INTRODUCTION

1. Definition

ObligationlRestructuringlislalprocedurelthatlpermitslalprivatelorlopenlorganizationlorlalsovereignlsub
stancelconfrontinglincomelissueslandlmoneylrelatedlmiseryltoldecreaselandlrenegotiatelitslobligation
slwithlalspecificlgoalltolenhancelorlreestablishlliquiditylsolitlcanlproceedlwithlitsltasks.l

2. Introduction

"Rebuilding" is the adjustment in the terms of the advance by virtue of money related troubles
being looked by the borrower which would not have been generally allowed by the bank. The
rebuilding would trail receipt of a demand to that impact from the obtaining units. The reference
will be dealt with to have been gotten, if the demand is went with the evaluated accounting
reports of the most recent three years, unaudited information for the present year and the total
points of interest of the alleviation and concessions looked for by the unit alongside their
supports and other pertinent papers/information required to examine/getting ready recovery
conspire for the unit.

3. Need for Restructuring

A requirement for rebuilding of a benefit could emerge because of any of the accompanying
inner/outer issues looked by the borrower/unit which results in borrowers' powerlessness to meet
his monetary duties to the bank.

1
Inward/External issues

a. Technical issues underway/transitory separate of plant.

b. Commercial Compulsions caused by request and supply position, evaluating and

advertise.

c. Managerial deficiencies, for example, delay in naming specialized/proficient staff.

d. Economic factors-outside in nature caused by changes in Government approaches.

e. Financial factors, for example, cost-over keep running in venture usage bringing about
liquidity crunch, surprising installments, delay in arrival of bank fund and so forth..

f. Delay in beginning of business creation.

Impermanent income abnormality

Impermanent income abnormality may likewise emerge because of any of the accompanying
angles:

a. Non-arrival of endowments/allows by Government.

b. Inadequacy of claim stores/long haul reserves..

c. Decrease in exchange credit.

d. Spurt in costs of crude materials, different data sources.

e. Decrease in offering cost of completed products.

f. Accumulation of inventories because of mass buys, impermanent request limitations,

transport bottlenecks; and so forth.

4. Restructuring/Rehabilitation Methods

2
Rebuilding may include:

• Replacement of recuperation plan for term credit represents both intrigue and portion (s).

• Waiver/concessions in intrigue accused of or without reward.

• Funding the un-overhauled intrigue/unpredictable segment in the working capital

offices/term advance offices (WCTL/FITL).

• Reduction in edge for subsidized and non-financed limits.

• Reassessment of the credit offices including the working capital.

• Restructuring perhaps for a here and now or medium term.

• It perhaps with or without extra term or working capital subsidizing regularly with extra
financing in certified cases for Balancing hardware, Modernisation, Critical Capital Expenditure
(CAPEX) basic to make specialty unit feasible. Working capital might be required over
short/medium/long haul premise inside the rebuilding/recovery outline work.

Rescheduling

It is only changing the example of obligation benefit commitment from likened regularly
scheduled payment to swelling plan (expanding the level of sum in portions bit by bit) or sliding
calendar (inverse of swelling) without thinking about any upgrade in reimbursement period and
quantum of remarkable. Rescheduling properties include:

a. Retaining the current reimbursement time frame.

Not surpassing the current the remarkable introduction.

b. The nature and quantum of existing credit offices isn't changed.

c. No crisp credit office or extra breaking point past the current extraordinary presentation
is endorsed.

3
Replacement

Replacement is rescheduling with upgrading the reimbursement time frame as it were.

It is exceptionally useful now and again of any unanticipated occasions like normal disasters.

Repeated Re-organizing

For the most part a record is relied upon to return to ordinary wellbeing amid the stipulated time
allotment when the rebuilding is improved the situation the first run through. In any case,
additionally rebuilding might be required at times of certifiable challenges outside the ability to
grasp of the borrower like change in Government approaches, move in supply/request, and so
forth.

5. Eligibility Criteria for Restructuring of Advances

• Bank may rebuild the records arranged under 'standard', 'sub-standard' and 'dicey' classes.

• Bank can't reschedule/rebuild/renegotiate borrower accounts with review impact. While a

rebuilding proposition is under thought, the typical resource arrangement standards would keep
on applying. The procedure of renaming of an advantage isn't halted simply on the grounds that
rebuilding proposition is under thought.

• Restructuring of obligation happens just with the formal assent/utilization of the

borrower. Notwithstanding, the way toward rebuilding can be started by the bank in meriting
cases subject to client consenting to the terms and conditions.

• No account is taken up for rebuilding by the bank except if the money related
reasonability is built up and there is a sensible sureness of reimbursement from the borrower,
according to the terms of rebuilding bundle.

• The feasibility is controlled by the bank in light of the satisfactory practicality

benchmarks.

4
• Any rebuilding managed without investigating money streams of the borrower and
evaluating the reasonability of the tasks/action financed by banks would be dealt with as an
endeavor to regularly greening a feeble credit office and will welcome administrative
concerns/activity.

6. Stages where Restructuring is finished

a. Before initiation of business creation/activity.

b. After initiation of business creation yet before the advantage has been named "sub-
standard"

c. After initiation of business creation/activity and the advantage has been named 'sub-
standard' or 'farfetched'.

7. Asset Classification subsequent to Restructuring

• Accounts delegated 'standard resources' are promptly renamed as 'sub-standard resources'

after rebuilding.

• The non-performing resources, after rebuilding, would keep on having indistinguishable

resource order from preceding rebuilding and slip into additionally bring down resource
characterization classifications according to resource grouping standards.

• All rebuilt accounts which have been named NPA's after rebuilding would be qualified
for up-degree to the standard class after perception of 'agreeable execution' amid one year time
frame from the date of first installment of intrigue or portions regarding the rebuilding bundle
indicated period.

• Specified period implies

i. In instance of money credit accounts, the record ought not be out of request for over 90
days amid the predetermined period and there ought not be any finished levy toward the finish of
indicated period.

5
ii. In instance of term advances no installments ought to stay late for over 90 days amid the
predetermined period and there must be no finished levy toward the finish of the predefined
period.

• Any extra fund will be dealt with as 'standard resource', amid the predetermined period.
Anyway on account of records where the pre rebuilding offices were delegated 'sub-standard' and
'dicey', premium salary on the extra fund ought to be perceived on money premise.

8. Advantages and Disadvantages of Debt Restructuring

Obligation Restructuring is utilized by organizations in an endeavor from recuperation from high

obligations which they can't pay. This helpful device modifies the manner in which installments
are made on obligation.

Individuals have their organizations experience this procedure on the off chance that they have
turned out to be not able remain over their money related circumstance. It is unique in relation to
chapter 11 in that it is more affordable and won't assume as substantial as loss of notoriety.

Obligation Restructuring is more worthwhile to the borrower than it is to the bank.

The main slight icing is that rather than totally discounting as a terrible credit, in any event if the
rebuilding procedure ends up effective the bank would have the capacity to limit its misfortunes.

 It is an instrument to help out of help to borrowers who are incidentally in trouble,

specifically where the misery is caused by conditions outside the ability to control
of borrower

 It may likewise be justified in the event of development of lawful or different

issues that reason delays, especially on account of undertaking execution.

 If considered in a more extensive picture, obligation rebuilding may turn out to be

significantly more imperative in specific cases like horticulture and certain
MSME advances as a few occupations rely upon it.

6
  When there is a monetary downturn, this plan incompletely helps in resuscitating
it.

9. Risks Involved

Obligation rebuilding similarly as with some other structure has its expert's and con's. At the
point when utilized properly and prudently it is valuable to both the gatherings included. Be that
as it may, abuse of rebuilding component should be possible .Restructuring has been a
conspicuous focal managing an account instrument in the seasons of emergency crosswise over
most wards notwithstanding its ethical risk viewpoints. It is likewise joined by the administrative
self control on resource grouping, provisioning and capital ampleness so as to give the banks and
corporate the genuinely necessary space to restore their gainful resources amid times of
emergency. Administrative patience on resource order in India, be that as it may, has turned into
a standing element regardless of the nearness or nonattendance of a money related
emergency/downturn.

Additionally Debt rebuilding must be done if all else fails or when it's completely a need; rather
it has been seen that even at the smallest indication of backing off of economy or a specific
division of the economy, Corporate and organizations have a tendency to rebuild, which is
deceptive.

NeedlforlthelStudy

Restructuringlislalsocietallconventionltolattemptltolassistlanyonelinldistress.lSimilarly,lrestructuringli
slaltoolltollendlalhandloflassistanceltolborrowerslwholareltemporarilylinldistress,linlparticular,lwherelth
eldistresslislcausedlbylcircumstanceslbeyondlthelcontrolloflthelborrower.lThus,ldebtlrestructuringlma
ylbelrequiredlunderlcertainlcircumstanceslviz.lalgeneralldownturnlinltheleconomylwhichlresultslinlthel
deteriorationlinlthelfinanciallhealthloflborrowers.lItlmaylalsolbelwarrantedlinlcaseloflemergenceloflleg
allorlotherlissueslthatlcauseldelays,lparticularlylinlcasesloflprojectlimplementation.lExternalldevelop

7
ments,lsuchlaslgloballfactorslmaylalsolresultlinlwidespreadlimpactlonlthelfinanciallhealthloflborrower
slandlmaylnecessitateluseloflrestructuringlaslaltoolltolhelplthelborrowerltideloverldifficultlcircumstanc
es.l

Thelneedlforlsuchlalspecializedlinstitutionallmechanismlaroselinlthelbackgroundlofldifficultieslfacedl
bylbankslwhilelrestructuringlespeciallyltheirllargelexposureslinvolvinglmorelthanlonellender,lunderlc
onsortiumlbankinglarrangement.lWhilelitlwasleasierlforlbanksltolnegotiateltheltermsloflrestructuringl
ofltheirlownlexposurelwithltheirlcustomers,ltheylfoundlitldifficultltolco-
ordinateltheirlnegotiationlandlmonitoringleffortslwherelrestructuringlinvolvedlmultiplellenders.lTher
efore,lalneedlwaslfeltltoldeviselalsystemlwherelrestructuringlofllargelcorporatelexposureslfromlmultipl
elbankslunderlconsortiumlbankinglarrangementslcouldlbelcarriedlout.lThelReservelBanklwaslseizedlo
flthelmatterlandlitlputlinlplacelthelschemeloflCDRlinlAugustl2001lbasedlonlthelmechanismlprevalentlin
lcountriesllikelthelU.K.,lThailand,lKorea,lMalaysia,letc.lTheselguidelineslwerelfinalizedlafterlextensi

veldiscussionlbetweenlGovernmentloflIndia,lReservelBank,lBankslandlFIs.l

Research Methodology

The study is descriptive in nature. Description is fundamental to our work since description
based on various parameters leads to causal explanation of a particular situation. The study is
based on qualitative research method since surveys and experiments (quantitative research
method) are not really relevant in this case. The research is qualitative in nature as restructuring
mechanism varies from one sector/industry/firm to another. No generalizations can be made.

Data Collection and Tools

• Data that was used was secondary data. Data has been collected from several secondary
sources.

• Data was collected by analyzing few Restructuring proposals.

• Published documents, periodicals, journals all over the world, newspapers, website of
individual banks, Indian Banks Association (IBA) and RBI website.

• Annual reports published by SBH.

8
• Data was also taken from CDR website.

Objective of the study

To understand the importance of restructuring.

To understand the different mechanisms of restructuring that are present.

To analyze a case study of debt restructuring under JLF mechanism.

To evaluate the trend of restructuring in State Bank of Hyderabad in the past 5 years.

Limitations/Conditions

Thelschemelcomeslwithlalnumberloflconditions

 Bankslarelnotlallowedltolofferlanylmoratoriumlonlrepaymentlonlthelsustainablelpartloflthel
debt.
 Bankslarelalsolnotlallowedltolextendlthelrepaymentlschedulelorlreducelthelinterestlratelonlthel
debt.
 Bankslwilllalsolneedltolsetlasidelhigherlprovisionslifltheylchooseltolfollowlthislroute.lLendersl
willlhaveltolmakelprovisionsltolthelextentlofl20%lofltheltotalloutstandinglamountlorl40%lofl
thelamountlofldebtlthatlislseenlaslunsustainable.

9
 REVIEWlOFlLITERATURE

AlwatchfullchoiceloflapplicablelmateriallwaslanlimposinglassignmentlbeforelthelResearcher.
lEndeavorslhavelbeenlmadeltolexaminelthelwritinglexceedinglylapplicableltolthelContext.l

ThelprimarylwellspringsloflwritinglhavelbeenlthelWebsiteloflthelReservelBankloflIndia,lthelsiteloflthel
BaslelCommitteelonlBankinglSupervisionlandlthelsitesloflalfewlnoteworthylBanks.l

Dr.Y.V.ReddylintroducedlPaperslatlWorldlBanklInternationallMonetarylFundlandlBrookingsl
InstitutionlConferencelonlFinanciallSectorlGovernance,lThelpartsloflPubliclandlPrivatelSectors,l
PubliclSectorlBankslandlthelGovernancelChallenge:lIndianlExperience,lMonetarylandlFinanciallSect
orlReformslinlIndia:lAlPractitioner'slPerspectivel(IndianlEconomylConference,lCornelllUniversity,l
USAl(2003),'TowardslGlobalizationlinlthelFinanciallSectorlinlIndia'lInauguralladdresslatlthelTwentyl
FifthlBanklEconomistslConference,lMumbai.lInltheseladdresseslDr.Reddyltalkedlaboutltheldifferentl
activitieslbeingltakenlbylthelReservelBankloflIndialtolguaranteelmoneylrelatedlstrengthloflthelBanks.l
TheladministrativelchangeslstartedlbylthelReservelBankloflIndia,lthelmovelfromlsmalllscalelprudentia
llcontrolltolfulllscaleldirectionlhavelbeenltalkedlabout.lThelprogressionslstartedlhavelrealizedlanlocea
nlchangelinlthelresponsibilitylforlBanks,lalcheckedlchangelinlthelsoundnesslparametersllikelthelarrival
lonlresources,lstafflprofitability,linnovation,lresourcelqualitylandlsolforth.l

Hannan and Hanweck felt that the indebtedness for Banks turns out to be genuine when current
misfortunes deplete capital totally. It likewise happens when the arrival on resources (ROA) is
not as much as the negative capital-resource proportion.

Patrick Honohan clarifies the utilization of budgetary assets to help rebuild an expansive fizzled
Bank/Banking framework and the different results related with it. The article talks about how
instruments can best be intended to reestablish Bank capital, liquidity and impetuses. It considers
how recapitalization can be demonstrated to guarantee right motivating forces for new
administrators/chiefs to work in a judicious way guaranteeing great resulting execution It talks

10
about how Government's financial plan and the enthusiasm of the citizen can be ensured and
recommend that fiscal approach should react to the recapitalization rather decide its outline.

