recovery under SARFAESI Act, as consent of second charge holders is also
required, the first charge holder / second charge holder under consortium
generally agree on apportioning the sale proceeds in an agreed ratio and ranges
between 15% to 25% to second charge holders.
6) When action under SARFEASI Act is initiated against the
borrower(s)/mortgagor(s)/guarantor(s), all costs, charges and expenses which in
the opinion of the secured creditor, have been properly incurred by the secured
creditor or any expenses incidental thereto, shall be recoverable from the
borrower(s)/mortgagor(s)/guarantor(s) and in the absence of any contract to the
contrary, the sale proceeds shall firstly be applied towards such cost, charges
and expenses and thereafter in discharge of dues of the secured creditor(s) on
pro-rata basis.
6.15 Sale under SARFAESI Act through Private Treaty:
1) Sale through ‘Private Treaty’ is a recognized mode of sale under SARFAESI

Act. Private Treaty may be explored after having exhausted public auction
mode. There is an advantage in resorting to Private Treaty and thereby ensuring
the success of sale as it brings down the chances of sabotage by borrower,
nullifies chances of syndicate etc. Sale through Private Treaty may be
considered without resorting to other methods if all the dues of the bank/lenders
in the case are being fully recovered. Same being not the case, sale through
private treaty can be considered where the auction has failed once in cases
with asset value up to Rs.1 crore and twice in cases with asset value more
than Rs.1 crore. (Ref - Ministry of Finance circular dt April 23, 2012).Reserve
price for private treaty shall not be less than last failed auction reserve
price.
2) The procedural modalities of sale through private treaty are:
 The initial steps of identifying among the assets mortgaged to the bank that
are eligible for action under SARFAESI Act, issuance of notice under
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section 13(2) of the Act, issuance of notice under section 13(4) of the Act,
taking possession of the asset, with assistance of DM/CMM if required,
issuance of notice for sale, valuation etc – meticulous compliance to all the
procedural guidelines has to be ensured.
 Auction under SARFAESI must have failed at least once in case of asset
value up to Rs.1 crore and twice in cases where asset value more than Rs.1
crore for exploring sale under Private Treaty. The Reserve Price for Sale
under Private Treaty shall not be less than the last failed auction reserve
price. Engage external agencies like enforcement/recovery agents to do the
base work and scout for bidders.
 Give wide publicity through nearby branches; reach out to local contacts,
industry associations, real estate agents etc.
 Identification of potential buyer at an acceptable price not below the last
failed auction reserve price
 ‘Notice for Sale’ for cases proposed under Private Treaty (15 days prior
notice only) shall be issued to borrower(s)/mortgagor(s), under SARFAESI
Act . Only if the borrower(s)/mortgagor(s)/guarantor(s) is absconding/ not
traceable the said notice needs to be published in newspapers.
 The pricing, as laid down in SARFAESI Act and Rules made there under, is
as agreed between the Bank and the proposed purchaser.
 The sale by any methods other than public auction or public tender shall be
on such terms as may be settled between the Bank and the proposed
purchaser in writing.
3) General Terms for sale under Private Treaty:

 At the time of submitting offer for private treaty, 10% of the sale price
offered (not less than the last failed auction reserve price) shall be
collected from the proposed purchaser as EMD
 After negotiation the ‘Sale Price’ (not less than the last failed auction
reserve price) as agreed between the Bank and the purchaser shall be
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finalized and ‘Confirmation of sale’ shall be issued by the Bank.

‘Confirmation of sale’ inter alia shall contain the terms of payment as per
SARFAESI Act.
 On issuance of ‘Confirmation of sale’ the purchaser shall immediately ie
on the same day or not later than next working day, as the case may be,
pay deposit of 25% of the amount of the sale price, which is inclusive of
EMD, to the Authorised Officer conducting the sale.
 The balance amount of ‘Sale price’ payable shall be paid by the
purchaser to the Authorised Officer on or before the 15th day of
‘Confirmation of sale’ of the property or such extended period ( as may
be agreed upon in writing between the purchaser and the secured creditor
in any case not exceeding three months)
 In default of payment within the period mentioned above, the deposit
shall be forfeited and the property shall be resold and the defaulting
purchaser shall forfeit (to the secured creditor) all claim to the property
or to any part of the sum for which it may be subsequently sold.
 Once the sale price is paid in full, Sale certificate as per the Statutory
Format shall be issued which shall be stamped and registered as per local
laws, if necessary, cost of which shall be borne by the purchaser.
 As per provision under Section 194-IA of Income Tax Act, 1961, TDS has
to be deducted by the buyer of any immovable property(other than
6.16 SARFAESI Act – Secured creditor (Bank) to acquire immovable property

The amendment dated 15.01.2013 to the SARFAESI act enables the Secured
Creditor to acquire immoveable property over which it holds security interest, if
such immovable property cannot be sold through a bid process, at a Reserve Price.
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1) General Guidelines for Secured Creditors (Bank) to acquire such immovable

property is given below:
In the event the sale of an immovable property, is postponed for want of a bid
of an amount not less than the Reserve Price, any officer of the secured
creditor (IDBI Bank) authorized in this behalf may at any subsequent sale, bid
for the said immovable property on behalf of the secured creditor
Bank shall ensure that

i. The bid shall be at minimum of the Reserve Price as at last failed auction
Reserve Price.
ii. All the formalities prescribed in the bid document which are required to be
observed by an ordinary bidder are duly complied.
iii. The unconditional bid is submitted in sealed cover to the Authorised Officer
within the time and date specified in this behalf
iv. Such bid is accompanied by the EMD in such form and manner specified in
the bid document
v. The inspection of the property is carried out on the date and time specified in
the bid document
vi. No other encumbrances, charges, litigation, liens , statutory liabilities
including taxes and out goings on or effecting the property exists
vii. Due diligence in respect of the Title to the property is done
viii. All necessary licenses / permissions from public authorities if any required
are obtained
ix. On acceptance of the offer of the Bank, the purchase price is adjusted
towards the claim of the bank for which the auction of enforcement of
security interest is taken by the Bank under SARFAESI Act.
x. The stamp duty, registration charges, sales tax and any other charges in
connection with the conveyance of the title in favour of the bank are borne
by the prospective purchaser (ie IDBI Bank) in addition to the purchase price
xi. Timelines and the obligations prescribed in the bid document are properly
complied
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2) Process flow:
i. Approval from Sanctioning Authority: The approval for acquiring
immovable property by Bank (over which the bank holds security interest),
in case such immovable property cannot be sold through a bid process, at a
reserve price, under SARFAESI Act shall be obtained by the dealing group
after complying with the due process.
ii. Inspection of Property: Inspection of the property shall be arranged for
FIMD officials
iii. Due diligence: Due diligence in respect of the title to the property may be
carried out through empanelled advocate.
iv. Licenses/Permission: All necessary licenses/ permission from public
authorities, if any required, may be obtained by FIMD (premises section).
v. Submission of Bid: As acquisition/ maintenance of immovable properties is
a premises matter, FIMD (Premises section) shall be requested to take
necessary action for submitting the bid in sealed cover within the stipulated
timelines
vi. Appropriation of Sale Price: After receipt of sale consideration from FIMD,
the dealing group needs to take necessary steps for appropriation of amount
to the concerned loan accounts.
vii. Other charges: The stamp duty, registration charges, sales tax and any other
charges in connection with the conveyance of the title in favour of the Bank
are borne in addition to the purchase price by FIMD (Premises section), if
any.
6.17 CERSAI:
Central Registry of Securitisation Asset Reconstruction and Security Interest
(CERSAI) is a central online security interest registry of India. It was primarily
created to check frauds in lending against equitable mortgages, in which people
would take multiple loans on the same asset from different banks. As per the
amendment to SARFAESI (Central Registry) Rules(notification dated 22.01.2016),
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it will be necessary to register the security interest created in case of movable &
intangibles assets in addition to the registration of security interest in immovable
property
The SARFAESI Act has been further amended wherein Bank cannot take
SARFAESI action against the secured assets/security interest which is not
registered with CERSAI. However said amendment is yet to be notified.
6.18 Sale proceeds under SARFAESI act :
1) When action under SARFAESI Act is initiated against the

borrower(s)/mortgagor(s)/guarantor(s) (who has created security interest in
favour of the Bank), all costs, charges and expenses which in the opinion of the
secured creditor/Bank, have been properly incurred by the secured
creditor/Bank or any expenses incidental thereto, shall be recoverable from the
borrower(s) / mortgagor(s) / guarantor(s) and in the absence of any contract to
the contrary, the sale proceeds shall firstly be applied towards such cost, charges
and expenses and thereafter in discharge of dues of the secured creditor(s)/Bank
on pro-rata basis.
2) Government departments and authorities entrusted with the function of

recovering taxes and other dues like PF, ESI are lodging claims over the
securities of the banks on the grounds that Government dues have priority over
the bank dues as Secured creditors. There are various decisions clearly
establishing that the Crown Debts (government dues) do not have priority over
the dues of secured creditors (unless specifically provided by the State in the
relevant Act itself). As such, each case is to be examined in relation to the
relevant Statute and suitable reply to be given.
3) The provision for mandatory registration of security interest with CERSAI is

