DEPARTMENT : RECOVERY & LAW DEPARTMENT

Transcription

1 DEPARTMENT : RECOVERY & LAW DEPARTMENT Circular No. HO/REC & LAW/ 16/ / 525 Date: TO : ALL BRANCHES/ OFFICES REG : REVIEW / AMENDMENT IN RECOVERY POLICY OF THE BANK The Recovery Policy of the Bank is reviewed and amended to the extent desirable every year on the basis of feedback received from field functionaries as well as intricacies came across while handling settlement proposals. Also, wherever policy guidelines are received from RBI, Ministry of Finance or any other regulatory body, the same are also incorporated in this policy with a view to updating it. Accordingly, the Recovery Policy of the Bank has been thoroughly reviewed and updated. Now, the same is being forwarded herewith as a booklet and applicable contents of the same be followed by field Functionaries. In nutshell changes brought in this Recovery Policy are: 1. Minimum indicative settlement amount in accounts covered under CGTMSE, should be amount equal to more than the amount to be received from the Corporation. 2. Valuation of properties should be marked For Bank Purpose and not for General Purpose. 3. All properties invariably be visited by specified authorities for verification and assessment before settlement. 4. The authority to decline the settlement offer has been defined and no settlement proposal be rejected without counter offer. 5. Action under SARFAESI Act, is to be initiated immediately after account/s turn NPA. 6. All NPA accounts without any cut off date and amount, are eligible for settlement under Lok Adalat. All field functionaries are advised to go through and follow relevant provisions of the Recovery Policy of the Bank while handling recovery cases. In case of doubt over any issue, matter may be referred to Recovery & Law Department, Head Office for necessary clarification. S.K. Sharma General Manager (Rec. & Law) 1

2 CONFIDENTIAL FOR USE OF BANK OFFICIALS ONLY ORIENTAL BANK OF COMMERCE RECOVERY & LAW DEPARTMENT HEAD OFFICE: NEW DELHI RECOVERY POLICY ORIENTAL BANK OF COMMERCE Plot No. 5, Sector-32 Institutional Area, Gurgaon Phone : , Fax :

3 S.L. BANSAL Chairman & Managing Director PREFACE On the basis of feedback received from the field functionaries as well as intricacies coming across while handling settlement proposals, the Bank s Recovery Policy is reviewed from time to time. In order to ensure better understanding by all field functionaries, Recovery & Law Department has brought out a revised and updated version of the Bank s Recovery Policy. This revised booklet also covers the entire framework and legal changes brought about from time to time as well as guidelines issued by Reserve Bank of India. I am sure that field functionaries will find this booklet very useful in their day-today working. I would urge all filed functionaries to go through this valuable document and make concerted recovery efforts which will enable the Bank to improve its profitability. September 23, 2014 Gurgaon (S.L. BANSAL) CHAIRMAN & MANAGING DIRECTOR 3

4 ACKNOWLEDGEMENT We are grateful to the Top Executives at Head Office, the Regional Heads and field functionaries for providing us valuable suggestions / inputs which have gone a long way in revising existing Recovery Policy. Our approach has been to provide a systematic and simplified approach for handling the NPAs. Branches / Regional Offices are advised to meticulously go through the policy and for any clarification, Recovery and Law Department at Head office may be contacted. All field functionaries are advised to ensure compliance of the policy. September 23, 2014 Gurgaon (S.K. SHARMA) GENERAL MANAGER (REC. & LAW) 4

5 INDEX S.NO. CHAPTER PAGE NO. 1. PRUDENTIAL NORMS ON INCOME RECOGNITION, ASSET CLASSIFICATION AND PROVISIONING PERTAINING TO ADVANCES 2. MANAGEMENT OF NPAS AND GUIDELINES FOR FOLLOW UP 3. COLLECTION OF DUES AND REPOSSESSION OF SECURITIES 4. COMPROMISE & NEGOTIATED SETTLEMENTS IN NPA ACCOUNTS LOK ADALAT THE SECURITISATION & RECONSTRUCTION OF FINANCIAL ASSETS & ENFORCEMENT OF SECURITY INTEREST ACT, RECOVERY THROUGH LEGAL RECOURSE REHABILITATION OF SICK ASSETS WILFUL DEFAULTERS POLICY FOR SALE OF FINANCIAL ASSETS TO: 1. SECURITISATION COMPANY/ RECONSTRUCTION COMPANY CREATED UNDER SARFAESI ACT, 2002 and 2. OTHER BANKS/FIs & NBFCS 11. GUIDELINES / POLICY FOR FINAL CLOSURE OF TECHNICALLY WRITTEN OFF (TWO) ACCOUNTS WITH MEAGRE PRESENT OUTSTANDING OF RE.1/- OR MORE 12. POLICY ON EMPANELMENT / ENGAGEMENT OF RECOVERY AGENTS FOR RECOVERY OF BANK S DUES 13. SETTLEMENT OF DECEASED DEPOSITOR CLAIM CASE

6 CHAPTER - I PRUDENTIAL NORMS ON INCOME RECOGNITION, ASSET CLASSIFICATION AND PROVISIONING 1. NPAs OF OUR BANK Right from the beginning, our Bank has been following the prudential norms introduced by the RBI in letter and spirit. Though the prudential norms were operative from but as a prudent banker, our Bank did a special exercise to identify the NPA portfolio as on instead of as directed by RBI. The said exercise proved a landmark for the Bank in controlling the NPAs. The exercise revealed that our NPAs stood at about ` 324 Crore against the total loan portfolio of about ` 1850 crore i.e. 17.5%. The position being alarming, the Bank immediately started recovery drive. The NPAs of the Bank were brought down to ` 293 crore (12.63%) during the following year ended March Despite increase in the business, the NPAs of the Bank were on reducing side thereafter and the same stood at ` 221 crore (6.14%) as on There has been gradual increase in gross NPAs although in percentage terms the NPAs decreased from till The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 has made some impact/ fear in the minds of the borrowers and attitudinal change is visible. Erstwhile Global Trust Bank has been merged with the Bank w.e.f and thereby gross NPA of the Bank has increased to ` 2513 crore as on At the time of amalgamation, the NPA of egtb was to the extent of ` crore. The Apex Bank introduced Income Recognition norms effective from but our Bank introduced the system of not debiting unrealized interest to the borrowers accounts and recording it separately from itself, which proved a turning point in containing our NPAs at the lower level. Due to economic slowdown there has been increase in NPA during the last few years. The Gross NPA of the Bank as on is ` crore (3.99% of Gross Advances of the Bank). 6

7 YEAR 1.1. Year-Wise Position of Asset Classification, Gross & Net NPAs and Gross Advances The NPA position of the Bank for the last 10 years from the year ended March 31, 2005, is given below: STAN- DARD SUB- STANDA RD DOUBT -FUL LOSS GROSS NPA (` in Crore) GROSS ADVANC ES % OF NPA TO GRO SS ADV ANC ES NET ADVANC ES % OF NET NPAs TO NET ADVA NCES Background:- A non-performing asset (NPA) was defined as a credit facility in respect of which the interest and/ or installment of principal has remained overdue for a specified period of time. The specified period was reduced in a phased manner as under:- Year ending March 31 Specified period 1993 Four quarters 1994 Three quarters 1995 Two quarters (i.e. 180 days) 2004 One quarter (i.e. 90 days) With a view to moving towards international best practices and to ensure greater transparency, it was been decided to adopt the 90 days overdue norm for identification of NPAs, from the year ended March 31, PRUDENTIAL NORMS For the guidance of the Branches / Regional Offices, we reproduce below the updated guidelines on income recognition asset classification and provisioning as circulated by Apex Bank vide master circular RBI/ /74 DBOD.No.BP.BC.9/ / dated July 1, DEFINITIONS 2.1 Non Performing Assets An asset, including a leased asset, becomes non performing when it ceases to generate income for the bank A non performing asset (NPA) is a loan or an advance where; 7

8 i. interest and/ or installment of principal remain overdue for a period of more than 90 days in respect of a term loan, ii. the account remains out of order as indicated at paragraph 2.2 below, in respect of an Overdraft/Cash Credit (OD/CC), iii. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted, iv. the installment of principal or interest thereon remains overdue for two crop seasons for short duration crops, v. the installment of principal or interest thereon remains overdue for one crop season for long duration crops, vi. the amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitisation transaction undertaken in terms of guidelines on securitisation dated February 1, vii. in respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment. As a facilitating measure for smooth transition to 90 days norm, banks had been advised by RBI to move over to charging of interest at monthly rests, (by April 1, 2002). However, the date of classification of an advance as NPA should not be changed on account of charging of interest at monthly rests In case of interest payments, banks should, classify an account as NPA only if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter In addition, an account may also be classified as NPA in terms of paragraph i.e. Accounts with temporary deficiencies. 2.2 Out of Order status An account should be treated as 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power. In cases where the outstanding balance in the principal operating account is less than the sanctioned limit/drawing power, but there are no credits continuously for 90 days as on the date of Balance Sheet or credits are not enough to cover the interest debited during the same period, these accounts should be treated as 'out of order'. 2.3 Overdue Any amount due to the bank under any credit facility is overdue if it is not paid on the due date fixed by the bank. 8

9 3. INCOME RECOGNITION 3.1 Income Recognition Policy The policy of income recognition has to be objective and based on the record of recovery. Internationally income from non -performing assets (NPA) is not recognised on accrual basis but is booked as income only when it is actually received. Therefore, the banks should not charge and take to income account interest on any NPA. This will apply to Government guaranteed accounts also However, interest on advances against term deposits, NSCs, IVPs, KVPs and Life policies may be taken to income account on the due date, provided adequate margin is available in the accounts Fees and commissions earned by the banks as a result of renegotiations or rescheduling of outstanding debts should be recognised on an accrual basis over the period of time covered by the renegotiated or rescheduled extension of credit. 3.2 Reversal of Income If any advance, including bills ;purchased and discounted, becomes NPA, the entire interest accrued and credited to income account in the past periods, should be reversed if the same is not realised. This will apply to Government guaranteed accounts also In respect of NPAs, fees, commission and similar income that have accrued should cease to accrue in the current period and should be reversed with respect to past periods, if uncollected Leased Assets The finance charge component of finance income [as defined in AS 19 Leases issued by the Council of the Institute of Chartered Accountants of India (ICAI)] on the leased asset which has accrued and was credited to income account before the asset became non performing, and remaining unrealised, should be reversed or provided for in the current accounting period. 3.3 Appropriation of Recovery in NPAs Interest realised on NPAs may be taken to income account provided the credits in the accounts towards interest are not out of fresh/ additional credit facilities sanctioned to the borrower concerned In the absence of a clear agreement between the bank and the borrower for the purpose of appropriation of recoveries in NPAs (i.e. towards principal or interest due), banks should adopt an accounting principle and exercise the right of appropriation of recoveries in a uniform and consistent manner. 9

10 3.4 Interest Application On an account turning NPA, banks should reverse the interest already charged and not collected by debiting Profit and Loss account, and stop further application of interest. However, banks may continue to record such accrued interest in a Memorandum account in their books. For the purpose of computing Gross Advances, interest recorded in the Memorandum account should not be taken into account. 3.5 Computation of NPA Levels Banks to compute their Gross Advances, Net Advances, Gross NPAs and Net NPAs, as per the format in Annex ASSET CLASSIFICATION 4.1 Categories of NPAs Banks are required to classify non performing assets further into the following three categories based on the period for which the asset has remained non performing and the realisability of the dues: i. Sub standard Assets ii. Doubtful Assets iii. Loss Assets Substandard Assets With effect from March 31, 2005, a sub standard asset would be one, which has remained NPA for a period less than or equal to 12 months. Such an asset will have well defined credit weaknesses that jeopardise the liquidation of the debt and are characterised by the distinct possibility that the banks will sustain some loss, if deficiencies are not corrected Doubtful Assets With effect from March 31, 2005, an asset would be classified as doubtful if it has remained in the sub standard category for a period of 12 months. A loan classified as doubtful has all the weaknesses inherent in assets that were classified as sub-standard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values highly questionable and improbable Loss Assets A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly. In other words, such an asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value. 10

11 4.2 Guidelines for classification of assets Broadly speaking, classification of assets into above categories should be done taking into account the degree of well- defined credit weaknesses and the extent of dependence on collateral security for realisation of dues Banks should establish appropriate internal systems (including technology enabled processes) for proper and timely identification of NPAs, especially in respect of high value accounts. The banks may fix a minimum cut off point to decide what would constitute a high value account depending upon their respective business levels. The cutoff point should be valid for the entire accounting year. Responsibility and validation levels for ensuring proper asset classification may be fixed by the banks. The system should ensure that doubts in asset classification due to any reason are settled through specified internal channels within one month from the date on which the account would have been classified as NPA as per extant guidelines. Our Bank has fixed ` lacs and above accounts as high value accounts Availability of security / net worth of borrower/ guarantor The availability of security or net worth of borrower/ guarantor should not be taken into account for the purpose of treating an advance as NPA or otherwise, except to the extent provided in Para Accounts with temporary deficiencies The classification of an asset as NPA should be based on the record of recovery. Bank should not classify an advance account as NPA merely due to the existence of some deficiencies which are temporary in nature such as non -availability of adequate drawing power based on the latest available stock statement, balance outstanding exceeding the limit temporarily, non -submission of stock statements and non -renewal of the limits on the due date, etc. In the matter of classification of accounts with such deficiencies banks may follow the following guidelines: i) Banks should ensure that drawings in the working capital accounts are covered by the adequacy of current assets, since current assets are first appropriated in times of distress. Drawing power is required to be arrived at based on the stock statement which is current. However, considering the difficulties of large borrowers, stock statements relied upon by the banks for determining drawing power should not be older than three months. The outstanding in the account based on drawing power calculated from stock statements older than three months, would be deemed as irregular. A working capital borrowal account will become NPA if such irregular drawings are permitted in the account for a continuous period of 90 days even though the unit may be working or the borrower's financial position is satisfactory. ii) Regular and ad hoc credit limits need to be reviewed/ regularised not later than three months from the due date/date of ad hoc sanction. In case of constraints such as non- availability of financial statements and other data from the borrowers, the branch should furnish evidence to show that renewal/ review of 11

