NON PERFORMING ASSETS – NEED FOR PRAGMATIC & PRACTICAL REGULATORY FRAMEWORK

* Mr. Vinod Jain, FCA, FCS, FICWA, LL.B., DISA (ICA), Chairman, INMACS and Vinod Kumar & Associates. vinodjain@inmacs.com, vinodjainca@gmail.com, +91 9811040004
NONPERFORMINGASSETS–
NEEDFORPRAGMATIC&PRACTICAL
REGULATORYFRAMEWORK
The Reserve Bank of India, Indian
BanksAssociation, almost all Public
Sector Banks and the Indian
businesses are deeply concerned
about significant rise in non-
performing assets during last one
year. The Indian economy has been
passing through unprecedented
turbulent times. Many important
sectors of the economy have been
adversely affected. Telecom sector is passing through
critical policy issues after 2G scam. Power Sector has
been suffering due to lack of coal and fuel linkage. Coal
mining has been subjected to serious scrutiny by CBI and
Hon’ble Supreme Court. The Iron ore mining has been
subjected to a Supreme Court ban. The national highways’
development projects in BOT mode have severely suffered
due to difficulty in achieving financial closure, policy issues
besides political impasse and a complete rethinking about
the sanctity of toll collection itself. Similarly heavy industries,
steel sector and real estate construction sector have been
passing through difficult times during the last 3 years.
Even the financial market is strained by severe liquidity
crunch. The capital market has not been able to channelize
any fresh resources to business and industry for last many
years. In certain sectors including power sector
disbursements are not being made by the banks, in spite
of full financial closure and loan sanctionsin place due to
apprehension in the minds of lenders. Air India and
Kingfisher indicate Aviation sector difficulties. Similar
analysis can be made about many other crucial and basic
sectors.
In the aforesaid backdrop, we also need to consider that
contd....page-8
Volume XXV, No. 2, February, 2014
EDITORIAL
CA Vinod Jain*
A new debate has emerged in respect of pricing of gas
and petroleum products due to heavy increase in the cost
permitted by the government. The government should
ensure that the entire data and information in respect of
actual cost and how the said cost is determined is to be
transparently made public. The justification based on
international prices of specific products could be
manipulative and may not be relevant. It is important to
provide adequate and reasonable margin to the industry
and business but at the same time the prices have to be
regulated based on detailed cost analysis and management
and curbing anti- competitive practices. The increase in
prices of coal, milk, power and various otherbasic inputs
require a close scrutiny by the regulator and the govt.
We welcome our readers to send us detailed information
and data available with them or any suggestions in this
regard so that Indian trade and industry and more
importantly public at large is charged fair price duly
regulated in a transparent and effective manner.
PETROLEUMANDGASPRICES–
CONSUMERS'FEELTHEPINCH'INTHE
ENTANGLEDISSUE
as per the regulatory framework in place, the term loan
and all other borrowings are treated as non -performing
assets on the basis of a very strict rule of 90 days or more
delay in repayment or payment of interest to the banks.
Also in case of time overrun i.e. delay in implementation
of projects, the term loans are categorized as non-
performing assets. Once the loans are categorized as non
performing in respect of a borrower, no further financial
facility or borrowing of any kind is considered by the
banking system. The banking system has to mandatorily
make a provision for doubtful debtand the interest portion
cannot be recognized as revenue. These rules of RBI have
worked very well during the economic growth period, but
in the current atmosphere several issues have emerged for

2 THE CHARTERED ACCOUNTANT WORLD – February 2014
1.0 RBI allows Asset Reconstruction Companies
to convert debt into equity
The Reserve Bank of India (RBI) has permitted
asset reconstruction companies (ARCs) to
convert debt of crisis- ridden companies into
equities as part of restructuring process.
Such companies are required to obtain, for the
purpose of enforcement of security interest, the
consent of secured creditors holding not less than
60 percent of the amount outstanding to a
borrower as against 75 percent at present.