pending notification. On notification of such provision, after registration of
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security interest with CERSAI, the debts due to any secured creditor shall be
paid in priority over all other debts and all revenues, taxes, cesses and other
rates payable to the Central Government of State Government of local authority
6.19 Reporting
Progress in action under SARFAESI Act - details are reviewed and reported on a monthly
basis to Recovery Review Committee.
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SECTION 7
Sale of financial assets to ARCs/ BANKs/ FIs/ NBFCs
7.1 Sale of financial assets to ARCs/Banks/FIs/NBFCs (Buyers) is one of the tools for
management of the non-performing assets portfolio of the Bank. Sale of financial
assets shall not be construed as a primary or hard core recovery measure, particularly
if it entails subscription to large percentage of SRs issued as part of sale
consideration of the asset. However, where direct realisation is difficult and /or
expected to take longer time, sale of financial assets could provide a better value
proposition.
7.2 NMG at Corporate office shall be the Nodal Group for driving the process of sale of
financial assets including identification of the cases and the policy guidelines are
reviewed and issued by NMG at Corporate office from time to time based on RBI
guidelines.
7.3 Considering market dynamics to enable the Bank to resolve some of the distressed
financial assets in quick and efficient manner, through sale to ARCs/banks/
FIs/NBFCs, the latest policy approved by Board in its meeting held in September
2018 is in place which lays down a framework for sale of the financial assets to
ARCs/banks/FIs/NBFCs(Buyers) including identification of assets, norms, valuation,
procedure for fixing Reserve Price , the auction process to be followed for price
discovery, provisioning etc. The salient features of the latest policy are given below:
7.4 Financial assets which are permitted to be sold: The Bank may consider selling
following categories of financial assets to ARCs/ Banks/ FIs/NBFCs where the asset
is;
1) A Non-Performing Asset (NPA), including non performing Bond/Debenture;
2) A Standard asset where;
a) the asset is under Consortium/Multiple Banking arrangements,
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b) at least 75% by value of the asset is classified as NPA in the books of other
Banks/FIs, and
c) at least 75% (by value) of the Banks/ FIs who are under the Consortium/
Multiple Banking Arrangements agree to the sale of the asset to ARC
3) Special Mention Accounts (SMA) under category 2 (SMA-2).
4) Technically Written Off assets (TWO).
In compliance with the regulatory guidelines, assets reported as ‘fraud’ as on the
date of sale or that have been originated fraudulently shall not be sold.
7.5 Norms for identification of financial assets for sale to Buyers: Bank shall explore
the possibility of selling the financial assets in the following scenarios:
1) Legal proceedings are pending before legal forum (DRTs/High Courts/Civil
Courts) for a considerable period without proper resolution/remedy and where
normal recovery measures would not be effective / possible on account of such
legal proceedings.
2) Where the borrower/guarantor(s)/promoter(s) stonewall the recovery efforts of the
Bank by initiating multiple litigations and as a result the recovery measures are
prolonged without effective outcome.
3) Where the Bank has made full provision for the account and sale would not have
a negative impact on the balance sheet of the Bank.
4) Doubtful and other stressed assets beyond the threshold limit as may be fixed by
the Board from time to time.
5) Where multiple lenders have charge on the secured assets and it is difficult to get
the mandate of other banks for initiating recovery proceedings or reach a
consensus on the recovery action.
6) Cases where one-time settlement or negotiated settlement or restructuring by the
Bank is a remote possibility and the recovery through the normal route might be
time consuming.
7) NPA cases under Consortium/Multiple Banking Arrangements, where 75% (by
value) of the lenders decide to assign the debt,
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8) Cases where sale of assets would result in better NPA reduction and savings in
terms of incremental provision.
7.6 The threshold limits for cases eligible for sale to the buyers:
 All SMA2, NPA and Technically Written Off (TWO) assets with the Gross Loan
Outstanding of Rs.100 Crore and above and ,
 All other identified assets considered suitable for assignment irrespective of
exposure/ outstanding.
The ‘Policy for Sale of financial assets to ARCs/Banks/FIs/NBFCs’ is hosted

separately on NMG website and may be referred by branches/dealing group for
detailed guidelines.
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SECTION 8
Policy on Collection of dues and Repossession of security
8.1 Introduction:
Bank’s Policy on Collection of dues and Repossession of security (Seizure

Policy) aims at recovery of dues in the event of default through the assets financed
under the facility and any other assets / securities charged to the bank against the
facility. This policy on collection of dues and repossession of Security shall
apply to all cases where in the security – vehicles - are hypothecated to the
Bank.
The policy recognizes fairness and transparency in repossession/seizure, valuation

and realization of security. All the practices adopted by the bank for follow up and
recovery of dues and repossession of security shall be inconsonance with the law.
8.2. General Guidelines:

The following guidelines shall be followed by all the members of the staff or any
person authorized to represent the bank in collection and/or security
repossession/seizure:
1) The customer would be contacted ordinarily at the place of his/her
business/occupation and if unavailable at the place of his/her
business/occupation, at the place of his/her residence.
2) Identity and authority of persons authorized to represent bank for follow up and
recovery of dues would be made known to the borrowers at the first instance.
The bank staff or any person authorized to represent the bank in collection of
dues or/and security possession/seizure shall identify himself / herself and
display the authority letter issued by the bank upon request.
3) The bank shall respect privacy of its borrowers.
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4) The bank is committed to ensure that all written and verbal communication with
its borrowers will be in simple business language and bank will adopt civil
manners for interaction with borrowers.
5) Normally the bank’s representatives will contact the borrower between 0700 hrs
and 1900 hrs, unless the special circumstance of his/her business or occupation
requires the bank to contact at a different time.
6) Borrower’s requests to avoid calls at a particular time or at a particular place
would be honored as far as possible.
7) The bank will document the efforts made for the recovery of dues and the copies
of communication sent to customers, if any, will be kept on record.
8) All assistance will be given to resolve disputes or differences regarding dues in
a mutually acceptable and in an orderly manner.
9) Inappropriate occasions such as bereavement in the family or such other
calamitous occasions will be avoided for making calls/visits to collect dues.
8.3 Giving notice to borrowers
While written communications, telephonic reminders or visits by the bank’s

representatives to the borrowers place or residence will be used as loan follow up
measures, the bank will not initiate any legal or other recovery measures including
repossession/seizure of the security without giving due notice in writing.
A prior written notice shall be given before resorting to legal or other recovery
measures including repossession/seizure of securities. In the said notice, it shall be
stipulated that the borrower/ guarantor/ mortgagor/ ought to make repayment within
one week of issuing notice failing which further recovery action will be initiated.
Any genuine difficulties expressed/disputes raised by the customer shall be

considered by the banks before initiating recovery measures. Bank shall follow all
such procedures as required under law for recovery/repossession of security.
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In order to handle the seizure of vehicles and keeping them under safe custody,
Recovery/seizure agents may be engaged. In accounts/cases which are entrusted to
Recovery/Seizure Agents, keeping in tune with principal of natural justice, a notice
shall be sent to the borrower/guarantor/mortgagor informing them that as the
borrower has failed to repay the dues, the portfolio of recovery of dues in the
account have been entrusted to Recovery/Seizure Agent specifying their names,
who would be assisting the Bank in effecting recovery.
8.4 Repossession/Seizure of Security
Repossession/Seizure of security is aimed at recovery of dues and not to deprive the

borrower of the property. The recovery process through repossession of security
will involve repossession/seizure, valuation of security and realization of security
through appropriate means.
Repossession shall be done only after issuing the notice as detailed above. Due
process of law shall be followed while taking possession of the security. The bank
shall take all reasonable care for ensuring the safety and security of the same
after taking possession, in the ordinary course of the business and necessary
cost will be charged to borrower.
8.5 Valuation and Sale of Property
Valuation and sale of property repossessed by the bank shall be carried out as per
extant guidelines and in a fair and transparent manner.
In case of hypothecated assets after taking possession if no payment is forthcoming,

the bank shall arrange for sale of these assets in such a manner as deemed fit by the
Bank. When sale is envisaged by public auction/e-auction or by tender, the same
shall be published in two leading newspapers out of which one shall be in local
vernacular paper.
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The bank shall have right to recover from the borrower the balance due if any, after
sale of security. Excess amount if any, obtained on sale of security shall be returned
to the borrower after meeting all the related expenses provided the bank is not
having any other claims against the customer.
8.6 Opportunity for the borrower to take back the security
As indicated earlier in the policy document, the bank shall resort to

repossession/seizure of security only for the purpose of realization of its dues as the
last resort and not with intention of depriving the borrower of the security.
Accordingly the bank will be willing to consider handing over possession of
security to the borrower at any time after repossession/seizure and before sale
transaction of the security takes place, provided the bank dues are cleared in full.
If satisfied with the genuineness of borrower’s inability to pay the loan installments
as per the schedule which resulted in the repossession/seizure of security, the bank
may consider handing over the security after receiving the installments in arrears.
However, this would be subject to the bank being convinced of the arrangements
made by the borrower to ensure timely repayment of remaining installments in
future.
If the amounts are repaid, either as stipulated by the bank or dues settled as agreed
to by the bank, possession of seized assets shall be handed back to the borrower
within seven (7) days after getting permission from the competent/sanctioning
authority of the bank or Court/DRT concerned if recovery proceedings are filed and
pending before such forums.
In case of suit filed cases, i.e. if recovery proceedings are filed and pending before
DRT/Court, Bank shall take steps immediately to retrieve/obtain back the
documents from Court/DRT and within 7 days of receipt of title deeds from
Court/DRT, the same shall be handed over to borrower/mortgagor.
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8.7 Approval for action under the Seizure policy:
In all cases where repossession/seizure and related activities are undertaken,

approval shall be obtained from delegated authority being Regional Head / General
Manager of the branch/centre handling the case.
8.8 Engagement of recovery agents