12 credit limits is already on and would be completed soon. In any case, delay beyond six months is not considered desirable as a general discipline. Hence, an account where the regular/ ad hoc credit limits have not been reviewed/ renewed within 180 days from the due date/ date of ad hoc sanction will be treated as NPA Upgradation of loan accounts classified as NPAs If arrears of interest and principal are paid by the borrower in the case of loan accounts classified as NPAs, the account should no longer be treated as non-performing and may be classified as standard accounts Accounts regularised near about the balance sheet date The asset classification of borrowal accounts where a solitary or a few credits are recorded before the balance sheet date should be handled with care and without scope for subjectivity. Where the account indicates inherent weakness on the basis of the data available, the account should be deemed as a NPA. In other genuine cases, the banks must furnish satisfactory evidence to the Statutory Auditors/Inspecting Officers about the manner of regularisation of the account to eliminate doubts on their performing status Asset Classification to be borrower -wise and not facility -wise i) It is difficult to envisage a situation when only one facility to a borrower/one investment in any of the securities issued by the borrower becomes a problem credit/investment and not others. Therefore, all the facilities granted by a bank to a borrower and investment in all the securities issued by the borrower will have to be treated as NPA/NPI and not the particular facility/investment or part thereof which has become irregular. ii) If the debits arising out of devolvement of letters of credit or invoked guarantees are parked in a separate account, the balance outstanding in that account also should be treated as a part of the borrower s principal operating account for the purpose of application of prudential norms on income recognition, asset classification and provisioning. iii) The bills discounted under LC favouring a borrower may not be classified as a Non-performing advance (NPA), when any other facility granted to the borrower is classified as NPA. However, in case documents under LC are not accepted on presentation or the payment under the LC is not made on the due date by the LC issuing bank for any reason and the borrower does not immediately make good the amount disbursed as a result of discounting of concerned bills, the outstanding bills discounted will immediately be classified as NPA with effect from the date when the other facilities had been classified as NPA. iv) Derivative Contracts a) The overdue receivables representing positive mark-to-market value of a derivative contract will be treated as a non-performing asset, if these remain unpaid for 90 days or more. In case the overdues arising from forward contracts and plain vanilla swaps and options become NPAs, all other funded facilities 12

13 granted to the client shall also be classified as non-performing asset following the principle of borrower-wise classification as per the existing asset classification norms. However, any amount, representing positive mark-to-market value of the foreign exchange derivative contracts (other than forward contract and plain vanilla swaps and options) that were entered into during the period April 2007 to June 2008, which has already crystallised or might crystallise in future and is / becomes receivable from the client, should be parked in a separate account maintained in the name of the client / counterparty. This amount, even if overdue for a period of 90 days or more, will not make other funded facilities provided to the client, NPA on account of the principle of borrower-wise asset classification, though such receivable overdue for 90 days or more shall itself be classified as NPA, as per the extant IRAC norms. The classification of all other assets of such clients will, however, continue to be governed by the extant IRAC norms. b) If the client concerned is also a borrower of the bank enjoying a Cash Credit or Overdraft facility from the bank, the receivables mentioned at item (iv) above may be debited to that account on due date and the impact of its non-payment would be reflected in the cash credit / overdraft facility account. The principle of borrower-wise asset classification would be applicable here also, as per extant norms. c) In cases where the contract provides for settlement of the current mark-tomarket value of a derivative contract before its maturity, only the current credit exposure (not the potential future exposure) will be classified as a non-performing asset after an overdue period of 90 days. d) As the overdue receivables mentioned above would represent unrealised income already booked by the bank on accrual basis, after 90 days of overdue period, the amount already taken to 'Profit and Loss a/c' should be reversed, and held in a Suspense Account-Crystalised Receivables in the same manner as done in the case of overdue advances. e) Further, in cases where the derivative contracts provides for more settlements in future, the MTM value will comprise of (a) crystallised receivables and (b) positive or negative MTM in respect of future receivables. If the derivative contract is not terminated on the overdue receivable remaining unpaid for 90 days, in addition to reversing the crystallised receivable from Profit and Loss Account as stipulated in para (d) above, the positive MTM pertaining to future receivables may also be reversed from Profit and Loss Account to another account styled as Suspense Account Positive MTM. The subsequent positive changes in the MTM value may be credited to the Suspense Account Positive MTM, not to P&L Account. The subsequent decline in MTM value may be adjusted against the balance in Suspense Account Positive MTM. If the balance in this account is not sufficient, the remaining amount may be debited to the P&L Account. On payment of the overdues in cash, the balance in the Suspense Account- Crystalised Receivables may be transferred to the Profit and Loss Account, to the extent payment is received. 13

14 f) If the bank has other derivative exposures on the borrower, it follows that the MTMs of other derivative exposures should also be dealt with / accounted for in the manner as described in para (e) above, subsequent to the crystalised/settlement amount in respect of a particular derivative transaction being treated as NPA. g) Since the legal position regarding bilateral netting is not unambiguously clear, receivables and payables from/to the same counterparty including that relating to a single derivative contract should not be netted. h) Similarly, in case a fund-based credit facility extended to a borrower is classified as NPA, the MTMs of all the derivative exposures should be treated in the manner discussed above Advances under consortium arrangements Asset classification of accounts under consortium should be based on the record of recovery of the individual member banks and other aspects having a bearing on the recoverability of the advances. Where the remittances by the borrower under consortium lending arrangements are pooled with one bank and/or where the bank receiving remittances is not parting with the share of other member banks, the account will be treated as not serviced in the books of the other member banks and therefore, be treated as NPA. The banks participating in the consortium should, therefore, arrange to get their share of recovery transferred from the lead bank or get an express consent from the lead bank for the transfer of their share of recovery, to ensure proper asset classification in their respective books Accounts where there is erosion in the value of security/frauds committed by borrowers In respect of accounts where there are potential threats for recovery on account of erosion in the value of security or non -availability of security and existence of other factors such as frauds committed by borrowers it will not be prudent that such accounts should go through various stages of asset classification. In cases of such serious credit impairment the asset should be straightaway classified as doubtful or loss asset as appropriate: i. Erosion in the value of security can be reckoned as significant when the realisable value of the security is less than 50 per cent of the value assessed by the bank or accepted by RBI at the time of last inspection, as the case may be. Such NPAs may be straightaway classified under doubtful category and provisioning should be made as applicable to doubtful assets. ii. If the realisable value of the security, as assessed by the bank/ approved valuers/ RBI is less than 10 per cent of the outstanding in the borrowal accounts, the existence of security should be ignored and the asset should be straightaway 14

15 classified as loss asset. It may be either written off or fully provided for by the bank Advances to Primary Agricultural Credit Societies (PACS)/Farmers Service Societies (FSS) ceded to Commercial Banks In respect of agricultural advances as well as advances for other purposes granted by banks to PACS/ FSS under the on- lending system, only that particular credit facility granted to PACS/ FSS which is in default for a period of two crop seasons in case of short duration crops and one crop season in case of long duration crops, as the case may be, after it has become due will be classified as NPA and not all the credit facilities sanctioned to a PACS/ FSS. The other direct loans & advances, if any, granted by the bank to the member borrower of a PACS/ FSS outside the on -lending arrangement will become NPA even if one of the credit facilities granted to the same borrower becomes NPA Advances against Term Deposits, National Savings Certificates (NSCs), Kisan Vikar Patra (KVP)/Indira Vikas Patra (IIVP), etc Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs and life policies need not be treated as NPAs, provided adequate margin is available in the accounts. Advances against gold ornaments, government securities and all other securities are not covered by this exemption Loans with moratorium for payment of interest i. In the case of bank finance given for industrial projects or for agricultural plantations etc. where moratorium is available for payment of interest, payment of interest becomes 'due' only after the moratorium or gestation period is over. Therefore, such amounts of interest do not become overdue and hence do not become NPA, with reference to the date of debit of interest. They become overdue after due date for payment of interest, if uncollected. ii. In the case of housing loan or similar advances granted to staff members where interest is payable after recovery of principal, interest need not be considered as overdue from the first quarter onwards. Such loans/advances should be classified as NPA only when there is a default in repayment of installment of principal or payment of interest on the respective due dates Agricultural advances i. A loan granted for short duration crops will be treated as NPA, if the installment of principal or interest thereon remains overdue for two crop seasons. A loan granted for long duration crops will be treated as NPA, if the installment of principal or interest thereon remains overdue for one crop season. For the purpose of these guidelines, long duration crops would be crops with crop season longer than one year and crops, which are not long duration crops, would be treated as short duration crops. The crop season for each crop, which means the period up to harvesting of the crops raised, would be as determined by 15

16 the State Level Bankers Committee in each State. Depending upon the duration of crops raised by an agriculturist, the above NPA norms would also be made applicable to agricultural term loans availed of by him. The above norms should be made applicable to all direct agricultural advances as listed at paragraph III (1.1) of the Circular on Priority Sector Lending Targets and Classification RPCD.CO.Plan.BC.9/ / dated July 1, An extract of the list of these items is furnished in the Annex - 2. In respect of agricultural loans, other than those specified in the Annex - 2 and term loans given to non-agriculturists, identification of NPAs would be done on the same basis as non-agricultural advances, which, at present, is the 90 days delinquency norm. ii. Where natural calamities impair the repaying capacity of agricultural borrowers, banks may decide on their own as a relief measure conversion of the short-term production loan into a term loan or re-schedulement of the repayment period; and the sanctioning of fresh short-term loan, subject to guidelines contained in RBI circular RPCD. No.PLFS.BC.6/ / dated July 2, iii. In such cases of conversion or re-schedulement, the term loan as well as fresh short-term loan may be treated as current dues and need not be classified as NPA. The asset classification of these loans would thereafter be governed by the revised terms & conditions and would be treated as NPA if interest and/or installment of principal remains overdue for two crop seasons for short duration crops and for one crop season for long duration crops. For the purpose of these guidelines, "long duration" crops would be crops with crop season longer than one year and crops, which are not 'long duration" would be treated as "short duration" crops. iv. While fixing the repayment schedule in case of rural housing advances granted to agriculturists under Indira Awas Yojana and Golden Jubilee Rural Housing Finance Scheme, banks should ensure that the interest/ installment payable on such advances are linked to crop cycles Government guaranteed advances The credit facilities backed by guarantee of the Central Government though overdue may be treated as NPA only when the Government repudiates its guarantee when invoked. This exemption from classification of Government guaranteed advances as NPA is not for the purpose of recognition of income. The requirement of invocation of guarantee has been delinked for deciding the asset classification and provisioning requirements in respect of State Government guaranteed exposures. With effect from the year ending March 31, 2006 State Government guaranteed advances and investments in State Government guaranteed securities would attract asset classification and provisioning norms if interest and/or principal or any other amount due to the bank remains overdue for more than 90 days. 16

17 Restructuring/ Rescheduling of Loans Project under Implementaion The restructuring / rescheduling of standard as well as NPA accounts and upgradation of restructured / rescheduled NPA accounts are looked after by Credit Administration Deptt., Corporate Office, Gurgaon Advances under rehabilitation approved by Board for Industrial and Financial Reconstruction (BIFR) / Term Lending Institutions (TLI) Banks are not permitted to upgrade the classification of any advance in respect of which the terms have been renegotiated unless the package of renegotiated terms has worked satisfactorily for a period of one year. While the existing credit facilities sanctioned to a unit under rehabilitation packages approved by BIFR/term lending institutions will continue to be classified as sub standard or doubtful as the case may be, in respect of additional facilities sanctioned under the rehabilitation packages, the Income Recognition, Asset Classification norms will become applicable after a period of one year from the date of disbursement OUTSTANDING IN CREDIT CARD OPERATIONS It will be treated by the branches as part of advances under the head-cash credits, overdrafts and loans repayable on demand. It has been further clarified by RBI vide letter No.BP.BC.25/ / dated that all dues from credit card operations including dues from other Banks/Organizations should be classified under advances. However, any item which is in the nature of revenue need not be included under advances. (i) In credit card accounts, the amount spent is billed to the card users through a monthly statement with a definite due date for repayment. Banks give an option to the card users to pay either the full amount or a fraction of it, i.e., minimum amount due, on the due date and roll-over the balance amount to the subsequent months billing cycle. (ii) A credit card account will be treated as non-performing asset if the minimum amount due, as mentioned in the statement, is not paid fully within 90 days from the next statement date. The gap between two statements should not be more than a month. (iii) Banks should follow this uniform method of determining over-due status for credit card accounts while reporting to credit information companies and for the purpose of levying of penal charges, viz. late payment charges, etc., if any. 5 PROVISIONING NORMS 5.1 General The primary responsibility for making adequate provisions for any diminution in the value of loan assets, investment or other assets is that of the bank managements and the statutory auditors. The assessment made by the inspecting officer of the RBI is furnished to the bank to assist the bank management and the statutory auditors in taking 17

18 a decision in regard to making adequate and necessary provisions in terms of prudential guidelines In conformity with the prudential norms, provisions should be made on the nonperforming assets on the basis of classification of assets into prescribed categories as detailed in paragraphs 4 supra. Taking into account the time lag between an account becoming doubtful of recovery, its recognition as such, the realisation of the security and the erosion over time in the value of security charged to the bank, the banks should make provision against substandard assets, doubtful assets and loss assets as below: 5.2 Loss assets Loss assets should be written off. If loss assets are permitted to remain in the books for any reason, 100 percent of the outstanding should be provided for. 5.3 Doubtful assets i. 100 percent of the extent to which the advance is not covered by the realisable value of the security to which the bank has a valid recourse and the realisable value is estimated on a realistic basis. ii. In regard to the secured portion, provision may be made on the following basis, at the rates ranging from 25 percent to 100 percent of the secured portion depending upon the period for which the asset has remained doubtful: Period for which the advance has Provision requirement (%) remained in doubtful category Up to one year 25 One to three years 40 More than three years 100 Illustrations :- I. The outstanding amount as on 30 th June 2011 : Rs.10,00,000/- Realisable value of security : Rs. 8,00,000/- Date of NPA : Period for which the advance has remained in NPA category as on 30 th June 2011: 1 year 3 months (i.e. A/c is doubtful upto one year- D-1) Provisioning requirement as per the rates of Provisioning: As on Asset Classification Provisions on secured portion Provision on unsecured portion 30 th June 2011 Doubtful upto one year (D-1) Total (Rs.) % Amt. % Amt. 25 2,00, ,00,000 4,00,000 18