2.0 DDA to raise floor area ratio for hotels by up
to 66%
The Delhi Development Authority (DDA) has
decided to increase the floor area ratio (FAR) or
floor space index (FSI) — the ratio of the total
floor area of a building to the size of the plot on
which it is built — to 3.75 for hotels outside the
Lutyens zone that stand on roads with more than
30-metre width, up from existing FAR of 2.25.
This means the gross floor area across different
floors of such a hotel can be 3.75 times the size
of the plot.
In the case of hotels next to roads with width of
under 30 meters (again outside the Lutyens zone),
FAR is being raised to 3.25, up 44 per cent.
3.0 New NPA, Restructuring, Loan takeover
guidelines by RBI
The Reserve Bank of India (RBI) has offered some
leeway to banks for early detection and resolution
of bad loans. Under the new regime kicking off
from April 1, lenders can finance 50 per cent of
the outstanding loan value. Earlier, Reserve Bank
of India (RBI) had proposed to allow takeover of
existing loans by new financiers at 60 per cent
or more of the loan value.
The central bank also diluted rules for accelerated
provisioning it had proposed for non-performing
accounts. Now lenders will make 25 per cent
provision for unsecured loans that remain unpaid
for six months. Initially, RBI had proposed 30
per cent provisions.
Plus, for loans that have remained unpaid for two
years, banks have to set aside 40 per cent, instead
of 50 per cent.The new framework calls for early
formation of a lenders’ committee with the
LATEST IN FINANCE
LATEST IN FINANCE / CAPITAL MARKET
CAPITAL MARKET
1.0 SEBI issues norms for registration of FPI
with depositories
Ushering in a new regime for overseas investors
as FPIs (Foreign Portfolio Investors), Securities
and Exchange Board of India (SEBI) issued
operating guidelines for depository participants
to register these new entities and to ensure that
their combined holding in any listed company
remains capped at 10 per cent.
2.0 No open offer required for inter-se transfer
among foreign companies
Foreign companies acquiring stake in a listed
Indian firm from a group entity, which are “inter-
se transfer” of shares, are exempted from making
an open offer to the existing shareholders.
3.0 RBI to Withdraw Pre-2005 Currency Notes
Anybody with currency bundles stashed under
the mattress may need to check them. The
Reserve Bank of India has said that banknotes
issued before 2005 will be completely phased out
after March 31 and replaced with new ones.
From July 1 onwards, however, things could get
more interesting at bank counters. To exchange
timeline to agree to a plan for resolution. It also
offers incentives for lenders to agree collectively
and quickly to a restructuring plan. It will give
better regulatory treatment of stressed assets if a
resolution plan is underway. However, it will
attract accelerated provisioning if no agreement
can be reached. Seeking improvements in the
current debt restructuring process, the
framework allows independent evaluation of large
value restructuring. This is for purpose of framing
viable plans and a fair sharing of losses (and future
possible upsides) between promoters and
creditors.
4.0 RBI allows NRIs to operate resident bank
A/c on ‘either or survivor’ basis
The Reserve Bank of India (RBI) has allowed
non-resident Indians (NRIs) to operate resident
bank accounts on “either or survivor” basis.
According to RBI, banks may include an NRI
close relative in existing/new resident bank
accounts as joint holder with the resident account
holder on “either or survivor” basis, subject to
fulfillment of a few conditions.

3A JOURNAL OF ALL INDIA CHARTERED ACCOUNTANTS’ SOCIETY
CAPITAL MARKET / FEMA
more than 10 pieces of ` 500 and ` 1,000 notes,
non-customers will have to furnish proof of
identity and residence to the bank branch in which
she/he wants to exchange the notes.
4.0 RBI aligns NBFC loan restructuring rules with
banks
The Reserve Bank of India (RBI) said that
rules for restructuring loans by non-banking
financial companies will be the same as those of
banks.
The key provisions include that the relaxation
or extension of commencement of projects will
not amount to restructuring for infrastructure,
non-infrastructure and corporate real estate
projects.
The central bank also said a special classification
benefit will be provided to corporate debt
restructuring cases, including small and medium
enterprises, until the end of March 2015.