The bank may utilize the services of recovery agents for collection of dues and
repossession of securities. Recovery agents shall be appointed as per regulatory
guidelines issued in this regard. In this respect:
a) Only recovery agents from the approved panels shall be engaged by the bank.
b) In case bank engages service of such recovery/enforcement/seizure agent for any
recovery case, the identity of the agent will be disclosed to the borrower
c) The recovery agents engaged by the bank will be required to follow a code of
conduct covering their dealings with customers.
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SECTION 9
Legal Measures for Recovery (Suit file)
9.1 Filing suit / recovery application before the concerned jurisdictional Civil Court /
DRT against the borrower(s) / Mortgagor(s) and the guarantors must be considered
at an appropriate stage after the account becomes NPA.
 As per the Enforcement of Security Interest and Recovery of Debts Laws and
Miscellaneous Provisions (Amendment) Act, 2016 certain provisions of the
Recovery of Debts due to Banks and Financial Institutions Act 1993 are
amended and accordingly, the Bank can now file the recovery application before
the DRT having jurisdiction over the area of the Bank branch where the
defaulted loan account is maintained (the dealing office/branches may be guided
by the Legal Department /Empanelled advocates for deciding the jurisdiction of
Civil Court /DRT) .
 Suit / Recovery application shall be filed well before the Bank’s claim gets time
barred under the Limitation Act, 1963. The suit / recovery application filed
against the borrower will put pressure on the
borrower(s)/mortgagor(s)/guarantor(s) and also prevent the loan documents
from getting time barred.
9.2 Various options available for recovery of Bank's dues may be explored
simultaneously during the process of filing the suit, at proceedings stage and also
after the decree is obtained.
9.3 Prior to referring the account(s) for filing suit, it shall be ensured that
 All relevant documents duly stamped and properly executed / signed by all the
concerned parties and duly completed in all respects are on record and are in
force.
 The true copies of all the loan and security documents (including duly certified
statement of account) relied on in support of the claim are filed along with the
recovery application before DRT.
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 Latest addresses with complete details of the Borrower / Proprietor / Partners/

Directors, Guarantor/s shall be obtained and kept on record so that the legal
notice, etc. can be served properly without any loss of time.
 In the event of the death of the borrower / guarantor / pledgor / third party
mortgagor, notices shall be issued and suit / recovery application shall be filed
against their respective legal heirs.
9.4 Revision in Monetary limit for filing application before DRT:

 With effect from 06.09.2018, all applications for recovery of debts, where the
claim amount is Rs.20 Lakh (Rupees Twenty Lakh only) or more, are now
required to be filed only before the concerned DRTs (Notification dated
06.09.2018 issued by Ministry of Finance (MoF), Department of Financial
Services). If the claim amount is less than Rs.20 Lakh (Rupees Twenty Lakh
only), then such civil suits are required to be filed before the concerned Civil
Courts having jurisdiction in the matter.
 Subsequently the Hon’ble Rajasthan High Court Bench at Jaipur, vide its order
dated 26.09.2018 passed a Civil Writ Petition No.21860 of 2018 has stayed the
aforesaid notification of MoF till final judgment. Pursuant to aforesaid order,
the Registrar-in Charge of Kolkata DRT-2 issued notice dated 28.09.2018 that
Kolkata DRT would continue to receive original applications where the claim
amount is Rs.10 lakh or more till final judgement.
 Hence, for filing of original suit with claim amount between Rs.10 lakh and
Rs.20 lakh shall be with reference to Legal Department circular(s) in this
regard.
9.5 Suitable prayers / interim relief(s) should be incorporated in all the
plaint/petition/application while filing the same in Court or DRT (Refer LD
Circular IDBI Bank 2016-17/468 CC Legal/96 dated 10.01.2017). Some of them
are –
 Disclosure on oath of all assets in the name of defendants by way of affidavit.
 Appointment of Commissioner for taking inventory
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 Injunction in respect of secured immovable / movable properties and also the

other assets disclosed by the defendants
 Defendants shall insure the properties
 Passports of all defendants shall be submitted to the Registrar of DRT
 Annual Return of Income Tax shall be filed with DRT.
 Appointment of Court Receiver for sale of perishable goods or any other goods
required to be sold.
 Seeking an interim order/decree to the extent of the liability admitted by the
borrower.
 Attachment before judgment/ interim sale of assets, if warranted;
 Defendants shall submit the statement of accounts regarding the sale proceeds
realized by sale of the secured assets in the ordinary course of business and
deposit such sale proceeds in the account maintained with the Bank
9.6 Attachment before Judgment (ABJ):

In respect of suit filed accounts, wherever it is observed that borrowers / guarantors
have assets that are disposable but are not charged to the Bank and the charged
assets are not likely to yield sufficient amount to satisfy the suit claim or otherwise
the Bank apprehends that the defendants – borrower/guarantors - are likely to
alienate / dispose of such assets / securities, steps to be initiated to seek / obtain an
order for Attachment Before Judgment (ABJ) or restraint order or appointment of
Receiver as the case may be.
9.7 Procedure in case of approval of Settlement proposal(OTS/NS)
1) Filing of Consent terms:

a. Any settlement spread over a period of more than 6 months consent
terms may be filed with DRT/Court, wherever a legal suit has already
been preferred.
b. Where the Negotiated settlement (NS) (ie. Settlement period is spread
over a period more than three months) in a TWO account and is
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approved by a Head Office Level Committee, consent terms shall be

filed with DRT/Court, wherever a legal suit has already been preferred.
c. In case of filing ‘Consent terms’ with DRT/Civil Court, Bank shall insist
for decree / recovery certificate for the total amount claimed in the
recovery suit / application, subject to a condition that in the event of
making prompt payments as per the OTS/NS terms, the decree / recovery
certificate shall stand satisfied. Further, a clause may be incorporated
that in the event of any default in adhering to the consent terms and/or
committing default in payment as per the approved OTS/NS terms, the
OTS/NS shall stand revoked / cancelled and the Bank shall proceed with
the execution of the decree/recovery certificate the borrower
(s)/guarantor(s) shall become liable for the payment of the entire
decreetal amount.
d. Bank has the right to produce LoA, as accepted, for obtaining partial
recovery certificate and/or as acknowledgement of debt by
borrower/guarantor.
2) The Bank and the borrower(s)/guarantor(s) shall keep on hold the legal action
proceedings and enforcement actions during compliance of OTS/NS terms.
However, in the event of default/delay, the parties are entitled to revive or
continue the legal proceedings/enforcement actions.
9.8 Follow up of the Original application filed before DRT / Court :
 On filing of Original application before DRT/Court, branch has to follow up

personally and through the advocate engaged for filing such application/suit to
ensure timely action at various stages of proceedings in DRT/Court till the
order/decree is received.
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 As per the Enforcement of Security Interest and Recovery of Debts Laws and
Miscellaneous Provisions (Amendment) Act, 2016 certain amendments to
Recovery of Debts Due to Banks and Financial Institutions Act 1993, timelines
have been provided for completion of various procedures, to expedite
adjudication process. In case of delays, if any, in the adjudication process
beyond the time lines given in the amended provisions of the Act, Bank can take
steps to expedite the process.
 The brief details on the timelines mentioned are as summarized below:

Stage of the proceedings Timelines
To issue summons to the On registration of the recovery
defendants. application filed by the Bank.
To file written statement along 30 days from the date of receipt of the
with the documents by the summons & in exceptional cases & in
defendants. special circumstances to be recorded in
writing, Tribunal can extend said period
by further period not exceeding 15 days.
In case the defendant files set- Within 30 days of filing such claims & in
off or counter claim, the Bank exceptional cases & in special
has to file its reply. circumstances to be recorded in writing,
the Tribunal can extend said period by
further period not exceeding 15 days.
To fix the date for On receipt of written statement or on expiry
admission/denial of documents of time granted to file written statement.
by the parties
In case of admission of full or Tribunal shall issue order to defendants to

part of the debt due pay the admitted claim amount within 30
days from the date of such order. In case of
failure to remit the admitted amount,
certificate in respect of admitted amount
would be issued by Tribunal.
Pass final order Within 30 days from the date of conclusion
of the hearings in respect of all claims, set-
off or counter claim and interest on such
claims.
The amended DRT act also specifies that every effort shall be made by the
DRTs to complete the proceedings in 2 hearings & to dispose of the application
finally within 180 days from the date of receipt of application.
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Bank shall proactively interact with the advocates concerned to ensure that
Bank’s advocate are present at the time of hearings before DRT/DRAT to avoid
any adverse/ ex-parte orders and also raise objections, as appropriate, to avoid/
discourage borrower/third parties seeking frivolous adjournments. For speedy
disposal of recovery applications, Bank officials shall coordinate with the
advocates engaged to generally ensure that they do not seek any adjournments
unless it is at the instance of the Bank under unavoidable circumstances and also
strongly oppose the adjournments granted, if any, beyond the prescribed
timelines.
9.9 Follow-up for Recovery from Decreed Accounts
1) Once a Decree / Recovery Certificate (RC) is obtained, execution of the same

shall be undertaken on war footing.
2) The services of the advocates may be engaged in the pending cases before RO
for expeditious recovery (Ref IDBI Bank Circular No. IDBI Bank/2017-
18/434/CC/Legal-127 dt 01.01.2018.).
3) Even when the decree is under execution, the borrower(s)/guarantor(s) can be
personally contacted and persuaded to pay off the dues.
4) The RC issued by DRT shall be deemed to be a decree or order for the purpose
of initiating insolvency against individuals or partnership firms.
5) In case, the decree amount is not paid, insolvency notice shall be served on the
borrower through the court demanding payment. In case of failure of
borrower(s)/ guarantor(s) to pay, further steps, if warranted, to declare them as
insolvent, may be initiated.
6) On commencement of execution proceedings of the RC, the branch concerned
has to play a major role:
a. by identifying and furnishing particulars of properties for attachment and
sale,
b. substituting any deceased borrower / guarantor i.e. judgment debtor, if
any, by his/her legal heirs,
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c. finding market for sale of properties of the judgment debtors, etc.