19 II. The outstanding amount as on 30 th June 2011 : ` 10,00,000/- Realisable value of security : ` 8,00,000/- Date of NPA : Period for which the advance has remained in NPA category as on 30 th June 2011: 3 years 3 months (i.e. A/c is doubtful for more than 2 years) Provisioning requirement as the new rates of Provisioning: As on Asset Classification Provisions on secured portion Provision on unsecured portion 30 th June 2011 Doubtful 1 to 3 years (D-2) Total (Rs.) % Amt. % Amt. 40 3,20, ,00,000 5,20,000 III. The outstanding amount as on 30 th June 2011: ` 10,00,000/- Realisable value of security : ` 8,00,000/- Date of NPA : Period for which the advance has remained in NPA category as on 30 th June 2011: 4 years 3 months(i.e. Doubtful > 3 years) Provisioning requirement as per the rates of Provisioning: As on 30 th June 2011 Asset Classification Doubtful More than 3 years (D-3) Provisions on secured portion Provision on unsecured portion Total (`) % Amt. % Amt ,00, ,00,000 10,00,000 Note: Valuation of Security for provisioning purposes With a view to bringing down divergence arising out of difference in assessment of the value of security, in cases of NPAs with balance of ` 5 crore and above stock audit at annual intervals by external agencies appointed as per the guidelines approved by the Board would be mandatory in order to enhance the reliability on stock valuation. Collaterals such as immovable properties charged in favour of the bank should be got valued once in three years by valuers appointed as per the guidelines approved by the Board of Directors. However our Bank has decided to get the securities verified/ valuation obtained once in two years as per RMD circular No. HO/RMD/77/ /842 dated Substandard assets (i) A general provision of 15 percent on total outstanding should be made without making any allowance for ECGC guarantee cover and securities available. (ii) The unsecured exposures which are identified as substandard would attract additional provision of 10 per cent, i.e., a total of 25 per cent on the outstanding balance. However, in view of certain safeguards such as escrow accounts available in respect of 19

20 infrastructure lending, infrastructure loan accounts which are classified as sub-standard will attract a provisioning of 20 per cent instead of the aforesaid prescription of 25 per cent. To avail of this benefit of lower provisioning, the banks should have in place an appropriate mechanism to escrow the cash flows and also have a clear and legal first claim on these cash flows. The provisioning requirement for unsecured doubtful assets is 100 per cent. Unsecured exposure is defined as an exposure where the realisable value of the security, as assessed by the bank/approved valuers/reserve Bank s inspecting officers, is not more than 10 percent, ab- initio, of the outstanding exposure. Exposure shall include all funded and non- funded exposures (including underwriting and similar commitments). Security will mean tangible security properly discharged to the bank and will not include intangible securities like guarantees (including State government guarantees), comfort letters etc. (iii) In order to enhance transparency and ensure correct reflection of the unsecured advances in Schedule 9 of the banks' balance sheet, it is advised that the following would be applicable from the financial year onwards: a) For determining the amount of unsecured advances for reflecting in schedule 9 of the published balance sheet, the rights, licenses, authorisations, etc., charged to the banks as collateral in respect of projects (including infrastructure projects) financed by them, should not be reckoned as tangible security. Hence such advances shall be reckoned as unsecured. b) However, banks may treat annuities under build-operate-transfer (BOT) model in respect of road / highway projects and toll collection rights, where there are provisions to compensate the project sponsor if a certain level of traffic is not achieved, as tangible securities subject to the condition that banks' right to receive annuities and toll collection rights is legally enforceable and irrevocable. c) It is noticed that most of the infrastructure projects, especially road/highway projects are user-charge based, for which the Planning Commission has published Model Concession Agreements (MCAs). These have been adopted by various Ministries and State Governments for their respective public-private partnership (PPP) projects and they provide adequate comfort to the lenders regarding security of their debt. In view of the above features, in case of PPP projects, the debts due to the lenders may be considered as secured to the extent assured by the project authority in terms of the Concession Agreement, subject to the following conditions : i) User charges / toll / tariff payments are kept in an escrow account where senior lenders have priority over withdrawals by the concessionaire; ii) There is sufficient risk mitigation, such as pre-determined increase in user charges or increase in concession period, in case project revenues are lower than anticipated; iii) The lenders have a right of substitution in case of concessionaire default; iv) The lenders have a right to trigger termination in case of default in debt service; and 20

21 v) Upon termination, the Project Authority has an obligation of (i) compulsory buyout and (ii) repayment of debt due in a pre-determined manner. In all such cases, banks must satisfy themselves about the legal enforceability of the provisions of the tripartite agreement and factor in their past experience with such contracts. d) Banks should also disclose the total amount of advances for which intangible securities such as charge over the rights, licenses, authority, etc. has been taken as also the estimated value of such intangible collateral. The disclosure may be made under a separate head in "Notes to Accounts". This would differentiate such loans from other entirely unsecured loans. 5.5 Standard assets Provision on Standard Assets is looked after by Accounts Deptt., Corporate Office, Gurgaon. 5.6 Prudential norms on creation and utilisation of floating provisions Principle for creation of floating provisions by banks The bank's board of directors should lay down approved policy regarding the level to which the floating provisions can be created. The bank should hold floating provisions for advances and investments separately and the guidelines prescribed will be applicable to floating provisions held for both advances & investment portfolios Principle for utilisation of floating provisions by banks i The floating provisions should not be used for making specific provisions as per the extant prudential guidelines in respect of non performing assets or for making regulatory provisions for standard assets. The floating provisions can be used only for contingencies under extraordinary circumstances for making specific provisions in impaired accounts after obtaining board s approval and with prior permission of RBI. The Boards of the banks should lay down an approved policy as to what circumstances would be considered extraordinary. ii To facilitate banks' Boards to evolve suitable policies in this regard, it is clarified that the extra-ordinary circumstances refer to losses which do not arise in the normal course of business and are exceptional and non-recurring in nature. These extra-ordinary circumstances could broadly fall under three categories viz. General, Market and Credit. Under general category, there can be situations where bank is put unexpectedly to loss due to events such as civil unrest or collapse of currency in a country. Natural calamities and pandemics may also be included in the general category. Market category would include events such as a general melt down in the markets, which affects the entire financial system. Among the credit category, only exceptional credit losses would be considered as an extra-ordinary circumstance. 21

22 5.6.3 Accounting Floating provisions cannot be reversed by credit to the profit and loss account. They can only be utilised for making specific provisions in extraordinary circumstances as mentioned above. Until such utilisation, these provisions can be netted off from gross NPAs to arrive at disclosure of net NPAs. Alternatively, they can be treated as part of Tier II capital within the overall ceiling of 1.25 % of total risk weighted assets Disclosures Banks should make comprehensive disclosures on floating provisions in the notes on accounts to the balance sheet on (a) opening balance in the floating provisions account, (b) the quantum of floating provisions made in the accounting year, (c) purpose and amount of draw down made during the accounting year, and (d) closing balance in the floating provisions account. 5.7 Additional Provisions for NPAs at higher than prescribed rates. The regulatory norms for provisioning represent the minimum requirement. A bank may voluntarily make specific provisions for advances at rates which are higher than the rates prescribed under existing regulations, to provide for estimated actual loss in collectible amount, provided such higher rates are approved by the Board of Directors and consistently adopted from year to year. Such additional provisions are not to be considered as floating provisions. The additional provisions for NPAs, like the minimum regulatory provision on NPAs, may be netted off from gross NPAs to arrive at the net NPAs 5.8 Provisions on Leased Assets i) Sub standard assets a) 15 percent of the sum of the net investment in the lease and the unrealised portion of finance income net of finance charge component. The terms net investment in the lease, finance income and finance charge are as defined in AS 19 Leases issued by the ICAI. b) Unsecured (as defined in paragraph 5.4 above) lease exposures,, which are identified as substandard would attract additional provision of 10 per cent, i.e., a total of 25 per cent. ii) Doubtful assets 100 percent of the extent to which the finance is not secured by the realisable value of the leased asset, should be provided for. Realisable value is to be estimated on a realistic basis. In addition to the above provision, provision at the following rates should be made on the sum of the net investment in the lease and the unrealised portion of finance income net of finance charge component of the secured portion, depending upon the period for which asset has been doubtful: 22

23 Period for which the advance has Provision remained in doubtful category requirement (%) Up to one year 25 One to three years 40 More than three years 100 iii) Loss assets The entire asset should be written off. If for any reason, an asset is allowed to remain in books, 100 percent of the sum of the net investment in the lease and the unrealised portion of finance income net of finance charge component should be provided for. 5.9 Guidelines for Provisions under Special Circumstances Advances granted under rehabilitation packages approved by BIFR/term lending institutions (i) In respect of advances under rehabilitation package approved by BIFR/term lending institutions, the provision should continue to be made in respect of dues to the bank on the existing credit facilities as per their classification as substandard or doubtful asset. (ii) As regards the additional facilities sanctioned as per package finalised by BIFR and/or term lending institutions, provision on additional facilities sanctioned need not be made for a period of one year from the date of disbursement. (iii) In respect of additional credit facilities granted to SSI units which are identified as sick [as defined in Section IV (Para 4.7) of circular RPCD.SME&NFS.BC.No.5/ / dated July 1, 2013] and where rehabilitation packages/nursing programmes have been drawn by the banks themselves or under consortium arrangements, no provision need be made for a period of one year Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs, gold ornaments, government & other securities and life insurance policies would attract provisioning requirements as applicable to their asset classification status Treatment of interest suspense account Amounts held in Interest Suspense Account should not be reckoned as part of provisions. Amounts lying in the Interest Suspense Account should be deducted from the relative advances and thereafter, provisioning as per the norms, should be made on the balances after such deduction Advances covered by ECGC guarantee In the case of advances classified as doubtful and guaranteed by ECGC, provision should be made only for the balance in excess of the amount guaranteed by the Corporation. Further, while arriving at the provision required to be made for doubtful assets, realisable value of the securities should first be deducted from the outstanding 23

24 balance in respect of the amount guaranteed by the Corporation and then provision made as illustrated hereunder: Example Outstanding Balance ECGC Cover Period for which the advance has remained doubtful Value of security held ` 4 lakhs 50 percent More than 2 years remained doubtful (say as on March 31, 2014) ` 1.50 lakhs Provision required to be made Outstanding balance ` 4.00 lakhs Less: Value of security held ` 1.50 lakhs Unrealised balance ` 2.50 lakhs Less: ECGC Cover ` 1.25 lakhs (50% of unrealisable balance) Net unsecured balance ` 1.25 lakhs Provision for unsecured portion of ` 1.25 lakhs (@ 100 percent of advance unsecured portion) Provision for secured portion of ` 0.60 lakhs (@ 40 per cent of the advance (as on March 31, 2014) secured portion) Total provision to be made ` 1.85 lakhs (as on March 31, 2014) Advance covered by guarantees of Credit Guarantee Fund Trust For Micro and Small Enterprises (CGTMSE) or Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH) In case the advance covered by CGTMSE or CRGFTLIH guarantee becomes nonperforming, no provision need be made towards the guaranteed portion. The amount outstanding in excess of the guaranteed portion should be provided for as per the extant guidelines on provisioning for non performing advances. An illustrative example is given below: Example Outstanding Balance CGTMSE/CRGFTLIH Cover Period for which the advance has remained doubtful Value of security held ` 10 lakhs 75% of the amount outstanding or 75% of the unsecured amount or ` lakh, whichever is the least More than 2 years remained doubtful (say as on March 31, 2014) ` 1.50 lakhs 24

25 Provision required to be made Balance outstanding ` lakh Less: Value of security ` 1.50 lakh Unsecured amount ` 8.50 lakh Less: CGTMSE/CRGFTLIH cover (75%) ` 6.38 lakh Net unsecured and uncovered portion: ` 2.12 lakh Provision for Secured 40% of ` 1.50 lakh ` 0.60 lakh Provision for Unsecured & uncovered 100% of ` 2.12 lakh ` 2.12 lakh Total provision required ` 2.72 lakh Take out finance The lending institution should make provisions against a 'take out finance' turning into NPA pending its take over by the taking over institution. As and when the asset is taken over by the taking -over institution, the corresponding provisions could be reversed Reserve for Exchange Rate Fluctuations Account (RERFA) When exchange rate movements of Indian rupee turn adverse, the outstanding amount of foreign currency denominated loans (where actual disbursement was made in Indian Rupee) which becomes overdue, goes up correspondingly, with its attendant implications of provisioning requirements. Such assets should not normally be revalued. In case such assets need to be revalued as per requirement of accounting practices or for any other requirement, the following procedure may be adopted: The loss on revaluation of assets has to be booked in the bank's Profit & Loss Account. In addition to the provisioning requirement as per Asset Classification, the full amount of the Revaluation Gain, if any, on account of foreign exchange fluctuation should be used to make provisions against the corresponding assets Provisioning for country risk Banks shall make provisions, with effect from the year ending March 31, 2003, on the net funded country exposures on a graded scale ranging from 0.25 to 100 percent according to the risk categories mentioned below. To begin with, banks shall make provisions as per the following schedule: Risk category ECGC Classification Provisioning Requirement (per cent) Insignificant A Low A Moderate B1 5 High B2 20 Very high C1 25 Restricted C2 100 Off-credit D

26 Banks are required to make provision for country risk in respect of a country where its net funded exposure is one per cent or more of its total assets. The provision for country risk shall be in addition to the provisions required to be held according to the asset classification status of the asset. However, in the case of loss assets and doubtful assets, provision held, including provision held for country risk, may not exceed 100% of the outstanding. Banks may not make any provision for home country exposures i.e. exposure to India. The exposures of foreign branches of Indian banks to the host country should be included. Foreign banks shall compute the country exposures of their Indian branches and shall hold appropriate provisions in their Indian books. However, their exposures to India will be excluded. Banks may make a lower level of provisioning (say 25% of the requirement) in respect of short-term exposures (i.e. exposures with contractual maturity of less than 180 days) Excess Provisions on sale of Standard Asset / NPAs (a) If the sale is in respect of Standard Asset and the sale consideration is higher than the book value, the excess provisions may be credited to Profit and Loss Account. (b) Excess provisions which arise on sale of NPAs can be admitted as Tier II capital subject to the overall ceiling of 1.25% of total Risk Weighted Assets. Accordingly, these excess provisions that arise on sale of NPAs would be eligible for Tier II status in terms of paragraph of Master Circular DBOD.No.BP.BC.9/ / dated July 02, 2013 on Prudential guidelines on Capital Adequacy and Market Discipline - New Capital Adequacy Framework (NCAF) Provisions for Diminution of Fair Value Provisions for diminution of fair value of restructured advances, both in respect of Standard Assets as well as NPAs, made on account of reduction in rate of interest and / or reschedulement of principal amount are permitted to be netted from the relative asset Provisioning norms for Liquidity facility provided for Securitisation transactions The amount of liquidity facility drawn and outstanding for more than 90 days, in respect of securitisation transactions undertaken in terms of RBI guidelines on securitisation dated February 1, 2006, should be fully provided for Provisioning requirements for derivative exposures Credit exposures computed as per the current marked to market value of the contract, arising on account of the interest rate & foreign exchange derivative transactions, credit 26

