Restructuring and Rescheduling

8/13/2019 Restructuring and Rescheduling

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RESTRUCTURING / RESCHEDULING

Rescheduling of repayment programme becomes imperative, where income generation isadversely affected. On ascertaining the genuine problems of the borrowers, such accountsshould be restructured/rescheduled by giving suitable restructuring package/repaymentschedule.

Industrial units :

The norms relating to restructuring of standard and sub-standard assets were reviewed inMarch !!". #n the conte$t of restructuring of the accounts, the following stages at whichthe restructuring / rescheduling / renegotiation of the terms of loan agreement could takeplace can be identified %

a& before commencement of commercial production %

b& after commencement of commercial production but before the asset has beenclassified as sub standard.

c& after commencement of commercial production and after the asset has beenclassified as sub standard.

#n each of the foregoing three stages, the rescheduling, etc., of principal and / or ofinterest could take place with or without sacrifice as part of the restructuring packageevolved.

Treatment of Restructured Standard Accounts.

a& ' rescheduling of the installments of principal alone, at any of the aforesaid firsttwo stages would not cause a standard asset to be classified in the sub standardcategory provided the loan / credit facility is fully secured.

b& ' rescheduling of interest element at any of the foregoing first two stages wouldnot cause an asset to be downgraded to sub standard category sub(ect to thecondition that the amount of sacrifice if any in the element of interest, measured inpresent value terms, is either written off or provision is made to the e$tent of the

sacrifice involved.

)or this purpose, present value terms and sacrifice if any will be arrived as under.

i& *etermine what would be the amount of future interest for the balance periodof the loan if interest had been charged at e$isting +R / +R as on the dateof restructuring& original risk factor applicable to the borrower at the time ofinitial sanction of the loan.

ii& *iscount the interest cash flows at i& above at +R / +R as on the date ofrestructuring& original risk factor, to arrive at present value of future interestcash flows.

iii& *etermine future interest on the balance period of the loan on the basis of the

interest rate as restructured.iv& *iscount the cash flows at iii& above at +R/+R as on the date of

restructuring& original risk factor to arrive at the present value of futureinterest cash flows.

v& The sacrifice / provisioning would be ii& minus iv&

c& #n case there is a sacrifice involved in the amount of interest in present value terms,as at b& above, the amount of sacrifice should either be written off or provisionmade to the e$tent of the sacrifice involved.


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Treatment of Restructured Su! Standard Accounts

a& ' rescheduling of the instalments of principal alone, would render a sub-standardasset eligible to be continued in the sub - standard category for the specified period.i.e. a period of one year after the date when first payment of interest or ofprincipal, whichever is earlier, falls due, sub(ect to satisfactory performance duringthe period& provided the loan / credit facility is fully secured.

b& ' rescheduling of interest element would render a sub-standard asset eligible to becontinued to be classified in sub standard category for the specified period i.e. aperiod of one year after the date when first payment of interest or of principal,whichever is earlier, falls due, sub(ect to satisfactory performance during theperiod& sub(ect to condition that the amount of sacrifice if any, in the element ofinterest, measured in present value terms, is either written off or provision is madeto the e$tent of the sacrifice involved. )or this purpose, present value terms andsacrifice if any will be determined as per details mentioned above.

c& #n case there is a sacrifice involved in the amount of interest in present value termsas at b& above, the amount of sacrifice should either be written off or provisionmade to the e$tent of the sacrifice involved. 0ven in cases where the sacrifice is by

way of write off of the past interest dues, the asset should continue to be treated assub-standard.

U"#radation of restructured accounts

The sub-standard accounts which have been sub(ected to restucturing etc., whether inrespect of principal instalment or interest amount by whatever modality would be eligibleto be upgraded to the standard category only after the specified period i.e. a period of oneyear after the date when first payment of interest or of principal, whichever is earlier,falls due, sub(ect to satisfactory performance during the period. The amount of provisionmade earlier, net of the amount provided for the sacrifice in the interest amount in presentvalue terms as aforesaid could also be reversed after the one year period.