7) In case of need, the branch may get the service of a detective agency (PDA)
/skip tracing agency for ascertaining the present whereabouts and particulars of
assets of the judgment debtors.
8) Follow up the suit filed and decreed cases shall be made vigorously for speedy
disposal keeping in view the timelines
9) All contemplated action shall have only one motive and that is recovery of the
Bank's dues.
10) Suit or decree execution proceedings shall be withdrawn only on realization of
total dues or entire settlement amount and compliance with all the terms of
settlement.
9.10 Distribution of Sale proceeds on sale of secured assets through DRT:
As per the Enforcement of Security Interest and Recovery of Debts Laws and
Miscellaneous Provisions (Amendment), 2016 certain amendments to Recovery of
Debts Due to Banks and Financial Institutions Act 1993, :
 The sale proceeds from the secured assets shall be distributed firstly towards the
cost incurred by the Bank for preservation, protection, valuation and sale of
assets and secondly towards the debt owed to the Banks/FIs
 The rights of secured creditor on the sale proceeds of secured assets shall
have priority over all the other debts and Government dues including
revenues, taxes, cesses and rates due to Central Government or local
authority.
 In case of a borrower company under liquidation, the distribution of sale
proceeds shall be as per section 326 of Companies Act , 2013 and in cases
wherein Insolvency and Bankruptcy proceedings are pending, the distribution of
sale proceeds shall be subject to order of priority under Insolvency and
Bankruptcy Code, 2016.
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9.11 DRT/DRAT Nodal Officer:
As per directions of Department of Financial Services, Ministry of Finance, each

Bank has to appoint ‘Nodal officers‘for each DRTs and DRATs. The bank has
appointed and designated some of ‘Legal officers’ as ‘Nodal officers’ for DRT
/DRATs to facilitate dealing groups for close and continuous monitoring of
movement of cases filed by and against the Bank in DRTs and DRATs, to aid
efficient & expeditious disposal of all pending cases. The indicative role of the
Nodal Officers to DRT/DRAT has been detailed vide circular ref. IDBI Bank/
2017-2018/371/CC/Legal dt 21.11.2017 and the same is further elaborated vide
circular ref. IDBI Bank/2018-19/248/CC/Legal/78 dt 07.09.2018.
9.12 Reporting:
1) As per extant guidelines, Bank has to submit information in respect of

defaulting borrower accounts with details of suit filed/non-suit filed (doubtful
and loss accounts) with outstanding of Rs. 1 Crore and above to CIC’s on a
quarterly basis
2) Suit filed details and decreed details are reviewed and reported on a quarterly
basis to Recovery Review Committee.
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SECTION 10
Other Measures for Initiating Recovery
10.1 Declaring the company/promoter as wilful defaulter, non-cooperative borrower,

initiation of insolvency proceeding, publishing the photographs of
promoter/guarantors declared as wilful defaulter in the newspaper and initiation of
winding up proceedings after complying with extant law, rules & regulations, can
also be considered to bring the borrower to the negotiating table.
10.2 Identification & Attachment of un-encumbered assets of Promoter/ Borrower/

Guarantor:
In addition to the recovery from the security charged to the bank for the facilities
sanctioned to the borrower, one of the additional modes of recovery is by action
against the guarantors and guarantor assets. Bank shall proceed against the
individual guarantors / corporate guarantors and their assets, if any, for realization
of entire dues simultaneously with the recovery actions against the borrower,
recovery from the available securities and other assets of the borrower.
1) Engagement of Skip tracing Agencies for NPA/TWO Accounts: The

services of a Skip tracing Agency may be engaged for NPA/TWO cases where
the borrower(s)/guarantor(s) is not contactable / traceable generally in cases
with GPO more than Rs.10.00 Lakh. For engagement and remuneration of the
Skip tracing agency the Dealing groups shall be guided by the Retail Recovery
& Collection Process Manual.
2) Engagement of PDAs in NPA/TWO cases :
a) Wherever, the resolution is not by way of revival / restructuring package and the
security charged to the bank is not expected to meet the Total Dues (TD – the
total dues computed as per the terms of agreements), immediately Private
Detective Agency (PDA) with necessary experience relevant to the complexity
of the case may be appointed to unearth any other assets held by the promoter-
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guarantors etc which are not charged to the Bank. On identification of any
unencumbered assets of the borrower/guarantor, steps to be taken to seek
immediate attachment of such assets through DRT/Court, including through
Attachment before Judgment (ABJ).
b) Further, PDA may be engaged for the NPA/TWO cases with GPO above Rs
1.00 Crore at the discretion of the Regional Head/ Centre Head in case of Retail
/ Corporate and NMG .
c) The services of a PDA shall be invariably utilised in NPA/TWO cases with

GPO above Rs.10.00 Crore for identification of unencumbered assets of the
borrower/guarantor and attachment through DRT/Court
3) OTS/NS and engagement of PDAs: Generally, engagement of PDAs and

initiation of steps for attachment of such unencumbered assets identified
through PDA shall exert pressure on the borrower/guarantor and bring them to
negotiation table. Moreover, as a part of the due diligence process, engagement
of PDAs at the time of taking up settlement (OTS/NS) proposals wherever
a. the security coverage is inadequate or
b. there is sharp erosion in networth of borrower/guarantor or
c. involves higher sacrifice
shall be an effective tool in negotiation and may be utilised to enhance recovery
through settlement.
4) Execution of RC and engagement of PDAs: On commencement of execution
proceedings of the Recovery Certificate (RC) before DRT in the original suit
filed against the borrower/guarantor, services of external agencies like
PDA/Skip Tracing agency shall be engaged (if not engaged already) to
i) ascertain other assets of the borrower / guarantor so as to attach them through

legal process where in security cover is inadequate;
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ii) trace the present whereabouts of the absconding borrower/guarantor,

mortgagor , ascertain the financial standing etc., for attachment of assets
possessed by them.
iii) ascertain particulars of legal heirs, of deceased borrower, guarantor,
mortgagor and their addresses etc., so as to take forward the legal process by
substituting any deceased borrower / guarantor i.e. judgment debtor by his/her
legal heirs.
10.3 Other measures for initiating recovery:
 In addition to the above discussed measures for reduction in NPA like

implementation of Resolution Plan, Restructuring, Recovery through OTS/NS,
filing original suit and action under SARFAESI Act, etc., Bank shall also
evaluate classification of borrowers as “Wilful Defaulters” and “Non-
Cooperative Borrowers” and initiate necessary action wherever applicable
 Once classified as “Wilful defaulters”, these borrowers including proprietors/
partners / directors /guarantors of borrower firms /companies, they are barred
from accessing the Banking System for any form of assistance and no additional
loans are given by any bank or FIs for a period of 5 years.
 Similarly, once classified as Non cooperative borrowers – higher provisioning
requirements as applicable to substandard assets, are made applicable to any
fresh assistance to the non-cooperative borrower or a company that has on its
Board of directors any of the whole time directors/promoters of a non-
cooperative borrowing company or any firm in which such a non-cooperative
borrower is in charge of management of the affairs.
 These provisions are aimed at bringing better cooperation and discipline among
the borrowers and ensuring that further exposure to these borrowers of Banks/FIs
are blocked.Hence, it shall be used judiciously.
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10.4 Classification and Declaration of Borrowers, its Directors & Guarantors as