27 default swaps and gold, shall also attract provisioning requirement as applicable to the loan assets in the 'standard' category, of the concerned counterparties. All conditions applicable for treatment of the provisions for standard assets would also apply to the aforesaid provisions for derivative and gold exposures Provisioning for housing loans at teaser rates It has been observed that some banks are following the practice of sanctioning housing loans at teaser rates i.e. at comparatively lower rates of interest in the first few years, after which rates are reset at higher rates. This practice raises concern as some borrowers may find it difficult to service the loans once the normal interest rate, which is higher than the rate applicable in the initial years, becomes effective. It has been also observed that many banks at the time of initial loan appraisal, do not take into account the repaying capacity of the borrower at normal lending rates. Therefore, the standard asset provisioning on the outstanding amount of such loans has been increased from 0.40 per cent to 2.00 per cent in view of the higher risk associated with them. The provisioning on these assets would revert to 0.40 per cent after 1 year from the date on which the rates are reset at higher rates if the accounts remain standard Provisioning Coverage Ratio i. Provisioning Coverage Ratio (PCR) is essentially the ratio of provisioning to gross nonperforming assets and indicates the extent of funds a bank has kept aside to cover loan losses. ii. From a macro-prudential perspective, banks should build up provisioning and capital buffers in good times i.e. when the profits are good, which can be used for absorbing losses in a downturn. This will enhance the soundness of individual banks, as also the stability of the financial sector. It was, therefore, decided that banks should augment their provisioning cushions consisting of specific provisions against NPAs as well as floating provisions, and ensure that their total provisioning coverage ratio, including floating provisions, is not less than 70 per cent. Accordingly, banks were advised to achieve this norm not later than end-september iii. Majority of the banks had achieved PCR of 70 percent and had represented to RBI whether the prescribed PCR is required to be maintained on an ongoing basis. The matter was examined and till such time RBI introduces a more comprehensive methodology of countercyclical provisioning taking into account the international standards as are being currently developed by Basel Committee on Banking Supervision (BCBS) and other provisioning norms, banks were advised that : a) the PCR of 70 percent may be with reference to the gross NPA position in banks as on September 30, 2010; b) the surplus of the provision under PCR vis-a-vis as required as per prudential norms should be segregated into an account styled as countercyclical provisioning buffer, computation of which may be undertaken as per the format given in Annex - 3; and 27

28 c) this buffer will be allowed to be used by banks for making specific provisions for NPAs during periods of system wide downturn, with the prior approval of RBI. iv. The PCR of the bank should be disclosed in the Notes to Accounts to the Balance Sheet. V. In terms of the Discussion Paper on Introduction of Dynamic Loan Loss Provisioning Framework for Banks in India dated March 30, 2012, banks are required to build up Dynamic Provisioning Account during good times and utilise the same during downturn. Under the proposed framework, banks are expected to either compute parameters such as probability of default, loss given default, etc. for different asset classes to arrive at long term average annual expected loss or use the standardised parameters prescribed by Reserve Bank of India towards computation of Dynamic Provisioning requirement. Dynamic loan loss provisioning framework is expected to be in place with improvement in the system. Meanwhile, banks should develop necessary capabilities to compute their long term average annual expected loss for different asset classes, for switching over to the dynamic provisioning framework. 6. Writing off of NPAs 8.1 In terms of Section 43(D) of the Income Tax Act 1961, income by way of interest in relation to such categories of bad and doubtful debts as may be prescribed having regard to the guidelines issued by the RBI in relation to such debts, shall be chargeable to tax in the previous year in which it is credited to the bank s profit and loss account or received, whichever is earlier. 8.2 This stipulation is not applicable to provisioning required to be made as indicated above. In other words, amounts set aside for making provision for NPAs as above are not eligible for tax deductions. 8.3 Therefore, the banks should either make full provision as per the guidelines or writeoff such advances and claim such tax benefits as are applicable, by evolving appropriate methodology in consultation with their auditors/tax consultants. Recoveries made in such accounts should be offered for tax purposes as per the rules. 8.4 Write -off at Head Office Level Banks may write- off advances at Head Office level, even though the relative advances are still outstanding in the branch books. However, it is necessary that provision is made as per the classification accorded to the respective accounts. In other words, if an advance is a loss asset, 100 percent provision will have to be made therefor. 28

29 Annexure-1 (Cf. para 3.5) Part A Details of Gross Advances, Gross NPAs, Net Advances and Net NPAs (` in crores up to two decimals) Particulars Amount 1. Standard Advances 2 Gross NPAs * 3. Gross Advances ** ( 1+2 ) 4. Gross NPAs as a percentage of Gross Advances (2/3) (in %) 5. Deductions (i) Provisions held in the case of NPA Accounts as per asset classification (including additional Provisions for NPAs at (ii) higher than prescribed rates). DICGC / ECGC claims received and held pending adjustment (iii) Part payment received and kept in Suspense Account or any other similar account (iv) Balance in Sundries Account (Interest Capitalization - Restructured Accounts), in respect of NPA Accounts (v) (vi) Floating Provisions*** Provisions in lieu of diminution in the fair value of restructured accounts classified as NPAs (vii) Provisions in lieu of diminution in the fair value of restructured accounts classified as standard assets 6. Net Advances(3-5) 7. Net NPAs {2-5(i + ii + iii + iv + v + vi)} 8. Net NPAs as percentage of Net Advances (7/6) (in %) * Principal dues of NPAs plus Funded Interest Term Loan (FITL) where the corresponding contra credit is parked in Sundries Account (Interest Capitalization - Restructured Accounts), in respect of NPA Accounts. ** For the purpose of this Statement, Gross Advances' mean all outstanding loans and advances including advances for which refinance has been received but excluding rediscounted bills, and advances written off at Head Office level (Technical write off). *** Floating Provisions would be deducted while calculating Net NPAs, to the extent, banks have exercised this option, over utilising it towards Tier II capital. Part B Supplementary Details (` in crores up to two decimals) Particulars Amount 1. Provisions on Standard Assets excluding 5(vi) in Part A above 2. Interest recorded as Memorandum Item 3. Amount of cumulative Technical Write - Off in respect of NPA accounts reported in Part A above 29

30 Annexure - 2 (Cf. para ) Relevant extract of the list of direct agricultural advances, from the Circular Priority Sector Lending Targets and Classification - paragraph III (1.1) of RPCD.CO.Plan. BC.9/ / dated July 1, 2013 Direct Agriculture A. Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups (JLGs), i.e. groups of individual farmers, provided banks maintain disaggregated data on such loans] engaged in Agriculture only. (i) (ii) Short-term loans to farmers for raising crops, i.e. for crop loans. This will include traditional / non-traditional plantations and horticulture. Medium & long-term loans to farmers for agriculture (e.g. purchase of agricultural implements and machinery, loans for irrigation and other developmental activities undertaken in the farm). (iii) (iv) (v) (vi) (vii) (viii) (ix) Loans to farmers for pre-harvest and post-harvest activities, viz., spraying, weeding, harvesting, sorting, grading and transporting of their own farm produce. Loans to farmers up to 50 lakh against pledge / hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months, irrespective of whether the farmers were given crop loans for raising the produce or not. (as amended by RPCD.CO.Plan.BC.72/ / dt ) Loans to small and marginal farmers for purchase of land for agricultural purposes. Loans to distressed farmers indebted to non-institutional lenders. (vii) Bank loans to Primary Agricultural Credit Societies (PACS), Farmers' Service Societies (FSS) and Large-sized Adivasi Multi Purpose Societies (LAMPS) ceded to or managed / controlled by such banks for on lending to farmers for agricultural activities. Loans to farmers under Kisan Credit Card Scheme. Export credit to farmers for exporting their own farm produce. B. Loans to corporates including farmers' producer companies of individual farmers, partnership firms and co-operatives of farmers directly engaged in Agriculture Activities, up to an aggregate limit of ` 2 crore per borrower for the following purposes. (i) Short-term loans for raising crops, i.e. for crop loans. This will include traditional / nontraditional plantations and horticulture. (ii) Medium & long-term loans for agriculture (e.g. purchase of agricultural implements and machinery, loans for irrigation and other developmental activities undertaken in the farm). (iii) Loans for pre-harvest and post-harvest activities, viz., spraying, weeding, harvesting, grading and sorting. (iv) Export credit for exporting their own farm produce. 30

31 Format for Computing Countercyclical Provisioning Buffer Annexure 3 Computing Countercyclical Provisioning Buffer as on September 30, 2010 Amount in ` in Crores Gross Plus Technical / Prudential Write-off * Specific Provisio ns for NPAs held/req uired Provisions for diminution in fair value of the restructure d accounts classified as NPAs Techni cal writeoff Total (4+5+6) Ratio of (7) to (3) Sub-Standard Advances Doubtful Advances (a+b+c) a b c < 1 year 1-3 Years >3 years 3. Advances classified as Loss Assets 4. Total 5. Floating Provisions for Advances (only to the extent they are not used as Tier II Capital) 6. DICGC / ECGC claims received and held pending adjustment 7. Part payment received and kept in Suspense Account or any other similar account 8. Total (Sum of column 7 of Row 4+ Row 5 + Row 6+ Row 7) 9. Provision Coverage Ratio {(Row 8/Total of Column 3 of Row 4)*100} 10. If PCR < 70%, shortfall in provisioning to achieve PCR of 70% ( 70% of Column 3 of Row 4 Row 8) 11.a Countercyclical Provisioning Buffer, if bank has achieved PCR of 70% - Floating Provisions for advances to the extent not used as Tier II capital (Row 5) 11.b Countercyclical Provisioning Buffer, if bank has not achieved PCR of 70% - Floating Provisions for advances to the extent not used as Tier II capital (Row 5) + Shortfall in provisioning to achieve PCR of 70%, if any (Row 10) which needs to be built up at the earliest. 31

32 CHAPTER 2 MANAGEMENT OF NPAS AND GUIDELINES FOR FOLLOW UP The bank has well established set-up consisting of Recovery & Law Deptt. at Head Office and Recovery & Law Deptt. at all the Regional Offices. Each office has specialised Law Officers alongwith Legal Retainer to effectively deal with NPA accounts. Recovery Officers are also provided in branches having large NPA portfolio. The system gets activated immediately once an account is declared as NPA. All out efforts, at all the three tiers of the bank are made to get it upgraded or to get the account liquidated/adjusted through persuasion. Officials from the Branch(es) & Regional Office(s) contact the defaulting borrowers to effect recovery in NPA accounts. In the NPA accounts, where the stakes of the Bank are high, officials from Recovery & Law Department also visit the concerned Branch(es) /Regional Office(s) and contact such borrower(s) to get the accounts upgraded/adjusted through persuasive efforts. The following broad guidelines for management and follow-up for all NPA accounts have been issued by the Bank and circulated vide our Circulars No. HO/REC & LAW /15 / / 489 dated and HO/REC & LAW /07 / / 552 dated : 1. Prevention of NPAs. 1.1 EAS/SMA Accounts. Our bank introduced the concept of Standard Irregular Accounts as early as 1995 to identify those Standard accounts which have the tendency of becoming NPAs, if proper watch is not kept on them. These are the accounts falling between Standard & Substandard category and the concept has been appreciated by the RBI officials and the same have been renamed as Special Mention Accounts. Bank has introduced a system of monitoring of EAS/SMA Accounts, which was circulated vide CAD Circulars No. HO/ADV/42/ /205 dated and other CAD Circulars dated and Effective monitoring by field functionaries may help detecting the irregularity at an early stage and enabling them to initiate remedial measures to prevent slippage of such accounts to NPAs. In order to identify incipient stress in the borrowal account before it turns into Non Performing Asset (NPA), Bank vide Circular No: HO/CAD/127/ /1164 dated are henceforth required to have three sub-categories under the SMA category as given in the table below: SMA SUB-CATEGORIES BASIS FOR CLASSIFICATION SMA-0 Principal or interest payment not overdue for more than 30 days but account showing signs of incipient stress SMA-1 Principal or interest payment overdue between days SMA-2 Principal or interest payment overdue between days 32

33 1.1.1 NPA Accounts Despite taking all possible measures in terms of Bank s guidelines to keep the accounts in standard category, some accounts may slip to NPA category. It has been approved that where realisable security is available, the Branch Head / Competent Authority will initiate action under SARFAESI act, 2002 immediately after account/s turn NPA. In other accounts which are not eligible for SARFAESI action, other recovery measures be initiated. 2. Strategies for improving recovery The following illustrative list of strategies/follow up measures may be adopted by the field functionaries for improving recovery: SARFAESI notice should be issued immediately in eligible accounts after the account/s turn NPA apart from maintaining regular contact with the borrowers. Help of Revenue Authorities should be sought in recovery of Priority Sector Advances through State Recovery Acts. SLBC forum, District Consultative Committee and BLBC forum should also be effectively utilized. Further, the services of Farmers Club may also be utilized for better recovery. Regional Offices shall form a team of dedicated staff members having the special aptitude for effecting recovery in not only NPA accounts but also in the weak & irregular accounts. Proper tempo should be built sufficiently in advance for launching of Recovery Campaigns by holding Recovery Camps during Kharif and Rabi harvesting/marketing seasons. Full involvement of branch staff should be ensured in these Campaigns. While organizing Recovery Campaign, active participation of Chronic & Identified Branches should be ensured for better recovery from the borrowers. Proper training to the field functionaries for improving their negotiation skill, imparting good knowledge of recovery tools and recovery management. 3. Physical verification of securities: On classifying an account as NPA, it is all the more important to immediately visit and verify the primary and collateral securities and thereafter regularly at irregular intervals so that the same are not diluted/ disposed off/ alienated by the obligants. The following guidelines must be adhered to by the incumbents: i) Incumbent incharge to ensure that title deeds of the charged securities are intact and mortgage continues to be legally enforceable. ii) All NPA accounts be distributed among branch officials as above for verification of primary/collateral securities and proper record be maintained. The verification in respect of securities charged to the Bank should be done through independent discreet enquiries/market. At the time of verification of securities, the obligants 33