CRISIL give an account of hazard administration expressed that the misfortune potential from
showcase hazard will increment without solid hazard administration apparatuses. The banks
which embrace a proactive way to deal with updating hazard administration abilities which are as
of now unsophisticated when contrasted with globally best practices, would have an aggressive
edge in future. The report remarked that in the undeniably deregulated and focused condition, the
hazard administration techniques of banks would hold the way to separation in their credit value.

11
 COMPANYLPROFILE
BANKLPROFILE

PROFILElOFlSBI:

ThelSBI’slpowerfullcorporatelbankinglformationldeployslmultiplelchannelsltoldeliverlintegratedl
solutionslforlalllfinanciallchallengeslfacedlbylthelcorporateluniverse.lThelCorporatelBankinglGrou
plandlthelNationallBankinglGrouplarelthelprimaryldeliverylchannelslforlcorporatelbankingl
products.

ThelCorporatelBankinglGrouplconsistslofldedicatedlStrategiclBusinesslUnitslthatlcaterexclusively
l

tolspecificlclientlgroupslorlspecializelinlparticularlproductlclusters.lForemostlamongltheselalspecia
lizedlgrouplislthelCorporatelAccountslGroupl(CAG),lfocusinglonlthelprimelcorporatelandlinstituti
onall
clientsloflthelcountry’slbiggestlbusinesslcenters.lThelotherslarelthelProjectlFinancelunitlandlthelLe
asinglunit.ThelNationallBankinglGrouplalsoldeliverslthelentirelspectrumloflcorporatelbankinglpro
ductsltolotherlcorporatelclients,lonlalnationwidelplatform.

ThelbanklislalsollookinglatlopportunitiesltolgrowlinlsizelinlIndialaslwelllaslInternationally.lItlpresen
tlylhasl82lforeignlofficeslinl32lcountrieslacrosslthelglobe.lItlhaslalsol7lSubsidiarieslinlIndial–
lSBIlCapitallMarkets,lSBICAPlSecurities,lSBIlDFHI,lSBIlFactors,lSBIlLifelandlSBIlCardsl-

lforminglalformidablelgrouplinlthelIndianlBankinglscenario.lItlislinlthelprocessloflraisinglcapitallfor

litslgrowthlandlalsolconsolidatinglitslvariouslholdings.lThroughoutlalllthislchange,lthelBanklislalsol

attemptingltolchangeloldlmindsets,lattitudeslandltakelalllemployeesltogetherlonlthislexcitinglroadlt
olTransformation.lInlalrecentlylconcludedlmasslinternallcommunicationlprogrammeltermedl‘Pariv
artan’lthelBanklrolledloutloverl3300ltwoldaylworkshopslacrosslthelcountrylandlcoveredloverl130,0
00lemployeeslinlalperiodlofl100ldayslusinglaboutl400lTrainers,ltoldrivelhomelthelmessageloflChan

12
gelandlinclusiveness.lThelworkshopslfiredlthelimaginationloflthelemployeeslwithlsomelotherlbanksli
nlIndialaslwelllaslotherlPubliclSectorlOrganizationslseekingltolemulatelthelprogramme.

SBIlperformancelinllastlfivelyears:lStatelBankloflIndial(SBI)lislalllgearedlupltolincrea
selitslbusinesslperlemployeelandlprofitlperlemployeelaslitlthinkslthatlforlSBI,ltheseltwolparamete
rslarelamong lthellowestlinlthelindustry.

Onlonelhand,lthelbanklisltryingltolreducelitslstafflstrengthlwhichlwouldleventuallylimprovelthelrati
os;lbutlonlthelother,lthelbanklislalsolgoinglflatloutltolincreaselitslcustomerlbase.

"Ourlbusinesslperlemployeelandlprofitlperlemployeelisloneloflthellowestlinlthelindustry,"lSBIlha
dlrecentlylsaidlinlaljointlstatementlissuedlbylthelmanagementlandlunions.SBI'slgenerateslRsl2.99
lcroreloflbusinesslperlemployee,lwhilelitslprofitlperlemployeelisljustlaboutlRsl2.17llakh.lBylcontr

ast,lmajorityloflthellargelpubliclsectorlbankslarelbetterlinltermsloflbothltheselparameters.

Forlinstance,lCanaralBanklhaslalbusinesslperlemployeel(BPE)loflRsl4.42lcrore,lwhilelUnionlBankl
oflIndia'slBPElislatlRsl4.36lcrorelandlBankloflBaroda'sl(BoB)lRsl3.51lcrore.lTheselarelaccordinglto
ltheirlrespectivelannuallreportsllforl2005-06.

Onlthelotherlhand,lCanaralBank'slprofitlperlemployeel(PPE)lislalsolonlthelhigherlsidelatlRsl3.02llak
h.lThelPPEsloflUnionlBanklandlBoBlarelatlRsl2.66llakhlandlRsl2.13llakh,lrespectively.

"Overlthelyears,lwelhavelbeenlsteadilyllosinglourlmarketsharelfromlaboutl35%linl1970sltolaroun
dl16%linl2006.lOurlvastlnetworklislfailingltolattractlthelnewlandldemandinglyounglcustomers,"lS
BIlsaidlinlthatlstatement,lwhichlisladdressedltolalllSBIlofficerslandlemployeellandlaimedlatlchang
ingltheirlattitudeltowardslcustomers.

13
ThelstatementlwasljointlylsignedlbylchairmanlOPlBhatt,lmanagingldirectorslTSlBhattachar
yalandlYogeshlAgarwallandltoplofficelbearersloflitslofficerslandlemployeeslassociations.

Toladdressltheselissues,lbothlthelmanagementlandlunionslhavelagreedltolworklhandlinlhand.lThe
ylhavelappealedltolthelbank'slstaffsltolgolflatloutltolincreaselitslcustomerlbase."Letluslbelconsciou
sloflthelcustomer'sloveralllneedslratherlthanlonlyltheltransactionlatlhand.lLetluslexpandlourlcusto
merlbase,"lthelstatementlread.

Thelbanklhaslnearlyl37llakhlsavingslbanklaccountsllinlthelBengallcirclelitself.Meanwhile,lth
elcountry'sllargestlandloldestlbanklhaslofferedlanlexitloptionlschemel(EOS)ltolitslemployees.
lThelbanklhaslsomel2.1llakhlstaffs,loutloflwhichlnearlyl1.4llakhlarelclericallandlsubordinatele

mployees.

SBIlRECENTlACHIVEMENTSlANDlMILESTONES:

AWARDS:SBIlhaslbeenlthelproudlrecipientloflthelICRAlOnlinelAwardl-l8ltimes,lCNBClTVl–
l18,lCrisillAwardl2006l-l4lAwards,lThelLipperlAwardl(Yearl2005-
2006)landlmostlrecentlylwithlthelCNBClTVl-
l18lCrisillMutuallFundloflthelYearlAwardl2007landl5lAwardslforlourlschemes.

SBIlCardlreacheslthreelmillionlmilestone:lSBIlCard,laljointlventurelbetweenlStatelBankloflI
ndialandlGElMoney,lannouncedlyetlanotherllandmarklachievementloflcrossinglthelthreelmillio
nlcardholders-mark.lRoopamlAsthana,lCEO-
SBIlCard,lsaid,l"Thislmilestonelislevenlmorelremarkablelaslwelhaveladdedlonelmillionlcardhol
derslinljustltenlmonths.lOurlobjectivelisltolacceleratelthelpaceloflgrowthlbylextendinglthelbenef
itsltolalbroaderlrangeloflconsumerslinlTierlIIlcities,lalonglwithlimprovedlvaluelpropositionslfor
lthelurbanlaffluentlcustomers."lSBIlCardlrecentlylsignedluplIndianlcricketerlYuvrajlSinghlaslits
lbrandlambassador.

14
SBI JOINS CHINESE BANKS TO TOCH 10000 BRANCHES:

PubliclsectorlStatelBankloflIndialonlSundaylbecamelonlylthelsecondlbanklinlthelworldltol
havel10,000lbrancheslwhenlUnionlFinancelMinisterlPlChidambaramlinauguratedlitsllatest
lbranchl.

Speakinglonltheloccasion,lChidambaramlsaidlChina'slICBClBanklwaslthelotherlbankltolhavel
10,000lbranches.lOpeningl10,000lbrancheslwaslalgreatlfeat.l"Itlislnotlanleasylmilestonelthoughlthe
lSBIlwaslthelbankloflthelgovernmentlandlIndianlpeoplelevenlbeforelotherlbankslwerelnationalised,
"lhelsaid.

Peoplelallloverlthelworld,lincludinglthelChinese,lwouldlnowlknowlaboutlthislsmalllvillagelwherelt
hel10000thlbranchloflthelSBIlhadlbeenlopened,lhelsaidladdingltheylwouldlbelamazedlbylthelbank'sl
growth.lThelbanklshouldlbelproudloflthelachievementlhelsaidlandlwishedlthatlthelbanklopenedlonel
lakhlbranches.

ThelMinisterlsaidloutlofltheloverl100lcrorelpeople,lseventyl75lperlcentldidlnotlhavelanyltypeloflinsu
rance.lSimilarly,l50lperlcentloflthel11lcrorelfarmersldidlnotlhavelbanklaccount.lBankslshouldlgoltolt
helpeoplelandlenrolllthemlaslaccountlholders.l'Thatlislwhatleconomistslsaylislfinanciallinclusion,'lh
elsaid.

15
MissionlandlVisionlStatement

Vision
“Tolbelthelmostlpreferredlandltrustedlbank”.

Mission
“Dedicatedltolcustomerldelightlandlinclusivelgrowthlbylleveragingltechnologylwithlemp
owered andlcommittedlworklforce”

Values

 TransparencylandlEthical
 RespectlandlEmpathylforlcustomers.
 Competencelandldedicationlinlalllthatlweldo.
 Nurturinglalculturelofllearninglandltechnologicallexcellence.
 lCommitmentltolnationallandlsociallobjectives.

16
Particulars Quarter Yearlended Quarter
ended 31.03.2016 ended
31.03.2016 (audited) 31.03.2015
(audited) (audited)
Totallincomelfromloperationsl(net) 390708.00 1563278.00 414585.00
NetlProfitlfromlordinarylactivitieslafterl 25313.00 106493.00 44551.00
tax
NetlProfitlforlthelperiodlafterltaxl(after 25313.00 106493.00 44551.00
extraordinarylitems)
EquitylSharelCapital 2075.00 2075.00 2075.00
Reservesl(excludinglRevaluationlReser 1037888.00 1037888.00 957581.00
veslasshownlinlthelBalancelSheetloflPre
viouslyear)
EarningslPerlSharel(beforelextraordinar
yitems)l(oflRs.100/-leach)
(notlannualized)lBasic: Rs.l1,219.90 Rs.l5,132.19 Rs.l2,147.04
(notlannualized)lDiluted Rs.l1,219.90 Rs.l5,132.19 Rs.l2,147.04
EarningslPerlSharel(afterlextraordinaryl
items)(oflRs.100/-leach)
(notlannualized)lBasic: Rs.l1,219.90 Rs.l5,132.19 Rs.l2,147.04
(notlannualized)lDiluted Rs.l1,219.90 Rs.l5,132.19 Rs.l2,147.04

17
KeylPeople

Smt.lArundhatilBhattacharyal–lChairman
ShrilSantanulMukherjeel–lManaginglDirector
ShrilVlViswanathanl-lChieflGenerallManagerl(RetaillBanking)
ShrilDlVlSureshlKumarl-lChieflGenerallManagerl(SAMG)
ShrilIlSivalNainarl-lChieflGenerallManagerl(CommerciallBanking)

SBHlhaslwonlseverallprestigiouslawardsl.Someloflthemlare:
a. SKOCHlAwardl-lSmartlTechnologyl-lTelanganaSLBC.coml(2015)
b. BestlBanklbrancheslunderlPradhanlMantrilJan-DhanlYojanal(PMJDY)l(2015)
c. e-PaymentlSolutionlforlGovernmentloflMaharashtral(2015)
d. BestlBanklAwardl(2011)

FinanciallStatus

AuditedlFinanciallResultslforlthelquarterl/lyearlendedl31stlMarchl2017

Amountlinllakhs

BalancelSheetlaslonl31/03/2017

Rs.lInlthousands

Particulars Aslonl31/03/2017 Aslonl31/03/2016

CapitallandlLiabilities

Capital 207500 207500

ReserveslandlSurplus 103788820 95758077
Deposits 1371740653 1301661873
Borrowings 88745294 85024536

18
Otherlliabilitieslandlprovisions 81485543 62375855
Total 1645967810 1645027841
Assets

CashlandlbalanceslwithlRBI 65173546 57916820

Balanceslwithlbankslandlmoneylatlcalllendlshortlnotice 13077391 16225017
Investments 380075950 364911486
Advances 1110653464 1050531289
FixedlAssetsl 6859591 6381697
OtherlAssets 70127868 49061532
Total 1645967810 1645027841
ContingentlLiabilities 694043330 627958489
BillslforlCollection 34355329 24129712
Particulars YearlEnded
Income 31stlMarchl2017 31stlMarchl2016

InterestlEarned 141872066 138237598

OtherlIncome 14455764 13250629
Total 156327630 151488227
Expenditure

InterestlExpended 95935942 94311469

OperatinglExpenses 27485289 28040104
ProvisionslandlContingencies 22277374 15965377
Total 145678586 138316950
Profit/Loss 10649245 13171279
Netlprofitlforlthelyear 3 4
ProfitlbroughtlForward
Total 10649248 13171283

19
 INDUSTRYLPROFILE

HistoryloflBankingl

Thelwordlbanklislusedlinlthelsenseloflalcommerciallbank.lItlisloflGermanicloriginlthoughlsome
lpersonsltracelitsloriginltolthelFrenchlwordl‘Banqui’landlthelItalianlwordl‘Banca’.lItlreferredltol
albenchlforlkeeping,llending,landlexchangingloflmoneylorlcoinslinlthelmarketlplacelbylmoneyl
lenderslandlmoneylchangers.

Therelwaslnolsuchlwordlasl‘banking’lbeforel1640,lalthoughlthelpracticeloflsafe-
keepinglandlsavingslflourishedlinltheltempleloflBabylonlaslearlylasl2000lB.C.lChanakyalinlhisl
Arthashastralwrittenlinlaboutl300lB.C.lmentionedlaboutlthelexistenceloflpowerfullguildslofl
merchantlbankerslwholreceivedldeposits,landladvancedlloanslandlissuedlhundisl(letterslofltransf
er).lThelJainlscriptureslmentionlthelnameslofltwolbankerslwholbuiltlthelfamouslDilwarelTempl
esloflMountlAbulduringl1197landl1247lA.D.

Thelfirstlbanklcalledlthel‘BankloflVenice’lwaslestablishedlinlVenice,lItalylinl1157ltolfinancel
thelmonarchlinlhislwars.l

BankinglinlIndia

History

ThelbankinglsectorlinlIndia,linlitslmodernlsenseloriginatedlinlthellastldecadeloflthel18thlcentury
.lAmonglthelfirstlbanklwaslthelBankloflHindustan,lwhichlwaslestablishedlinl1770landlliquidate
dlinl1829-32.