Wilful defaulters:
As per extant guidelines, the incidence of wilful default by borrower would be

deemed to have occurred, in the following events:
 Wilful Default: Defaulted in meeting the payment obligations even when they
have the capacity to honour the said obligations.
 Diversion of funds: Utilisation of funds for purposes/activities or creation of
assets other than those for which the loan was sanctioned.
 Siphoning of funds: Utilisation of funds for purposes unrelated to the
operations of the borrower, against the terms of sanction.
 Alienation of assets charged: Disposed off or removed or created further
charge on assets offered as security to the Bank without the consent of the Bank.
1) Identification of Wilful Defaulter:
Generally, the following entities may be considered for declaring as wilful
defaulters
Borrower – firm / company represented by proprietor / partner / promoter
Directors of the company including whole time directors/ promoter director/ other
directors’ in-lieu of key managerial personal excluding Non-whole time directors’
i.e. Nominee directors and Independent directors (subject to guidelines)
Guarantor – non group corporate and individual guarantors- who has refused to
settle the claim of the banker/creditor despite having sufficient means (cases where
guarantee were taken on or after Sep 9, 2014)
Guarantor being a Group company of the wilful defaulting unit who has not
honoured claim by the banker/lender
2) Classification of Wilful Defaulter
Bank has to build the practice of periodical meaningful scrutiny of the records and
statements of the Borrower. Regular inspection of assets charged to the Bank, visit
to the assisted units, periodical stock audit, periodical scrutiny of books of accounts
and accounts maintained with other banks etc would enable them in identification
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of incidence of Wilful default. The detailed guidelines for such identification are
elicited in the RBI circular/notifications issued from time to time in this regard.
The branch has to collate the underlying proof/records for evidencing the incidence
of wilful default by borrowers including proprietors/ partners / directors /guarantors
of borrower firms /companies (referred as ‘borrowers’) and submit the proposal for
Declaring the borrowers as wilful defaulters (sample formats are accessible in the
intranet NMG website)
 The NMG HO acts as the nodal office for enabling the examination of such
proposals by the “Wilful Defaulters’ Committee (WDC)”.
 On approval of the proposal by WDC, Show Cause Notice (SCN) shall be
issued by the branch to the borrowers.
 In case of any response to the SCN, the same is again presented to the WDC for
further directions.
 WDC may consider the submission and may provide an opportunity for
personal hearing to the representing borrower / promoter / whole time director
 WDC thereafter on examination will decide on the incidence of Wilful default
or otherwise.
 In the event of willful default, WDC shall issue an order recording the fact of
wilful default and the reason for the same.
 The order of WDC is reviewed by “Wilful Defaulters’ Review Committee
(WDRC)” and the order becomes final after the confirmation by WDRC.
 The same is reported to RBI and Credit Information Companies for
dissemination (by NMG-HO).
3) Further action on Declaration as Wilful Defaulters:
Bank after declaration of borrowers as Wilful Defaulters may examine and
invoke/apply the various provisions enabled by extant guidelines, to bring
pressure on the borrower to negotiate/settle the dues
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1) Reporting to Credit Information Companies:

On classification of borrowers, including proprietors / partners/ directors /
guarantors of borrower firms/companies as wilful defaulters, Bank submits
list of Suit Filed accounts and Non Suit filed accounts of wilful defaulters of
Rs.25lakh and above to Credit information companies. This affects their
Credit Rating and is detrimental for any future financial assistance from the
banking system.
2) Reporting to RBI in CRILC - List of Wilful Defaulters is reported in
CRILC to RBI
3) Publication of Names and Photographs of Wilful Defaulter
 On classification of borrower as “Wilful defaulter”, ensuring
compliance to the Bank’s Board approved Policy with regard to
“Publishing of Names and Photographs of Wilful Defaulters” the bank
may publish their names and photographs in newspapers.
 The decision regarding publication of photographs of borrower
including proprietors/partners/directors/ guarantors who has been
declared as wilful defaulter shall be taken by a Senior Officer, not
below the rank of Chief General Manager, who shall exercise the power
in non-discriminatory and consistent manner.
 The publication of names and photographs of the wilful defaulters
approved during the quarter should be reported to the WDC.
4) Other measures –
 Bank shall ensure that ‘No additional facilities’ are granted to borrowers
declared as wilful defaulters.
 Bank shall initiate legal process wherever warranted, against the
borrowers/guarantors and foreclosure for recovery of dues expeditiously
5) Debarring from Fresh facilities from Banks/FIs/NBFCs
As per RBI guidelines, wilful defaulters companies including their
entrepreneurs / promoters where banks have identified siphoning / diversion
of funds / mis-representation / falsification of accounts and fraudulent
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transactions should be debarred from institutional finance from Banks /FIs/

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.
So this ensures that the wilful defaulters are not able to access the banking
system.
6) Criminal actions against Wilful defaulters:
After having declared the borrower/guarantor as wilful defaulter, in order to
build further pressure & to recover banks dues, branch may initiate Criminal
proceedings against wilful defaulters, wherever applicable based on the facts
and circumstances of each case.
The following procedure may be followed while initiating criminal
proceedings against wilful defaulters:
1) In case there are instances of breach of trust or cheating, construed to
have been committed by the borrower, the criminal action may be
initiated under section403/ 415 of the India Penal Code (IPC) of 1860.
2) Grounds on which action under section 403/ 415 of IPC could be
initiated shall be as under:
Section 403 of IPC: shall be examined on the following grounds based
on regular or special audits (concurrent or forensic), money trail,
accounts, physical visits etc.
(i) Siphoning off of funds to the detriment of the defaulting units;
(ii) Assets financed either not purchased or been sold and proceeds
have been misused; and
(iii) Disposal/removal of movable properties which are offered as
security, without bank’s knowledge.
Section 415 of IPC: shall be construed in case of any misrepresentation
either in the application for loan/ loan agreement, falsification of
records/ certificates/accounts by the borrower constituting an act of
cheating, based on documentary evidence.
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3) The evidence shall be gathered and documented by the branch. The

admissibility of the evidence/records to establish a prima facie case
shall be ascertained from Legal Department.
4) Thereafter, the proposal to initiate criminal action indicating details of
evidences/Documents relied along with Legal Department’s
observations shall be submitted to Delegated Authority for approval.
7) Change of Management
Wherever possible, bank may adopt a proactive approach for change of
management of the Wilful Defaulting borrower unit.
8) Objection to Induction of WD as Board Member in any Borrower
Company funded by Bank
Bank while examining proposals for funding of other borrowing units, based
on the information available regarding borrowers declared as wilful
defaulters, may insist that the other borrowing unit 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 on its Board, it would take expeditious and
effective steps for removal of person from its Board.
10.5 Classification and Declaration of borrower as Non-Cooperative borrower:

The definition of a Non Cooperative Borrower as per RBI guidelines is: “A non-
cooperative borrower is one who does not engage constructively with his lender by
defaulting in timely repayment of dues while having ability to pay, thwarting
lenders’ efforts for recovery of their dues by not providing necessary information
sought, denying access to assets financed/collateral securities, obstructing sale of
securities, etc. In effect, a non-cooperative borrower is a defaulter who deliberately
stone walls legitimate efforts of the lenders to recover their dues”.
As per extant RBI / Bank’s guidelines, only borrowers with aggregate facility (fund
and non-fund based) of Rs.50 million and above can be classified as “Non-
Cooperative Borrower.”
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When a borrower is classified as “Non-Cooperative Borrower (NCB)” it entails by

implication greater risk necessitating higher provisioning as a prudential measure
since the expected losses on exposures to such NCBs are likely to be higher.
1. Who can be classified as Non-Cooperative borrower:
 In the case of a Company, which is declared as Non-Cooperative Borrower it
includes, besides the company, its promoters and whole time directors
(excluding independent directors and directors nominated by the
Government and the lending institutions).
 In case of business enterprises (other than companies), non-cooperative
borrowers would include persons who are in-charge and responsible for the
management of the affairs of the business enterprise.
2. Criteria for examination:
Bank has identified some of the criteria that can be adopted as the basis for
classifying borrowers as non-cooperative borrowers.
i. Nonpayment of dues despite having ability to pay
ii. Non routing of sales through bank account
iii. Non submission of information
iv. Denying access to assets/collateral security
v. Non creation of security
vi. Noncompliance with any other requirement of the bank like failing to
arrange adequate insurance, payment of dividend despite dues to bank, or
any other material act/omission of facts detrimental to the banks interests.
On a case-to-case basis, based on the evidence available to validate the above noted
criteria or any other criteria for declaring the non-cooperative character of the
borrower the proposals may be taken up for examination for declaration as NCB.
3. Classification as Non Cooperative borrowers:
Bank has to build the practice of periodical meaningful scrutiny of the records
and statements of the Borrower. In case non submission of timely information,
non-routing of proportionate sales, non-cooperation in carrying out visits, non-
adherence to critical covenants of the facility agreement, etc is observed then
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Bank can examine the possibility of classifying the borrower as NCB. The
detailed guidelines for such identification are elicited in the RBI/ Internal
circular/notifications issued from time to time in this regard.
 Branch has to collate the underlying proof/records for evidencing the
incidence of Non cooperation by borrowers and take up the proposal for
Declaring the borrowers as Non cooperative borrowers (sample formats
are accessible in the intranet NMG website)
 The NMG HO acts as the nodal office for enabling the examination of
such proposals by the “Non Cooperative Borrowers’ Committee
(NCBC)”.
 On approval of the proposal by NCBC, Show Cause Notice (SCN) shall
be issued by the Branch to the borrowers.
 In case of any response to the SCN, the same is again presented to the
NCBC for further directions.
 NCBC may consider the submission and provide an opportunity for
personal hearing to the representing borrower
 NCBC thereafter on examination will decide on the incidence of non-
cooperation or otherwise
 In the event of incidence of non-cooperation being established, NCBC
shall issue an order recording the facts and the reason for the same.
 The order of NCBC is reviewed & confirmed by “Non-cooperative
Borrowers’ Review Committee (NCBRC)”.
 The borrower classified as ‘Non-Cooperative Borrower” is reported
through CRILC on quarterly basis (by NMG-HO)
4. Further action on Classification as Non-cooperative borrowers:
i. Reporting to RBI in CRILC - List of Non-cooperative borrowers is
reported in CRILC to RBI.
ii. Attracts higher provisioning:
Any fresh assistance to a non-cooperative borrower or a company that has
on its board of directors any of the whole time directors/promoters of a
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non-cooperative borrowing company or any firm in which such a non-