*uring this one year period, the sub-standard asset will not deteriorate in its classification

if satisfactory performance of the account is demonstrated during the period. #n case,however, the satisfactory performance during the one year period is not evidenced, theasset classification of the restructured account would be governed as per the applicableprudential norms with reference to the pre-restructuring payment schedule.

General

a& These instructions would be applicable to all type of credit facilities includingworking capital limits, e$tended to industrial units, provided they are fully coveredby tangible securities.

b& 's trading involves only buying and selling of commodities and problemsassociated with manufacturing units such as bottleneck in commercial production,time 1 cost escalation etc. are not applicable to them, these guidelines should not

be applied to restructuring / rescheduling of credit facilities e$tended to traders.c& 2hile assessing the e$tent of security cover available to the credit facilities3

which are being restructured / rescheduled collateral security would also bereckoned provided such collateral is a tangible security properly charged to thebank and is not in the intangible form like guarantee etc. of the promoter / others.

d& The asset classification status as on the date of approval of the restructuredpackage by the competent authority would be relevant to decide the assetclassification status of the account after restructuring / rescheduling / renegotiation.


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e& #t is not e$pected to repeatedly restructure / reschedule the credit facility unlessthere are very strong and valid reasons which warrant such repeated restructuring /rescheduling #t will not be appropriate to e$tend the special asset classificationstatus as provided for in discussion earlier in a/cs , where there are repeatedrestructuring / rescheduling.

f& 2hile the bank may consider other accounts also for restructuring such accountswould have to 4ualify the basic test of viability before it is considered forrestructuring. 5owever, these accounts would not 4ualify for the special assetclassification status available to restructured 6standard7 and restructured6substandard7 accounts as per discussions earlier. The accounts which do not4ualify for restructuring in terms of paras above will be sub(ected to the followingnorms.

i& These restructured / rescheduled accounts would continue to age and migrateto the ne$t asset classification status in the normal course. #t should beensured that the amount of sacrifice, if any, in the element of interest is eitherwritten off or provided for. The sacrifice will be determined as per detailsmentioned earlier.

ii& These restructured / rescheduled accounts would be eligible to be upgraded tothe standard category only after a period of one year after the date when firstpayment of interest or of principal, whichever earlier, falls due under therevised terms.

8ince the principles underlying the restructuring of all advances are identical R# hasharmonised the prudential norms across all categories of debt restructuring mechanisms,9other than those restructured on account of natural calamities, which will continue to becovered by the e$tant guidelines issued by R# R+:*&;.

T$e re%ised "rudential #uidelines are enumerated elo&:

a& Revised prudential norms are applicable to all restructurings including those under:orporate *ebt Restructuring 9:*R; Mechanism.

b& #t may also be noted that henceforth, the :*R Mechanism will also be available tothe corporates engaged in non-industrial activities, if they are otherwise eligible forrestructuring as per the criteria laid down for this purpose.

T$e re%ised "rudential #uidelines are di%ided into follo&in# ma'or cate#ories:

8r. +articulars Refer

"


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advances be reported to :entral Office in the format enclosed 'nne$ure-#B& tillthe relevant format in credit set is revised.

ii& ' few illustrative cases on the asset classification of restructured accounts aregiven in 'nne$. C###

iii& The issue regarding convertibility into e4uity& option as a part of restructuring

e$ercise whereby the bank / financial institutions shall have the right to convert aportion of the restructured amount into e4uity shall be decided, keeping in viewthe statutory re4uirement under 8ection "D of the anking Regulation 'ct, "DADand relevant 80# regulations.