Thellargestlbank,landltheloldestlstilllinlexistence,lislthelStatelBankloflIndial(S.B.I).lItloriginated
laslthelBankloflCalcuttalinlJunel1806.lInl1809,litlwaslrenamedlaslthelBankloflBengal.lThislwas
loneloflthelthreelbankslfundedlbylalpresidencylgovernment;lthelotherltwolwerelthelBanklof
lBombaylandlthelBankloflMadras.l

20
PRESENTLSCENARIOLOFLBANKINGLINDUSTRYLINLINDIA

INTRODUCTION

AslperlthelReservelBankloflIndial(RBI),lIndia’slbankinglsectorlislwell-
regulated.lThelfinanciallandleconomiclconditionslinlthelcountrylarelfarlsuperiorltolmanylotherl
countrieslinlthelworld.lCredit,lmarketlandlliquiditylrisklstudieslsuggestlthatlIndianlbankslarel
generallylresilientlandlhavelwithstoodlthelgloballdownturnlwell.

ThelIndianlbankinglsectorlislbroadlylclassifiedlintolscheduledlbankslandlnon-scheduledlbanks.

Thelscheduledlbankslarelthoselwhichlarelincludedlunderlthel2ndlScheduleloflthelReservelBankloflI
ndialAct,l1934.
21
MARKETLSIZE

ThelIndianlbankinglsystemlconsistslofl26lpubliclsectorlbanks,l20lprivatelsectorlbanks,l43lforeig
nlbanks,l56lregionallrurallbanks,l1,589lurbanlcooperativelbankslandl93,550lrurallcooperativel
banks,linladditionltolcooperativelcreditlinstitutions.lThelIndianlbankinglsector’slassetslreachedl
US$l1.8ltrillionlinlFY14lfromlUS$l1.3ltrillionlinlFY10,lwithl70lperlcentloflitlbeinglaccountedl
bylthelpubliclsector.lPublic-
sectorlbankslcontrollnearlyl80lpercentloflthelmarket,ltherebylleavinglcomparativelylmuchlsmall
erlshareslforlitslprivatelpeers.

TotallcreditlextendedlwentlupltolUS$l1,089lbillionlbylFY15.

22
RECENTLINVESTMENTS/DEVELOPMENTS

KeylinvestmentslandldevelopmentslinlIndia’slbankinglindustrylinclude:

 EximlBankloflIndialandlthelGovernmentloflAndhralPradeshlhaslsignedlalMemorandumlofl
Understandingl(MoU)ltolpromotelexportslinlthelstate.
 KotaklMahindralBanklLimitedlhaslboughtl19.9lperlcentlstakelinlAirtellMlCommercelServi
ceslLimitedl(AMSL)lforlRsl98.38lcrorel(US$l14.43lmillion)ltolsetluplalpaymentslbank.lAM
SLlprovideslsemi-
closedlprepaidlinstrumentlandlofferslserviceslunderlthel‘AirtellMoney’lbrandlname.
 India'sllargestlpubliclsectorlbank,lStatelBankloflIndial(AI),lhaslopenedlitslfirstlbranchldedic
atedltolservinglstart-uplcompanies,linlBangalore.

23
 ThelReservelBankloflIndial(RBI)lhaslgrantedlin-
principlellicencesltol10lapplicantsltolopenlsmalllfinancelbanks,lwhichlwilllhelplexpandi
nglaccessltolfinanciallserviceslinlrurallandlsemi-urbanlareas.

GUIDELINES

1. GenerallPrincipleslandlPrudentiallNormslforlRestructuredlAdvances

Thelprincipleslandlprudentiallnormsllaidldownlarelapplicableltolallladvanceslthatlareleligibl
e.l

2. Background

ThelguidelineslissuedlbylthelReservelBankloflIndialonlrestructuringlofladvancesl(otherlthan
lthoselrestructuredlunderlalseparatelsetloflguidelineslissuedlbylthelRurallPlanninglandl

CreditlDepartmentl(RPCD)loflthelRBIlonlrestructuringlofladvanceslonlaccountloflnaturall
calamities)lareldividedlintolthelfollowinglfourlcategories
 GuidelinesloflRestructuringlofladvanceslextendedltolindustriallunitslunderlthelCorp
oratelDebtlRestructuringl(CDR)/JointlLenderlForuml(JLF)lMechanism.
 GuidelineslonlRestructuringlofladvanceslextendedltolSmalllandlMediumlEnterprise
sl(SME).
 GuidelinesloflRestructuringloflotherladvanceslpertainingltolagriculturelduringl
NaturallCalamities.

24
3. GUIDELINESLOFLCORPORATELDEBTLRESTRUCTURINGL
MECHANISM
3.1OBJECTIVE

ThelobjectiveloflCDRlisltolensureltimelylandltransparentlmechanismlforlrestructuringl
thelcorporateldebtsloflviablelentitieslfacinglproblemslforlthelbenefitsloflalllconcerned.l
Mainlaimlisltolminimizelthellossesltolthelcreditorslandlotherlstakeholderslthroughlanl
orderlylandlcoordinatedlrestructuringlprogramme.

3.2ELIGIBILITYLCRITERIA

o ThelCDRlmechanismlwilllcoverlonlylmultiplelbankinglaccounts/syndication/conso
rtiumlaccountsloflcorporatelborrowerslengagedlinlanyltypeloflactivity.
o Theltotalloutstandingl(fund-basedlandlnon-
fundlbased)lexposurelislRs.10lcrorelorlabove.
o Corporatelindulginglinlfraudslandlmalfeasancelevenlinlalsinglelbanklwilllcontinue
ltolremainlineligiblelforlrestructuringlunderlCDRlmechanism.

o BIFRlcaseslarelnotleligiblelforlrestructuringlunderlthelCDRlsystem.lHoweverllargel
valuelBIFRlcaseslmaylbeleligiblelforlrestructuringliflspecificallylrecommendedlbyl
CDRlCorelGroup.

3.3STRUCTURELOFLCDRLSYSTEM

CDRlsystemlinlIndialfollowslalthreeltierlstructure.
i. CDRlStandinglForumlandlitslCorelGroup
ii. CDRlEmpoweredlGroup
iii. CDRlCell

25
3.3.1 CDRLSTANDINGLFORUMLANDLITSLCORELGROUP

a. ThelCDRlstandinglforumlwouldlbelthelrepresentativelgenerallbodyloflal
llfinanciallinstitutionslandlbankslparticipatinglinlCDRlsystem.lAlllfinan
ciallinstitutionslandlbankslshouldlparticipatelinlthelsystemlinltheirlownli
nterest.l
b. ThelCDRlStandinglForumlshalllcompriseloflChairmanlandlManaginglD
irector,lIDBIlLtd;lChairman,lSBI;lManagerlandlCEO,lICICIlBanklLimit
ed;lChairman,lIndianlbankslAssociationlaslwelllaslchairmanlandlmanagi
ngldirectorsloflalllbankslandlfinanciallinstitutionslparticipatinglaslperma
nentlmemberslinlthelsystem.
c. ThelForumlwilllelectlitslChairmanlforlalperiodloflonelyearlandlprinciplel
oflrotationlwilllbelfollowedlinlthelsubsequentlyears.lHowever,lthelforum
lmayldecideltolhavelalWorkinglChairmanlaslalwhole-

timelofficerltolguidelandlcarryoutltheldecisionsltakenlbylCDRlStandingl
Forum.
d. ThelCDRlStandinglForumlhasltolmeetlatlleastlonceleverylsixlmonthsltol
reviewlandlmonitorlthelprogressloflCDRlsystem.
e. ThelForumlwouldllayoutlthelpolicieslandlguidelinesllikelmaximumlperi
odlforlalunitltolbecomelviablelunderlalrestructuringlpackage...etc.
f. AlCDRlCorelGrouplshouldlbelcarvedloutloflthelCDRlStandinglForumlto
lassistlthelCDRlStandinglForum.

g. ThelCorelGrouplconsistsloflChieflexecutivesloflIDBI,lSBI,lICICI,lBankl
oflBaroda,lBankloflIndia,lPNB,lIndianlBankslAssociationlandlDeputylC
hairmanloflIndianlBankslAssociationlrepresentinglforeignlbankslinl
India.
h. ThelCDRlCorelGrouplwouldllayldownlpolicieslandlguidelinesltolbelfoll
owedlbylCDRlEmpoweredlGrouplandlCDRlCelllforldebtlrestructuring.l

26
3.3.2 CDRLEMPOWEREDLGROUP

a. CDRlEmpoweredlGrouplconsistsloflEDllevellrepresentativesloflIDBI,
lICICIlandlSBIlaslstandinglmembers,linladditionltolEDllevellrepresentat

ivesloflfinanciallinstitutionslandlbankslwholhavelanlexposureltolthel
concernedlcompany.
b. StandinglmemberslfacilitatelthelconductloflthelGroup’slmeetings,l
votinglwilllbelinlproportionltolthelexposureloflthelcreditorslonly.
c. Thellevelloflrepresentationloflbanks/financiallinstitutionslonlthelCDRl
EmpoweredlGrouplshouldlbelatlalsufficientlylseniorllevelltolensurelthatl
concernedlbank/FIlabidelbylthelnecessarylcommitmentslincludinglsacri
ficeslmadeltowardsldebtlrestructuring.
d. Nomineeslwholattendlthelmeetinglpertainingltolonelaccountlshouldl
invariablylattendlalllthelmeetingslpertainingltolthatlaccount.
e. ThelCDRlEmpoweredlGrouplislmandatedltollooklintoleachlcaselofldebtl
restructuring,lexaminelthelviabilitylandlrehabilitationlpotentialloflthel
companylandlapprovelthelrestructuringlpackagelwithinlalspecifiedltimel
framelofl90ldays,lorlatlbestlwithinl180ldays.
f. TheldecisionsloflthelCDRlEmpoweredlGrouplshalllbelfinal.
g. Iflrestructuringlislnotlfoundlviable,lthelcreditorslwouldlthenlbelfreeltol
takelnecessarylstepslforlimmediatelrecoveryloflduesland/orlliquidation
lorlwindingluploflthelcompany,lcollectivelylorlindividually.

h. ThelCDRlEmpoweredlGrouplshallldecidelonlthelacceptablelviabilitylbe
nchmarkllevelslonlthelfollowinglillustrativelparameters,lwhichlmaylbel
appliedlonlalcase-by-caselbasis,lbasedlonlthelmeritslofleachlcase:
 ReturnlonlCapitallEmployedl(ROCE).
 DebtlServicelCoveragelRatiol(DSCR).
 GaplbetweenlthelInternallRateloflReturnl(IRR)landlthelCostlofl
Fundl(CoF).

27
  Extentloflsacrifice.

l3.3.3lCDRLCELL

a. ThelCDRlcelllwilllmakelthelinitiallscrutinyloflthelproposalslreceivedlfro
mlborrowers/creditors,lbylcallinglforlproposedlrehabilitationlplanlandl
therlinformationlandlputluplthelmatterlbeforelthelCDRlEmpoweredl
grouplwithinl30ldayslforldecision.
b. Thelperiodlcanlbelextendedlupltolalmaximumlofl180ldayslfromltheldatel
oflreferenceltolthelCDRlcell.
c. ThelCDRlStandinglForum,lthelCDRlEmpoweredlGrouplandlCDRlCell
lislatlpresentlhousedlinlIndustriallDevelopmentlBankloflIndialLtd.

d. CDRlCelllshouldlhaveladequatelmembersloflstaffldeputedlfromlbanks
landlfinanciallinstitutions.

e. ThelcostlinloperatinglthelCDRlmechanismlincludinglthelCDRlCelllwilll
belmetlfromlcontributionloflthelfinanciallinstitutionslandlbankslinlthel
CorelGrouplatlthelrateloflRsl50llakhleachlandlcontributionlfromlotherlin
stitutionslandlbankslatlthelrateloflRsl5llakhleach.l
l

3.4LEGALLBASIS
a. CDRlislalnon-statutorylmechanismlwhichlislalvoluntarylsystemlbasedl
onlDebtor-CreditorlAgreementl(DCA)landlInter-
CreditorlAgreementl(ICA).DCAlandlICAlshalllprovidelthellegallbasisl
tolthelCDRlmechanism.
b. TheldebtorslshalllhaveltolaccedeltolthelDCA,leitherlatltheltimelofl
originallloanldocumentationl(forlfuturelcases)lorlatltheltimeloflreference
ltolCorporatelDebtlRestructuringlCell

c. AlllparticipantslinlthelCDRlmechanismlthroughltheirlmembershiploflthe
lStandinglForumlshalllhaveltolenterlintolallegallylbindinglagreement,lwi

thlnecessarylenforcementlandlpenallclauses,ltoloperatelthelsystemlthrou
ghllaidldownlpolicieslandlguidelines.

28
 d. ThelICAlsignedlbylthelcreditorslwilllbelinitiallylvalidlforlalperiodlofl3l
yearslandlsubjectltolrenewallforlfurtherlperiodslofl3lyearslthereafter.l
e. Thelcreditorslshouldlagreelthatlifl75lpercentloflthelcreditorslbylvaluel
andl60lpercentloflcreditorslbylnumber,lagreeltolalrestructuringlpackagel
oflanlexistingldebtl(i.e.ldebtloutstanding),lthelsamelwouldlbelbindinglon
lthelremaininglcreditors.

f. OneloflthelmostlimportantlelementsloflDebtor-
CreditorlAgreementlwouldlbel‘standlstill’lagreementlbindinglforl90lday
slorl180ldayslbylbothlsides.lUnderlthislclauselbothltheldebtorlandlcredit
or(s)lshalllagreeltolallegallylbindingl‘standstill’lwherebylbothlthelparties
lcommitlthemselveslnotltoltakelrecourseltolanylotherllegallactionlduringl

thel‘stand-still’lperiod.l

3.5CATEGORISATION

3.5.1 CATEGORYL1LCDRLSYSTEM

a) Applicableltolonlylstandardlandlsub-
standardlaccounts,lwhichlinlthelopinionlofl75lpercentloflthelcreditorslby
lvaluelandl60lpercentloflcreditorslbylnumberlarellikelyltolbecomelperfor

minglafterlintroductionloflthelCDRlpackage?

3.5.2 CATEGORYL2LCDRLSYSTEM

 Therelhavelbeenlinstanceslwherelthelprojectslhavelbeenlfoundltolbelviab
lelbylthelcreditorslbutlthelaccountslcouldlnotlbeltakenluplforlrestructurin
glunderlthelCDRlsystemlasltheylfelllunderldoubtfullcategory.lHencelalse
condlcategoryloflCDRlwaslintroducedlforlcaseslwherelthelaccountslhave
lbeenlclassifiedlasldoubtfullinlthelbooksloflcreditors,landliflalminimum

lofl75%loflcreditorsl(bylvalue)landl60%lcreditorsl(bylnumber)lsatisfylth

emselvesloflthelviabilityloflthelaccountlandlconsentlforlrestructuring.