1.0 RBI eases FDI norms, allows ‘optionality’
clauses
The Reserve Bank of India (RBI) has eased
foreign direct investment norms by allowing
optionality clauses to facilitate investors to exit
from investments in both equity and debentures.
In a notification, the central bank said that
henceforth, call and put options can be included
in such investments, subject to the minimum lock-
in period and without assured return.
A call option allows a holder to buy shares in an
entity at an agreed price while a put option allows
an investor to sell.
2.0 Firms can convert overseas borrowings into
equity
The Reserve Bank of India (RBI) said that
companies can convert their overseas borrowings
through the ECB route into equity shares at the
foreign exchange rate applicable on the date of
the swap agreement.
The RBI will have no objection if the borrower
company wishes to issue equity shares for a rupee
amount less than that arrived at as mentioned
above by a mutual agreement with the ECB lender.
It may be noted that the fair value of the equity
shares to be issued shall be worked out with
reference to the date of conversion only.
3.0 Cos may issue debt to NRIs as bonus: RBI
With a view to rationalising and simplifying the
procedures, it has been decided by the Reserve
Bank of India (RBI) that an Indian company may
issue non-convertible/redeemable preference
share or debentures to non-resident shareholders
by way of distribution as bonus from its general
reserves. So far, RBI was granting permission
for such issuances on a case-to-case basis.
4.0 Rajasthan & Delhi says no to retail FDI
Within a month of the Aam Aadmi Party (AAP)-
led government in Delhi withdrawing approval
to foreign direct investment (FDI) in multi-brand
retailing, Bharatiya Janata Party (BJP)-ruled
Rajasthan has likewise reversed the state’s official
position on the matter.
FEMA

FEMA / CORPORATE AND ECONOMIC LAWS
5.0 Jaeger-LeCoultre applies for single brand
retail
Swiss luxury watch brand Jaeger-LeCoultre has
filed for a 100% single brand application to enter
the Indian retail market.
6.0 FDI in the Pharmaceuticals Sector: No 'Non-
compete' clause
Present Position:
As per Circular 1 of 2013-Consolidated FDI
Policy, effective from April , 2013, the policy
relating to the Foreign Direct Investment in the
pharmaceuticals sector is as under:
Pharmaceuticals Limit Route
Greenfield 100% Automatic
Brownfield 100% Government
Note: Government may incorporate appropriate
conditions for FDI in brownfield cases, at the
time of granting approval.
Reviewed Position:
The Government of India has reviewed the
position in this regard and decided that the existing
would continue with the condition that 'non-
compete' clause would not be allowed except in
special circumstances with the approval of the
Foreign Investment Promotion Board
7.0 Interest Rates on FCNR (B) Deposit
8.0 RBI allows forward contract in all transactions
For more operational flexibility in the external
sector, the Reserve Bank of India (RBI) has
allowed rebooking and cancellation of forward
contracts without restriction in all current and
capital account transactions up to one year.
9.0 Deregulation of Interest Rates on Non
Resident (External) Rupee (NRE) Deposits
It has been decided to extend the freedom allowed
to banks to offer interest rates on incremental
Maturity Existing With effect from
Period March 1, 2014
1 Year to LIBOR/Swap No Change
less than plus 200
3 years basis points
3-5 years LIBOR/Swap LIBOR/SWAP plus
plus 400 300 basis points
basis points
1.0 Soften company law blow for private
companies
Private companies — in which public interest is
non-existent — should not be subjected to
mandatory auditor rotation, requirement of a
woman director on the Board or be covered under
class action suits. A submission to this effect has
been made to the Corporate Affairs Ministry,
listing at least 20 provisions of the new company
law from which “non-public interest private
companies” should be exempted.
The exemption should be available for all private
companies that are neither subsidiaries of listed
companies nor have substantial public borrowings
2.0 Suing directors for loan recovery
The Supreme Court ruled that though a mortgage
of assets of a company which failed to return a
loan may have come to an end with their sale,
the contract of indemnity with regard to the loan
would continue. They are independent contracts.
The directors who stood guarantee will still be
liable to return the full loan.