34 may also be followed up for regularization/ upgradation/ adjustment through negotiated settlement. iii) In case of any dilution/short fall in the securities is noticed, immediate action be taken and efforts be made to strengthen the security aspect to safe guard Bank s interest. iv) Details of other attachable assets of the obligants be ascertained/verified and placed on Bank s record and subsequently be got attached after filing of suit. v) Cases of Fresh Slippage should be monitored meticulously in line with R&L Deptt Circular No. HO:REC:20: :837 dated which includes a) Recover the critical amount for upgradation. b) Within 60 days of notice period under SARFAESI action, steps be initiated to find a borrower by contacting nearby property dealers etc. c) Social pressure be mounted on the borrower to bring him to the negotiating table within 60 days mandatory notice period. d) Efforts be made to ensure that the sale under SARFAESI does not fail as it gives a wrong signal to the borrower as well as to the other prospective bidders. vi) Branch/R.O. shall insure that the limitation is kept live. 4. Recovery 4.1 Recovery through Govt. Agencies : For the purpose of recovery in non performing borrowal accounts, services of Government Officials such as District Collector, Tehsildar, Revenue Recovery Officers, Panchayat Officers, etc., wherever available, may be availed of fully at the prescribed rate of fees under respective State Recovery Act, so that dues are recovered as early as possible. 4.2 Recovery through Securitization and Reconstruction of Financial Assets & Enforcement of Securities Interest Act-2002 (SARFAESI Act-2002) The SARFAESI ACT-2002 is a handy tool available with the secured creditors to deal with the defaulters. Field functionaries should make effective use of the rights of enforcement of security interest as provided in the Act for quicker resolution of NPAs. The steps that are required to be taken for this purpose are given in detail in Chapter 6 on SARFAESI Act Field functionaries are advised to meticulously follow the procedure outlined in the Recovery Policy and the circulars issued from time to time. The cases where enforcement of Bank s security interest under the said Act is difficult may be allotted to Enforcement Agents. The cases may be referred to local agents who are well versed with the activity/ working to minimize the cost and to have quick results. While assigning the case to an agent, nature and details of assignment of job be specifically mentioned. The detailed guidelines for empanelment of Enforcement Agents 34

35 with Fee schedule, payment guidelines and ground rules to be observed by them have been incorporated in Chapter 6 on SARFAESI Act Recovery through Legal Action: Where SARFAESI Act-2002 is not applicable or where bank s dues are not fully recoverable through action under SARFAESI Act, legal action shall be initiated immediately without loss of further time. In terms of Recovery of Debts due to Banks and Financial Institutions Act 1993, Debt Recovery Tribunals have been established to adjudicate claims involving an amount of ` 10 lakh and over in respect of amounts due to Banks and FIs. Suit/Claim filed before Civil Courts/DRTs shall be pursued effectively. As per the decision of Supreme Court in the matter of M/s Transcore Vs. Union of India & Others SARFAESI action can continue/be proceeded with, without withdrawal of the DRT application and that the remedies under SARFAESI Act and DRT Act are complimentary to each other and can be taken up simultaneously. While exercising the aforesaid powers, following guidelines shall be complied with meticulously: It should also be ensured that simultaneous action under SARFAESI Act has already been initiated and vigorously followed up in all eligible cases, irrespective of filing suit. The Authorised Officer should ensure pursuance of the action under SARFAESI Act 2002 in all the cases where no stay is granted by the Court on borrower s appeal against such action. Further it is clarified that such cases should not be misconstrued with filing of suit by the Bank for the recovery of dues as both cases are different and hence limitation aspect should be taken care of in all such cases. While filing suit it should be ensured that Attachment Before Judgment affidavit is invariably filed. Before filing suit it should be ensured that staff accountability aspect has been properly examined and placed before the authorities TRANSFER OF AMOUNT OUTSTANDING TO PROTESTED BILLS A/C After grant of permission by the competent authority to file suit/ claim, the entire amount outstanding in all the facilities be transferred to the PB/SF account after seeking permission from the Regional Office/Head Office. As per RBI prudential guidelines, interest debited in an account, which remained unrealized is to be reversed not only for current year but also for the previous years upto the date of transfer to PB Account. The Protested Bills Account is opened in the Finacle system as per Job Card circulated by CBS Cell. Before transferring the dues to Protested Bills Account (PB account), self liquidating securities i.e. Bank Deposits/NSC/IVP/Units/LIC 35

36 Policy/Govt. Bonds/Units of Mutual Funds etc. should be encashed and credited to the account to arrive at the net outstandings. All the operating accounts of the borrower are to be closed by debit to one PB account and credit afforded to the operating accounts i.e. Cash Credit/ Term Loan / Demand Loan / Bills etc. as the case may be. No operations are allowed in PB account except credit of recovery made from the borrower. Interest accrued on the total amount recoverable from the borrower including other charges is to be calculated in the usual manner but the same is recorded in the Memorandum. The credits received in the account are adjusted to clear the outstandings in the PB account till the account shows a debit balance of Re.1/-. Thereafter, the amount of recorded interest and other charges are recovered Delegation of Powers for filing of Suit/Claim against Defaulting Borrowers before the Court/ DRT The following delegation of powers of the field functionaries for permitting filing of Suit/Claim against Defaulting Borrowers before the Court/ DRT have been fixed : Functionaries Regional Head (other than GM) Regional Head (GM) GM (R&L) at H.O. Amount Upto ` Crore Full powers Full powers Note:-The above powers shall be exclusive of recorded interest and other charges upto the date of filing of suit/ claim Ap p r o va l of DRAF T PL AI N T The Regional Heads are empowered, as hitherto, to approve all draft plaints/ pleadings of suits/claims irrespective of the amount involved as the Regional Offices are provided with Law Officer(s) & Legal Retainer(s) of adequate competence & experience for speedy disposal of the same. Once it is decided by the competent authority to initiate legal action against borrower(s)/ guarantor(s), it should be ensured that the suit is filed in the competent Court/ DRT within 30 days from the date of grant of permission by the competent authority where after it should be followed up vigorously in concerned Court/ DRT through the concerned counsel to get it decreed in the shortest possible time to make it purposeful and to effect recovery of the bank s dues. Regional Offices refer the cases to Head Office before filing of claim for declaring the account as sticky and transfer the outstanding to P.B. Account. Regional Offices are well aware that when account is classified as NPA, there is no purpose to declare it again as sticky. As such, legal action can be initiated without declaring the account sticky or transferring to PB account. 36

37 4.3.4 Power for waiver of Legal Action In case the competent authority feels that no useful purpose would be served by filing suit against a borrower due to non-availability of any security or whereabouts of the borrower(s)/guarantor(s) are not known/traceable and /or the obligants do not have means to repay the dues of the bank and initiating legal action will amount to spending good money for bad money, the competent authority may decide for waiver of legal action by taking the under noted points in mind. Regional Head is empowered for waiver of legal action in case of advances under Sponsored Schemes / Retail Product Schemes and in respect of accounts classified as loss assets or where no tangible security is available to fall back upon or whereabouts of borrower(s) / guarantor(s) are not traceable and also in cases with principal outstanding upto ` 1.00 Lac, where Regional Head feels that it will not be worthwhile to file suits against them. While taking decision for waiver of legal action, full facts of the case, staff accountability, availability of security & other circumstances be kept in view and proper record thereof be maintained. 5. Accounts where viability is yet to be decided or Rehabilitation Scheme yet to be implemented Cases referred to BIFR As per the existing practice, the accounts where credit facilities have been granted by the Branch Incumbent or Regional Head, all matters concerning conducting of viability study and preparation of rehabilitation package etc. shall continue to be dealt with at Regional Office. However, in accounts where the facilities have been granted under Head Office powers, the matter shall be required to be reported to the concerned sanctioning authority for taking timely remedial measures. In respect of cases referred to BIFR, more efforts have to be made towards improving controls and preventing further deterioration of assets charged to the Bank because legal action for recovery/regularization can t be taken in isolation without formulating a rehabilitative restructuring/one time settlement scheme as common approach (in case of consortium advances) and without the approval of BIFR. However, in case of financing by more than one secured creditors/ joint financing, BIFR permission is not required, if consent of secured creditors representing not less than sixty percent in value of the amount outstanding against financial assistance disbursed to the borrower is available, for initiating action under SARFAESI Act Where a reference is pending before the BIFR, such reference shall abate if the secured credirors, representing not less than threefourth in value of the amount outstanding against financial assistance disbursed to the borrower of such secured creditors, have taken any measures to recovery their secured debt u/s 13 (4) of SARFAESI Act. 37

38 Follow-up, therefore, in such accounts be directed towards: a) Preventing borrowers from disposal of primary and collateral securities. b) Avoiding further increase in credit exposure and minimizing funding dues to the bank. c) Obtaining additional securities (Primary and/or collateral) and personal guarantees. d) Strengthening existing securities by completing pending documentation formalities, creation/registration of charges on movable and immovable assets of the borrower(s)/ guarantor(s). A sizable amount of NPA portfolio is not getting resolved due to proceedings undergoing with BIFR/AAIFR. If the proceedings are unduly delayed, the bank should immediately seek permission from BIFR for filing claim with DRT. In all eligible/ appropriate cases, the bank may proceed under the provisions of the SARFAESI Act, In case of consortium lending, the meeting of the consortium members should be immediately called for approval of at least 60 % in value of the secured creditors so as to proceed under the provision of SARFAESI Act, For further guidance please refer to Chapter- 8 on Rehabilitation of Sick Units. 6. Recovery camps/ OBC Adalats Holding of Recovery Camps / OBC Adalats is a basic tool in the hands of bank to effect recovery in NPA accounts. Every year bank launches recovery drive by organizing Recovery Camp/ OBC Adalats at Regional offices/ Branches, particularly NPA prone branches and the system has proved very helpful in effecting recovery. All out efforts at all levels of the bank are made to contact each and every borrower and bring him to the negotiating table. Officials from Head Office including the General Mangers also visit the Recovery Camps organized by the Branches/ Regional Offices to facilitate on the spot decision on OTS proposals received in the camps. The number of camps organized by the Regions is called on quarterly basis and region-wise consolidated position is placed before the authorities. The practice of holding Recovery Camps/OBC Adalats shall be continued in future also, especially in case of accounts under small segment. 7. Engagement of Recovery Agencies The Bank has formulated a policy for engagement of Recovery. NPA accounts (whether non-suit filed, suit filed or decreed) with outstanding upto ` 10 lac are eligible under the scheme. Moreover, written off accounts can also be entrusted to Recovery Agencies to effect recovery. There is a need to implement the scheme with greater vigour and proper planning. For further guidance please refer to Chapter- 12 on Empanelment/ Engagement of Recovery Agents. 38

39 8. Incentive Scheme To make concerted and coordinated recovery efforts both at Regional Office level as well as at Branch level Bank has formulated Incentive Scheme for Staff Members on eligible cash recovery in NPA accounts with outstanding / TWO upto ` lacs as per CS&P Department Circular No: HO/ CS&P/ 28/ dated Engagement of Detective/ Investigating Agency Regional Head may approve availment of services of the Detective Agencies/ Investigating Agencies on merits of the case and cost consideration. 10. Wilful Defaulter RBI has issued detailed guidelines for declaring the borrower as wilful defaulter. For further guidance please refer to Chapter- 9 on Wilful Defaulters. 11. Fraud/ Malfeasance: Criminal action be initiated against the borrower/guarantor in consultation with I & C/ Vigilance / R & L Deptt. at Head Office. 12. Negotiated Settlement for Recovery : After analysis of the account, when it is found that the unit is not viable for rehabilitation or restructuring then normal course of recovery procedure should be immediately initiated. In case recovery is not forthcoming through normal process, possibilities of settling the account through OTS are to be explored. Resolution of Non Performing Assets through one-time settlement (OTS) has been recognized as an effective non-legal remedy by the Bank due to twin advantages of faster recovery of dues and income generation by recycling of funds otherwise likely to be blocked for a long time. One time settlement of dues refers to a negotiated settlement under which the bank endeavours to recover maximum amount within least possible time, with least possible expenses. Detailed guidelines have been given in Chapter No. 4 on Compromise and Negotiated Settlements. 13. Release of Security(ies)/ Property(ies) Charged/Mortgaged to the Bank There have been instances where borrower(es)/guarantors/mortgagor(s) have approached the bank for release of security(ies)/property(ies) charged/mortgaged to the bank against payment of the amount equivalent to its/their present market/realizable value instead of settling/liquidating upto date dues of the bank. The bank may accede to such request of the obligants in accordance with the provisions of Chapter-4 of this policy. 39

40 14. Lok Adalat: The institution of Lok Adalat constituted under Legal Services Authorities Act 1987 helps in resolving the disputes between the parties by conciliation, mediation, OTS or by amicable settlement. Every award of the Lok Adalat shall be deemed to be a decree of a Civil Court and no appeal shall lie to any Court against the award made by the Lok Adalat. Field functionaries should make best possible use of forum of Lok Adalat for amicable and quick resolution of NPAs. 15. ECGC Cover In case ECGC coverage is available, the same should continue to be reported to the Head Office even after lodgment / settlement of claim and the same be appropriated in the account as per instructions/guidelines issued by IBD department at Head Office from time to time. 16. Limitation Aspect Limitation is to be kept alive at all times. Limitation Register (OF-257) should be maintained properly and Balance Confirmation Letters / Letter of Revival are to be obtained from the obligants at regular intervals as per system in vogue. In case, there is no alternative but to initiate legal proceedings, the matter should be referred to the Competent Authority six months before the date of expiry of limitation period. As and when obligants repay some amount, they should be asked to sign the pay-inslip in the same style and fashion in which they had signed the loan documents. However, in no case limitation should be allowed to expire on the basis of documents/bc/letter of revival. In exceptional cases, where limitation is expiring shortly, suit/claim must be filed before the competent court/drt within limitation and thereafter ratification of action should be sought from the competent authority. 17. Appropriation of Recovery in NPA Accounts To maintain uniform policy, the Board vide Item No. F-1 dated has approved that the Bank should stick to the uniform policy of appropriating recovery in all NPA accounts including restructured accounts i.e recovery effected be appropriated first towards principal outstanding in the books of the Bank and thereafter towards income of the Bank. The guidelines were conveyed to Branches/ Regional Offices vide circular HO/REC/ 06/ / dated The recovery effected in NPAs/Written-off accounts has to be appropriated in the following manner: Sub-standard Accounts (C.C./O.D./LOANS/BILLS A/CS) Recoveries shall be first appropriated to reduce outstanding (principal). After full recovery of irregular portion, recoveries shall be appropriated towards recorded interest, after which the account shall be upgraded to Standard Asset. 40