29
  UnderlCategoryl2litlislnotlbindinglonlthelcreditorsltolprovideladditionall
financinglworkedloutlunderlthelCDRlpackage,lsolwhatlhappenslislthatlth
elexistinglloanslarelrestructuredlandlitlislonlthelpromoterltolfirmlupladdit
ionallfinancing.lAlllotherlfeatureslunderlcategoryl1landlcategoryl2lsuchl
aslstandstill,lassetlclassificationletclarelthelsame.

3.6ADDITIONALLFINANCINGLANDLEXITLOPTION

 AdditionallfinancelaslperltheltermsloflthelfinallCDRlpackagelisltolbelpro
videdlbylalllcreditorsloflalstandardlorlsub-
standardlaccountlirrespectiveloflwhetherltheylarelworkinglcapitallorlter
mlcreditorslonlalprolratalbasis.
 Inlcaselforlanylinternallreason,lanylcreditorlwholisloutsidelthelminimuml
75%landl60%lSuperlMajoritylVotelthresholdldoeslnotlwishltolcommitla
dditionallfinancing,lthatlcreditorlwilllhavelanlexitloption.
 However,lsuchlcreditorlhasltoleither,larrangelforlitslsharelofladditionallfi
nanceltolbelprovidedlbylalnewlorlexistinglcreditor,lorlagreeltoltheldeferm
entloflfirstlyear’slinterestldueltolitlafterlthelCDRlpackagelbecomesleffect
ive.lThelfirstlyear’sldeferredlinterestlwithoutlcompoundinglislpayablelal
onglwithlthellastlinstalmentloflthelprincipalldueltolthelcreditor.

3.7LGUIDELINESLONLJOINTLLENDERSLFORUML(JLF)LANDL
CORRECTIVELACTIONLPLANL(CAP)

TheselguidelineslwilllbelapplicablelforllendinglunderlConsortiumlandlMultiplelBankin
glArrangementsl(MBA).lRBIldoeslgiveloutlguidelineslfromltimeltoltime.
JLFlmechanismlislquickerlandleffectivelwhenlcomparedlwithlCDR.lStilllsometimes,l
thoughlrarelJLFlmayldecideltolfollowlCDRlmechanismlwhenlrestructuring.l

30
3.8lFormationloflJointlLenderslForum

BeforelalloanlaccountlturnslintolalNPA,lbankslarelidentifyinglincipientlstresslinlthe
laccountlbylcreatinglthreelsub-

lcategorieslunderlthelSpeciallMentionlAccountl(SMA)lcategorylaslgivenlinltheltablel

below.

SMAlS BasislForlClassification
ub-
Catego
ries
SMA-0 Principallorlinterestlpaymentlnotloverduelforlmorelthanl30ldayslbutlaccountls
howinglsignsloflincipientlstress.
SMA-1 Principallorlinterestlpaymentloverduelbetweenl31-60ldays
SMA-2 Principallorlinterestlpaymentloverduelbetweenl61-90ldays

 ReservelBankloflIndial(RBI)lhaslsetluplalCentrallRepositoryloflInformationlonl
LargelCreditsl(CRILC)ltolcollect,lstore,landldisseminatelcreditldataltollenders.
 Bankslarelrequiredltolreportlcreditlinformation,lincludinglclassificationloflanlac
countlaslSMAltolCRILClonlallltheirlborrowerslhavinglaggregatelfund-
basedlandlnon-lfundlbasedlexposureloflRs.50lmillionlandlabovelwithlthem.
 However,lCroplloanslarelexemptedlfromlsuchlreporting,lbut,lbankslshouldlconti
nueltolreportltheirlotherlagriculturelloanslinltermsloflthelabovelinstruction.

31
3.9APPLICABILITYLOFLFRAMEWORKLINLCERTAINLCASES

BankslreportltheirlCashlCreditl(CC)landlOverdraftl(OD)laccounts,lincludingloverdraftl
arisingloutlofldevolvedlLCs/invokedlguaranteesltolCRILCl(CentrallRepositoryloflInfor
mationlonlLargelCredits).
 Billslpurchasedlorldiscountedl(otherlthanlthoselbackedlbylLCslissuedlbylbanks)l
andlderivativelexposureslwithlreceivableslrepresentinglpositivelmarkltolmarketl
valuelremainingloverduelforlmorelthanl60ldayslshouldlbelreportedltolCRILClasl
SMA-2.
 BankslshouldlcontinueltolreportlthelcreditlinformationlandlSMAlstatusltolCRIL
Clonlloanslincludinglloanslextendedlbyltheirloverseaslbranches.
 However,lformationloflJLFlwilllnotlbelmandatorylinlcaseslofloffshorelborrower
slwhichldolnotlhavelanylpresencelinlIndia,leitherlbylwayloflalsubsidiary,lparentl
orlalgrouplentity.

3.10 REPORTINGLTOLCENTRALLREPOSITORYLOFLINFORMAT
IONLONLLARGELCREDITS

RBIlhaslsetluplthelCRILCltolcollect,lstorelandldisseminateldatalonlalllborrowerslcreditle
xposureslincludinglSpeciallMentionlAccountsl(SMAl0,l1l&l2)lhavinglaggregatelfund-
basedlandlnon-fundlbasedlexposureloflRs.50lmillionlandlabove.l

i. CRILClmainl(QuarterlylSubmission):lThislwilllcompriseloflfourlsections.
 Sectionl1:lExposureltollargelborrowersl(GloballOperations).
 Sectionl2:lReportinglofltechnicallylwrittenloflaccounts.
 Sectionl3:lReportingloflbalancelinlcurrentlaccount.
 Sectionl4:lReportingloflnon-cooperativelborrowers.
ii. CRILC-SMAl2landlJLFlFormation:lTolbelsubmittedlaslandlwhenlbasis.

32
3.11 CORRECTIVELACTIONLPLANL(CAP)LBYLJLF

ThelJLFlmaylexplorelvariousloptionsltolresolvelthelstresslinlthelaccount.lThelintentionl
islnotltolencouragelalparticularlresolutionloption,le.g.lrestructuringlorlrecovery,lbutltol
arrivelatlanlearlylandlfeasiblelsolutionltolpreserveltheleconomiclvalueloflthelunderlyingl
assetslaslwelllaslthellenders’lloans.lTheloptionslunderlCorrectivelActionlPlanl(CAP)lbyl
thelJLFlwouldlgenerallylinclude:l

a) RECTIFICATIONL-
lObtaininglalspecificlcommitmentlfromlthelborrowerltolregulariselthelaccountl

solthatlthelaccountlcomesloutloflSMAlstatuslorldoeslnotlsliplintolthelNPAlcateg
ory.lThelcommitmentlshouldlbelsupportedlwithlidentifiablelcashlflowslwithinlth
elrequiredltimelperiodlandlwithoutlinvolvinglanyllosslorlsacrificelonlthelpartlofl
thelexistingllenders.lIflthelexistinglpromoterslarelnotlinlalpositionltolbringlinl
additionallmoneylorltakelanylmeasuresltolregulariselthelaccount,lthelpossibilityl
oflgettinglsomelotherlequity/strategiclinvestorsltolthelcompanylmaylbelexplored
lbylthelJLFlinlconsultationlwithlthelborrower.lTheselmeasureslarelintendedlto

lturnaroundlthelentity/companylwithoutlanylchangelinltermslandlconditionsloflt

helloan.lThelJLFlmaylalsolconsiderlprovidinglneedlbasedladditionallfinanceltolt
helborrower,liflconsideredlnecessary,laslpartloflthelrectificationlprocess.lHowev
er,litlshouldlbelstrictlylensuredlthatladditionallfinancinglislnotlprovidedlwithlal
viewltolever-greeninglthelaccount.l

b) RESTRUCTURINGL–
lRestructuringlconsiderslthelpossibilityloflrestructuringlthelaccountliflitlislprimal

facielviablelandlthelborrowerlislnotlalwilfulldefaulter,li.e.ltherelislnoldiversionlo
flfunds,lfraudlorlmalfeasance,letc.lInlthislstage,lcommitmentlfromlpromoterslfor
lextendingltheirlpersonallguaranteeslalonglwithltheirlnetlworthlstatementlsuppor

tedlbylcopieslofllegalltitlesltolassetslmaylbelobtainedlalonglwithlaldeclarationlth
atltheylwouldlnotlundertakelanyltransactionlthatlwouldlalienatelassetslwithoutlth

33
 elpermissionloflthelJLF.lForlthislactionltolbelsustainable,lthellenderslinlthelJLFl
maylsignlanlInterlCreditorlAgreementl(ICA)landlalsolrequirelthelborrowerltolsi
gnlthelDebtorlCreditorlAgreementl(DCA)lwhichlprovideslthellegallbasislforlthel
restructuringlprocess.
c) RECOVERYL–
lIflthelfirstltwoloptionsli.e.,lRectificationlandlRestructuringlarelnotlfeasible,lduel

recoverylprocesslmaylbelresorted.lThelJLFlmayldecidelthelbestlrecoverylproces
sltolbelfollowed,lamonglthelvariousllegallandlotherlrecoveryloptionslavailable,l
withlalviewltoloptimisingltheleffortslandlresults.

Theldecisionlagreedluponlbylalminimumlofl75%loflcreditorslbylvaluelandl60%loflcredi
torslbylnumberlinlthelJLFlwouldlbelconsideredlaslthelbasislforlproceedinglwithlthelrest
ructuringloflthelaccount.lThelJLFlislrequiredltolarrivelatlanlagreementlonltheloptionltol
beladoptedlforlCAPlwithinl45ldayslfroml(i)ltheldateloflanlaccountlbeinglreportedlaslSM
A-
2lbylonelorlmorellender,lorl(ii)lreceiptloflrequestlfromlthelborrowerltolformlalJLF,lwithl
substantiatedlgrounds,liflitlsenseslimminentlstress.lThelJLFlshouldlsignloffltheldetailed
lfinallCAPlwithinlthelnextl30ldayslfromltheldateloflarrivinglatlsuchlanlagreement.

3.12 RESTRUCTURINGLBYLJLF

lIflthelJLFldecideslonlrestructuringlthelaccountlindependentloflCDRlmechanismlthelfoll

owinglguidelineslareltolbelfollowed.
a) ThelJLFlshouldlcarryloutltheldetailedlTechnolEconomiclViabilityl(TEV)lstudy,
landliflfoundlviable,lfinaliselthelrestructuringlpackagelwithinl30ldayslfromltheld

ateloflsigninglofflthelfinallCAP.
b) ForlaccountslwithlAggregatelexposureloflRs.5000lmillionlandlabove,lthelabove
-
mentionedlTEVlstudylandlrestructuringlpackagelwilllhaveltolbelsubjectedltolanl
evaluationlbylanlIndependentlEvaluationlCommitteel(IEC)loflexpertslfulfillingl
certainleligibilitylconditions.lThelIEClwillllooklintolthelviabilitylaspectslafterle

34
 nsuringlthatltheltermsloflrestructuringlarelfairltolthellenders.lThelIEClwilllbelre
quiredltolgiveltheirlrecommendationlinltheselcasesltolthelJLFlwithinlalperiodlofl
45ldays.l
c) IflthelJLFldecidesltolgolaheadlwithlthelrestructuring,lthelrestructuringlpackageli
ncludinglallltermslandlconditionslaslmutuallylagreedluponlbetweenlthellendersl
andlborrower,lwouldlhaveltolbelapprovedlbylalllthellenderslandlcommunicatedlt
olthelborrowerlwithinlnextl15ldayslforlimplementation.l
d) RestructuringlcaseslareltakenluplbylthelJLFlonlylinlrespectloflassetslreportedlasl
Standard,lSMAlorlSub-
StandardlbylonelorlmorellendersloflthelJLF.lWhilelgenerallylnolaccountlclassifi
edlasldoubtfullshouldlbelconsideredlbylthelJLFlforlrestructuring,linlcaseslwhere
lalsmalllportionlofldebtlisldoubtfulli.e.lthelaccountlislstandard/sub-

standardlinlthelbooksloflatlleastl90%loflcreditorsl(bylvalue),lthelaccountlmaylth
enlbelconsideredlunderlJLFlforlrestructuring.
e) ThelviabilityloflthelaccountlisldeterminedlbylthelJLFlbasedlonlacceptablelviabil
itylbenchmarksldeterminedlbylthem.lIllustratively,lthelparameterslmaylincludel
thelDebtlEquitylRatio,lDebtlServicelCoveragelRatio,lLiquidity/CurrentlRatiola
ndlthelamountloflprovisionlrequiredlinllieulofltheldiminutionlinlthelfairlvaluelofl
thelrestructuredladvance,letc.l

35
ACCELERATEDLPROVISIONING

lInlcaseslwherelbankslfailltolreportlSMAlstatusloflthelaccountsltolCRILClorlresortltolme

thodslwithlthelintentltolconceallthelactuallstatusloflthelaccountslorlevergreenlthelaccoun
t,lbankslwilllbelsubjectedltolacceleratelprovisioninglforltheselaccountsland/orlotherlsup
ervisorylactionslasldeemedlappropriatelbylRBI.lThelcurrentlprovisioninglrequirementla
ndlthelrevisedlacceleratedlprovisioninglinlrespectloflsuchlnonlperforminglaccountslarel
aslunder:

AssetlClassifi PeriodlaslN CurrentlProvisioningl RevisedlAcceleratedlProvisi

cation PA (%) oningl(%)l
Sub- Upltol6lmon 15 NolChange
Standardl(Sec thsl
ured) 6lmonthsltol 15 25
1lyear
Sub- Upltol6lmon 25l(otherlthanlinfrastru 25
Standardl(Uns ths cturelloans)
ecured) 20l(Infrastructurelloans
)
6lmonthsltol 25l(otherlthanlinfrastru 40
1lyear cturelloans)
20l(Infrastructurelloans
)
DoubtfullI 2ndlyear 25l(Securedlportion) 40l(Securedlportion)
100l(Unsecuredlportio 100l(Unsecuredlportion)
n)
DoubtfullII 3rdlandl4thly 40l(Securedlportion) 100lforlbothlsecuredlandlunse
ear 100l(Unsecuredlportio curedlportions
n)
DoubtfullIII 5thlyearlonw 100 100
ards

36
ll

3.13 OTHERLISSUES/CONDITIONSLRELATINGLTOLRESTRUC
TURINGLBYLJLF/CDRLCELL

BothlunderlJLFlandlCDRlmechanism,lthelrestructuringlpackagelshouldlalsolstipulatelth
eltimelinelduringlwhichlcertainlviabilitylmilestonesl(e.g.limprovementlinlcertainlfinanc
iallratioslafterlalperiodlofltime,lsay,l6lmonthslorl1lyearlandlsolon)lwouldlbelachieved.lT
helJLFlmustlperiodicallylreviewlthelaccountlforlachievement/non-
achievementloflmilestoneslandlshouldlconsiderlinitiatinglsuitablelmeasureslincludinglr
ecoverylmeasureslasldeemedlappropriate.JLF/CDRlmaylconsiderlthelfollowingloptions
lwhenlaslloanlisltolbelrestructured:

 Possibilitylofltransferringlequityloflthelcompanylbylpromotersltolthellenders,ltol
compensatelforltheirlsacrifice.
 Promoterslinfusinglmorelequitylintoltheirlcompanies.