3.0 SC seeks centre’s reply on plea against new
Companies Act
The Supreme Court (SC) has sought the Centre’s
response on a petition seeking to declare as ultra
vires of the Constitution some of the provisions
of the new Companies Act that aims to create
the National Company Law Tribunal (NCLT) and
theAppellate Tribunal.
4.0 CCI order on trade practices leaves chemist
groups divided
CCI has passed several orders against various
chemist associations after complaints were
lodged with the competition watchdog that these
associations were preventing retailers from
offering discounts to consumers and boycotting
certain pharma companies without justified
reasons.
CORPORATE AND ECONOMIC LAWS
NRE deposits with maturity of 3 years and above
without any ceiling till February 28, 2014. With
effect from March 1, 2014, the interest rate
ceiling will revert to the position prior to August
14, 2013, i.e. interest rates offered by banks on
NRE deposits cannot b e higher than those offered
by them on comparable domestic rupee deposits.

CORPORATEANDECONOMICLAWS/DIRECT TAXATION
DIRECT TAXATION
1.0 STT must for tax breaks on losses
The Mumbai Income-Tax Appellate Tribunal
(ITAT) has upheld a penalty on a foreign investing
entity that had attempted to pay lower taxes by
setting off long-term capital losses based on
transactions on which it paid securities
transaction tax (STT) against long-term capital
gains based on non-STT transactions.
2.0 Tax Regime: Foreign Portfolio Investors to
be treated like FIIs
The Government came out with a notification
for the new combined category. Foreign Portfolio
Investors (FPIs) will get the same tax treatment
as FIIs under the Income Tax Act.
The Authorised Dealer will repatriate money for
QFIs only when a chartered accountant has
certified that all tax dues have been paid.
3.0 I-T dept to use information from banks to
nail tax evaders
The Income Tax Department is considering
seeking information on individuals exchanging
high-denomination notes in huge numbers. It will
then match banks’ information with its own. If
there is a mismatch in the income reported by a
person and cash exchanged by him, the taxman
will go deeper.
But Reserve Bank of India has provided an easy
three-month window for exchange of notes.
Details of identity and residence will not be
required for exchange of notes between April 1
5.0 SC okays revocation clause in Land
Acquisition law
The Supreme Court (SC) uphold cancellation
where acquisition amount not accepted for 5
years or more, if the dispute was in court all
along, with a rider, even for old cases.
The order relates to compensation under Clause
24 or the ‘retrospective’ clause for land acquired
by private parties or the government. The new
law — the formal name is Right to Fair
Compensation and Transparency in Land
Acquisition, Rehabilitation and ResettlementAct,
2013. If for five years after acquisition the owners
of the land refused to accept compensation, the
acquisition could be set aside.
and June 30. The I-T department is concerned
that many individuals with black money might
take advantage of this.
4.0 CBDT clarifies on TDS on Service Tax
The Central Board of Direct Taxes (CBDT) has
made it clear that tax need not be deducted at
source on the service tax component on payments
made/due to a resident payee.
This will be allowed only in cases where the
service tax component comprised in the amount
payable to a resident is indicated separately in the
contract between the payer and the payee, the
CBDT has said in a circular.
In such situation, tax has to be deducted on the
amount paid/payable without including the service
tax component.
5.0 Safe Harbour Norms to change after poor
response from MNCs
Prompted by a dismal response from MNCs with
only about 30 applications coming in for adopting
safe harbour mechanism for transfer pricing in
its first year, the government is likely to appoint
a committee for revising profit margins stipulated
in the norms.
6.0 Some Latest Judgements
The Chattisgarh High Court has held that where
assessee surrendered income during search,
explained manner in which it was derived in
statement and paid tax as well as interest thereon,
it was not necessary to file return before due
date to get immunity from penalty for
concealment under clause (2) of Explanation 5
to section 271(1)(c)
Commissioner of Income-tax, Bilaspur C.G. vs. Abdul
Rashid, [2013] 40 taxmann.com 244
The Pune ITAT bench has held that where
premium paid in excess of face value of
investments classified under HTM (Held to
Maturity) category had been amortized over
period till maturity, same was allowable as
‘revenue expenditure’
Assistant Commissioner of Income-tax, Circle-1, Nashik
vs. Ozer Merchant Co-operative Bank Ltd., [2014] 41
taxmann.com 110
The Mumbai ITAT bench has held that entire
expenses incurred on gratuity and other terminal
benefits at time of retirement of employee are

DIRECT TAXATION / INDIRECT TAXATION / AUDIT
arevenue in nature allowable in year of retirement.
