India: Revised Framework By The Reserve Bank Of India For Resolution Of Stressed Assets

Last Updated: 20 February 2018
Article by RP Vats and Yashika Sarvaria

The Reserve Bank of India ("RBI") in exercise of its powers under the Banking Regulation Act, 1949 and the Reserve Bank of India Act, 1934 on 12th February, 2018 brought in a revised framework for resolution of stressed assets to overhaul the existing framework, in the wake of rising non-performing assets (NPAs). The revised framework is in consonance with and gives more power to the Insolvency and Bankruptcy Code, 2016 ("Code") and provides for time bound resolution of stressed assets. It replaces the earlier framework including the framework for Revitalising Distressed Assets, Corporate Debt Restructuring Scheme, Flexible Structuring of Existing Long Term Project Loans, Strategic Debt Restructuring Scheme (SDR), Change in Ownership outside SDR, and Scheme for Sustainable Structuring of Stressed Assets (S4A) and abolishes the institution of Joint Lenders' Forum (JLF).

The key features of the framework are discussed herein below:

  1. Identification - The Lenders are required to identify incipient stress in loan accounts on the occurrence of a default and further classify the stressed assets as special mention accounts (SMA), categorised into SMA-0, SMA-1 and SMA-2, where the principal or interest payment or any other amount wholly or partly overdue between 1-30 days, 30-60 days and 60-90 days respectively. The aforesaid categorisation is the same as it was in the earlier framework.
  2. Reporting - The framework provides provisions for regular reporting to the Central Repository of Information on Large Credits (CRILC), which are as under:

    • Reporting of SMAs- Where an account having an aggregate exposure of INR 50 million and above, is classified as SMA;
    • The CRILIC-Main Report – This report comprises of four sections i.e. Section 1: Exposure to Large Borrowers (Global Operations), Section 2: Reporting of Technically/Prudentially Written-off Accounts (Global Operations), Section 3: Reporting of Balance in Current Account (Global Operations) and Section 4: Reporting of Non cooperative Borrowers (Global Operations).1 This was earlier required to be submitted on a quarterly basis. However, under the revised framework, it has to be submitted on a monthly basis; and
    • Weekly Report - A weekly report regarding all borrower entities in default with aggregate exposure (fund based and non fund based) of INR 50 million and above has to be submitted at the close of business on every Friday or the preceding working day if Friday happens to be a holiday, starting from February 23, 2018.
  3. Applicability - The framework is applicable to all accounts which also include such accounts where any of the predecessor schemes have been invoked but not yet implemented. There are many accounts which are already undergoing restructuring under the old framework, transition to the new framework may create an anomalous situation in certain circumstances. Although the intention is to resolve such accounts promptly and efficiently, it is only with the passing of time that a smooth transition can be ensured.
  4. Resolution - As stated above, the framework emphasises on resolution of the stressed assets. For this purpose, the framework mandates the lenders to have in place a board approved policy for resolution of stressed assets. As soon as there is a default, the lenders (individually or jointly) are required to act in accordance with the said resolution plan in order to cure the default. The resolution plan may provide for any action or plan to resolve the account. It is however pertinent to note that securing 100% approval from lenders for a resolution plan will be difficult or may be impossible in certain cases. Despite the above, by providing a mandatory provision to formulate a resolution plan, the framework attempts to shift the approach from recovery to corporate rescue, which in turn leads to maximisation of value of assets and is thus good for the economy.
  5. Stringent Timelines - The framework provides for stringent timelines for resolution of a large account where the aggregate exposure is INR 20 billion and above, on or after 1st March, 2018 ('reference date'). This also includes accounts which are currently undergoing restructuring under the old framework. The resolution plan is to be implemented within a period of 180 days from the reference date if there is default as on the reference date or the date of first such default if there is default after the reference date, as the case may be.
  6. Conditions for a Resolution Plan to be deemed as "implemented"- There are certain conditions which are required to be fulfilled in order for a resolution plan to be deemed as "implemented":