4. GUIDELINESLONLRESTRUCTURINGLOFLADVANCESL
EXTENDEDLTOLSMALLLANDLMEDIUML ENTERPRISESL(SME)

4.1lobjective

 ThelobjectiveloflthislPolicylisltolensureltimelylandltransparentlDebtlRestructuringl
Mechanisml(DRM)lforlrestructuringltheldebtsloflviablelMSMEslfacinglproblems,lo
utsidelthelpurviewloflBIFR,lDRT,lCDRlandlotherllegallproceedings.lInlparticular,lt
helframeworklwilllaimlatlpreservinglviablelMSMEslthatlarelaffectedlbylcertainlinte
rnallandlexternallfactorslandlminimizelthellossesltolthelcreditorsl(thelBank)landloth
erlstakeholderslthroughlanlorderlylandlcoordinatedldebtlrestructuringlmechanismlor
lrehabilitationlpackage.

37
4.2LSCOPEL&LAPPLICABILITY

lThelMicro,lSmalllandlMediumlenterpriseslarelclassifiedlbasedlonlthelfollowinglcriteria.

S Descriptionlof ManufacturinglSector ServicelSector

r. lEnterprises Investmentl(*)linlplantlandlmachi Investmentl(*)linlEquipmentl
nery
A MicrolEnterpr UpltolandlincludinglRs.l25llakh UpltolandlincludinglRs.l10llakh
ises
B SmalllEnterpri AbovelRs.l25llakhlbutlupltolandli AbovelRs.l10llakhlbutlupltolandli
ses nclusiveloflRs.l5lCrores.l nclusiveloflRs.l2lCrores.
C MediumlEnter AbovelRs.l5lCroreslbutlupltolandl AbovelRs.l2lCroreslbutlupltoland
prises inclusiveloflRs.l10lCrores. linclusiveloflRs.l5lCrores.

Notel(*)l--
lExcludinglcostloflpollutionlcontrol,lresearchlandldevelopment,lindustriallsafetyldeviceslan

dlsuchlotherlitems.

a. Inlcaseloflmultiplelbanking/syndicate/consortiumlaccountslwherelrestructuringlcanl
belconsideredlunderlCorporatelDebtlRestructuringlSchemel(CDRS),lwelmaylmakel
effectiveluseloflCDRlmechanism.lInlsuchlcaseslrestructuringlmaylbelconsideredlonl
thelbasisloflrehabilitationlschemelworkedloutlandlapprovedlbylCDRlEmpoweredlGr
oup.l
b. Suitlfiledlcaseslareleligibleliflalminimumlofl75%loflthellendersl(bylvalue)linlcaselofl
multiplelbanking/lsyndicate/consortiumlaccountslconsentlforlsuchlrestructuring.

38
4.3LDEFINITIONLOFLSICKLMICRO,LSMALLLANDLMEDIUML
ENTERPRISES

a. MediumlSectorlEnterprises:
AslperlRBIlguidelines,lalmediumlsectorlenterpriselislclassifiedlaslsicklif
i. Anyloflthelborrowerlaccountsloflthelunitlremainslsub-
standardlforlmorelthanlsixlmonths,lprincipallorlinterest,linlrespectloflanylofli
tslborrowerlaccountslhaslremainedloverduelforlalperiodlexceedinglonelyear,l
Thislrequirementlofloverduelperiodlexceedinglonelyearlwilllremainlunchan
gedlevenliflthelpresentlperiodlforlclassificationloflanlaccountlaslsub-
standard,lislreducedlinlduelcourse.
l(Or)

ii. Therelislerosionlinlthelnetlworthloflthelborrowerldueltolaccumulatedlcashllo
ssesltolthelextentlofl50lperlcentloflitslnetlworthlduringlthelpreviouslaccounti
nglyear.
l(And)

iii. Thelunitlhaslbeenlinlcommerciallproductionlforlatlleastl2lyears
b. MicrolandlSmalllEnterprisel(lMSE):

AslperlRBIlGuidelineslalMicrolandlSmalllEnterprisel(MSE)lunitlmaylbelclassifiedla
slsicklif

i. AnyloflthelborrowedlaccountloflthelenterpriselremainslNPAlforlthreelmonth
slorlmore.
l(Or)

ii. Therelislerosionlinlthelnetlworthldueltolaccumulatedllossesltolthelextentlofl5
0lperlcentloflitslnetlworthlduringlthelpreviouslaccountinglyear.lTheldecisionl
onlviabilityloflthelunitlshouldlbeltakenlatlthelearliestlbutlnotllaterlthanl3lmon
thsloflunitlbecominglsicklunderlanylcircumstances.

39
4.4leligibilitylcriteria

a. Alllnon-corporatelMSMEslirrespectiveloflthellevelloflduesltolthelBank.l
b. lAlllCorporatelMSMEslenjoyinglbankinglfacilitieslsolelylfromlsinglelBanklirrespec
tiveloflthellevelloflduesltolthelbank.l
c. lAlllcorporatelMSMEs,lwhichlhavelfundedlandlnon-
fundedloutstandinglupltolRs.l10lCroreslunderlmultiplel/lconsortiumlbankinglarrang
ementlwithlonelorlmorelbanks.l
d. lAccountslclassifiedlaslSub-
StandardlorlDoubtfullwouldlalsolbeleligiblelbutlaccountslclassifiedlasl“LosslAssets
”lwilllnotlbeleligiblelforlDRM.l
e. CaseslwherelOperatinglAgencylhaslbeenlappointed,lrestructuringlmaylbelconsidere
dlonlthelbasisloflthelRehabilitationlSchemelworkedloutlbylthelOperatinglAgency.l
f. AccountslwherelrecoverylsuitslhavelbeenlfiledlorlactionlunderlSARFAESIlActlhasl
beenlinitiatedlwilllgenerallylnotlbelconsideredleligiblelforlrestructuringlunderlDRM
lforlMSMEs.lHowever,linlexceptionallcaseslGenerallManagerloflthelZonel/lCorpora

telOfficelmaylpermitlrestructuringlinlsuchlcases.l
g. InlrespectloflunitslreferredltolCDRlmechanism,lrestructuringlmaylbelconsideredlonl
thelbasisloflschemelworkedloutlandlapprovedlbylCDRlEmpoweredlGroup.l
h. Accountslinvolvinglwilfulldefaults,lfraudlandlmalfeasancelwilllnotlbeleligiblelforlre
structuringlunderltheselguidelines.l
i. Wherelfundsldivertedlearlierlhavelbeenlbroughtlbacklintolthelbusinessland/orlthereli
slchangeloflmanagementland/orlwhereltheldiversionlislintralcompany,lrestructuringl
maylbelundertakenlonlalcaseltolcaselbasis.lHowever,lrestructuring/rehabilitationlne
edlnotlbelwithheldlwherelIntralCompanylorlevenlinter-
companyldiversionslhaveltakenlplace,lprovidedlthelamountldivertedlislbroughtlback
lwithinlalreasonableltime.lSuchlrestructuringlwouldlbeldecidedlonlalcaseltolcaselbas

is,latlthelsoleldiscretionloflthelbank.lButladditionallmargin/lcontribution,lsecuritylet
c.lwhereverlpossiblel&lfeasiblelandlsuitablelcovenantslmaylbelconsideredlaslperlBa
nk’sldiscretionltolensurelbothlsafetyloflBank’slfundslandlnon-recurrencelinlfuture.

40
4.5LVIABILITYLCRITERIALFORLSMALLLANDLMICROL
ENTERPRISES

lViabilitylandlthelabilityltolserviceltheldebtlafterlrestructuringlshalllbelthelimportantlcriteri

a. Alunitlmaylbelregardedlaslpotentiallylviableliflitlwouldlbelinlalpositionltolcontinuel
tolservicelitslrepaymentlobligationslaslagreedluponlincludinglthoselforminglpartlofl
thelpackage,lafterlimplementinglalrelieflpackagelspreadloverlalperiodlnotlexceedingl
10lyearsliflitlislengagedlinlinfrastructurelactivitieslandl–l7-
lyearslinlcaseloflotherlUnitslfromlthelcommencementloflthelpackagelfromlBanks/lFi

nanciallInstitutions/lGovernmentl(Central/State)landlotherlconcernedlagencies,lasl
maylbelnecessary,lwithoutlthelhelploflthelconcessionslafterlthelaforesaidlperiod.l
b. Thelrepaymentlperiodlforlrestructuredl(past)ldebtslincludinglmoratoriumlperiodlifla
nylshouldlnotlexceedl15lyearslinlcaseloflinfrastructurelAdvanceslandl10lyearslinlcas
eloflotherlAdvanceslfromltheldateloflimplementationloflthelpackage.l
c. Basedlonlthelnormslspecifiedlabove,litlwilllbelforlthelbanks/financiallinstitutionsltol
decidelwhetherlalsicklMSMElunitlislpotentiallylviablelorlnot.

FORLMEDIUMLSECTORLENTERPRISES:

Theldecisionlonlviabilityloflalunitlshouldlbeldecidedlquicklylbutlnotllaterlthanl-04-
lmonthslandlmadelknownltolthelunitlandlotherslconcernedlatlthelearliest.

FORLMICROLANDLSMALLLENTERPRISES:

Theldecisionlonlviabilityloflthelunitlshouldlbeltakenlatlthelearliestlbutlnotllaterlthanl
3lmonthsloflbecominglsicklunderlanylcircumstanceslandlmadelknownltolthelunitlan
dlotherslconcernedlatlthelearliest.

d. Restructuring/RehabilitationlschemelforlMSMElsectorltolbelimplementedlwithinlth
reelmonthslfromldateloflreceiptloflfullylfledgedlapplicationslalonglwithlcopiesloflAu
ditedlBalancelsheetslforlthellastl-3-
lyearslandlalllthelnecessarylrelevantlpaperslrequiredltolpreparelthelscheme.

41
 e. Itlmaylnotlbelfeasibleltolconductlviabilitylstudylinlverylsmalllunitslandlwilllonlylincr
easelpaperlwork.lAslsuchlforlmicrol(manufacturing)lenterprises,lhavinglinvestmentl
inlplantlandlmachinerylupltolRs.l5llakhlandlmicrol(service)lenterpriseslhavinglinvest
mentlinlequipmentlupltolRs.l2llakh,lthelBranchlManagerlmayltakelaldecisionlonlviab
ilitylandlrecordlthelsame,lalonglwithltheljustification.l

lg.

Particulars DRMlforlSMEs
MinimumlAveragelDSCR* 1.25
Maximumlperiodlwithinlwhichlthel 7lyears
unitlshouldlbecomelviable
Maximumlrepaymentlperiodloflalllt 10lyears
ermlloansl/FITL/WCTL
Minimumlpromoterslcontributionlo 15%loflthellongltermlrequirementloflfundslpluslth
flwhichlatlleastl50%lmustlcomelupf elmonetarylvalueloflthelsacrificeslmadelbylthellen
ront ders
l

*DSCR-DebtlServicelCoveragelRatiol(NetlOperatinglIncome/DebtlServices)

4.6lHOLDINGLONLOPERATIONS

lForlMediumlSectorlEnterprises:

lWhilelidentifyinglandlimplementinglthelrestructuring/rehabilitationlpackage,”lholdingloperati

on”lmaylbelconsideredlforlalperiodlofl06lmonths.lThislwilllallowlsmall-
scalelunitsltoldrawlfundslfromlthelcashlcreditlaccountlatlleastltolthelextentlofltheirldepositl
oflsalelproceedslduringlthelperiodloflsuchl“holdingloperation”llesslpre-
agreedlcutbacksltolreduceloverldues.

 HoldinglOnlOperationslessentiallylimplies:

42
  Continuousloperationslinlthelaccount,llikelopeninglfreshlLCsltolthelexte
ntloflreductionlinldevolvement,levenlifldevolvementlislnotlfullylcleared.
 RollloverloflLClopenedlbylthelbank.
 Allowingloperationslinlthelcashlcreditlaccountldespitelinterest/forcedlde
bitslnotlbeinglcleared.
 SuchlHoldinglonlOperationslmaylgenerallylbelpermittedlwithlalcutlbackloflsaylabou
tl10-
15%ltowardslreductionlinloverldues.lHoldinglonlOperationslcanlalsolbelpermittedle
venlwithoutlcutlbacklarrangementlonlcaseltolcaselbasislandlmeritsloflthelcase.

FORLMICROLANDLSMALLLUNITS:

HANDHOLDINGLSTAGE

 TimelylandladequatelassistanceltolMSEslandlrehabilitationleffortlshouldlbeginlonlal
proactivelbasislwhenlearlylsignsloflsicknesslareldetected.lThislstagelwouldlbelterme
dlasl‘handholdinglstage’lasldefinedlbelow.lThislwilllensurelinterventionlbylbanksli
mmediatelylafterldetectinglearlylsymptomsloflsicknesslsolthatlsicknesslcanlbelarrest
edlatlanlearlylstage.lAnlaccountlmaylbeltreatedltolhavelreachedlthel“handholdinglsta
ge”;liflanyloflthelfollowingleventslareltriggered:l
l

a. Therelisldelaylinlcommencementloflcommerciallproductionlbylmoreltha
nlsixlmonthslforlreasonslbeyondlthelcontrolloflthelpromoters.
b. AlCompanylincursllosseslforltwolyearslorlcashllosslforlonelyear,lbeyond
lthelacceptedltimeframe.

c. Thelcapacitylutilizationlisllesslthanl50%loflthelprojectedllevellinltermslo
flquantitylorlthelsaleslarellesslthanl50%loflthelprojectedllevellinltermslof
lvaluelduringlalyear.