iv& 's permitted by R# ac4uisition of e4uity shares / convertible bonds / convertibledebentures in companies by way of conversion of debt / overdue interest can bedone without seeking prior approval from R#, even if by such ac4uisition theprudential capital market e$posure limit prescribed by the R# is breached.5owever, this will be sub(ect to reporting of such holdings to R#, *epartment ofanking 8upervision *8&, every month along with the regular *8 Return on'sset Euality. =onetheless, the provisions of 8ection "D& of the ankingRegulation 'ct, "DAD shall be complied with.

v& 'c4uisition of non-8R securities by way of conversion of debt is e$empted fromthe mandatory rating re4uirement and the prudential limit on investment inunlisted non-8R securities, prescribed by the R#, sub(ect to periodical reportingto the R# in the aforesaid *8 return.

Anne)ure!I

*rudential Guidelines on Restructurin# of Ad%ances.

+, General *rinci"les and *rudential Norms for Restructured Ad%ances.

' restructured account is one where the bank, for economic or legal reasons relating to theborrower7s financial difficulty, grants to the borrower concessions that the bank would nototherwise consider. Restructuring would normally involve modification of terms of the

advances/ securities, which would generally include, among others, alteration of repaymentperiod/ repayable amount/ the amount of instalments/ rate of interest due to reasons other thancompetitive reasons&.

A. Eli#iilit- Criteria for restructurin# of ad%ances-

+. 'ccounts classified under 6standard7, 7substandard7 and 6doubtful7 categories only areeligible for restructuring.

. Restructuring / rescheduling / renegotiation cannot be done in borrowal accounts withretrospective effect.

. 2hile a restructuring proposal is under consideration, the usual asset classificationnorms would continue to apply. The process of re-classification of an asset s$ould notsto"merely because restructuring proposal is under consideration. The assetclassification status as on the date of a""ro%al of t$e restructured "ac0a#eby thecompetent authority would be relevant to decide the asset classification status of theaccount after restructuring / rescheduling / renegotiation.

1. Restructuring cannot take place unless alteration / changes in the original loanagreement are made with the formal consent / application of the debtor. 5owever, theprocess of restructuring should be initiated in deserving cases sub(ect to customer


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agreeing to the terms and conditions.

2. =o account will be taken up for restructuring unless the financial viability isestablished and there is a reasonable certainty of repayment from the borrower, as perthe terms of restructuring package. The accounts not considered viable should not berestructured and the recovery measures in respect of such accounts should be initiated.

'ny restructuring done without looking into cash flows of the borrower and assessingthe viability of the pro(ects / activity financed would be treated as an attempt at evergreening a weak credit facility.

3. The borrowers indulging in frauds and malfeasance will continue to remain ineli#ilefor restructuring.

4. #n cases of borrowers classified as wilful defaulters specially in old cases where themanner of classification of a borrower as a wilful defaulter was not transparent andthat the borrower is in a position to rectify the wilful default to our satisfaction, therestructuring of such cases may be done with oard7s approval, while for suchaccounts the restructuring under the :*R Mechanism may be carried out with theapproval of the :ore


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2. All restructured accounts*, which have been classified as non-performing assetsupon restructuring, would be eligible for up-gradation to the standardcategory after observation of satisfactory performance* during thespecified period*.

FRefer 'nne$. ##&

*. #n case, however, satisfactory performance after the specified period is not evidenced,the asset classification of the restructured account would be governed as per theapplicable prudential norms with reference to the "re!restructurin# "a-mentsc$edule.

3. ny additional finance may be treated as standard asset up to a period of one yearafter the first interest + principal payment whichever is earlier falls due underthe approved restructuring pac4age. !owever in the case of accounts wherethe pre-restructuring facilities were classified as sub-standard anddoubtful interest income on the additional finance should be recognisedonlyon cash basis.

