Download - Recovery Management Cdr Bifr Oct,13
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RECOVERY
MANAGEMENT
OCTOBER,2013
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REHABILITATION & RECOVERY Despite close monitoring, some accounts will become
sick. Then decision is to be taken whether there is scope
for nursing the account back to health and recover banksdues.
What is Sickness ?
In case of an SSI, a unit will be identified as sick onthe basis of following criteria :i. It is in operation for at least two years, and
ii. The amount has remained continuously overdue or out oforder for more than 12 months OR the accumulated cashlosses exceeds 50% of its net worth.
In case of large units :
i. The company should be in existence for a period of 5years.
ii. The accumulated cash losses are equal or more than its networth.
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BIFRBoard of Industrial & Financial Reconstruction (BIFR) :
BIFR was set up under the SICA,1985.
Under SICA, sick companies have to report their sickness
to BIFR under the following circumstances :i. When the accumulated losses exceeds 50% of its net worth
ii. When their net worth is completely wiped-off.
Implications :
a. Immunity from legal cases
b. Appointment of Operating Agency to work out Rehabilitation ofthe sick unit.
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DEBT RE-STRUCTURING - SMEs
SME : Investment in P & M between Rs.25 lacs to Rs.10 crs. incase of a Manufacturing unit and between Rs.25 lacs to Rs. 5
crs. in case of a Service unit.
Eligibility :Corporate or non-Corporate SMEs who are viable &potentially viable, are eligible irrespective of level of borrowings
from a Single Bank or multiple banks.
Viability Benchmark : The rehabilitated firm should turnfinancially viable in 7 years,with the repayment period not
exceeding 10 years.
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DEBT RE-STRUCTURING - SMEs
Time-frame : restructuring package to be implemented
within 60 days from the date of borrowers request for
rehabilitation.
Review : on a quarterly basis
OTS / Out of Court Settlement : OTS / Out of Court
settlement can be implemented for recovery of NPAs belowRs.10 crs.
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CORPORATE DEBT
RESTRUCTURING (CDR)
Unlike BIFR which is constituted under an Act, CDR is a non-statutory, voluntary organisation comprising of banks & FIs.
Under CDR, rehabilitation schemes can be worked out for
even a standard account.
Eligibility :
It takes up cases involving debts of Rs.10crs. & above from
the banking system. Minimum 2 banks funding.
60% of the financing banks who have lent at least 75% of thetotal borrowing approves reference to the CDR
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SARFAESI ACT,2002
The Act allows the SC / RC to acquire financial assets from
any bank / FI on mutually agreed terms.
Salient Features :
Incorporation of SPVs namely SC / RC
Securitization of financial assets
Funding of Securitization
Asset Reconstruction
Enforcing security interest i.e. taking over the assets given as
security for the loan WITHOUT COURT INTERVENTION.
Establishment of central registry for regulating ®istering
the securitization transactions.
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LEGAL ACTIONS
When all efforts to recover banksdues fail, banks resort
to legal & other remedies. Options available are :
Civil Courts Criminal Courts
Lok -Adalats
Debt Recovery Tribunals (DRTs) Act,1993
SARFAESI Act,2002 Sale of Debt to other banks / NBFCs/ARCs
Compromise / Write-off
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THANK YOU
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