Additional Commissioner of Income-tax vs. Nicholas
Piramal India Ltd., [2013] 40 taxmann.com 538
The Mumbai ITAT bench has held that VRS
payments made to retiring employees are
allowable as revenue expenditure
The Mumbai ITATbench has held that travelling
expenses incurred by foreign head office on
travelling of its own staff in connection with
Indian branches was allowable under section
37(1) and section 44C was not applicable to it
Deputy Director of Income-tax (International Taxation) -
4 (2) vs. Oman International Bank SAOG, [2013] 40
taxmann.com 319
Section 194C, read with section 40(a)(ia): TDS
on contracts
The Allahabad High Court has held that in a
case of purchase of goods and equipment,
provisions of section 194C would not be attracted
Commissioner of Income-tax, Faizabad vs. Krishna
Kumar Goel, [2014] 41 taxmann.com 113
Section 194-I, read with section 194C: TDS
on contracts and Rent
The Karnataka High Court has held that where
assessee entered into an agreement with a
contractor for hiring of vehicles and made use
of vehicles and equipment and paid hire charges
on basis of number of hours of use, section
194-I, and not section 194C, would be attracted.
Three Star Granites (P.) Ltd. Vs. Assistant Commissioner
of Income-tax, Circle -1(1), [2014] 41 taxmann.com 91
Section 115JA: Computation of Booked Profit
The Delhi High Court has held that Since
computation of minimum alternate tax was
cumbersome which was not possible by merely
examining return or documents enclosed with
return itself as several aspects were required to
be examined, prima facie adjustment under
section 143(1)(a) could not be made.
Ester Industries Ltd. Vs. Commissioner of Income-tax,
Delhi-IV, [2013] 40 taxmann.com 376
Section 24: Deductions from House Property
The Punjab & Haryana High Court has held
that interest on interest paid due to default in
payment of home loan instalments is not
deductible u/s 24
Master Naman Kumar vs. Commissioner of Income-tax,
Patiala, [2014] 41 taxmann.com 10
Section 32: Depreciation
The Mumbai ITAT bench has held that even if
merged company did not claim depreciation for
last few years, depreciation in hands of resultant
company was to be allowed on WDV computed
without adjustment of earlier depreciation
Section 50C: Special provision for full value
of consideration in case of Land & Building
The Jodhpur ITAT bench has held that where
assessee sold a property and he had challenged
market value adopted by Registrar for stamp duty
purposes, provisions of section 50C(1) would
not apply for purpose of computing capital gain
on sale of property
Income-tax Officer, Ward - 1(4), Udaipur vs. Shiv Kumar
Rangwani, [2013] 40 taxmann.com 323
AUDIT
1.0 SEC judge bars ‘Big Four’ China units for 6
months over audits
Chinese units of the global “Big Four” accounting
firms should be suspended from auditing US-
listed companies for six months, a judge in the
US ruled, in an escalation in a long-running
dispute over regulators’ access to documents.In
a harshly worded 112-page ruling, Securities and
Exchange CommissionAdministrative Law Judge
Cameron Elliot censured the Chinese affiliates of
KPMG, Deloitte & Touche, Pricewaterhouse
Coopers and Ernst and Young.
INDIRECT TAXATION
1.0 Section 35B: Appeals to CESTAT
The Bombay High Court has held that Action
to recover tax before expiry of statutory period
for filing appeal is high-handed & in defiance of
law
Tata Teleservices (Maharashtra) Ltd vs. Ministry of
Finance (Bombay High Court)

SPECIAL INCENTIVES FOR EXPORTERS
SERVED FROM INDIA SCHEME (SFIS)
OBJECTIVE:
Objective of SFIS is to accelerate growth in export of
services so as to create a powerful and unique ‘Served
From India’ brand, instantly recognized and respected
world over.
