Wednesday, August 19, 2015

NON CO-OPERATIVE BORROWERS



A non-cooperative borrower is one who does not engage constructively with his lender by defaulting in repayment of dues while having ability to pay, thwarting lenders’ efforts for recovery by not providing necessary information sought, denying access to 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.

Banks should take the following measures in classifying a borrower as non-cooperative borrower and reporting information on such borrowers to Central Repository of Information on Large Credits (CRILC):

a)  Non-cooperative borrowers would be those borrowers having aggregate facilities of Rs.5 Crores from the concerned bank. In case of companies, non-cooperative borrower will include the company itself, promoters and directors. In case of other than companies, non-cooperative borrowers would include persons in-charge and responsible for the management of the business.

b)      A solitary or isolated instance should not be the basis for such classification. The decision should be entrusted to a Committee of higher functionaries headed by an ED and two other senior officers of the rank of GM or DGM as decided by the Board of the bank.

c)   If the Committee concludes that the borrower is non-cooperative, it shall issue a Show Cause Notice to the concerned borrower and call for his submission. After considering his reply, the committee will issue an order metioning the borrower to be non-cooperative and the reasons for the same. An opportunity should be given to the borrower for a personal hearing if the Committee feels necessary.

d)    The order of the Committee should be reviewed by another Committee headed by the CMD and two independent directors of the Bank. The order shall become final only after it is confirmed by the said Review Committee.

e)      Banks will be required to report information on their non-cooperative borrowers to CRILC under CRILC-Main return. The quarterly CRILC Main report is required to be submitted within 21 days from the close of the relevant quarter.

f)       Boards of banks should review the status of non-cooperative borrowers on a half-yearly basis, for deciding whether their names can be declassified. Removal of names should be separately reported under CRILC with adequate rationale.

g)      Banks will be required to make higher provisioning as applicable to substandard assets in respect of new loans sanctioned to such borrowers. However, for the purpose of asset classification and income recognition, the new loans would be treated as standard assets.

h)   It is reiterated that as the CRILC data is collected under the provisions of the RBI Act, non-adherence to reporting instructions attracts penal provisions.

Based on the Master Circular of 1/7/15.

Please visit www.rbi.org.in  for any further clarification if required…………….. Poppy