 Thelhandholdinglsupportltolsuchlunitslshouldlbelundertakenlwithinlalmaximumlperi
odlofltwolmonthsloflidentificationloflsuchlunits.l

43
4.7LTECHNOLECONOMICLVIABILITYLSTUDY

 Tolascertainlthelviabilityloflalsicklunit,ldetailedltechnical,leconomical,lfinancialland
lmanageriallappraisallshouldlbelcarriedloutltolfindloutlwhetherlsufficientlprofitlwilll

belgeneratedlwithinlthelperiodloflrehabilitationlandlwhetherlthelunitlwilllbelableltola
chievelpositivel“Netlworth‟.
 InlAccountslwherelaggregatelexposurel(existing/proposed)lexceedslRs.lOnelCrore,l
TEVlstudyltolbelcarriedloutlbyloutsidelempanelledlAgencylwithlmemberlbanks.l
 InlrespectloflAccountslwherelsuchlexposurelexceedslRs.lFivelCroreslsuchlTEVlrep
ortltolbelvettedlbylthelbanklProjectlFinancelDivision.
 Thelstudylsolconductedlshouldlcoverlvariouslaspectslrelatingltoltechnical,lfinancial,
lcommerciallandlmanageriallappraisal.l

4.8LMETHODOLOGYLTHATLISLGENERALLYLADOPTEDLINLMSME
LDEBTL RESTRUCTURINGL

LSCENARIOL1

LWHENLALBANKLISLTHELLARGESTLLENDER?

a. ThelborrowerlwilllmakelrequestlforlrestructuringlunderlDRMlforlMSMEsltolthelbranchl
alonglwithlProposallPapersl(PP)landlitslenclosures/ldocuments.lThelrequestlshouldlbele
nteredlinlthelProposallReceiptlRegisterlandlacknowledgementlgivenltolthelborrower.l
b. Thelrespectivelbanklbranchlshalllexamineltheleligibilityloflthelreferencelforlrestructurin
glunderlDRMlforlMSMEs.l
c. ThelbranchlshalllsendlalcopyleachloflthelPPltolotherllenders,linformingltheldatelofljointl
meetingloflthellenderslwhichlshalllnotlbellaterlthanl15ldayslfromltheldateloflthelreceiptlo
flthelrequest.
d. OurlstandlonlthelrestructuringlproposallshouldlbelfinalizedlbeforelthelJointlmeeting.lTh
elviewsloflotherllenderslmaylbelobtainedlinlthelJointlmeeting.
e. Thellenderslshallldiscussltheladmissibilityloflthelreference,lthelreasonablenessloflthelrel
ieflandlconcessionslsought,lthelsystemltolbeladoptedlforlestablishinglviabilitylandlmajo

44
 rlissuesltolbeladdressedlinlthelsame,ltheltermslandlconditionsltolbelstipulatedlinlcaselthel
accountlislrestructured
f. Techno-
EconomiclViabilitylneedsltolbelestablishedlbeforelproceedinglwithlthelrestructuring.lW
hetherlthelTEVlstudylisltolbeldonelbylthellargestllenderlalonglwithlthelsecondllargestlle
nderlin-houselorlthroughlanloutsidelagencylmaylbeldecidedlinltheljointlmeetinglitself.
g. ThelbranchlalonglwithlthelsecondllargestllenderlshouldlpreparelthelFinallRestructuringl
PackagelbasedlonlthelTEVlstudylreportlandlcirculatelthelsameltolotherllenders.lBeforelc
irculatinglthelFinallPackage,lthelbranchlshouldlobtainlthelapprovalloflthelstandlfromlthe
lsanctioninglauthority.lThelotherllenderslshouldlobtainlthelapprovallofltheirlcompetentl

authoritylandlimplementlthelrestructuringlpackage.
h. Packagelwouldlbelimplementedlsimultaneouslylbylalllthellenderslafterlitlislsanctionedlb
yltheirlrespectivelcompetentlauthorities.
i. 75%lLenderslbylvaluelshouldlagreelforlrestructuringlschemelapproved.

LSCENARIOL2

LWHENLALBANKLISLTHELSOLELLENDER?

a. ThelborrowerlwilllmakelrequestlforlrestructuringlunderlDRMlforlMSMEsltolthelbranc
hlalonglwithlPerformalPackagel(PP,lthelapplicationlformlforlmakinglrequestlforlrestruc
turinglunderlDRMlforlMSMEsl–
specificlformat)landlitslenclosures/ldocuments.lThreelsetslofldocumentslshalllbelprovid
edlbylthelborrower.lThelrequestlshouldlbelenteredlinlthelProposallReceiptlRegisterlandl
acknowledgementlgivenltolthelborrower.
b. ThelbranchlshalllexamineltheleligibilityloflthelreferencelforlrestructuringlunderlDRMlf
orlMSMEs.lThelbranchlshalllsendlonelsetleachltolitslcontrollinglofficel&lthelsanctionin
glauthority,lwherelnecessary,lalonglwithlitslviews/lrecommendations.
c. Techno-
economiclViabilitylneedsltolbelestablishedlbeforelproceedinglwithlthelrestructuring.lA
lllcaseslshalllbelforwardedltolthelcontrollinglofficelforlassessmentloflviabilitylandlfurth
erlaction.

45
 d. Iflthelunitlislfoundlviable,lthelbranchlshouldlpreparelthelFinallRestructuringlPackagelb
asedlonlthelTEVlstudylreportlandlsubmitlthelsameltolthelappropriatelauthorityloflthel
Bank.

LSCENARIOL3

LWHENLALBANKLISLSECONDLLARGESTLLENDER?

a. ThelbanklshalllexamineltheleligibilityloflthelreferencelforlrestructuringlunderlDRMlforl
MSMEs.l
b. ThelstandlonlthelrestructuringlproposallshouldlbelcrystallizedlbeforelthelJointlmeeting.l
OurlviewslmaylbelconveyedlinlthelJointlMeeting.
c. Techno-
EconomiclViabilitylneedsltolbelestablishedlbeforelproceedinglwithlthelrestructuring.
d. ThelFinallPackagelcirculatedlbylthellargestllenderlshouldlbelputlupltolthelcompetentlaut
hority,lafterltheljointlmeeting,lforlsanctionloflthelrestructuringlpackage.

LSCENARIOL4

LWHENLALBANKLISLNEITHERLTHELLARGESTLNORLSECONDLLARGESTL

LENDER?

a. ThelbanklshouldlexamineltheleligibilityloflthelreferencelforlrestructuringlunderlDRMlf
orlMSMEs.lThelbanklshould,limmediatelylthereafter,lsendlonelcopyleachltolitslRegiona
llOfficel&lthelsanctioninglauthority,lwherelnecessary.l
b. ThelstandlonlthelrestructuringlproposallshouldlbelcrystallizedlbeforelthelJointlmeeting.l
c. ThelFinallPackagelcirculatedlbylthellargestllenderlshouldlbelputlupltolthelcompetentlaut
horitylforlsanctionloflthelrestructuringlpackagelandlimplementedlwithinlthelprescribedlt
imelframe.

46
5. GUIDELINESLONLRESTRUCTURINGLOFLADVANCESLONL
AGRICULTURELDURINGLALNATURALLCALAMITY

5.1LINTRODUCTION
Periodicallbutlfrequentloccurrencesloflnaturallcalamitiesltakelalheavyltollloflhumanllifel
andlcauselwidelspreadldamageltoleconomiclpursuitsloflhumanlbeingslinlonelarealorlthel
otherloflourlcountry.lTheldevastationlcausedlbylsuchlnaturallcalamitieslcallslforlmassiv
elrehabilitationleffortslbylalllagencies.lThelCentral,lStatelandllocallauthoritiesldrawlpro
grammeslforleconomiclrehabilitationloflthelaffectedlpeople.lTheldevelopmentallrolelass
ignedltolthelcommerciallbankslandlco-
operativelbanks,lwarrantsltheirlactivelsupportlinlrevivallofltheleconomiclactivities.

Thelbankslcontributionlinlprovidinglrelieflrelatesltolreschedulingloflexistinglloanslandls
anctioningloflfreshlloanslaslperlthelemerginglrequirementsloflthelborrowers.lBankslnee
dltolhavelsomelInstitutionallframeworklinlplaceltoldeallwithlthelsituationlandltheylmayl
alsollikeltoltakelsomelotherlfacilitatinglmeasuresllikelreducing/waivingltheirlpenallchar
ges,letc.lThelpreciseldetailslinlregardltolthelprovisionloflcreditlassistancelbylthelcommer
ciallbankslwillldependlonlthelrequirementsloflthelsituation,ltheirlownloperationallcapabi
litieslandlthelactuallneedsloflthelborrowers.

5.2LTYPESLOFLNATURALLCALAMITIES

InltermsloflNationallDisasterlManagementlFramework,ltherelareltwolfundslconstitutedl
viz.lNationallDisasterlResponselFundlandlStatelDisasterlResponselFundlforlprovidinglr
elieflinlthelaffectedlareas.lThislframeworklcurrentlylrecognizesl12ltypesloflnaturallcala
mities.lTheylare:

 Cyclone
 Drought
 Earthquake

47
  Fire
 Flood
 Tsunami
 Hailstorm
 Landslide
 Avalanche
 Cloudburst
 Pestlattack
 ColdlWave/frost

Oflthel12lcalamities,lforl4lcalamitiesli.e.ldrought,lhailstorms,lpestlattacklandlcoldlwave
/frost,lthelMinistryloflAgriculturelislthelnodallministrylwhilelforlremainingl8lcalamitie
slMinistryloflHomelAffairslislrequiredltolmakelappropriatelarrangements.lAlslewloflm
easureslforlrelieflarelundertakenlbylthelSovereignl(Central/StatelGovernment)ltolprovi
delreliefltolthelaffectedlpersonslwhichlinclude,linterlalia,lprovisionlforlthelinputlsubsidi
eslandlfinanciallassistanceltolmarginal,lsmalllandlotherlfarmers.

5.3LINSTITUTIONALLFRAMEWORK

ESTABLISHINGLPOLICY/PROCEDURESLFORLDEALINGLWIT
HL NATURALLCALAMITIES

Sincelthelarealandltimelofloccurrencelandlintensityloflnaturallcalamitieslcannotlbel
anticipated,litlislimperativelthatlthelbankslhavelalblueprintloflactionlinlsuchl
EventualitiesldulylapprovedlbylthelBoardloflDirectorslsolthatlthelrequiredlrelieflandl
assistancelislprovidedlwithlutmostlspeedlandlwithoutlanyllosslofltime.lThislpre-
lsupposeslthatlalllthelbranchesloflcommerciallbankslandltheirlRegionallandlZonallOf
ficeslwilllhavelalsetloflstandinglinstructionslspellingloutlthelactionlthatlthelbranchesl
willlhaveltolinitiatelinlthelcalamitylaffectedlareaslimmediatelylafterlthelrequisiteldecl
arationlbyltheldistrict/lstatelauthorities.lItlislnecessarylthatltheselinstructionslshouldla

48
lsolbelavailablelwithlthelStatelGovernmentlauthoritieslandlalllthelDistrictlCollectorsl
solthatlalllconcernedlarelclearlaboutlthelactionlthatlwouldlbeltakenlbylthelbanks’lbra
ncheslinlthelaffectedlareas.

DISCRETIONARYLPOWERSLTOLDIVISIONALL/LZONALLMAN
AGERLOFLBANKS

Divisional/ZonallManagersloflcommerciallbankslshouldlbelvestedlwithlcertainldiscreti
onarylpowerslsolthatltheyldolnotlhaveltolseeklfreshlapprovalslfromltheirlCentrallOffices
ltolthellineloflactionlagreedltolbylthelDistrict/lStatelLevellBankers’lCommittees.l

MEETINGSLOFLSTATELLEVELLBANKERS’LCOMMITTEE/DIS
TRICTL CONSULTATIVELCOMMITTEE

InltheleventloflthelcalamitylcoveringlentirelState/llargerlpartloflalState,lthelconvenerloflt
helStatelLevellBankers’lCommitteelwilllconvenelalmeetinglimmediatelylafterltheloccur
renceloflnaturallcalamityltolevolvelalcoordinatedlactionlplanlforlimplementationloflthelr
elieflprogrammelinlcollaborationlwithlthelStatelGovernmentlauthorities.lHowever,linlc
aselthelcalamitylhaslaffectedlonlylalsmalllpartloflthelState/fewldistricts,lthelconvenerslo
flthelDistrictlConsultativelCommitteesloflthelaffectedldistrictslshouldlconvenelalmeetin
glimmediately.lInltheselspeciallSLBC/DCClmeetings,lthelpositionlinlthelaffectedlareasl
shouldlbelassessedltolensurelspeedylformulationlandlimplementationloflsuitablelreliefl
measureslbylbanks.
DECLARATIONLOFLNATURALLCALAMITY

ItlislrecognisedlthatldeclarationloflnaturallcalamitieslislinltheldomainloflthelSovereignl(
Central/StatelGovernments).lThelinputslreceivedlfromlthelStatelGovernmentslreveallth
atltherelarelnoluniformlprocedureslbeinglfollowedlforldeclarationloflnaturallcalamitylan

49
dlissuelofldeclarations/certificates.lTheseldeclarations/certificateslarelcalledlbyldifferen
tlnameslsuchlaslAnnewari,lPaisewari,lGirdawari,letc.linldifferentlstates.lNevertheless,lt
helcommonlthreadltolextendlrelieflmeasureslislthatlthelcropllosslassessedlshouldlbel50
%lorlmore.l

DISTINCTIONLBETWEENLDROUGHTLANDLOTHERLCALA
MITIES

Solfarlasldroughtlislconcerned,lalcoupleloflStateslarelfollowingltheladvancedlmethodolo
gylbasedlonltheldataloflrainfall,lcroplarealsown,lvegetationlindex,lmoistureladequacylin
dexlalonglwithlotherlparameterslaslsuggestedlinlthel‘ManuallforlDroughtlManagement’
lreleasedlbylthelMinistryloflAgriculture.lInlthelcircumstances,litlislconsideredlappropria

teltolmakeldistinctionlbetweenl(i)lDroughtl(whichlislgenerallylalslowlylevolvinglcalami
tylandlcanlaggravatelorlreverselaslperlthelrainfalllduringlthelperiod;landl(ii)lOtherlCala
mitieslwhichlarelphysiologicallyldifferentlfromlDroughtlandlareloflalsuddenlnature.

Drought:l‘ManuallforlDroughtlManagement’lcommendslcertainlguidelineslforlthelStat
elGovernmentsl(whilelmakinglitlclearlthatltheselguidelineslarelnotlmandatory)lonlthelad
optionloflscientificltechnologylandlvariouslparameters/indexes,laslmentionedlabove,ltol
assesslthelsituation,lthelStatelGovernmentslmayleither:

a. AdoptlthelprocedureslindicatedlinlthelManuallforlDroughtlManagementlandlbas
edlonlthelvariouslparameters/indexeslindicatedltherein,ldecidelonltheldeclaratio
nlofldrought.lSuchldeclarationslshouldlelaboratelylindicateltheldata/proceduresl
whichlhavelbeenlreliedlupon/followedlbylthelStatelgovernmentlandlthelextentlof
lassessedlcroplloss.

b. ConductlCroplCuttinglExperimentslaslprescribedlinlthelNationallAgriculturelIn
surancelProgramme,lwhichlisloneloflthelpre-
conditionslforldeclaringlthelcropsleligiblelforlinsurance,landldeclarelthel‘Annew
ari’l(bylwhateverlnamelcalled)lindicatinglthelcrop-
wiselpercentagellosslinlthelcertificateslissued.lInlanylcase,lStatelGovernmentsln

50
 eedltolsubmitldetailedltaluka/block/districtlwiselcropllossldataltolCentrallGover
nmentlifltheylseeklanylfundslforlrelieflwork
5.4LRESTRUCTURING/RESCHEDULINGLOFLEXISTINGLLOANS

Aslthelrepayinglcapacityloflthelpeoplelaffectedlbylnaturallcalamitieslgetslseverelylimpa
iredldueltoltheldamageltoltheleconomiclpursuitslandllosslofleconomiclassets,lrelieflinlre
paymentloflloanslbecomeslnecessarylinlareaslaffectedlbylnaturallcalamitylandlhence,lre
structuringloflthelexistinglloanslwilllbelrequired.