ELIGIBILITY:
Indian Service Providers, listed in Appendix 41 of
Handbook of Procedures Volume 1 (HBPv1)-
a. who have free foreign exchange earning of at least
` 10 lakhs in current financial year
b. For Individual Indian Service Providers, minimum
exchange earnings of ` 5 Lakhs.
LIST OF SERVICES AS PER GATT (eligible and
ineligible)
All Indian Service Providers (Appendix 10 of HBPv.1)
including professional services, management
consulting services, business services & educational
services.
DUTYENTITLEMENT
Duty Credit Scrip equivalent to 10% of free foreign
exchange earned during current financial year (w.e.f
1.1.2011).
UTILIZING DUTY SCRIPS FOR THE IMPORTS
1. For import of any capital goods (including spares,
office equipment & furniture and consumables) that
are otherwise freely importable and / or restricted
under ITC (HS).
2. For importing / domestic sourcing of capital goods
(including spares) related to the manufacturing
sector business of service provider.
3. For import of only those vehicles, which are in the
nature of professional equipment.
4. For payment of duty in case of Import/ domestic
sourcing of motor cars, SUV’s and all purpose
vehicles as Professional Equipment by Hotels,
Travel agents, Tour operators, etc.
a. Such vehicles will have to be registered for
Tourist purpose only.
b. Proof of registration will need to be submitted
to RA (Revenue Authority) within 6 months.
5. In case of hotels, clubs having residential facility
of minimum 30 rooms, golf resorts and stand-alone
restaurants having catering facilities, for import of
consumables including food items and alcoholic
beverages.
SPECIAL INCENTIVES FOR EXPORTERS UTILIZING DUTY SCRIPS FOR EXCISE DUTY
For payment of excise duty for procurement from
domestic sources, in respect of items permitted for
imports under SFIS Duty Credit Scrip.
Refer Notification 33/2012 CE
NON TRANSFERABILITY OF GOODS
Entitlement /goods (imported / procured) shall be non
transferable (except within group company and
managed hotels) and be subject toActual User condition.
DUTYDRAWBACK
Additional customs duty/excise duty paid in cash or
through debit under Duty Credit Scrip shall be adjusted
as CENVAT Credit or Duty Drawback as per DoR
(Department of Revenue) rules, except under SFIS.
VALIDITYPERIODAND REVALIDATION
Valid for a period of 18 months. Revalidation of Duty
Credit Scrip shall not be permitted unless covered under
paragraph 2.13.1 or paragraph 2.13.2 A of HBP v1.
TRANSFEROFEXPORTPERFORMACE
Transfer of export performance from one to another
shall not be permitted.
FACILITY OF SPLIT SCRIPS
Available subject to a minimum of Rs 5 Lakh each and
multiples thereof
RE-EXPORT OF DEFECTIVE GOODS
ALLOWED
FINANCIAL INDICATORS
CurrentRate* MonthAgo 3Month 6Month
(in%) (in%) Ago(in%) Ago(in%)
3 Month LIBOR ($) 0.24 0.24 0.24 0.27
3 Month MIBOR (`) 9.52 9.22 9.19 8.21
SENSEX 20334 20713 20273 19294
NIFTY 6053 6168 6079 5817
CRR 4.00 4.00 4.00 4.00
REPO 8.00 7.75 7.75 7.50
REVERSE REPO 7.00 6.75 6.75 6.25
Gold (per 10 gm) 29881 29033 30143 26103
Silver (per kg) 44585 44824 48373 40174
Crude (USD/bbl) 108.35 107.25 106.40 108.51
Rs. vs USD 62.34 61.94 62.73 60.13
Rs. vs Euro 85.06 84.31 84.06 76.89
Rs. vs 100 Yen 61.03 59.01 63.94 59.76
Rs. vs RMB 10.29 10.16 10.40 9.76
Rs. vs Pound 102.36 102.06 100.92 89.52
MCX Aluminium 103.95 106.25 110.70 105.90
MCX Copper 444.45 452.25 448.15 405.85
*As on 10th Feb. 2014 (Sources: MoneyControl, NSE, BSE, RBI, MCX)

Contact details : Dharampal (9013363257) All India Chartered Accountants’ Society - CFO World 909, Chiranjiv Tower, 43, Nehru Place,
New Delhi-110019. Ph: 26223712, 26228410, 26226933 E-mail:aicas.cfo@gmail.com / cfoworld@gmail.com EDITOR: Pankaj Gupta, LLB, FCS
E-mail: pankajguptafcs@gmail.com PUBLISHED & PRINTED: At New Delhi by Satish Chandra, Administrative Officer, on behalf of All India Chartered
Accountants’ Society, 4696, Brij Bhawan, 21A, Ansari Road, Darya Ganj, New Delhi-110 002 Phone 23265320, 23288101 E-mail : aicas.cfo@gmail.com
Printed at: EIH Ltd., Unit : Printing Press, No. 7, Sham Nath Marg, Delhi-110054. Views expressed by contributors are their own and the Society does not accept
any responsibility.