5. If the restructured asset does not 'ualify for up-gradation at the end of the above-specified one-year period the additional finance shall be placed in the sameasset classification category as the restructured debt as mentioned under itemno. * above(

,. In case a restructured asset which is a standard asset on restructuring is sub"ectedto restructuring on a subse'uent occasion it should be classified as sub-standard. If the restructured asset is a sub-standard or a doubtful asset and issub"ected to restructuring on a subse'uent occasion its asset classificationwill be rec4oned from the date when it became N) on the first occasion.

6. !owever such advances7 restructured on second or more occasion may be allowedto be upgraded to standard category after one year from the date of first

payment of interest or repayment of principal whichever falls due earlier interms of thecurrent restructuring package subect to satisfactoryperformance.

FFRefer 'nne$. ##&

8. Income Recognition Norms-

Interest income in respect of restructured accounts classified as 9standard assets9 will

be recogni:ed on accrual basis and that in respect of the accounts classified

as 9non-performing assets9 will be recogni:ed on cash basis.

*. +rovisioning norms-

". =ormal +rovisions % 5olding of provision against the restructured advances as

per e$isting provisioning norms shall continue.


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. esides above additional provision for diminution / erosion in the fair value of

restructured advances shall be made.

Reduction in the rate of interest and /or reschedulement of the repayment of

principal amount, as part of the restructuring, will result in diminution/erosion in

the fair value of the advance. 8uch diminution in value is an economic loss forthe bank and will have impact on the bank7s market value of e4uity. #t is,

therefore, necessary to measure such diminution in the fair value of the advance

and make provisions for it by debit to +rofit 1 oss 'ccount. 8uch provision

shall be held in addition to the provisions as per e$isting provisioning norms as

indicated above, and in an account distinct from that for normal provisions.

a& The erosion in fair value of advance shall be calculated as under%

)or T, 2:T 1 )#T&.

i. :alculate the present value of future cash flows principal and interest& as per

the e$isting repayment terms of sanction as on the date of restructuring based onthe e$isting applicable rate of interest as per R+ +R term premium

credit risk premium applicable to the borrower& / as per e$isting sanction terms

which ever applicable&. Table for +resent Balue is enclosed for reference-see

'nne$ure B&.

ii. :alculate the present value of future cash flows principal 1 interest& based on

rate of interest applicable as per restructuring package.

#ii #n both the cases for computing the present value, the discount rate shall be

e4uivalent to the rate of interest as per the R+ as per e$isting sanction terms

which ever applicable& prevailing on the date of restructuring i.e. as mentioned

under i& above.

iv The tenor will be the maturity of the respective term loan components.

The difference between i& 1 ii& above shall be considered as erosion in fair value and

accordingly charged to +/ account. The accounting entries in this regard shall be

passed at central office level only.

5owever the information on diminution in fair value has to be submitted to :.O. on

half yearly basis as of 8eptember and March every year.

b& )or 2orking :apital )acilities, the calculation is same as that for Term oans.

5owever, for the purpose of principal, the limit or the outstanding in the::/Overdraft account, whichever is higher should be reckoned. The tenor shall

be one year. The term premium in the discount factor shall be as applicable for

one year.


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c& The diminution in the fair value is to be re-computed on each balance sheet date

till satisfactory completion of all repayment obligations and full repayment of

the outstanding in the account, so as to capture the changes in the fair value on

account of changes in +R, term premium and the credit category of the

borrower. :onse4uently, either additional provision for the shortfall will be

made or the amount of e$cess provision held in the distinct account will bereversed. The accounting entry in this regard shall be passed at central office

level only.

d& #t should be ensured that total provision in an account both normal plus

provisions in lieu of erosion in fair value as mentioned above& does not e$ceed

i.e. capped at "!!G of& the total outstanding debt amount.

e& #n the event any security is taken in lieu of the diminution in the fair value of the

advance, it should be valued at Re."/- till maturity of the security. This will

ensure that the effect of charging off the economic sacrifice to the +rofit 1 oss

account is not negated.

f& 8mall / rural branches may find it difficult to ensure computation of diminution

in the fair value of advances e$tended by them. Therefore, as permitted by R#,

it has been decided to adopt the option of notionally computing the amount of

diminution in the fair value and providing therefor, at five percent of the total

e$posure at :entral Office, in respect of all restructured accounts where the total

dues to bank are less than rupees one crore till the financial year ending March

!"". The position would be reviewed thereafter.