    1. No default - the borrower entity shall no longer be in default with any of the lenders.
    2. Documentation - where the plan involves restructuring, all related documentation shall be completed by the lenders;
    3. Accounts - the new capital structure and/or changes in the terms of conditions of the existing loans shall be duly reflected in the books of all the lenders and the borrower;
    4. Independent Credit Evaluation - Where the restructuring is in respect of a large account2, there shall be independent credit evaluation (ICE) of the residual debt, by credit rating agencies (CRAs) specifically authorised by the RBI for this purpose. The accounts with aggregate exposure of INR 5 billion and above shall require two such ICEs.
    5. Credit opinion of RP4 - resolution plans which receive a credit opinion of RP43 or better for the residual debt from one or two CRAs, as the case may be, shall be considered for implementation. This requirement is also applicable to restructuring of all large accounts even if the restructuring is carried out before the 'reference date'.
  7. Reference under the Insolvency and Bankruptcy Code - One of the most significant aspects of the framework is that in case the resolution is not implemented, the lender(s) shall compulsorily file an insolvency application under the Code within 15 days from the date of expiry of the timeline stated above. Moreover, where the resolution plan is implemented within the 180-day period, the account should not be in default at any point of time during the 'specified period'4, failing which the lenders shall file an insolvency application, singly or jointly, under the Code within 15 days from the date of such default. This is surely a forward step which is in line with the intent and object of the Code. However, as the Code is still at its infancy stage and the infrastructure is currently developing, it may take some time for the framework to fully achieve its objective.

    Where the aggregate exposure of the lenders is below INR 20 billion and, at or above INR 1 billion, the Reserve Bank is yet to announce, over a two-year period, reference dates for implementing the resolution plan. A Major number of accounts come under this category; however, in the absence of a reference date, nothing can be done with regard to these accounts for the time being and they are left in the lurch.
  8. Review and penalties - The framework subjects the lenders to constant review and imposes penalties in the event lenders fail to meet the prescribed timelines or conceal the status of accounts.
  9. Cases of frauds/wilful defaulters – The framework keeps into account the recent steps taken to prevent wilful defaulters and promoters from taking any undue advantage whilst the company is undergoing resolution, by incorporating a provision that borrowers who have committed frauds/ malfeasance/ wilful default will remain ineligible for restructuring. However, there is an exception in cases where the existing promoters are replaced by new promoters, and the borrower company is totally delinked from such erstwhile promoters/management, lenders may take a view on restructuring such accounts based on their viability, without prejudice to the continuance of criminal action against the erstwhile promoters/management.


The framework is indeed a major step to overhaul the existing system to resolve the stressed assets. However, there are certain steps which may have to be taken to ensure a smooth transition from the old framework to the new framework. The framework requires the lenders to bring into line the treatment of specific accounts across their books i.e. if one bank has treated a particular account as an NPA, other lenders on the same account will have to treat it as an NPA in their books as well, which will invariably lead to an increase in the number of NPAs. Also the Code is at an infancy stage and is currently undergoing a lot of changes with almost every passing day. These issues may delay the process and would have to be constantly monitored and looked into. Banks in India have always had the mindset to recover the debt with no attempts to actually rescue the corporate from liquidation. This framework endeavours to shift this paradigm approach. When the Code was brought into force, not many banks came forward due to the provisioning which banks have to make once decided to proceed under the Code. Consequently RBI had to take steps to ensure that the banks initiate action under the Code. The revised framework mandatorily requires the banks to make resolution plans, which will certainly help India in developing a robust insolvency resolution regime.


1.Guidelines on reporting to Central Repository of Information on Large Credits (CRILIC) dated 22nd May, 2014.

2. Large accounts are accounts where the aggregate exposure of lenders is INR 1 billion and above (Resolution of Stressed Assets – Revised Framework dated 12th February, 2018, Reserve Bank of India).

3. Debt facilities/instruments with this symbol are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such debt facilities/instruments carry moderate credit risk (See Resolution of Stressed Assets – Revised Framework dated 12th February, 2018, Reserve Bank of India).

4. 'Specified period' means the period from the date of implementation of RP up to the date by which at least 20 percent of the outstanding principal debt as per the RP and interest capitalisation sanctioned as part of the restructuring, if any, is repaid.

Provided that the specified period cannot end before one year from the commencement of the first payment of interest or principal (whichever is later) on the credit facility with longest period of moratorium under the terms of RP (See Resolution of Stressed Assets – Revised Framework dated 12th February, 2018, Reserve Bank of India).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions