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Banks
may upgrade the credit facilities whose ownership have been changed outside
SDR, to ‘Standard’ category, subject to the following guidelines:
(i)
Change in ownership may be by way of sale of shares, acquired by invocation of
pledge or by conversion of debt into equity outside SDR, or bringing in a new
promoter by issue of fresh shares or acquisition of the borrowing entity by
another entity. However, the exemptions from SEBI regulations permitted under
SDR guidelines will not be available;
(ii) On
such change in ownership, credit facilities may be upgraded as ‘Standard’. However,
the provision held as on the date of change shall not be reversed except as in
(v) below;
(iii)
The upgrade is subject to the following conditions:
a.
Banks should clearly
establish that the acquirer does not belong to the existing promoter group;
b.
The new promoter
should have acquired at least 51 per cent of the paid up equity capital of the
borrower company. If the new promoter is a non-resident, banks are to be satisfied
that with this equity stake the new non-resident promoter controls the management
of the company.
(iv) At
the time of takeover, banks may refinance the existing debt, considering the
changed risk profile, without treating the exercise as ‘restructuring’ subject
to banks making provisions for any diminution in the fair value of the existing
debt on account of the refinance;
(v)
Banks may reverse the provision only when all the facilities, perform satisfactorily during the ‘specified
period’ (one year as per norms on restructuring);
(vi) In
case of unsatisfactory performance during the specified period, the asset
classification would be made with reference to the repayment schedule that
existed before the change in ownership. In case the bank exits the account
completely, the provision may be reversed as on the date of exit.
Based on RBI
Circular dt 24/9/15. Please visit www.rbi.org.in for any further clarification
if required….. Poppy
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