If undelivered, please return to :
All India CharteredAccountants’Society
4696, Brij Bhawan 21A, Ansari Road,
Darya Ganj, New Delhi-110 002
Date of Printing : 12th
FEBRUARY, 2014
R.N.I. No. 50796/90
Posting Date: 14/15 February, 2014
Registration No. DL(c)-01/1268/2012-14
Licenced to post without prepayment No. U-(C)-82/2012-14
kind consideration of the financial system regulator. RBI
is known for a very pragmatic and professional approach
and therefore we wish to bring out the following for a
public debate and consideration by the regulator for a more
pragmatic, dynamic and practical approach :-
The Reserve Bank of India can consider as to whether
a uniform approach of 90 days benchmark is
appropriate for all the sectors or it could be differently
considered for different sectors of the economy.
We have seen that US and European governments have
provided for special benefits for early recovery of
various sectors. RBI has also considered special
dispensation for Air India, and certain large
infrastructure projects which were specially impacted
due to sect oralreasons. RBI may now consider issues
and economic situation of each sector and accordingly
work out a special financial package so that genuine
difficulties and problems of each sector are
appropriately considered to enable smooth working
of impacted businesses.
The banks may be allowed to consider all cases which
are currently non performing on case by case basis
and to provide necessary additional resources and re-
phasing all repayments, wherever considered
appropriate. The bank boards may be delegated to
devise an appropriate policy framework in this regard.
Wherever the funds are adequately secured, additional
lending through specially structured products to meet
the needs of the borrower may be permitted.
The banks may be freely permitted to extend corporate
loans, loans for general business purpose and any other
borrowings needed to meet the requirements as
assessed by the management and the bank, subject to
adequate security and / or cash flow.
Rates of interest should to be cut to lower levels to
make funding affordable. Special concessional funding
to agriculture sector, housing and SME sector is needed
to give boost to these sectors.
A new pragmatic and practical policy and regulatory
framework is neededat the RBI level as well as at level of
the banks. Indian economycurrently needs a special
treatment to not only improve the sentiments but also
stimulate growth. The current negative sentiment has
impacted money circulation and M3 significantly and not
only it is necessary to recognize the financial distressat an
early stage but also at the same time bold steps and support
are needed from the financial sector to meet the needs of
the borrower so that on a sustained basis a fair recovery
for the loans can be ensured. It is important to add that all
kinds of willful defaults with malicious or fraudulent
intentions have to be checked strictly.The banking approach
has to be developmental and principle based rather than
rule based, positive and simple.
Contd...... from pg 1
NON PERFORMING ASSETS ............EDITORIAL

NON PERFORMING ASSETS – NEED FOR PRAGMATIC & PRACTICAL REGULATORY FRAMEWORK

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NON PERFORMING ASSETS – NEED FOR PRAGMATIC & PRACTICAL REGULATORY FRAMEWORK