, *rudential Norms for con%ersion of "rinci"al into Det/E7uit- instruments:

i& 2hile restructuring the advances it may be necessary to convert a part of theoutstanding principal amount into debt or e4uity instruments such as debentures,

shares etc as part of package. The debt/e4uity instruments so created will be

classified in the same asset classification category in which the restructured

advance has been classified. )urther movement in the asset classification of

these instruments would also be determined based on the subse4uent asset

classification of the restructured advance.

ii& #n the case of restructured accounts classified as 6standard7, the income, if any,

generated by these instruments shall be recognised on accrual basis.

iii& #n the case of restructured accounts classified as non-performing assets, the

income, if any, generated by these instruments shall be recognised only on cash

basis.

iv& These instruments shall be held under H'vailable for 8aleH ')8& and valued as

per usual valuation norms. 04uity classified, as standard asset shall be valued

either at market value, if 4uoted, or at break-up value, if not 4uoted without


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considering the revaluation reserve, if any,& which is to be ascertained from the

company7s latest balance sheet. The break-up value means the private market

value, which can be obtained by selling off the assets of the firm / company. #n

case the latest balance sheet is not available the shares are to be valued at

Re.".!!. 04uity instrument classified as =+' shall be valued at market value, if

4uoted, and in case where e4uity is not 4uoted, it should be valued at Re. ".!!.De"reciation on t$ese instruments s$all not e offset a#ainst t$e

a""reciation in an- ot$er securities $eld under t$e A8S cate#or-.

, *rudential Norms for con%ersion of un"aid interest into funded interest term loan

98ITL, Det or E7uit- instruments:

i& The )#T / debt or e4uity instrument created by conversion of unpaid interest

will be classified in the same asset classification category in which the

restructured advance has been classified. )urther movement in the asset

classification of )#T/ debt or e4uity instruments would also be determined

based on the subse4uent asset classification of the restructured advance.

ii& The income, if any, generated by these instruments shall be recognised on

accrual basis, if these instruments are classified as 6standard7, and on cash basis

in the cases where these have been classified as a non-performing asset.

iii& The unrealised income represented by )#T/*ebt or e4uity instrument should

have a corresponding credit in an account styled as H8undry iabilities 'ccount

#nterest :apitaliIation&H.

iv& #n the case of conversion of unrealised interest income into e4uity, &$ic$ is

7uoted, interest income can e reco#ni;ed after t$e account is u"#raded to

standard cate#or- at mar0et %alue of e7uit- on t$e date of suc$ u"#radation not e)ceedin# t$e amount of interest con%erted into e7uit-.

v& Only on repayment in case of )#T or sale / redemption proceeds of the

debt/e4uity instruments, the amount received will be recogniIed in the +1

'ccount, while simultaneously reducing the balance in the H8undry iabilities

'ccount #nterest :apitalisation&H.

vi& Baluation and provisioning norms would be as per +ara & iv& above. The

depreciation, if any, on valuation may be charged to the 8undry iabilities

#nterest :apitalisation& 'ccount.

In all cases of restructurin# &$ere con%ersion of "rinci"al and/or un"aid interest to

e7uit-/det instruments is "ro"osed "rior references must e made to Central


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1, S"ecial Re#ulator- Treatment for Asset Classification:

:onditions and e$empted categories%

's mentioned under "& above the general principle for asset classification in case of

restructured advances is that the 6standard assets7 should be classified as 6sub-standard

assets7 immediately on restructuring. / & The non-performing assets 88' 1 *'&, upon

restructuring, would continue to have the same asset classification as prior to restructuring

and slip into further lower asset classification categories as per e$tant asset classification

norms with reference to the "re!restructurin# re"a-ment sc$edule.