AGRICULTURELLOANS

SHORTLTERMLPRODUCTIONLCREDITL(CROPLLOANS)

Alllshort-
termlloans,lexceptlthoselwhichlareloverduelatltheltimelofloccurrenceloflnaturallcalamity
,lshouldlbeleligiblelforlrestructuring.lThelprincipallamountloflthelshort-
termlloanlaslwelllaslinterestlduelforlrepaymentlinlthelyearlofloccurrenceloflnaturallcala
mitylmaylbelconvertedlintoltermlloan.

Thelrepaymentlperiodloflrestructuredlloanslmaylvaryldependinglonlthelseverityloflcala
mitylandlitslrecurrence,lthelextentlofllosslofleconomiclassetslandldistresslcaused.lGener
ally,lthelrestructuredlperiodlforlrepaymentlmaylbel3ltol5lyears.lHowever,lwherelthelda
magelarisingloutloflthelcalamitylislverylsevere,lbankslmay,latltheirldiscretion,lextendlth
elperiodloflrepaymentlranginglupltol7lyearslandlinlextremelcasesloflhardship,lthelrepay
mentlperiodlmaylbelprolongedlupltolalmaximumlperiodlofl10lyearslinlconsultationlwithl
thelTasklForce/lSLBC.

Inlalllcasesloflrestructuring,lmoratoriumlperiodloflatlleastlonelyearlshouldlbelconsidered
.lFurther,lthelbankslshouldlnotlinsistlforladditionallcollaterallsecuritylforlsuchlrestructur
edlloans.

51
AGRICULTURELLOANS-
LLONGLTERML(INVESTMENT)LCREDITL

Thelexistingltermlloanlinstalmentslwilllhaveltolbelrescheduledlkeepinglinlviewlthelrepa
yinglcapacityloflthelborrowerslandlthelnatureloflnaturallcalamitylviz.,

a. NaturallCalamitieslwherelonlylcroplforlthatlyearlisldamagedlandlproductivelass
etslarelnotldamaged.
b. NaturallCalamitieslwherelthelproductivelassetslarelpartiallylorltotallyldamagedl
andlborrowerslarelinlneedloflalnewlloan.

Inlregardltolnaturallcalamitylunderlcategoryl(a)labove,lthelbankslmaylreschedulelthelpa
ymentloflinstalmentlduringlthelyearloflnaturallcalamitylandlextendlthelloanlperiodlbylo
nelyear.lUnderlthislarrangementlthelinstalmentsldefaultedlwilfullylinlearlierlyearslwilll
notlbeleligiblelforlrescheduling.lThelbankslmaylalsolhaveltolpostponelpaymentloflinter
estlbylborrowers.

Inlregardltolcategoryl(b)li.e.lwherelthelborrower’slassetslarelpartially/totallyldamaged,l
thelreschedulinglbylwayloflextensionloflloanlperiodlmaylbeldeterminedlonlthelbasislofl
overalllrepayinglcapacityloflthelborrowerlvis-a-
vislhisltotallliabilityl(oldltermlloan,lrestructuredlcroplloan,liflanylandlthelfreshlcrop/ter
mlloanlbeinglgiven)llesslthelsubsidieslreceivedlfromlthelGovernmentlagencies,lcompe
nsationlavailablelunderlthelinsurancelschemes,letc.lWhileltheltotallrepaymentlperiodlfo
rlthelrestructured/freshltermlloanlwillldifferlonlcase-to-
caselbasis,lgenerallylitlshouldlnotlexceedlalperiodlofl10lyears.

52
5.5LASSETLCLASSIFICATION

Thelassetlclassificationlstatuslofltheselloanslwilllbelaslunder:

a. Thelrestructuredlportionloflthelshortltermlaslwelllasllong-
termlloanslmaylbeltreatedlaslcurrentldueslandlneedlnotlbelclassifiedlaslNPA.lTh
elassetlclassificationlofltheselfreshltermlloanslwouldlthereafterlbelgovernedlbylt
helrevisedltermslandlconditions.lNevertheless,lbankslarelrequiredltolmakelhighe
rlprovisionslforlsuchlrestructuredlstandardladvanceslaslprescribedlbylDepartme
ntloflBankinglRegulationlfromltimeltoltime.
b. Thelassetlclassificationloflthelremaininglamountldue,lwhichlhavelnotlbeenlrestr
uctured,lwilllcontinueltolbelgovernedlbyltheloriginalltermslandlconditions.lCons
equently,ltheldueslfromlthelborrowerlmaylbelclassifiedlbylthellendinglbanklund
erldifferentlassetlclassificationlcategorieslviz.lstandard,lsub-
standard,ldoubtfullandlloss.
c. Additionallfinance,liflany,lmaylbeltreatedlasl“standardlasset”landlitslfuturelasset
lclassificationlwilllbelgovernedlbyltheltermslandlconditionsloflitslsanction.

Thelaccountslthatlarelrestructuredlforlthelsecondltimelorlmorelonlaccountloflnaturallcal
amitieslwouldlretainlthelsamelassetlclassificationlcategorylonlrestructuring.lAccording
ly,lforloncelrestructuredlstandardlasset,lthelsubsequentlrestructuringlnecessitatedlonlac
countloflnaturallcalamitylwouldlnotlbeltreatedlaslsecondlrestructuring,li.e.,lthelstandard
lassetlclassificationlwilllbelallowedltolbelmaintained.lAlllotherlrestructuringlnorms,lho

wever,lwilllapply.

53
 5.6LTERMSLANDLCONDITIONS
GUARANTEE,LSECURITYLANDLMARGIN

Creditlshouldlnotlbeldeniedlforlwantloflpersonallguarantees.lWherelthelbank’slexistingl
securitylhaslbeenlerodedlbecauselofldamagelorldestructionlbylfloods,lassistancelwilllnot
lbeldeniedlmerelylforlwantlofladditionallfreshlsecurity.lThelfreshlloanlmaylbelgrantedle

venliflthelvalueloflsecurityl(existinglaslwelllaslthelassetltolbelacquiredlfromlthelnewlloa
n)lisllesslthanlthelloanlamount.lForlfreshlloans,lalsympatheticlviewlwilllhaveltolbeltaken
.

Wherelthelcroplloanl(whichlhaslbeenlconvertedlintoltermlloan)lwaslearlierlgivenlagains
tlpersonallsecurity/lhypothecationloflcroplandlthelborrowerlislnotlableltolofferlcharge/m
ortgagelofllandlaslsecuritylforlthelconvertedlloan,lhelshouldlnotlbeldeniedlconversionlfa
cilitylmerelylonlthelgroundloflhislinabilityltolfurnishllandlaslsecurity.lWherellandlisltake
nlaslsecurity,linlthelabsencelofloriginalltitlelrecords,lalcertificatelissuedlbylthelRevenuel
Departmentlofficialslmaylbelacceptedlforlfinancinglfarmerslwholhavellostlprooflofltheir
ltitlesli.e.linlthelformlofldeeds,laslalsolthelregistrationlcertificateslissuedltolregisteredlsh

are-croppers.

RATELOFLINTEREST

ThelratesloflinterestlwilllbelinlaccordancelwithltheldirectivesloflthelReservelBank.lWithinlthelareasl
ofltheirldiscretion,lhowever,lbankslarelexpectedltoltakelalsympatheticlviewlofltheldifficultiesloflthel
borrowerslandlextendlalconcessional

54
 ANALYSIS

RESTRUCTURING IN SBI

Trends

Total Amount that was restructured in the past 5 Years

Amount in Crores
4500
4040.3
4000

3500
3086.97
3000

2500 2314.31

2000 Amount in Crores

1500
1023.3
1000
548
500

0
2012-13 2013-14 2014-15 2015-16 2016-17

55
 Numer of Accounts Restructured
160
143
140

120 114

100
86 86
80 Numer of Accounts
Restructured
60 55

40

20

0
2012-13 2013-14 2014-15 2015-16 2016-17

Classification based on the Methodology/Procedure adopted during

Restructuring

1855.7
2016-17 64.37
2020.1

1163.61
2015-16 51.68
1871.68

947.9 Others
2014-15 36.79
1330.5 MSME
CDR
584.84
2013-14 16.19
361.71

284.19
2012-13 38.62
225.23

0 500 1000 1500 2000 2500

Amount Restructured (Amount in Crores)

56
 95
2016-17 16
32

63
2015-16 24
27

38 Others
2014-15 18
30 MSME
CDR
18
2013-14 8
22

23
2012-13 30
33

0 20 40 60 80 100

Number of Accounts Restructured

Analysis and Classification based on the type of Accounts

57
 2
2016-17 7
23

1
2015-16 7
19

2 Doubtful
2014-15 0
28 Sub-Standard
Standard
0
2013-14 0
22

0
2012-13 0
33

0 5 10 15 20 25 30 35

Number of Accounts Restructured under CDR Mechanism (Account Types)

0
2016-17 3
13

2
2015-16 4
18

1 Doubtful
2014-15 0
17 Sub-Standard
Standard
0
2013-14 0
8

0
2012-13 2
28

0 5 10 15 20 25 30

Number of Accounts Restructured under MSE Mechanism (Account types)

58
 101.37
2016-17 174.16
1744.65

41.77
2015-16 280.1
549.81

36.68 Doubtful
2014-15 0
1294.86 Sub-Standard
Standard
0
2013-14 0
361.71

0
2012-13 0
225.23

0 500 1000 1500 2000

Total Amount Restructured Under CDR Mechanism (Amount in Crores)

59
 0.01
2016-17 0.28
64.08

0.06
2015-16 0.84
50.78

0.16 Doubtful
2014-15 0
35.63 Sub-Standard
Standard
0
2013-14 0
16.19

0
2012-13 3.86
34.76

0 10 20 30 40 50 60 70

60
Total Amount Restructured under MSE Mechanism (Amount in Crores)

0.97
2016-17 1.64
1953.15

16.58
2015-16 136.68
1010.25

80.62 Doubtful
2014-15 36.31
821.05 Sub-Standard
Standard
26.25
2013-14 7.31
551.28

0
2012-13 0
284.19

0 500 1000 1500 2000 2500

Other Methods (Amount in Crores)

Analysis of Provisions

2016-17 188.33 3.86 116.75

2015-16 165.37 0.43 47.81

CDR
2014-15 210.84 0.5132.24
MSME
Other
2013-14 50.09 0.11 22.24

2012-13 16.2 1.16 1.61

0% 20% 40% 60% 80% 100%

Provision Amount set aside for restructuring (Amount in Crores)

61
 FINDINGSLANDLSUGGESTIONS

Observations

Inlthellastl5lyearslthelnumberloflaccountslthatlbankslwerelforcedltolrestructurelhaslbeenlincreasingl
atlanlalarminglrate.lBylanalyzingltheldatalaslwelllaslgoinglthroughlthelcaselstudies,lthelimportantlre
asonslforltheltrendlarelmentionedlbelow.

A.lSlowdownlinlEconomy

Alcommonlreasonlforlreferenceltolrestructuringlmentionedlbylalllthelborrowerslislgloballaslwelllasl
Indianlslowdown.lSlowdownlinltheleconomylcertainlylaffectslthelcapacityloflthelborrowersltolrepa
ylaslitlgenerallylslowsldownlthelcashlflowslandladverselylaffectslprofitability,lleveragelandlinterest
lcoveragelratio.lThislphenomenonlhaslbeenlobservedlinlthelIndianlcontextlalso.

B.lAdverselBusinesslEnvironment

Apartlfromlslowdownlinltheleconomyladverselbusinesslenvironmentlhaslalsolledlmanylcompaniesl
tolRestructuring.lTherelhaslbeenlanlinlordinateldelaylinlexecutionloflContractslbeyondlthelcontrollo
flthelCompaniesldueltoldelayslbylGovernmentlinllandlacquisitionl/lbillinglacceptance,lnon-
fulfilmentlofltermslbylJVlpartnersletc.l

C.lRelatedlPartylIssues

Itlhaslbeenlobservedlthatlborrowerslhavelcreatedlalchainloflassociatelandlsubsidiaries.lThelsituatio
nlhaslreachedlalarmingllevels.lItlhaslalsolbeenlobservedlthatlinlmanylcasesladjustedlnetlworthlhaslt
urnedlnegativelimplyinglthatlthelinvestmentslinlassociateslandlsubsidiarieslarelmuchlhigherlthanlth
elnetlworth.lItlislobservedlinlalmostlalllthelcaseslthatlthelreturnlonlthelinvestmentlmadelinlassociate
slandlsubsidiarieslislnillorltoolmeagrelVislalVislthelinvestments.l

62
D.lImprudentlAccountingl&lEthicsloflProfessionals

Companieslarelresortingltolimprudentlaccountingltoldelayltheldeclarationloflloss.lTheltrickslplayed
lbylcompanieslincludeladvancinglthelrevenuelorlpostponinglthelexpanses.lFirstlyearlthelexpanseslw

illlbelpostponedltolcontinuelalgoodlrelationshiplwithllenderslandlotherlstakeholderslandlnextlyearlt
helpreviouslyearlaslwelllaslcurrentlyearlexpenseslarelbookedlandlsuddenlylthelcompanylfaceslhugel
losslputtinglthelbankerslunderlpressureltolrestructure.

E.lFinanciallMismanagement

OneloflthelmostlvisiblelreasonslthatlhavelledlcorporateltolCDRlislpoorlplanning.lThislislreflectedlth
roughlvariouslrouteslviz.lmid-
streamlchangelinlbusinesslstrategyl/lOverlAmbition/Lackloflcriticalltielupsl/Changeslinltheloriginal
lprojectletc.