41 18.2 Doubtful/Loss Assets (Protested Bill/Suit Filed/Decreed Accounts) The recoveries shall be directly credited to the concerned account i.e. recoveries shall be first appropriated to reduce outstanding (principal). After full recovery of principal, recoveries shall be appropriated towards income of the Bank. Courts / DRTs are to be informed in the next hearing in case of Suit Filed/Decreed Account(s). The detailed procedure is available in job card of DIT Deptt Written off Accounts Full / Partial (except ` 1/- to keep the account alive):- Proportionate remittance shall be made to DICGC/ECGC/CGTMSE, if need be. After reducing the outstanding to ` 1/-, the remaining recovered amount will be taken to Commission Received (Bad Debts Written off recovered) Account as per the Job Card circulated by CBS Cell. To finally close the account, ` 1/- will be adjusted at the end. 19. Reporting of Recovery The progress made towards recovery of bank s dues is to be informed to the Regional/Head Office regularly and recommendations be sent for deciding the future course of action. 20. SALE OF SECURITIES /SHARES/ DEBENTURES/ PLEDGED STOCK The sale of security may be carried out according to due process of law. Shares and debentures may be sold through brokers of stock exchanges at the best possible price. Pledged stock may be sold after following the prescribed procedure. In all cases, the security should be sold to the extent as would be sufficient to adjust bank s dues, except the cases where the security is indivisible. A proper record of the transactions is to be maintained. The borrower should be advised from time to time, in writing, about the sale of the securities. The sale by auction is to be well advertised according to local practice. The place, date, time of the sale, and the particulars of the goods should be clearly stated in the notice of sale by auction. Apart from this, it must be clearly stated that the bank has the right of rejection of any bid without assigning any reason. 21. STAFF ACCOUNTABILITY REPORT As per direction of Management Committee of Board/ Board of Directors, staff accountability aspect be examined in all NPA accounts as per Staff Accountability Policy circulated vide Establishment Circular No. HO/HRD/70/45/ /614 Dated or as amended from time to time. 41

42 22. INSURANCE COVER FOR SECURITIES STANDING IN THE NAME(S) OF DEFAULTING BORROWERS/GUARANTORS. All assets charged to the Bank as security are to be kept fully insured even after filing of civil suit for recovery of dues of the Bank. However, there is no need to obtain insurance cover if the charged assets have been sold/ disposed of by the obligants. As such, the branches should verify the existence of securities before obtaining the insurance cover. Premium paid may be recorded in the Memorandum. 42

43 ANNEXURE-I RECALL NOTICE REGD. POST/UPC To be issued to all concerned i.e. Borrowers/Partners/Directors/Guarantors etc. Ref. NO. Date Dear sir, CREDIT FACILITIES AVAILED IN THE NAME OF The above account has been running irregular for quite some time and you have taken no steps to regularise/adjust the account which has turned NPA as on... In such circumstances, the Bank has decided to recall the advance granted to you and you are advised to repay the same with upto date interest within a period of 7 days failing which the bank shall be constrained to take recourse to legal action against you for recovery of the dues at your risk and responsibility and enforce the securities held with us at your costs and consequences. Details of outstandings Outstandings as on : Interest & other charges : Calculated and payable upto TOTAL : Besides future interest : and other charges Yours faithfully, BRANCH MANAGER 43

44 CHAPTER - 3 COLLECTION OF DUES AND REPOSSESSION OF SECURITY In pursuance to the guidelines of the Reserve Bank of India on Banking Code of Conduct, Policy on Collection of Dues and Repossession of Security was approved by the Board of Directors vide BR No. F-6 in their meeting held on Accordingly, the guidelines were circulated vide Head Office Circular No.HO/REC& LAW/ 11/ dated Subsequently, Banking Codes and Standards Board of India (BCSBI) has conveyed some observations on the Model Policy Documents circulated by the IBA. After incorporating the suggestions/observations of BCSBI, the revised policy has been approved by the Board of Directors vide Item No. F-9 dated The revised approved policy (superseding the earlier policy circulated vide Head Office circular supra dated ) was circulated vide Circular No. HO/REC & LAW/03 / /254 dated The guidelines are given as under:- 1. Introduction The debt collection policy of the bank is built around dignity and respect to borrowers. The policy is built on courtesy, fair treatment and persuasion. The bank believes and is of the opinion in following fair practices within legal parameters with regard to collection of dues and repossession of security and thereby fostering borrower confidence and long-term relationship. The repayment schedule for any loan sanctioned by the bank is fixed taking into account cash flow pattern and paying capacity of the borrower. The bank explains to the customer upfront the method of calculation of interest and how the Equated Monthly Installment (EMI) or any other mode of repayment will be appropriated against interest and principal due from the customers. The method of collection of EMI (say post dated cheque, direct debit, ECS etc.) would be fixed taking into consideration the convenience of the borrower. The bank would expect the customer to adhere to the repayment schedule agreed to and approach the bank for assistance and guidance in case of genuine difficulty in meeting repayment obligations. Bank s Security Repossession Policy aims at recovery of dues in the event of default and is not aimed at whimsical deprivation of the property. The policy recognizes fairness and transparency in repossession, valuation and realization of security. All the practices adopted by the bank for follow up and recovery of dues and repossession of security will be in consonance with the laws of land / practices and procedure of Banking Industry. 44

45 2. General Guidelines All the members of the staff or any person authorized to represent our bank in collection or/and security repossession would follow the guidelines set out below : The borrower would be contacted ordinarily at the place of his/her residence/ business/occupation or at the address/es / places furnished by borrower to the Bank. Identity and authority of persons authorized to represent bank for follow up and recovery of dues would be made known to the borrowers at the first instance. The bank staff or any person authorized to represent the bank in collection of dues or/and security repossession will identify himself/ herself and display the authority letter issued by the bank and upon request. The bank would respect privacy of its borrowers at his residence. The bank to ensure that all written and verbal communication with its borrowers will be in simple business language. Normally the bank s representatives will contact the borrower between 0700 hrs and 1900 hrs, unless the special circumstances of his/her business or occupation or nature of security and /or conduct of borrower requires the bank to contact at a different time. Borrower s requests to avoid calls at a particular time or at a particular place would be honored as far as possible unless the request appears to be malafide and wilful avoidance to pay dues. The Bank will document the efforts made for the recovery of dues and gist of interactions with the borrowers. All efforts will be made to resolve bonafide and genuine disputes and/ or differences regarding payment of dues in an orderly manner. Inappropriate occasions, such as bereavement in the family or such other calamitous occasions will be avoided for making calls/visits to collect dues. 3. Giving notice to borrowers While telephonic reminders or visits by the bank s representatives to the borrowers place or residence will be used as loan/ recovery follow up measures, the bank will not initiate any legal or other recovery measures including repossession of the security without giving due notice in writing. Such notice will be sent upon default by the borrower or when telephonic reminders or personal visits fail to yield result giving 10 days time to clear and/or regularize the entire dues and also recall the entire dues and such notice will, as far as possible, will contain giving details of the amount and security including power and authority to repossess security under the contract/ loaning document. Such notice shall be acknowledged by the Borrower / Noticee. In the event of the failure of the borrower to acknowledge the notice and to respond by way of payment of dues within the time period, i.e. 10 days from the date of notice, it will be considered that the customer/ borrower/ noticee is deliberately avoiding acknowledgement or establishing contact with the Bank and the Bank will be free to initiate such recovery measures including repossession of security under the contract /loan document as deemed fit. In case of exceptional circumstances/ nature of security / conduct of borrower, the Bank will be at liberty to straightway take recourse of repossession of security without any written notice. However, the Bank may also consider the request of the borrower made in writing to Bank for settlement in genuine and bonafide cases as per Bank s Recovery Policy. Any further default to 45

46 honour the settlement by the borrower would be considered as Wilful Default and settlement shall stands withdrawn automatically without any further notice thereby making entire outstanding dues payable by the borrower. 4. Repossession of Security In case there is deliberate avoidance in acknowledging the notice or establishing contact with the Bank, the Bank upon giving notice may proceed to go for repossession of property. Repossession of security is aimed at recovery of dues and not to deprive the borrower of the property. The recovery process through repossession of security will involve repossession, valuation of security and realization of security through appropriate means. All these would be carried out in a fair and transparent manner. Due process of law will be followed while taking repossession of the property. The bank will take all prudent measures for ensuring safety and security of the property after taking custody at the expense of the borrower. 5. Valuation and Sale of Property Valuation and sale of property repossessed by the bank will be carried out as per law and in a fair and transparent manner. A separate notice for sale of property shall be given and each notice shall contain the basic information as may be required in law to enforce each such notice. The borrower mortgager shall also be given notice of the time, date and venue of the auction. The valuation given by the approved valuer will be conveyed to the borrower before proceeding with sale of property. Even while finalizing sale of the property the offer(s) received by the bank will be informed to the borrower and he will be having an opportunity to bring in a higher price bid. The bank will have right to recover from the borrower the balance dues, if any, after sale of property. The Bank s right to General Lien and its implications will be made clear to the customer at the time of financing. Excess amount, if any, after having satisfied the outstanding dues of the Bank from the money obtained on sale of property will be returned to the borrower/ mortgager after meeting all the related expenses provided the Bank is not having any other claims against the customer / mortgager etc. 6. Opportunity for the borrower to take back the security As indicated earlier in the policy document, the bank will resort to repossession of security only for the purpose of realization of its dues as a last resort and not with intention of depriving the borrower of the property. Accordingly, the bank will be willing to consider handing over possession of property to the borrower any time even after repossession and before concluding sale transaction of the property, provided the bank dues are cleared in full. If satisfied, with the genuineness of borrower s inability to pay the loan installments as per the scheduled repayment programme, which resulted in the repossession of security, the bank may consider handing over the property after receiving the installments in arrears. However, this would be subject to the bank being convinced of the arrangements made by the borrower to ensure timely repayment of remaining installments in future. 46

47 In case the borrower has paid the required sum/ dues of the Bank, repossession of the property/ title deeds shall be handed over to the borrower. Where repossession of the property is involved that will be handed over within 15 days. Where return of title deeds/ documents is involved, in case where the title deeds are with the Bank or after receipt from DRT / Court etc., as the case may be, shall be handed over to the borrower/mortgagor within 7 days from receipt of entire amount or receipt of title deed from DRT / Court etc. as the case may be, whichever is later and provided that there is no other issue as regards delay, interest or lapse of settlement etc. If due to above reason, repossession of property / title deeds is not given to the borrower, the same shall be conveyed to the borrower within 15 days. The aforesaid guidelines shall be treated as part of Recovery policy and shall also be placed on website of the Bank for information of General Public. Copy of final reminder letter to be issued to the obligants is again enclosed for ready reference of the Field Functionaries 47

48 Note:- Notice be sent on bank s letter head to all borrowers, mortgagors, guarantors and legal representatives etc., on their all addressees, in bank s records. REGD. A.D. Dated: To, Sub: Recall notice under Banking Code of Conduct- Policy on collection of dues & repossession of security, recalling facilities in your CC A/c No. /Term Loan A/c No.. Dear Sir, That undermentioned facilities were sanctioned to you on and were availed by you from our branch: (A)., (B)., (C)., (D)., (E).. The said facilities were enhanced and/or new/fresh facilities were sanctioned from time to time in the year, &. That on execution, signing, delivery of relevant documents, agreements etc. to the bank you had availed the said sanctioned facilities. That in terms of sanction/s, you the aforesaid addressee/s, in order to guarantee the due repayment of outstanding dues, offered undermentioned securities; a) Hypothecation of, b) Equitable Mortgage of undermentioned properties: (i) owned by, (ii) owned by, c) Personal guarantees of addressee Nos., & d) Corporate guarantee of. 48

49 You have also acknowledged the outstanding dues in respect of the aforesaid facilities by executing, confirmation of balances and revival letters and other documents from time to time. That operation in your aforesaid CC/Term Loan Account since have become irregular. Therefore the debt has been classified as non-performing asset on in accordance with the directives/guidelines relating to assets classification issued by the Reserve Bank of India. Despite repeated requests made vide bank on &, you have failed and neglected to repay the said dues/outstanding liabilities, which along with interest and charges as on is `. Therefore, the Bank hereby calls upon you to clear and/or regularise in full the entire outstanding dues in aforesaid account/s within 10 days from the date of this notice as, your entire facilities have been recalled, since despite informing about the irregularity telephonically as well as during visits of bank s representative to your place, no steps were taken to regularise your accounts. You are also liable to pay future interest at the rate of per annum with monthly/quarterly rests on the outstanding balance along with aforesaid amount together with incidental expenses, cost, charges etc. If you fail to repay to the Bank the aforesaid sum dues and payable by you, the Bank on complying with stipulations as may be laid down in this regard may initiate any action, civil/criminal as may be available and advised to the bank including repossession of securities as you have failed to furnish any details of hypothecated stocks/statement of account, since. The bank also apprehends that despite using bank s funds you may have deliberately and intentionally misappropriated/siphoned off hypothecated stocks, which were being held in trust as you have also stopped depositing collected payments in your aforesaid account. You are thus put on notice to not to transfer by sale, lease or otherwise alienate or create any third party interest in any secured assets without obtaining written consent of the Bank. The Bank reserves its right to call upon you to repay any further contingent liabilities that may arise including the Bills Discounting Facilities, Bank Guarantee Facilities and Letters of Credit Facilities issued and established on your behalf that may also arise in future. Yours faithfully, (Authorized Official) 49

50 CHAPTER-4 POLICY FOR COMPROMISE AND NEGOTIATED SETTLEMENTS IN NPA ACCOUNTS The Reserve Bank of India vide notification bearing No. DBOD NO. BP.BC.34/ / dated on Guidelines on Purchase/Sale of Nonperforming Assets has directed as under: 1. Banks should, while selling NPAs, work out the net present value of the estimated cash flows associated with the realizable value of the available securities net of the cost of realization. The sale price should generally not be lower than the net present value arrived at the manner described above. 2. Same principle should be used in compromise settlements. As the payment of the compromise amount may be in installments, the net present value of the settlement amount should be calculated and this amount should generally not be less than the net present value of the realizable value of securities. In conformity with the above directions of the Apex Bank, the amendments in Policy on Compromise and Negotiated Settlements in NPA Accounts of the Bank was approved by the Board of Directors vide Agenda Items No. 60 and 91 dated and respectively. Government of India, Ministry of Finance, Deptt. of Financial Services vide letter dated 3 rd April 2012 has advised all Nationalised Banks for setting up of Credit Committees at the Corporate, Regional and Zonal level in Nationalised Banks. Accordingly, the Bank has to constitute Credit Committees at Head Office Level and Regional Office Level for the sanction of credit/ Loan compromise proposals, which was approved by Board of Directors vide agenda item No. 71 dated Further, in view of the latest development, the Board of Directors has approved the amendments in Settlement Policy and guidelines related to action under SARFAESI Act, 2002 vide Board resolution no. A-14 dated and no. A-24 dated The Settlement Policy with the approved amendments is given hereunder: 1. METHOD OF CALCULATION OF TOTAL RECOVERABLE DUES UNDER MODULE INTEREST APPROACH The Recoverable Dues will be calculated in the following manner:- 1.1 In case of suit filed or non-suit filed all NPA accounts, Recoverable Dues will be equal to:- A) Principal outstanding as on date of NPA plus B) Base Rate p.a. simple or contracted rate of interest whichever is lower on principal outstanding after giving due effect of recoveries, if any, after the date of NPA till the last completed quarter plus 50