Ho&e%er su'ect to com"liance of certain conditions all suc$ orro&ers &ill e entitled

to retain t$e asset classification as at t$e time of restructurin# called as 8pecial

Regulatory Treatment& with e)ce"tion of certain specified borrower categories .

The s"ecial treatment forasset classification is not a%ailale for follo&in# cate#oriesof

advances%

i Consumer = "ersonal ad%ances e$cept 5ousing oans to individuals&.

ii 'dvances classified as Ca"ital (ar0et e)"osures.

iii 'dvances classified as Commercial Real Estate E)"osures.

T$us standard cate#or- accounts under ao%e t$ree cate#ories of ad%ances and t$e

accounts &$ic$ do not com"l- &it$ conditions under s"ecial re#ulator- treatment

s$all e classified as su!standard u"on restructurin#.8imilarly the non-performing

assets 88' and *'&, under these categories, upon restructuring, would continue to have the

same asset classification as prior to restructuring and slip into further lower assetclassification categories as per e$tant asset classification norms with reference to the "re!

restructurin# re"a-ment sc$edule.

T$e s"ecial conditions that are to be complied withare as under%

"& The dues of the bank are 6fully securedF7. FRefer 'nne$. ##&

5owever the condition of 6fully secured7 s$all not e a""licale in the following cases%

a& 88# borrowers, where the outstanding is up to Rs.J lakh.

b& #nfrastructure pro(ects, provided the cash flows generated from these pro(ects are

ade4uate for repayment of the advance, an appropriate mechanism to escrow the cashflows are put in place, and also ank has a clear and legal first claim on these cash

flows.

& The unit becomes viable in "! years, if it is engaged in infrastructure activities, and in K

years in the case of other units.


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>& The repayment period of the restructured advance including the moratorium, if any,

does not e$ceed "J years in the case of infrastructure advances and "! years in the case

of other advances. 9T$e ceilin# of +> -ears o%er t$e re"a-ment "eriod of t$e

restructured ad%ances &ould not e a""licale for restructured $ousin# loans

since housing loans are normally granted with much longer repayment period su'ect to

com"liance &it$ all ot$er terms and conditions "rescried in t$is circular,.

A& +romoters@ sacrifice and additional funds brought by them should be a minimum of "JG

of banks7 sacrifice.

J& +ersonal guarantee is offered by the promoter e$cept when the unit is affected by

e$ternal factors pertaining to the economy and industry.

L& The restructuring under consideration is not a ?re"eated restructurin#@?. FRefer

'nne$. ##&

K& T$e restructurin# "ac0a#e is im"lemented &it$in +> da-s from t$e date of

a""ro%al under t$e CDR mec$anism and &it$in > da-s from t$e date of recei"t ofa""lication - t$e ranc$ in non! CDR accounts. 's such branches are advised to

ensure finalisation of the said applications within the prescribed timeframe&.

=on-fulfillment of an- of t$e ao%e conditions shall render the account ineli#ile for

special regulatory treatment for asset classification.

*lease note t$at in e%er- restructurin# "ac0a#e a standard clause of our ri#$t to

accelerate re"a-ment and t$e orro&ersB ri#$t to "re"a- ma- e sti"ulated. Similarl-

our ri#$t of recom"ense s$ould also e sti"ulated.

Anne)ure!II e- Conce"ts

9i, Ad%ances% The term 6'dvances7 will mean all kinds of credit facilities including cash

credit, overdrafts, term loans, bills discounted/purchased, factored receivables, etc. and

investments other than that in the nature of e4uity.

9ii, A#ricultural Acti%ities% 's defined in R+:* circular R+:*. =o. +lan. :. A /

!A.!D.!"/ !!L-!K dated 'pril >!, !!K as modified from time to time.