cooperative borrower is in charge of management of the affairs, would
attract higher provisioning as applicable to substandard assets (though the
loan would be treated as ‘Standard’ for asset classification and income
recognition). This penal provision would bring better co-operation and
discipline among the borrowers.
5. Review for Declassification and removal from Non-cooperative borrowers
list.
Bank’s Board shall review on a half yearly basis the status of non-cooperative
borrowers for deciding whether their names can be declassified as evidenced by
their return to credit discipline and cooperative dealings. Removal of names
from the list of non-cooperative borrowers should be separately reported to
CRILC with adequate reasoning/ rationale for such removal.
10.6 Initiation of prosecution: Section 138 Negotiable Instruments Act, 1881 (NI
Act) & Section 25 of the Payment and Settlement Systems Act, 2007
1. In case cheque presented through an account, is returned/dishonoured, then as
per the Negotiable Instrument Act, 1881, the proceedings may be initiated
before the Court in whose jurisdiction the Bank/branch where the payee
maintains the account is situated. This may also exert pressure on the borrower /
guarantor to reach settlement with the Bank.
i) In case a borrower fails to honour the cheque issued to the bank for
insufficiency of funds, when presented to the drawee bank with in a period
of 3 months from the date on which it is issued.
ii) In such cases under sec 138, a written notice is required to be issued within
30 days of the receipt of information of dishonor of cheque.
iii) The notice should advise the borrower to pay the amount of dishonoured
cheque within a period of 15 days from the receipt of the notice.
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iv) In case payment is not received, subsequent to the expiry of 15 days

complaint has to be filed within a period of 30 days before the concerned
court.
2. Same rights and remedies are available to the payee (beneficiary) against
dishonour of electronic funds transfer instructions for insufficiency of funds in
the account of payer (remitter), as are available to the payee under section 138
of the Negotiable Instrument Act, 1881 (as per provisions of Sub-section (5)
of section 25 of the Payment and Settlement Systems Act, 2007).
3. Advantages of Lok Adalat in respect of cases filed under Section 138 of NI

Act – Both pre-litigation matters and cases pending in the court can be referred
to the Lok Adalat
i) Pre-litigation matters:
Any matter (dispute) falling within the jurisdiction of any court (but not pending
before that court) can be referred to Lok Adalat through State Legal Services
Authority or District Legal Services Authority or the Supreme Court Legal
Services Committee or every High Court Legal Services Committee or Taluk
Legal services.
ii) Cases pending in the court:
In respect of the cases pending in any court, the Court can refer the said cases to
the Lok Adalats, (a) if both the parties agree or (b) any one of the parties make
an application to the court or (c) court itself is satisfied that the matter is
appropriate to refer to the Lok Adalat.
However, no case shall be referred by the court to the Lok Adalat except after
giving a reasonable opportunity of being heard to the parties.
10.7 Red Flagged Accounts:

 Reserve Bank of India has issued “Framework for dealing with loan frauds”
and subsequent clarification in respect of classification of accounts as ‘Red
Flagged Accounts’ vide circular no. DBS.CO.CFMC.
NO.15437/23.04.001/2015-16 dated 30.06.2016. “Red Flagged
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Accounts”(RFA) is a mechanism for early detection/ prevention of frauds in

loan accounts with an exposure of Rs.50 crore and above. Bank has also
issued detailed circulars in this regard.
 The framework require bank to proactively identify loan accounts showing
certain Early Warning Signals (EWS) and evaluate such signals to classify an
account as RFA for taking up investigation to ascertain incidence of fraud or
fraudulent activity in such accounts.
 Early Warning Signals (EWS) (based on illustrative list of EWS listed by
RBI ) are to be tracked / monitored on monthly / quarterly / half yearly /
yearly basis for each account with an aggregate exposure of Rs.50 crore and
above. Early Warning Signals in respect of NPA accounts to be reported only
in case where the units are operational.
 On classification of an account as RFA the said account shall be reported to
RBI and on the CRILC platform. Bank shall undertake a forensic audit /
investigation to ascertain any incidence of fraud. After investigation, within a
period of 6 months, RFA is to be classified as “Fraud” or delisted from RFA
category , depending upon the outcome of the investigation.
10.8 External Agencies:

With a view to expediting recovery of Bank’s dues, Bank shall utilize the services
of external agencies having requisite skill. Some of the External agencies engaged
by the bank for providing specialized services are:
(i) Valuers
(ii) Recovery Agency
(iii) Enforcement Agency
(iv) Security Agency
(v) Detective Agency
(vi) E-auction Service Providers
(vii) Resolution Agency
(viii) Seizure agency, Skip tracing agency
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(ix) Insolvency Professionals

Bank shall be guided by Board approved “ Policy on Engagement of External
Agencies in Recovery of NPAs” and other related notifications issued from time to
time for empanelment, scope of work, eligibility criteria, review of performance,
de-empanelment and other incidental matters of the external agencies.
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SECTION 11
Recovery through Lok Adalat
11.1 Lok Adalat is a legal authority constituted under the Legal Services Authorities Act,
1987 (LSA Act) to encourage settlement of disputes in a conciliatory manner by
arriving at a settlement amicably.
When a reference is made by one or more parties and there is prima facie chance of
settlement, the LokAdalat acts with utmost expedition to arrive at compromise or
settlement between the parties. The LokAdalat shall be guided by the principal of
justice, equity, fair-play and other legal principals.
Case pending before the Court/DRT (litigation matters) and any dispute which is
yet to be brought before any Court/DRT (pre-litigation matters) can be referred to
Lok Adalat for settlement of disputes. All types of accounts whether it is secured /
unsecured / small accounts / high value accounts / suit filed / non-suit filed accounts
etc. can be considered for settlement through Lok Adalats
Apart from Lok Adalats held by Legal Services Authorities, Lok Adalats may also
be organized for the Bank exclusively through the District Legal Services
Authorities or State Legal Services Authority as the case may be to enable the Bank
to settle large number of disputes / cases facilitating faster recovery and reduction
of NPAs
11.2 Benefits - Settlements through Lok Adalats :

The settlements through Lok Adalats can be explored wherever possible as it has
several advantages as detailed below.
 Helps the Bank in expeditious settlement / compromise of large number of
Pending recovery matters before various Courts / Tribunals as well as pre-
litigation cases thereby obviating the lengthy proceeding of the court.
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 Lok Adalats will take up pre-litigation and pending cases relating exclusively to
bank recovery, cheque bounce matters and related cases, particularly under
Section 138 of NI Act effectively and expeditiously as stated above.
 There is no Court fee payable on petition before Lok Adalat. Moreover
engagement of legal counsel over the prolonged case hearing as applicable to
filing suit before DRT/Court may be dispensed with , the Bank saves on such
costs.
 NPA cases with GPO not exceeding Rs.3.00 lakh are eligible to be considered
for waiver of legal actions subject to other terms and conditions. For settlement
in such small cases with GPO upto Rs.3.00 lakh, forum of Lok Adalat may be
explored prior to recommending waiver of legal actions.
 Further, if the case is already filed in the Court, the fee paid therein will be
refunded, if the dispute is settled through the LokAdalat.
 Every award of the LokAdalat shall be deemed to be a decree of civil court and
is final and binding on all the parties to the dispute and no appeal shall lie to any
court against such award. (whereas in the regular law courts there is always a
scope to appeal to the higher forum on the decision of the lower court, which
causes delay in the final settlement of the dispute.)
 The awards are issued immediately thereby substantially reducing the time
taken by the DRT/Civil Court in passing judgment even on small values.
 In case of non-payment after the award, Bank can straight away proceed to
execution proceedings, thus saving time on obtaining Recovery Certificate (RC)
in cases where RC is yet to be obtained.
 Recovery/Resolution of small NPA cases in DA3, loss and TWO category, also
through Lok Adalat, would add to the bottom line of the Bank as the amount of
provisioning in such cases are to the extent of 100% of the GPO
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11.3 To take advantage of the above and ramp up recovery the following course of
action is suggested:
1) Identification of cases:
i. Consider referring all small value cases where initiation of civil suit is not
feasible because of court fee, advocate fee, time taken for disposal etc.
especially cases with GPO not exceeding Rs.3.00 lakh where waiver of legal
action is contemplated.
ii. Refer cases where OTS/NS is either approved or under consideration,
iii. Pending cases facing delay on account of procedural compliances, vacancy of
DRT etc.
iv. Small value NPA cases in DA3, loss and TWO category
v. Facility/loan which has not been recalled or recovery action has not been
initiated.
vi. Any other case as appropriate
2) Pre-LokAdalat Reference process:

i. Contact the defaulting borrower(s) and guarantors
ii. Examine if there is a prima facie chance of settlement/compromise.
iii. Obtain In-principle Approval before referring to Lok Adalat:
1. Branch shall obtain ‘In-principle approval’ for a minimum amount and
maximum period/tenor for settlement for cases to be referred to Lok Adalat
2. Branch shall calculate ESAM etc in line with the extant ‘Policy on Recovery
through Settlement’ for obtaining inprinciple approval.
3. The Sanctioning authority for such inprinciple approval shall be based on the
extant ‘Policy on Recovery through Settlement’ and extant Delegation of
Power for such settlement proposals.
iv. The Officer familiar with the facts of the cases to be identified by Regional
Head/Centre head to represent the Bank before the LokAdalat ie Authorised
officer
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v. The Officer attending the Lok Adalat can be specially authorized to take a
decision at the time of hearing and arrive at a settlement (in terms of the In-
principle approval)
vi. The authorized officer shall engage an empanelled advocate and make a
reference to the Lok Adalat having jurisdiction and arrange to issue notice
fixing the hearing to the Borrower and guarantor(s).
3) LokAdalat Reference Process:

i. Authorized officer shall represent the Bank before the Lok Adalat along with
the empaneled advocate on the date of hearing and negotiate to arrive at the
settlement amount. The Authorised officer, shall make efforts to maximize the
settlement amount over and above the ‘In-principle approval’.
ii. ‘In-principle’ approval should be treated as the minimum agreeable terms of
settlement and the Authorised officer shall strictly abide by those terms while
negotiating before the Lok Adalat forum.
iii. As the Award delivered by the Lok Adalat has a judicial sanctity and there
cannot be any changes in the terms of OTS/NS offer once it is approved by
Lok Adalat, Authorised officer shall not agree for a settlement amount and
tenor before Lok Adalat - inferior to the terms already approved “In-principle”
by the Sanctioning Authority.
4) Status at LokAdalat Reference:

i. If the borrower has not appeared before LokAdalat or if the settlement is not
arrived before LokAdalat then it is deemed failure.
ii. If the settlement is arrived at in Lok adalat such cases are treated as ‘Settled
Cases’ and the authorized officer should coordinate with the empaneled
advocate to obtain the Award from Lok Adalat.
5) Post ‘LokAdalat Reference’ process:

i. All Referred Cases : Branch shall submit memorandum (case wise or
consolidated basis) to the Sanctioning authority, informing the developments,
settlement/failure of the reference etc.,
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ii. Deemed Failure Cases : If the borrower has not appeared before Lok Adalat
or if the settlement is not arrived before LokAdalat and the process is deemed
failure, then all recovery actions are to be continued.
iii. Settled Cases : The Authorised officer shall ensure that the settlement under
Lok Adalat is not inferior to the ‘Inprinciple approval’ as the ‘Award’ of Lok
Adalat has judicial sanctity and cannot be changed. Subsequently, in respect of
‘Settled cases’ on receipt of Lok Adalat Award, branch shall obtain approval as
per extant guidelines from the Sanctioning Authority for consequential waivers
based on the settlement amount and tenor as per ‘Lok Adalat Award’.
iv. In respect of settled cases, follow up with the borrower for recovery as per the
LokAdalat award
In case there is delay or default in making payments as per the award, execution petition to
be moved before the court or DRT, as the case may be.
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SECTION 12
Credit Card NPA
12.1 Credit card business is highly transaction & process intensive activity, heavily
dependent on technology and requiring close monitoring. To ensure that the product
is able to yield the desired revenue & profitability levels, it is critical to control the
risk of unsecured credit on real time basis. The critical part of IDBI credit cards
business relating to underwriting & issuance (grant of credit limit), transaction
monitoring, risk control & management, recovery, MIS & reconciliation etc. is
centralized at the Credit Card Department. Regular activities such as transaction
processing, transaction alerts by way of SMS, generation & dispatch of statements,
reward points calculation & redemption etc. have been outsourced to specialized
agencies in this field of business.
12.2 The recognition of delinquency and follow-up for payment starts from the non-
payment on due date and the escalation is in terms of Days Past Due date (DPD) of
buckets namely up to 30 days, after 30 days but less than 60 days, after 60 days but
less than 90 days and Post NPA classification.
12.3 The methodology of communication initially is a process of contacting the

customer to obtain Promise-to-Pay (PTP) for payment. In case of further
delinquency, it is followed by dunning letter (letters asking a debtor repeatedly for
payment) and capping the credit card limit and personal visits of officers. In case of
continued delinquency, the credit card limit shall be blocked with vigorous follow-
up, repeated dunning letters and personal visits to generate PTP.
12.4 Credit card account will be classified as NPA at 90 DPD in the system as per IRAC
guidelines. At 90 Days Past Due (DPD) Credit card Recall Notice shall be sent to
customer on 91 DPD. If customer is still delinquent bank shall inform the customer
that in case of non-payment of outstanding dues, strict legal action will be taken
against the customer.
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12.5 Post classification of account as NPA, follow up letters with personal visits shall be
utilized to classify the customer as unable to pay or no intention or absconding, on
the basis of which appropriate collection action will be taken such as:
1) Letter to Employer.
2) Paper Ads/Public Notice
3) Skip tracing etc.
4) In case customer shows willingness to pay or waivers in case of small
amounts One Time Settlement (OTS) may be initiated in such case
5) If customer still does not pay, legal action shall be initiated such as surrender
of other assets in lieu of outstanding.
6) Reporting to Credit Information Companies (CICs) like CIBIL etc.
7) Post classification as NPA, Credit Card shall be hot listed. Lien may be
marked in all deposits accounts of the customer and till outstanding is fully
recovered, periodic recovery may be done from these accounts.
8) Credit limits shall be reviewed in credit card after the dues are cleared
by the customer/card holder.
120

SECTION 13
Physical Write-Off of NPA Accounts
13.1 In order to weed out the un-remunerative NPA accounts and release the executive
time for productive purposes the exercise of Physical write off shall be undertaken
after critically analyzing the chances of recovery in all the NPA accounts.
13.2 Physical write off of NPAs occurs in two instances.
1) When a NPA/TWO account is settled under OTS/NS or sold to ARCs/ Bank /

FIs / NBFC, the accounts are closed in the books of the bank. This entails write
off of unpaid Principal and waiver of unpaid outstanding
Interest/expenses/charges in such accounts. This results in ‘Physical write off’
in the said account.
2) The NPA/TWO accounts can also be taken up for ‘Physical write off’ if it is
fully provided and considered that there is no chance of any recovery from the
account, after exhausting all avenues of recovery through normal course/ by
legal means/ through OTS etc. The exercise of write off has to be undertaken
on merits of each case after considering various factors like low/nil income
generation, capacity of borrower/guarantor to pay the dues, availability/state of
the securities etc.
13.3 Physical write off of Fully provided NPA accounts:

1) Physical Write-off option shall have to be used only as a last resort when,
2) All available securities have already been sold or no tangible security
(primary/collateral) is available or there is no salvage value of securities.
3) Net worth of the borrower/guarantor is nil or negative.
4) All legal means of recovery have been fully explored and all available avenues
for recovery & recovery actions have been exhausted
5) The account is not pending for examination of staff accountability
121

6) There is no further chance of recovery in the account and carrying the account
in the books of the bank will not serve any meaningful purpose and it would
only add to unproductive time and cost of monitoring & maintenance of
accounts
7) The borrower/guarantor(s) have no source of income or are not traceable after
reasonable enquiries.
8) In case of suit filed accounts – decreed or the existing decree is continuing to be
enforced – but no recovery is expected
However, in the following cases the ‘Physical write off’ shall be taken up in
exceptional cases with the approval of Executive Committee of the Board:
 The borrower/guarantor(s) have been declared as willful defaulter
 The borrower/guarantor(s) have been declared as fraud or is in the process
of being reported as fraud
 The Staff accountability has been examined and staff malfeasance is
discerned
13.4 Process of Physical Write-off of fully provided NPA Accounts:

 After due approval from delegated authority, such NPA account shall be
completely removed from the Bank’s books by passing the necessary waiver
entries & closing the account in the System.
 Along with approval for such physical write off of full provided accounts,
approval for withdrawal of legal action in process shall also be obtained and
Suits withdrawn on Physical write-off of the account.
 However, Legal and criminal processes shall not be withdrawn in cases of staff
malfeasance or borrower/guarantor/director declared as Wilful defaulter or cases
declared as fraud. In such cases, where the legal, criminal procedures have to be
pursued, the account shall continue to be maintained at the Branch and legal
process followed up till its logical conclusion.
122

 The details of such physically written off accounts shall be maintained at the
respective branches/ centers /location and their respective corporate centers and
reported to NMG HO who shall maintain the consolidated records
123

