India cenbank report says sales of energized assets expected to take place earlier

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By Swati Bhat

MUMBAI (Reuters) – Sale of stressed assets by lenders must be done at an earlier stage to enable optimal recovery of asset rebuilding businesses, a committee appointed by the Reserve Bank of India (RBI) said in a report released on Tuesday.

The committee also recommended that if 66% of lenders in value decide to accept an offer made by an asset reconstruction company (ARC), it should be binding on the remaining lenders and it should be implemented within 60 days after approval.

The RBI set up a committee in April to examine the role of CRAs in resolving troubled debt and revise their business model.

“As a measure to induce lenders to sell their financial assets to CRAs at an early stage of a crisis, the committee recommends waiving lenders, on an ongoing basis, to amortize the loss on sale, if any, on a two-year period, the report says.

He also said that in order to streamline the process of selling stressed assets to CRAs, for all accounts over 1 billion rupees ($ 13.4 million) that are in default, the resolution plan The lender should explicitly rate selling or auctioning these accounts to CRAs as one of the options.

All lenders, including banks, must compile a list of non-performing assets they intend to sell to qualifying entities, including CRAs, at the start of each year after entering into a confidentiality agreement with them. , recommends the report.

“Providing additional financing to stressed borrowers is a key requirement for relaunching their businesses,” the report says.

Since ARCs are envisioned as the primary vehicle for resolving stressed assets, the committee also recommended that the minimum net equity requirement for ARCs be doubled to two billion rupees.

“Existing RCAs may be offered a descent path to meet this requirement,” the report said.

The report is open for comments from stakeholders and the central bank will issue the final guidelines after considering all comments received.

($ 1 = 74.6465 Indian rupees)

(Reporting by Swati Bhat; Editing by Emelia Sithole-Matarise)


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