9iii, 8ull- secured% 2hen the amounts due to a bank present value of principal and interest

receivable as per restructured loan terms& are fully covered by the value of security, duly

charged in its favour in respect of those dues, the bank@s dues are considered to be fully

secured. 2hile assessing the realisable value of security, primary as well as collateral

securities would be reckoned, provided such securities are tangible securities and are notin intangible form like guarantee etc., of the promoter / others. 5owever, for this

purpose the bank guarantees, 8tate


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involve modification of terms of the advances / securities, which would generally

include, among others, alteration of repayment period/ repayable amount/ the amount of

instalments/ rate of interest due to reasons other than competitive reasons&.

9%, Re"eatedl- restructured accounts% 2hen a bank restructures an account a second or

more& times&, the account will be considered as a 6repeatedly restructured account7.5owever, if the second restructuring takes place after the period up to, which the

concessions were e$tended under the terms of the first restructuring, that account shall

not be reckoned as a 6repeatedly restructured account7.

9%i, S(Es:8mall and Medium 0nterprise 8M0& is an undertaking defined in R+:*

circulars R+:*.+=)8. :. =o.L>.!L.!. / !!L-!K dated 'pril A, !!K amended from

time to time.

9%ii, S"ecified *eriod% 8pecified +eriod means a period of one year from the date when the

first payment of interest or installment of principal falls due under the terms of

restructuring package.

9%iii

,

Satisfactor- "erformance% 8atisfactory performance during the specified period means

adherence to the following conditions during that period.

Non!a#ricultural cas$ credit accounts:#n the case of non-agricultural cash credit

accounts, the account should not be out of order any time during the specified period, for

duration of more than D! days. #n addition, there should not be any overdues at the end

of the specified period.

Non!a#ricultural term loan accounts% #n the case of non-agricultural term loan

accounts, no payment should remain overdue for a period of more than D! days. #n

addition there should not be any overdues at the end of the specified period.

All a#ricultural accounts:#n the case of agricultural accounts, at the end of the

specified period the account should be regular.

Anne)ure!IIIAsset Classification of Restructured Accounts under t$e Guidelines

*articulars Case + Case Case Case 1# 'ssumed due date of

payment>".!".!!K >".!".!!K

'ssumed date ofrestructuring

>".!>.!!K >".!>.!!K >".!>.!!K >".!>.!!K

+eriod of delin4uency as

on the date of restructuring

months months " months " months

'sset :lassification ':&before restructuring

@8tandard@ @8tandard@ @*oubtful-less thanone year@

@*oubtful-less thanone year@

*ate of =+' =' =' >".".!J'ssumed&

>".".!J'ssumed&

## Asset classification 9AC, on restructurin#'ssumed status of the Eli#ile for Not eli#ile Eli#ilefor Not eli#ile


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borrower specialregulatorytreatment

for specialregulatorytreatment

specialregulatorytreatment

for specialregulatorytreatment

': after restructuring @8tandard@ *owngradedto@[email protected] >".!>.!Ki.e., on thedate ofrestructuring&

@*oubtful -less thanone year@

@*oubtful -less than oneyear@

'ssumed first paymentdue under the revisedterms

>".".!K >".".!K >".".!K >".".!K

### Asset classification after restructurin#' T$e account "erforms satisfactoril- as "er restructured termsa& ': during the specified

one year period i.e., from

>".".!K to >".".!&

=o changei.e., remains

@8tandard@&

@*oubtful -less than one

year@ w.e.f.>".!>.! i.e.one year afterclassificationas@8ubstandard@&

=o change @*oubtful -one to three

years@ w.e.f.>".".!Ki.e., oneyear afterclassificationas @*oubtfulless than oneyear@&

b&

': after the specified oneyear period

:ontinues in@8tandard@category

?pgraded to@8tandard@category



If performance not satisfactory vis-;-vis restructured termsa& ': during the specified

one year period in casethe unsatisfactoryperformance is establishedbefore completion of oneyear period&

Treated assustandardw.e.f>!.A.!!K 1downgradedto @*oubtfulless than oneyear@ witheffect from>!.!A.!.