63
Recommendations

BasedlonlthelreferralsltolCDRlcell,litlhaslbeenlfoundloutlthatlmorelthanl40%lofltheltotallaggregateld
ebtlislfromlsixlsectorslIronlandlsteel,lInfrastructure,lEngineeringl,lEPC,lConstructionlandltext
ile.lThereforelthelbanklhasltolbelverylcarefullwhenldealinglwithltheselsectors.
IndustrylwiselclassificationlOflCDRlcasesl(UpltolMarchl2017)
Sr.lNo Industry No.loflcase AggregatelDebtl(Rs.lCrore Debtlinl
l s s) %
1 Ironl&lSteel 50 53580 21.24
2 Infrastructure 19 42824 16.98
3 Engineering 11 25314 10.04
4 EPC 5 23522 9.33
5 Construction 11 18644 7.39
6 Textiles 31 14573 5.78
7 ShiplBreaking/ShiplBuilding 3 11449 4.54
8 Pharmaceuticals 11 8782 3.48
9 Telecom 6 7727 3.06
10 Power 12 7472 2.96
11 NBFC 3 6252 2.48
12 Petrochemicals 1 4703 1.86
13 Manufacture 5 4463 1.77
14 Sugar 13 3614 1.43
15 Cement 7 2894 1.15
16 AutolAncillary 3 2605 1.03
17 CokelandlCoal 2 2372 0.94
18 Chemicals 3 2369 0.94
19 Storagelmedia 1 2054 0.81
20 Computers 2 1486 0.59
21 Paperlpackaging 8 937 0.37
22 Fertilizers 3 920 0.36
23 Hospitality 3 661 0.26
24 Cables 3 579 0.23
25 AutolComponents 2 502 0.20

64
26 Glass 1 404 0.16
27 FoodlandlFood 2 377 0.15
28 Service 1 367 0.15
29 Otherl(Jewelers,lLiquor,ledibleloillet 1 152 0.06
c.)
30 Metalsl(Non-lferrouslMetals) 1 134 0.05
31 Processing 1 133 0.05
32 Rubber 1 113 0.04
33 Dairy 1 97 0.04
34 Education 1 60 0.02
35 CeramiclTiles 1 41 0.02
36 Hospitalslandlhealthcare 1 33 0.01
37 Plastic 1 26 0.01

Total 231 252235 100.00

I. UseloflforensiclAudit

ForensiclAuditlhasltolbelconductedltolidentifylthelintentloflkeyldecision-
makers,lorlenhancinglthelscopeloflregulationslaroundl“willfulldefaulters”.lMorelrecently,litl
islallowinglbanksltoltakelequitylcontrollforlcompanieslthatlfailltolrepay.lThelforensiclauditls
houldlbelverylthoroughlandlalsolthelreallintentloflthelborrower.l

II. Developinglinternallskilllsetlforlcreditlassessment

InsteadloflsomelotherlentitylpreparinglTEVlstudy,lbanklwouldlbelinlalbetterlpositionliflthels
tudylisldonelinternally.l

III. ChangelinlthelFormatloflTEVlStudy

ThelTEVlstudylhasltolbelmorelspecific,lalfewladditionslwouldlbelmorelhelpfulltolthelbank.lI
tlshouldlpositivelylcoverlthelfollowinglaspects:

65
 (i)lWhatlarelthelefficiencylparametersloflsimilarlunitslinlthelsimilarlarealwithlthelsimilarlsiz
e?lWhatlarelstrengthsloflotherlunitlthatltheylarelsurvivinglandlunitlunderlCDRlislfacinglpro
blem?lReportlmustlspecificallylcommentlonlthelfactorslthatlaccountlforlthisldifference.

(ii)Whatlarelthelstepslthatlarelrequiredltoladdressltheselfactors?
ThelCDRlpackagelmustlspecificallyladdressltheselissues.

IV. ClosureloflAlllAccountslOutsidelConsortiuml/lMBA

lClosureloflalllaccountsloutsidelconsortiuml/lMBAlbankslmustlbelthelPre-

conditionlforlimplementinglthelCDR.lNolconcessionl/ladditionallfacilitieslshouldlbelextend
edlunlesslalllaccountsloutsidelconsortiuml/lMBAlbankslhavelbeenlclosed.

Conclusion

Whenlthelborrowerlfaceslfinanciallstresslandlcannotlrepaylloans,litlaskslforlrelaxationlofloriginallte
rmslandlconditions.lBankslthenleaselcertainltermsllikelreductionloflinterestlrates,lmoratoriumlonlint
erestlrepaymentlandlsolon.lInlbankinglparlance,litlislcalledlrestructuring.lWithltheleconomylbeingl
moreldynamiclandlverylreactivelnowlthanlneverlbefore,litlhaslbecomeldifficultltoljudgelthelfuturelo
utlook,lwithlthislbeinglsaidlitlislobliviouslthatlorganizationslarelunableltolcomprehendlthelfuturelco
rrectlylandlarelbeingloverlyloptimistic,lbecauseloflwhichlmanyloflthemlarelfacinglfinancialluncerta
intylfrequently.lItlislimpossiblelevenlforlbanksltolknowlforlsurelifltherelwouldlbelaldefault;lrestruct
uringlwouldlatlleastlallowlbanksltolrecoverlsomelamountlandlalsolgiveslthelborrowerlalsecondlchan
ce.

Inlthelbroaderlsenselrestructuringlmechanismlremainslaslthellastlresort,lmanyllivelihoodslwilllbelsa
vedliflalbanklapproveslrestructuringlpackage.lAlsolitlhaslbeenlobservedlthatlthelbelowlmentionedlf
actorslarelresponsiblelforlthelborrowers/Corporateslreferringltolthelrestructuringlprocess.l

 ImprudentlAccountingl&lEthicsloflProfessionals.
 LargelPoolloflLendersl/lLackloflCoordinationlamonglthelLenders.
 FinanciallMismanagement.

66
References
Websites

www.rbi.org.in

www.sbhyd.com

www.ibef.org

www.cdrindia.org

SpecificlURL’s

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=9908

https://rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9870

Books

FinanciallMarkets,lInstitutionslandlFinanciallServiceslbylCliffordlGomez

BankinglTheory,llawlandlpracticel(24thlEdition)lbylE.lGordonl&lK.lNatarajan

Mgmt.loflBankinglandlFinanciallServicesl(2ndlEdition)lbylPadmalathalSureshl&lJustinlPaul

Newslarticles

http://economictimes.indiatimes.com/news/economy/policy/is-the-new-rbi-debt-recast-plan-a-
win-win-solution/articleshow/52748388.cms

http://www.livemint.com/Industry/CyMYbcOkX7vRW9bZU0mFqJ/RBI-offers-relief-to-banks-
on-bad-loans.html

http://indianexpress.com/article/business/banking-and-finance/rbi-unveils-new-scheme-to-tackle-
bad-loans-of-big-firms-2851186/

http://www.business-standard.com/article/finance/rbi-s-new-debt-restructuring-scheme-may-not-be-a-
game-changer-116061401120_1.html

67
Annexure-1

ASSETLCLASSIFICATIONLANDLPROVISIONING

ASSETlCLASSIFICATION

NONLPERFORMINGLASSET

Anlasset,lincludinglalleasedlasset,lbecomeslnonperforminglwhenlitlceasesltolgeneratelincomelforlth
elbank.

Itlislalloanlorlanladvancelwhere
 Interestlorlinstalmentsloflprinciplelremainloverduelforlalperiodloflmorelthanl90dayslinlresp
ectloflaltermlloan.
 Thelbilllremainsloverduelforlalperiodloflmorelthanl90ldayslinlthelcaseloflbillslpurchasedland
ldiscounted.

 Thelinstalmentloflprinciplelorlinterestlthereonlremainsloverduelforl2lcroplseasonslforlshortl
durationlcrops.
 Thelinstalmentloflprinciplelorlinterestlremainsloverduelforlonelcroplseasonlforllonglduratio
nlcrops.

STANDARDLACCOUNT

AlStandardlaccountlislthelonelwhereltherelislnoldiscriminancylinlpayments.lInllayman’sltermslitlislj
ustlthelnormallaccountlwhereltherelwerelnollatelpaymentslorlarrears.lIflthelborrowerlregularlylpaysl
hisldueslregularlylandlonltime;lbanklwilllcalllsuchlaccountlasl“StandardlAccount”.

SUBLSTANDARDLACCOUNT

WithleffectlfromlMarchl31,l2005,lalsubstandardlaccountlwouldlbelone,lwhichlhaslremainedlNPAlf
orlalperiodllesslthanlorlequalltol12lmonths.lSuchlanlassetlwilllhavelwellldefinedlcreditlweaknessltha
tljeopardizeslthelliquidationlofltheldebtlandlislcharacterizedlbyltheldistinctlpossibilitylthatlthelbanks
lwilllsustainlsomelloss,lifldeficiencieslarelnotlcorrected.

68
DOUBTFULLACCOUNTL

WithleffectlfromlMarchl31,l2005,lanlassetlwouldlbelclassifiedlasldoubtfulliflitlhaslremainedlinlthels
ubstandardlcategorylforlalperiodlofl12lmonths.lAlloanlclassifiedlasldoubtfullhaslalllthelweaknessesl
inherentlinlassetslthatlwerelclassifiedlaslsub-
standard,lwithltheladdedlcharacteristiclthatlthelweaknesseslmakelcollectionlorlliquidationlinlfull,lo
nlthelbasisloflcurrentlylknownlfacts,lconditionslandlvalueslhighlylquestionablelandlimprobable.l

LOSSLACCOUNT

Allosslassetlislonelwherellosslhaslbeenlidentifiedlbylthelbanklorlinternallorlexternallauditorslorlthel
RBIlinspectionlbutlthelamountlhaslnotlbeenlwrittenlofflwholly.lInlotherlwords,lsuchlanlassetlislcons
ideredluncollectiblelandloflsuchllittlelvaluelthatlitslcontinuancelaslalbankablelassetlislnotlwarrantedl
althoughltherelmaylbelsome.

69
PROVISIONLONLRESTRUCTUREDLADVANCESL(REGULARLCASES)

TypeloflAccount Provisionl(%)

Standardl 5

Sublstandard 15

Doubtful

-Upltol1lyear 25

-1lyearltol3lyears 40

-Morelthanl3lyears 100

Loss 100

70
ANNEXUREL2

RATINGLSCALES

Borrower/AccountlRating

S.lN BorrowerlRati RangeloflSco Riskllevel Comfortllevel

o. ng res
1 A1 94-100 VirtuallylZerolrisk Virtuallylabsolutelsa
fety
2 A2 90-93 Lowestlrisk Highestlsafety
3 A3 86-89 Lowerlrisk Higherlsafety
4 A4 81-85 Lowlrisk Highlsafety
5 A5 76-80 Moderatelrisklwithladequatelcu Adequatelsafety
shion
6 A6 70-75 Moderatelrisk Moderatelsafety
7 A7 64-69
8 A8 57-63 Averagelrisk Abovelsafetylthresho
9 A9 50-56 ld
10 A10 45-49 Acceptablelrisk Safetylthreshold
(RiskltolerancelThreshold)
11 A11 40-44 Borderlinelrisk Inadequatelsafety
12 A12 35-39 Highlrisk Lowlsafety
13 A13 30-34 Higherlrisk Lowerlsafety
14 A14 25-29 Substantiallrisk Lowestlsafety
15 A15 <24 Pre-defaultlrisk Nil
(Extremelylvulnerableltoldefaul
t)
16 A16 - Defaultlgrade

71
FACILITYLRATING

S.lNo. FacilitylGrades Rangeloflscores RisklLevel ComfortlLevel

1 B1 94-100 Virtuallylzerolrisk Virtuallylabsolutel
safety
2 B2 87-93 Lowestlrisk Highestlsafety
3 B3 80-86 Lowerlrisk Higherlsafety
4 B4 73-79 Lowlrisk Highlsafety
5 B5 66-72 Moderatelrisklwithladequatelcushion Adequatelsafety
6 B6 59-65 Moderatelrisk Moderatelsafety
7 B7 52-58

8 B8 45-51 Averagelrisk Abovelsafetylthres

9 B9 38-44 hold
10 B10 31-37 Acceptablelrisk Safetylthreshold
(Riskltolerancelthreshold)
11 B11 24-30 Highlrisk Lowlsafety
12 B12 17-23 Higherlrisk Lowerlsafety
13 B13 11-16 Substantiallrisk Lowestlsafety
14 B14 5-10

15 B15 1-4 Highestlrisk Nil

16 B16 0

72
 ANNEXUREL3

MAJORLASSUMPTIONSLCONSIDEREDLINLCASELSTUDYLFORL
RESTRUCTURING:
Capacitylutilization:
Un 2014- 2015- 2016- 2017- 2018- 2019- 2020- 2021- 2022- 2023- 2024-
Description
it 15 16 17 18 19 20 21 22 23 24 25

Months l 6 12 12 12 12 12 12 12 12 12 12

IronlOrelBe
neficationlPl %
ant 36.30 42.90 49.50 52.80 56.10 56.10 56.10 56.10 56.10 56.10 56.10

PelletlPlant % 55.00 65.00 75.00 80.00 85.00 85.00 85.00 85.00 85.00 85.00 85.00

SpongelIron % 40.00 50.00 70.00 75.00 80.00 85.00 85.00 85.00 85.00 85.00 85.00

MSlIngot % 0.00 0.00 75.00 80.00 85.00 85.00 85.00 85.00 85.00 85.00 85.00

RollinglMill % 40.00 40.00 50.00 60.00 70.00 80.00 80.00 80.00 80.00 80.00 80.00

FerrolAlloy % 80.00 80.00 85.00 90.00 95.00 95.00 95.00 95.00 95.00 95.00 95.00

PowerlPlant % 90.00 90.00 90.00 98.00 98.00 98.00 98.00 98.00 98.00 98.00 98.00

73
SellinglPrice

2014- 2015- 2016- 2017- 2018- 2019- 2020- 2021- 2022- 2023- 2024-
Description Unit
15 16 17 18 19 20 21 22 23 24 25

Months 6 12 12 12 12 12 12 12 12 12 12

PelletlPlant

BasiclRate Rs. 6500 6500 7500 7500 7500 7500 7500 7500 7500 7500 7500

ExciselDuty 12.36% 803 803 927 927 927 927 927 927 927 927 927

SellinglPricel Rs. 7303 7303 8427 8427 8427 8427 8427 8427 8427 8427 8427

SpongelIron

BasiclRate Rs. 19000 19000 19500 19500 19500 19500 19500 19500 19500 19500 19500

ExciselDuty 12.36% 2348 2348 2410 2410 2410 2410 2410 2410 2410 2410 2410

SellinglPricel Rs. 21348 21348 21910 21910 21910 21910 21910 21910 21910 21910 21910

MSlIngot

BasiclRate Rs. 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000

ExciselDuty 12.36% 3708 3708 3708 3708 3708 3708 3708 3708 3708 3708 3708

SellinglPricel Rs. 33708 33708 33708 33708 33708 33708 33708 33708 33708 33708 33708

RollinglMill

BasiclRate Rs. 33000 33000 36000 36000 36000 36000 36000 36000 36000 36000 36000

ExciselDuty 12.36% 4079 4079 4450 4450 4450 4450 4450 4450 4450 4450 4450

SellinglPricel Rs. 37079 37079 40450 40450 40450 40450 40450 40450 40450 40450 40450

FerrolAlloy

BasiclRate Rs. 55000 55000 61000 61000 61000 61000 61000 61000 61000 61000 61000

74
75