51 C) Intt. reversed at the time of NPA plus D) Charges (Legal Charges, Charges paid to Enforcement Agent etc) less E) Recoveries effected till date. 1.2 In case of all decreed NPA accounts, Recoverable Dues will be equal to A) Suit amount plus B) Intt. as per terms of decree Base Rate p.a. simple or contracted rate of interest thereon, whichever is lower, after giving due effect of recoveries, if any, from date of filing suit upto last completed quarter plus C) Cost as per terms of decree and other miscellaneous charges incurred after the date of decree less D) Recoveries effected till date. 1.3 In case of all agriculture loans, including decreed cases interest is to be 7% p.a. simple or Contracted rate or Rate of interest awarded by court (in decreed cases) whichever is lower p.a. on principal outstanding/ suit amount (in decreed cases) plus interest reversed at the time of NPA and legal and other charges as given in 1.1 and 1.2 (decreed cases). 2. CALCULATION OF NET PRESENT VALUE OF REALIZABLE VALUE OF CHARGED PRIMARY / COLLATERAL SECURITIES In view of above stated reasons, NPVRV is to be calculated on the Realisable Value (arrived by reducing the Market Value due to certain factors) by discounting with number of years i.e. time taken for realisation of the security by applying the Base Rate + 2% simple interest. In the sale process of secured assets, the bank may have to incur some expenses for realization of sale proceeds and also the sale takes some time. As such, the Net Present Value of the Realizable Value of Securities may be calculated as under: (a) n R.V./ [1 + r / 100] R.V.= Reasilable Value of charged primary/ collateral securities r = Prevailing Base Rate + 2% simple interest. *n = No. of years for realization of securities based on the complicity of the case. (b) *From the amount calculated as (a) above, expenses towards cost/ expenses/ Fee payable to Enforcement Agent etc. for realization of securities be deducted. (c) Net Present Value of Realizable Value of Charged Securities = (a) (b) *The number of years taken for realization of securities and the expenses deducted should invariably be backed by cogent reasons and justifications. Note: For the calculation of NPVRV, Reasilable Value of the property(ies) charged in the account should be taken. 51

52 Further; In case of Agricultural Land where the local State Laws prohibit sale of Agricultural land upto a particular ceiling the Bank cannot legally sale such assets as such NPVRV is treated as NIL. Number of years taken for discounting the Realisable Value (RV) to arrive at NPVRV depends from case to case. In case of long ongoing litigations, family disputes in property, HUF or Trust property there is possibility of long process delaying the sale and accordingly discount of RV in such cases may be for more number of years. This also applies to tenanted property or property with the legal heirs due to death of the borrower. There are cases where the Bank comes to know about substantial amount of Statutory dues from various bodies and the prospective buyer may not bid with the apprehension that he will have to meet these liabilities in future. In such cases also the NPVRV is adjusted with such statutory liabilities. The period of discounting applied should be justified, in case it is more than one year, keeping in view factors mentioned above. However, factors affecting calculation of NPVRV and valuation as mentioned above are illustrative only and are not exhaustive. There needs to be a proper dialogue with the empanelled valuers in the Region by showing concern in regard to valuation reports being furnished by them and full justification needs to be given by them for reducing the Market Value to the extent of Realisable Value. This issue also becomes important in the wake of recent failure of auctions in some cases when no bid could be mobilized for the Reserve Price fixed by the Bank. If the valuer has done his home work properly, we do not find any reason for failure of auction except where the physical possession is not with the Bank. Valuation should not be older than one year. The calculation of Net Present Value of the Realizable Value of Securities has been illustrated hereunder by way of an example by taking following values:- 1. Reasilable Value of charged primary/ collateral securities = ` Prevailing Base Rate (10.25%) + 2% simple interest. 3. No. of years for realization of securities = One Year / Two Years / Three Years 4. Expenses towards cost / expenses / Fee payable to enforcement Agent etc. for realization of securities = ` 4500/- 52

53 EXAMPLE i) ii) iii) 1. Reasilable value of the charged primary / collateral securities as per valuation report 2. Base Rate + 2% simple interest 3. No. of years, estimated for realization of securities ` ` ` One Year Two year Three year 4. (a)(gross) Present Value of Realizable Value of charged securities / [ /100]1 =100000/ / [ /100]2 =100000/1.1225x =100000/ / [ /100]3 =100000/1.1225x x =100000/ = ` = ` = ` (b) Expenses towards cost / expenses / Fee payable to enforcement Agent etc. for realization of securities 6. (c) Net Present Value Of Realizable Value of Charged Securities= (a) (b) ` ` ` ` ` ` MINIMUM INDICATIVE SETTLEMENT AMOUNT: The Settlement Amount shall be calculated in all NPA accounts as per guidelines given below: 3.1 Wherever the settlements have been approved as per the directives/advice of the court, the same shall not be reopened as per the approved amended Recovery Policy, irrespective of the fact that these are being honoured or not. 53

54 3.2 In case NPVRV (Net Present Value of Realizable Value) of charged securities is more than or equal to the recoverable dues (calculated as per amended module approach), the minimum settlement amount will be equal to the said recoverable dues. 3.3 In case NPVRV of charged securities is less than the recoverable dues (calculated as per amended module approach) but exceeds the principal outstanding as on date, the minimum settlement amount will be equal to the principal outstanding as on date. However, the negotiations for OTS amount should aim at recovering maximum over and above Recoverable Dues. Generally, the settlement amount should not be less than the NPVRV of charged securities. 3.4 In case NPVRV of charged securities is less than the principal outstanding as on date, the minimum settlement amount will be equal to the NPVRV of charged security(ies). However, the negotiations for OTS amount should aim at recovering maximum share of Recoverable Dues. 3.5 Where the NPVRV is zero, i.e. in those cases where there are no securities charged in the account or where all the charged securities in the account have been disposed of, but the recoverable dues have still not been satisfied, the minimum settlement amount will be whatever maximum can be recovered Minimum indicative settlement amount in accounts covered under CGTMSE, should be amount equal to or more than the amount to be recovered from Corporation. In case the claim is rejected / declined by CGTMSE minimum indicative settlement amount shall be as per General Settlement Policy of the Bank NPVRV for property/ies already put on auction shall be equal to the last reserve price of the charged securities in case of failure of auction of the property. Further, the present occupation and net worth of borrowers / guarantors will invariably be ascertained and reported to Competent Authority in all settlement proposals by the branch. No Future Interest from the date of settlement shall be charged in the account, if the same is adjusted within 3 months of the date of settlement, failing which interest shall be charged from the date of approval of settlement at the Rate as per point No. 1.1/1.2/1.3, as applicable, till the adjustment of account on reducing balance. Note:- These are the guidelines for calculation of minimum indicative settlement amount, however branch should endeavor to recover maximum possible amount. 54

55 Note :- The principal outstanding wherever mentioned above means book outstanding plus amount technically written off (and remitted to the branch) plus ECGC /DICGC claim appropriated. Base Rate: Base Rate, wherever mentioned above, means prevailing Base Rate at the time of settlement. The officer/ authority sanctioning a Compromise/ One Time Settlement should append a certificate stating that the Compromise Settlements are in conformity with RBI guidelines. Common Features for Settlement The settlement amount to be recovered under the Module Approach as indicated above, represent the minimum amount to be recovered. All efforts should be made to obtain a better offer over and above the minimum amount calculated as above. It should be ensured that at least 10% to 25% of offer amount shall be obtained as upfront amount before considering the proposal or forwarding any proposal to the competent authority. In case there is variation in the reasilable value of the securities now being reported and as reported in the last sanction / renewal and the variation is more than 10%, cogent reasons for the same, property-wise should be clearly mentioned in the proposal by BM/RO. 4. VALUATION OF PROPERTIES/ SECURITIES The value of the properties/securities be treated as market value as per the latest certificate of valuation obtained from Govt. approved valuer/ Valuer on Bank s Panel, which should not be older than one year. In case the Bank feels that the valuation of the properties submitted by a valuer is grossly under/over valued, then in such cases, the Bank may obtain another valuation report from Govt. approved valuer/ valuer on Bank s Panel to safeguard the interest of the Bank. It should be ensured that the valuer is appointed by the Bank from its Panel. Wide variation in the valuation of securities at the time of considering the OTS proposal may negate our bargaining power/pressure on the borrower to reach at an amount more favorable to the bank. Branches/ Regional Offices must exercise prudence while accepting the valuation of the property(ies) at the time of sanction/ renewal/ enhancement of credit facility(ies) as well as at the time of considering /submitting the settlement proposal(s). Specific reasons for large variations be incorporated in the settlement proposal. In such cases Branch officials shall visit the site of the property and shall enquire from the local resources the reasons for variation in valuation. Valuation report given by the approved valuer should have only two valuations one Market Value and another Realisable Value. The Valuation Report should be from the sellers point of view i.e. in case the property 55

56 is put to sale what amount the Bank is going to realize. The Market Value (MV) of property should be based on ideal location, quality construction and not any hindrance in selling the property. In other words the MV is that value for which buyer is readily available in the market. Valuation taken at the time of settlement of NPA should be close the prevailing Market Value. However, in reality this happens very rarely due to various factors associated with the property. In case the property is to be sold, the actual Realisable Value may be less than the Market Value due to various factors.. However, endeavour should be to realize the maximum price so that the Realizable Value is as close to Market Value as possible. Realisable Value may be lesser due to following factors: Residential property: Property under disputed tenancy. Tenancy covered under the Rent Control Act. Long period tenancy or with tenants of the same locality, which may be difficult for any one to get them vacated. Agricultural Property: Property cultivated in common without demarcation, Difficulty in sale due to local laws Natural factors like soil quality, irrigation facility and change in course of river etc High tension wire over the property Industrial land: Whether the land is Regularised Industrial Land or constructed on Agricultural land with orders of competent authority on CLU (Conversion of Land use) If constructed on Agricultural land, NOC from local body will be required to be obtained by the owner followed by order for CLU Constructed without CLU- then the value of the land should be taken as the value for an Agricultural Land i.e., as per Agricultural circle rate, without taking the construction into consideration. Occupied by tenants for the purpose of establishing the tenant s factory etc, it will affect the saleability since the tenants will not be inclined to vacate in a shorter duration. 56

57 Commercial property: Occupied by tenant(s) for the purpose of establishing the tenant s shop/ business etc, as it will affect the saleability since the tenants will not be inclined to vacate in a shorter duration. Another factor which commonly applies to all these different type of properties is that the approach to the property is not clear/thorough. Such properties are also not easily saleable and the Bank may have to offer such properties to the owner of the adjacent/front property. This will also affect adversely the Market Value of the property. Note:- As far as negative lien is concerned, the amount of valuation is approved to be taken as nil for consideration of OTS proposal. Valuation Report of property(ies) should be Marked For Bank Purpose and not for General Purpose Visit To Properties All properties shall invariably be got visited by the Branch Manager for verification and giving his own assessment with regard to the total value obtained from the approved valuer. His assessment will be based on local market enquiry and input provided by real estate agents. Properties having market value of ` 5.00 crores and above at the time of sanction shall be visited by official duly authorized by Regional Head or RH himself/ herself in case the properties are located at the same city or near by areas where RO is situated. Properties which are located far away form RO, the same be got visited by the local Branch Manager or the official from local RO to give their independent assessment over the market value given by the approved valuer. Property/ security shall be valued at the time of settlement from one Govt. approved valuer on Bank s Panel to arrive at realistic value for consideration of settlement proposal and to arrive at NPVRV. However, in all cases where the realisable value of the property is ` 5.00 crores and above as per first valuation report, second valuation shall be obtained from another valuer appointed by Regional Office. (Circular No. HO/RMD/46/ /507 dated Such valuation shall be accompanied by independent assessment by official from RO/ Branch. 57

58 5 DELEGATION OF POWER 5.1 Exercise of Powers Now the Board of Directors, vide Agenda Item No. 71 dated have approved constitution of committees at Regional Office and Head Office level for considering the compromise settlement proposals. At Regional Office level, the committee has been named Regional Office Level Credit Committee headed by Regional Head (RLCC-RH) and Head Office level committees have been named as Head Office Level Credit Committee headed by Executive Director (HLCC-ED) and Credit Approval Committee Headed by Chairman and Managing Director (CAC). The constitution, composition and functioning and reporting of RLCC-RH is given hereunder: S No. Particulars Approved Guidelines 1 Name of the Regional Office Level Credit Committee headed by Regional Head Committee (RLCC RH) 2 Composition of the Committee a) Regional Head - Head of Committee b) Second man at RO c) In-Charge of Credit Deptt. at RO d) In-Charge of Risk Management Deptt. at RO* e) In-Charge of Credit Monitoring Deptt. / Planning Deptt. at RO f) In-Charge of Recovery Deptt. at RO * The alternate member for Officer in-charge of Risk Management Deptt. shall be Officer in-charge of Credit Monitoring at RO. 3 Mandatory Members a) Regional Head - Head of Committee b) For Credit Proposals In-Charge of Credit Deptt. at RO c) In-Charge of Risk Management Deptt. at RO* d) For Loan compromise / write off Proposals In-Charge of Recovery Deptt. at RO * The alternate member for Officer in-charge of Risk Management Deptt. shall be Officer in-charge of Credit Monitoring at RO. 4 Quorum The quorum of the Committee shall be three members including mandatory members. 5 Periodicity of the Meeting 6 Arranging Meetings, Recording of Minutes 7 Prior screening by Settlement Advisory Committee 8 Placing, Appraising & Recommending of the Proposals to the Committee 9 Reporting of Minutes to 10 Reporting of Sanctions to Weekly once or More Often Recovery Department at RO shall organise all necessary functions such as arranging meeting of RLCC RH, recording minutes of the meeting, placing the minutes before HLCC ED. The concept of independent Settlement Advisory Committee at Regional Office level has been discontinued. The presentation of Loan Compromise & Write-Off Proposals to RLCC RH for approval shall be undertaken by respective Officer of Recovery Deptt. The minutes of the meetings of the RLCC RH shall be sent by Regional Office to Recovery & Law Department, Head Office and the department shall place these minutes before HLCC ED for reporting in the next meeting. The compromise proposals sanctioned by RLCC RH shall be placed to the authority as per the chart below. Particulars Reporting of sanctions to Proposals Sanctioned by RLCC-RH headed by GM DGM AGM HLCC-ED GM (Recovery & Law) at H.O. 58