@Doutful !less t$an one-ear@ w.e.f.>".!>.! i.e.one year afterclassification

?Doutfulone tot$ree-ears?w.e.f.>".".!K

?Doutful !one to t$ree-ears?w.e.f.>".".!Ki.e., oneyear afterclassificationas @*oubtfulless than oneyear@ on>".".!L&

b&

': after the specified oneyear period, if theunsatisfactoryperformance continues

2ill migrateto@*oubtful -one to threeyears@ w.e.f>".!>.!D and@*oubtfulmore than

2illmigrate to@*oubtful -more thanthree [email protected]>".".!D

2ill migratefurther to@*oubtfulmore thanthree [email protected].>".".!D


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three [email protected].>".!>.!"".

Anne)ure!I

!articulars of Accounts "estructured#"s. in crore$

CDR(ec$anism

S(E DetRestructurin#


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. Row no >- RO# based on R+ #ncluding risk premium 1 term premium not theRO# being charged& as on the date of restructuring.

>. Row A- Original amount sanctioned to be filled in.

A. Row J- =ame of the 'ccount.

J. Row D column >&- 's on date of restructuring total amount overdue for repaymentprincipal amount& as per original terms of sanction should be mentioned followedby remaining repayment schedule as per terms of sanction covering entire residualperiod of repayment. #f interest amount is overdue as per original terms of sanction&the said amount shall be filled in column L row D&.

L. Row "! column A&-+rincipal amount e$cluding overdue principal as stated incolumn > to be mentioned. #n column J actual RO# i.e. e$isting RO#& being chargedto be mentioned. #n short sum of column > and A would be the total outstandingprincipal as on date of restructuring.

8imilarly second format should also be filled in based on terms of sanction ofrestructuring. =o other columns or rows are to be filled in. 'll other calculations are

formula based.)ormat # will calculate the present value of future cash flows as per OR#


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contribution. ' certificate from :' to this effect should also be obtained and kept onrecord. The list of such accounts should also be prepared and kept on record at branchand consolidated list of such accounts branch wise& the region should be prepared atRegional Office 1 kept on record. The consolidated amount of such restructuredaccounts of the region as a whole be furnished in credit set no."" : at the end of each4uarter.

esides above, the calculation of diminution value of all restructured accounts havingoutstanding balances of Rs"!!.!!lakhs and above has to be done every year as at >" st

March. ased on such recalculation either additional provision has to be made or therewill be write back in e$isting provision. #n view of this we re4uest you to recalculate thediminution value as at >".!>."! in respect of all accounts restructured having outstandingbalances of Rs"!!.!!lakhs and above on or before >".!>.!D. The working sheet on allsuch accounts as of >".!>.!D shall be sent to respective regional offices. The recalculateddiminution value should be submitted to :.O. through credit set "": as of >".!>."!. asstated above.

#t may be mentioned here that if the rate of interest on restructured advances is lower than

the pre-restructuring rate then diminution value may increase which will have adverse

impact on bank7s profitability. Therefore it is advised that efforts should be made to fi$appropriate rate of interest on restructuring, by analyIing the pro(ected cash flows in an

ob(ective manner, so that diminution value can be minimiIed whenever there is scope for

improvement in RO#. 8imilarly in case of e$isting restructured advances, after

scrutiniIing the present cash flows, possibility of increasing the rate of interest should bee$plored where the cash flow permits the same. =eedless to mention here that review of

all restructured accounts should be made on an on going basis to ensure that the

repayment obligations under restructuring are met as per restructuring sanction terms andthe asset class of such accounts do not deteriorate further.

Documents

Restructuring and Rescheduling