September 3, 2005
The Chairman/Managing Director All Public
Guidelines on One-Time Settlement Scheme for
Please refer to Paragraph No. 8 of our circular
No. 31/06.02.31/2005-06 dated August 19, 2005 and accordingly, a one-time
settlement scheme for recovery of NPAs below Rs.10 crore is proposed hereunder
which is required to be implemented by all public sector banks. These guidelines
will provide a simplified, non-discretionary and non-discriminatory mechanism
for one-time settlement of chronic NPAs in the SME sector. All public sector
banks shall uniformly implement these guidelines.
2. The guidelines will not, however,
cover cases of wilful default, fraud and malfeasance. Banks shall identify
cases of wilful default, fraud and malfeasance and initiate prompt action. Accordingly,
guidelines for one-time settlement of dues relating to NPAs of public sector
banks in SME sector are given below:
(A) Guidelines for one-time settlement of chronic
NPAs up to Rs. 10 crore
[ i ] Coverage
a) The revised guidelines will cover all NPAs
in SME sector which have become doubtful or loss as on March 31, 2004 with outstanding
balance of Rs.10 crore and below on the date on which the account was classified
b) The guidelines will also cover NPAs classified
as sub-standard as on 31st March 2004, which have subsequently become
doubtful or loss where the outstanding balance was Rs.10 crore and below on
the date on which the account was classified as doubtful.
c) These guidelines will cover cases on which
the banks have initiated action under the Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002 and also
cases pending before Courts/DRTs/BIFR, subject to consent decree being obtained
from the Courts/DRTs/BIFR.
d) Cases of wilful default, fraud and malfeasance
will not be covered.
e) The last date for receipt of applications
from borrowers will be as at the close of business on March 31, 2006. The processing
under the revised guidelines shall be completed by June 30, 2006.
[ ii ] Settlement Formula – amount
a) NPAs classified as Doubtful or Loss as on March
The minimum amount that shall be recovered under
the revised guidelines in respect of one-time settlement of NPAs classified
as doubtful or loss as on March 31,2004 will be 100% of the outstanding balance
in the account as on the date on which the account was categorised as doubtful
b) NPAs classified as sub-standard as on March 31, 2004 which
became doubtful or loss subsequently
The minimum amount that shall be recovered in
respect of NPAs classified as sub-standard as on March 31, 2004 which became
doubtful or loss subsequently would be 100% of the outstanding balance in the
account as on the date on which the account was categorised as doubtful NPAs,
plus interest at existing Prime Lending Rate from April 1, 2004 till the date
of final payment.
[ iii ] Payment
The amount of settlement arrived at in both
the above cases, shall preferably be paid in one lump sum. In cases where the
borrowers are unable to pay the entire amount in one lump sum, at least 25%
of the amount of settlement shall be paid upfront and the balance amount of
75% should be recovered in instalments within a period of one year together
with interest at the existing Prime Lending Rate from the date of settlement
up to the date of final payment.
[ iv ] Sanctioning Authority
The decision on the one-time settlement and
consequent sanction of waiver or remission or write-off shall be taken by the
competent authority under the delegated powers.
[ v ] Non-discretionary treatment
Banks shall follow the above guidelines for
one-time settlement of all NPAs covered under the scheme, without discrimination
and a monthly report on the progress and details of settlements should be submitted
by the concerned authority to the next higher authority and their Central Office.
Banks may go for wide publicity and also give notice by January 31, 2006 to
the eligible defaulting borrowers to avail of the opportunity for one-time settlement
of their outstanding dues in terms of these guidelines. Adequate publicity to
these guidelines through various means must be ensured.
[ vi ] Reporting to the Board
Banks shall submit a report on the progress
in the one-time settlement of chronic NPAs under the revised guidelines every
quarter to the Board of Directors. A copy of the quarterly progress report may
also be sent to us.
3. The above guidelines may please be advised
to your controlling offices and branches for immediate implementation. These
guidelines may be displayed on the web site of your bank.
4. Any deviation from the above settlement guidelines
for any borrower shall be made only by the Board of Directors.
5. Please acknowledge receipt.
Chief General Manager