RBI’s new rules on NPAs mean faster detection and better resolution

Today, we are witnessing a large spurt in Non-Performing Assets i.e. Now, Banks are expected to classify stressed accounts as “Special Mention Accounts” as per the following timelines: Thus, as per the norms, if either principal or interest is overdue even partly, for even 1 day, the loan gets classified as SMA-0. This issue was recently seen in many private banks, where one bank classified an account as stressed, or non-performing asset, others continued to show the account as standard. For large accounts, i.e in respect of accounts with aggregate exposure of the banks at ₹ 20 billion and above, a “resolution plan” is expected to be framed by banks within 180 days of default. The resolution plans for ‘large’ accounts, shall require independent credit evaluation of the residual debt by credit rating agencies specifically authorised by the RBI.