SECTION 14
Prudential/ Technical Write-Off of NPA Accounts
14.1 Prudential/ Technical write-off of NPA accounts is a management planning tool and
such exercise shall be undertaken as per applicable guidelines.
14.2 Prudential/Technical write-off exercise should not be deemed, as cessation of

recovery and recovery efforts in such accounts should continue to be vigorously
pursued by Bank.
14.3 The fact of prudential/technical write-off should be kept in strict confidence

and not disclosed to the borrowers under any circumstances.
124

SECTION 15
Review of NPA / TWO Accounts
15.1 Introduction:
15.1.1 Generally, after an account is classified as NPA, the periodical review / renewal is
suspended and hence there is no structured periodical review of non performing
account(s) to consider further actions required for safeguarding and protecting the
assets / securities and maximize the recovery. Hence, the following framework and
procedure are laid down for:
(i) Review of NPA / TWO accounts,
(ii) Cancellation / suspension of undrawn facilities,
(iii) Holding on Operations (HOO) of outstanding Working Capital limits
(including NFB limits),
(iv) Review/extension of validity of outstanding Non-Fund Based (NFB)
limits [Bank Guarantees (BGs) /Letters of Credit (LCs)/Standby Letter of
Credit (SBLC)], and
(v) Initiation of recovery measures.
15.2 Review of NPA and TWO accounts :
15.2.1 One of the most important steps in resolving / reducing non-performing assets is to
draw a case-specific, intensive and prompt monitoring of non-performing accounts
to evolve account-specific action plan and resolution strategies. With the above
intention the Bank had put in place a Monitorable Action Plan (MAP) to monitor
and review NPA accounts as per the action plan for NPA management submitted to
the Board at its meeting held on February 6, 2015. The Policy revises the MAP by
incorporating a committee level review mechanism for large accounts.
15.2.2 A committee level review mechanism is proposed for all fresh NPA accounts
where exposure is above Rs.5 crore and with respect to existing NPA/ TWO
125

accounts where exposure is above Rs.50 crore. Review of all other accounts is
proposed to be continued as per the existing framework given in MAP.
15.2.3 Exposure shall be as defined in the Credit Policy i.e. “Exposure shall include credit
exposure (on balance sheet & off balance sheet credit limits, including derivatives,
underwriting, Intra-day exposures, etc.) and investment exposure (including equity,
underwriting & similar commitments).The sanctioned & documented limit or
outstanding, whichever is higher shall be reckoned for arriving at exposure limit.
However, in the case of term loans, where there is no scope of further
disbursement, the Bank will reckon the outstanding as the exposure.”
15.2.4 The objective of the Committee level review is to evaluate the operations of the
borrower after the account has been classified as NPA, analyse the reasons for
default, take steps to ensure routing and monitoring of cash flows, asses the need
for forensic/ stock / concurrent audit of the borrower, consider various modes of
resolution, determine the approximate timeframe for successful resolution, the
conduct and co-operation of the promoters for amicable resolution, financial
parameters stipulated in the sanction and such other relevant factors. The
Committee may evaluate (a) all fresh NPA cases (credit exposure above Rs.5 crore)
within a period of one month from the end of the month in which the account is
classified as NPA, and (b) all cases with exposure above Rs.50 crore, within a
period of 6 months from the date of operation of this Policy. All such cases shall be
reviewed periodically (at least every year) till such time recovery actions are
initiated against the defaulting borrower.
15.3. Cancellation / suspension of undrawn facilities:
The Committee shall take a decision for cancelling the undisbursed / undrawn
portion of the term loan and also with respect to unavailed working capital
facilities, unless a resolution plan is under consideration and / or holding on
126

operations is approved. The Committee will take a view whether to allow

operations in the account maintained with the Bank.
15.4. Holding on Operations of Working Capital limits (including NFB limits):
15.4.1 Holding on Operations essentially implies:

 Continuous operations in the account, like opening fresh LCs/BGs to the extent
of reduction in devolvement/Invocation, even if devolvement is not fully
cleared,
 Roll over of LCs/BGs opened by the Bank,
 Allowing operations in the cash credit account despite interest/forced debits not
being cleared,
15.4.2 In case the borrower observes financial discipline, the Committee may take a
decision to allow Holding on Operations with or without cut back, subject to such
other terms and conditions as deemed necessary to keep the unit in operation or
continue execution of on-going projects till a decision on overall revival /
resolution plan is arrived at. Holding on Operations is generally permitted to
enable the Bank to reduce the fund-based and non-fund based outstanding.
15.4.3 The Committee shall review the Holding on Operations periodically but not
exceeding 6 months to ensure that a permanent / final resolution is achieved.
15.5 Review/Extension of validity of outstanding Non-Fund Based (NFB) limits

[Bank Guarantees (BGs) /Letters of Credit (LCs)/ Standby Letter of Credit
(SBLC)] :
15.5.1 There are various circumstances where NFB limits (BGs and LCs) are required to
be renewed or kept alive. The reasons could be that the unit is in operation and
Holding on Operations has been allowed by the Bank; the unit is not in operation
but the NFB limits are required to be renewed to avoid conversion of such NFB
limits as fund-based; the court order directs/on-going disputes necessitates keeping
the NFB limits valid; there is reasonable expectation of return of guarantee / LCs/
127

SBLCs within a short period, etc. The extension of guarantee / LCs /SBLCs should
be considered by the Committee taking into account all relevant factors.
15.5.2 Under ordinary circumstances, in NCLT admitted cases, no extension of

guarantee/LCs/SBLCs shall be granted beyond CIR period/adjudication order
where there is no successful resolution or the Borrower is going for liquidation.
However, in exceptional circumstances, the Committee may take such other
decisions to protect the interests of the Bank.
15.5.3 The competent authority as per the DoP may consider extension of guarantees /
LCs/SBLCs no longer than the period approved by the Committee. Subject to the
above, the period of extension, the rate of guarantee / LC commission, etc. will
continue to be considered by the competent authority.
15.6. Initiation of recovery measures:
15.6.1 The Committee, upon review give directions to the dealing group for initiation of
recovery action against the borrower and other security providers. Once it is
decided to initiate recovery action, the recovery process shall be taken within the
timelines as mentioned below. In case no structured review takes place as
mentioned in this section, recovery actions should be initiated not later than 3
months from the date of classification of the account as NPA.
Timelines for Recovery Actions in respect of cases subject to Committee Review:

Recovery Action Timelines
Recall of Loan with notice Within 10 days
period not exceeding 15days to
clear the dues
If the dues are not cleared within the notice period :
Invocation of Personal / Within 7 days from the date of completion of
Corporate Guarantees Recall Notice period
128

Recovery Action Timelines

Pledge of shares – Notice to
Pledgor / Borrower
(with notice period not
exceeding 7 days)
Invocation of pledge of shares* Within 3 days from date of completion of
Invocation notice period.
*In case of request by the borrower to withhold sale of shares but non-receipt of
viable mode of resolution, within reasonable time – not exceeding 1 week – sale of
shares must be proceeded with.
Issue of notice under Section Within 7 days from the date of completion of
13(2) of SARFAESI Act and Recall Notice period
further actions $
Issue of notice under Section On 61st day but not later than 75th day from the
13(4) of SARFAESI Act and date of issue of notice under section 13(2)
further actions$
Filing of suit under DRT/Civil Within 15 days from the date of from the date of
Court completion of Recall Notice period
$All further actions under the provisions of SARFAESI Act shall be initiated in a
time bound manner.
The time lines as above shall be strictly adhered to unless any of the above actions
is specifically deferred by the Committee.
15.6.2 The specific timelines mentioned above shall prevail over the general time lines
specified in clause 3.6 for Timelines for Recovery Actions.
15.7. The Committee

The Committee for considering various actions under the Section shall be
Sanctioning Authority as per the DoP.
****************************
129

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NPA MANAGEMENT POLICY

NPA Management Policy

NPA MANAGEMENT POLICY

1. SECTION 1: Introduction 3–5

NPA Management Policy

NPA Management Policy

This entails constant monitoring and follow-up of accounts indicating incipient

An account classified as non-performing shall be subjected to close monitoring,

NPA Management Policy

1.9 In the event of revision/ modification in the prescribed norms/ guidelines of

NPA Management Policy

Management of Distressed Accounts

2.4 Early Identification

NPA Management Policy

2.5 The Default is defined as under

NPA Management Policy

2.7.1 SMA-0 Accounts

The account featuring in SMA-0 shall be subjected to monitoring so as to avoid

NPA Management Policy

2.7.2 SMA-1- Accounts

SMA 1 classification indicates a tipping point/ inflection point in the movement of

1) Examination of symptoms leading to red-flagging and consequent actions

2.7.3 SMA-2- Accounts

NPA Management Policy

 Central Repository of Information on Large Credits (CRILC) has been set up by

NPA Management Policy

General Guidelines – Management of NPAs

NPA Management Policy

3.5 Recovery Process:

NPA Management Policy

seeking declaration of assets ( not charged / mortgaged) by the borrower /

NPA Management Policy

entire dues, except in case of settlement of the account under OTS / NS or

3.6 Timelines for Recovery Actions :

NPA Management Policy

Recovery Action In Non-Restructured In Restructured

2) The time lines as above shall be strictly adhered to.

NPA Management Policy

3.7 Verification and Valuation of Security:

1) Review of Security documents: The security documents shall be reviewed to

4) Valuation of the securities:

NPA Management Policy

NPA Management Policy

NPA Management Policy

3.9 Quick Mortality:

3.10 Upgradation of NPA accounts to Standard Category:

1) In the case of loan accounts (Other than restructured accounts) classified as

NPA Management Policy

3.11 Counter Claims

1) There may be instances where deficiency of services, negligence, inadequate

3.12 Abeyance of legal action

NPA Management Policy

3.13 Waiver of legal action

2) However, in exceptional situations, Bank may consider waiver of legal

i) Where securities are not available to realize Banks dues and

3.14 Income Recognition and Reversal of Provision on Settlement / Recovery/

1) Interest recovered on NPAs is reckoned as income.

NPA Management Policy