59 S No. Particulars Approved Guidelines 11 Reporting of Compromise settlements approved by the Branch Heads will be Sanctions by Branch Heads reported to RLCC-RH. The Regional Offices shall submit the consolidated Report of all cases approved by Branch Heads/ RLCC-RH during the month to Recovery & Law Department, Head Office by 7 th of the succeeding month. 12 Reconstitution of RLCC RH The CMD shall be empowered to constitute and reconstitute from time to time the RLCC RH including induction of Branch Head of Specialized branches. The constitution, composition and functioning & reporting of HLCC-ED shall be as under: S. No. Particulars Approved Guidelines 1 Name of the Head Office Level Credit Committee headed by Executive Director Committee (HLCC ED) 2 Composition of the a) Executive Directors Committee b) GM (Respective Credit Verticals) c) GM (Recovery) d) GM (Accounts) e) GM (Credit Monitoring) f) GM (Risk Management) 3 Mandatory Members a) One Executive Director b) GM (Respective Credit Verticals) for Credit Proposal c) GM (Recovery)for Loan Compromise / Write-Off Proposal d) GM (Risk Management) Note: In case any GM mentioned as mandatory members is not present in the office then the Alternate GM shall act as mandatory member. 4 Quorum The quorum of the Committee shall be four members including mandatory members. 5 Periodicity of the Weekly once or more often Meeting 6 Arranging Meetings, Recording of Minutes The respective departments shall organise all necessary functions such as arranging meeting of HLCC ED, recording minutes of the meeting, placing the minutes before CAC etc. 7 Prior screening Prior screening by High Level Settlement Advisory Committee 8 Placing, Appraising & Recommending of the Proposals to the Committee 9 Reporting of Minutes to 10 Reporting of Sanctions to 11 Reconstitution of HLCC ED (HLSAC) The presentation of Loan Compromise & Write-Off Proposals to HLCC ED for approval shall be undertaken by convenor& member secretary of HLSAC. Credit Approval Committee (CAC) Credit Approval Committee (CAC) The CMD shall be empowered to constitute and reconstitute from time to time the HLCC ED. 59

60 The constitution, composition and functioning and reporting of CAC is given hereunder: S. No. Particulars Approved Guidelines 1 Name of the Committee Credit Approval Committee 2 Composition of the Committee a) Chairman and Managing Director b) Executive Director-1 c) Executive Director-2 d) General Manager in-charge of the Large Corporate Credit e) General Manager in-charge of the Mid Corporate Credit f) General Manager in-charge of the Priority Sector Credit g) General Manager in-charge of Accounts/CFO h) General Manager in-charge of Risk Management 3 Mandatory Members a) Chairman and Managing Director b) One Executive Director c) GM (Respective Credit Verticals) for Credit Proposal d) GM (Recovery) for Loan Compromise / Write-Off Proposal 4 Quorum The quorum of the Committee shall be the above mentioned three mandatory members. 5 Delegation of Powers for Loan compromise / write off proposals 6 Arranging Meetings, Recording of Minutes In respect of Loan compromise/ Write off proposals, the Credit Approval Committee shall exercise powers for considering compromise/write off with ceiling on amount of sacrifice of a maximum of ` 4.00 crore subject to the condition that the Bank s exposure to such borrowers does not exceed ` 250 crore (Total dues recoverable including Recorded Interest, Charges levied, Partial/Full amount written off, etc.) The Board Secretariat shall organise all necessary functions such as arranging meeting of CAC, recording minutes of the meeting, placing the minutes before Board etc. as applicable to MCB. 7 Prior screening Prior screening by High Level Settlement Advisory Committee (HLSAC) 8 Placing, Appraising & The presentation of Loan Compromise & Write-Off Proposals to Recommending of the Proposals to the Committee CAC for approval shall be undertaken by convenor& member secretary of HLSAC. 9 Reconstitution of CAC The CMD shall be empowered to constitute and reconstitute the Credit Grid from time to time. Note:- The decision of these Committees shall be unanimous. In case of unanimous decision could not be arrived at, reasons of disagreement and the basis of the decision shall be specifically mentioned in the minutes. As regards prior screening of settlements/ compromise of loan and write- off proposals falling under Head Offices powers, the same will be dealt with by High Level Settlement Advisory Committee (HLSAC), consisting of the following members: i) Dy. General Manager/ Asstt. General Manager (Recovery & Law) to act as convener and member secretary of the committee. ii) Dy. General Manager/ Asstt. General Manager (RMD) iii) Dy. General Manager/ Asstt. General Manager (CMC) iv) Dy. General Manager/ Asstt. General Manager (Large Corporate) v) Retired High Court Judge vi) Retired Senior Executive of a Nationalised Bank 60

61 Quorum of this committee shall be four and mandatory members will be as per serial No. i), two out of serial No. ii),iii) & iv) and one out of serial No. v) & vi). Settlement Recommending Committee at Branches: The cases shall be settled by the Branch Incumbent falling under his power and Recommending Committee shall be formed for this purpose by the Branch Incumbent preferably consisting of members given hereunder: a) 2 nd Man at Branch (Mandatory) b) One Official from Loans Department c) One Official from Operations. Any one official at b) & c) shall form the quorum besides IInd Man at Branch. Note:- Where only one officer is posted apart from the Branch Incumbent, the settlement cases shall be forwarded to Regional Office (RLCC-RH) with recommendations for consideration/ approval. 5.2 Power Structure In order to arrive at the extent of sacrifice, the total dues in the settlement proposal shall be calculated by Module Approach. The amount of sacrifice/relief shall be calculated as difference of amount arrived at under Module Approach and Offer Amount. Now it is decided that the Authority for approval of settlement proposal be determined based on the amount of sacrifice/ relief calculated as per Module Approach within the powers mentioned hereunder: Functionaries Amount Particulars (` in Lacs) Scale I as Branch Head NIL No powers given for settlement/ relief. Scale II as Branch Head 1.00 Total relief is to be allowed only in Recorded Interest and Miscellaneous Charges Scale III as Branch Head 2.00 Total relief inclusive of Principal + Recorded Interest + Miscellaneous Charges (maximum 20% relief is to be allowed in the Principal Outstanding) Scale IV as Branch Head 5.00 Total relief inclusive of Principal + Recorded Interest + Miscellaneous Charges AGM as Branch Head Total relief inclusive of Principal + Recorded Interest + Miscellaneous Charges DGM as Branch Head Total relief inclusive of Principal + Recorded Interest + Miscellaneous Charges Regional Office Level Credit Committee (RLCC-RH) headed by AGM Total relief inclusive of Principal + Recorded Interest + Miscellaneous Charges Regional Office Level Credit Committee (RLCC-RH) headed by DGM Total relief inclusive of Principal + Recorded Interest + Miscellaneous Charges Regional Office Level Credit Committee (RLCC-RH) headed by GM Total relief inclusive of Principal + Recorded Interest + Miscellaneous Charges Head Office Level Credit Committee (HLCC-ED) headed by Executive Director Total relief inclusive of Principal + Recorded Interest + Miscellaneous Charges Credit Approval Committee, Head Office Total relief inclusive of Principal + Recorded Interest + Miscellaneous Charges Management Committee of Board, Head Office Full Power *Sacrifice/ relief means recoverable dues as per Module Approach (Point 1) less amount offered. 61

62 Note:-i) The powers vested in officers at Regional Office level and officers at Head Office Level (GM, ED & CMD) shall cease to exist. ii) For ARM Branches, the Branch Incumbent will exercise the powers as delegated to Branch Heads in the above mentioned power chart. iii) No Authority (by name) is empowered to settle NPA account in which the credit facilities were sanctioned by him / her. These cases shall be placed before the next higher authority. iv) Accounting system in vogue shall be followed /complied with meticulously. 5.3 Delegation of Powers for allowing Write off / Waiver in Principal O/S and T.W.O. without Settlement There may be some NPA accounts, depending upon non-availability of security to fall back upon/death of obligants(s)/ or other reasons and there are no chances of recovery and accounts need to be fully written off from the books of the Bank without any settlement/recovery. Such cases shall be approved at H.O. level on merits based on the recommendations of Regional Office. The Competent Authority (Committee) at Head Office shall be in consonance with powers of Head Office functionaries as mentioned in Chapter-11 on Guidelines / Policy for final closure of Technically Written Off ( TWO) accounts with meagre present outstanding of ` 1/- or more. 5.4 Re-Opening of Compromise/ Settlement approved earlier In certain cases, the compromise proposals do not get materialized/ implemented due to failure of the borrower/ guarantor to pay the approved compromise amount on account of factors like inability to sell the assets, deterioration in the financial status of the borrower, further losses etc. The settlement proposals approved invariably should contain the clause to the effect that on default, all concessions allowed to the borrower shall stand automatically withdrawn. However, if in such cases, the borrowers again approach the Bank with compromise proposal where the amount offered is lower than the earlier approved compromise amount, such cases can be re-opened and re-settled any number of times keeping in view the factors mentioned at point No. 6.1 in this chapter and the circumstances of each case on merit. Such cases may preferably be reopened provided that some upfront amount is deposited by the borrower/ third party in No Lien Account at the time of reopening of settlement. The power to reopen the settlements approved earlier should be exercised judiciously & sparingly. The power to re-open such cases shall be exercised in accordance with the delegated power structure mentioned at point No However, wherever the settlements have been approved as per the directives/advice of the court, the same shall not be reopened as per the approved amended Recovery Policy irrespective of the facts that these are being honoured or not. It is pertinent to mention that Compromise Decree is / shall be obtained from respective Court/ DRT to safeguard the interest of the Bank in respect of Suit Filed Accounts. 62

63 5.5 Condonation of Delay in Repayment & Change / Modification / Amendment in Terms and Conditions of Repayment i) The condonation of delay in repayment of settlement amount and to change/ modify/ amend the terms and conditions of repayment can be made by the same Competent Authority (which had originally approved the settlement) provided that total relief including relief in the interest for the overdue period falls within their power. Otherwise, the case shall be referred to the next higher authority/ appropriate competent authority. ii) In case of settlement proposal approved by HLCC-ED / CAC / MCB / Board or earlier cases sanctioned by individual sanctioning authorities, the RLCC-RH shall have the power to condone the delay of up to six months subject to payment of interest at the Rate as per point No. 1.1/1.2/1.3 as applicable plus 2% penalty for the default period. The Competent Authority (which had originally approved the settlement) will be informed about the condonation of delay after recovery of entire settlement amount alongwith interest for delayed period. Further, in case of settlement proposal approved by HLCC-ED / CAC / MCB / Board or earlier cases sanctioned by individual sanctioning authorities, the HLCC-ED shall have the power to condone the delay of more than six months, but up to one year, subject to payment of interest at the Rate as per point No. 1.1/1.2/1.3 as applicable plus 2% penalty for the default period. In all the cases of condoning beyond 12 months, the CAC shall have the power to condone the delay / change / modify / relief in interest for the delayed period/ amend terms and conditions of repayment. The Competent Authority (which had originally approved the settlement) will be informed about the condonation of delay after recovery of entire settlement amount alongwith interest for delayed period. 5.6 Power to decline the settlement Proposal:- Settlement proposals received in NPA accounts will not be declined without offering any counter offer from the Bank s side. Therefore, the declining authority should calculate amount as per the Recovery Policy of the Bank and the borrower should be advised to improve the offer upto that amount and period. Further the power to decline the settlement proposal will be based on NPA amount (Principal and TWO) as on date of offer of settlement. Powers to decline the settlement proposal received in NPA accounts will be as under:- NPA amount (Principal and TWO) as on date of offer of settlement. Upto ` 1.00 lacs Upto ` lacs Above ` lacs Authority to decline the offer Branch incumbent Regional Head Head Office 63

64 6. LINE OF COMPROMISE - BASIS OF SETTLEMENT/ COMPROMISE Endeavour should be to recover the maximum amount from the defaulting borrowers through compromise/negotiated settlement i.e. even more than the dues calculated by applying Module Approach taking cognizance of the factors stated under Para No However, each case will be considered on merits by the Competent Authority to arrive at negotiated settlement with the concerned borrower. At the time of submitting settlement proposal, the borrower is required to submit an undertaking that no other credit facilities have been obtained from any of the branches of the Bank. If any facilities are outstanding details thereof must be submitted alongwith the settlement proposal. Collaterals in the shape of Govt. securities/ bonds / NSCs/ KVPs/ LICs/ Term deposits shall be appropriated in the account before settlement. Regional Offices and Branches have already been advised to appropriate the liquid securities immediately the account is classified as NPA. As such, at the time of settlement the recoverable dues be worked out after appropriating any of the above mentioned available liquid securities. Settlement shall be considered as per classification of NPA, i.e., Sub-Standard, Doubtful and Loss as the case may be. There is no need to transfer the account to Protested Bill at the time of settlement. However, it is to be ensured that all the credit facilities in the name of the borrower have been taken into account at the time of settlement. In case, where the party offers to deposit the interest component of the settlement amount, on which further interest is not to be charged by the Bank, in lump sum before the expiry of settlement period with a request to get relief in interest to some extent, such proposals can be considered by the competent authority who has approved the settlement proposal provided total amount of relief comes within the delegated power (as per point No. 5.2). It shall enable the Bank to get the twin advantages of availability of immediate liquidity and income generation by recycling of blocked funds. 6.1 F acto rs to be t aken i n to Ac c o u n t f or cons ide ring Settlement Proposal While considering compromise/negotiated settlement/ waiver/sacrifice of dues, the following factors are to be taken into account: Genuineness of the case and difficulties of borrower(s) and his/ their intention to enter into compromise for repayment of the dues. Present financial position and repaying capacity of the defaulting borrower / guarantor and the party who intend to take over the unit / business of the borrower for repayment of bank s dues. Age/ status of the advance and outstanding in the account. 64

65 Death of the borrower(s)/ partner(s)/ guarantor(s) during the course of the account(s) with the Bank materially affecting the affairs of the borrower(s) and repayments. Availability of primary and/or collateral securities and/ or other available securities of the borrower(s)/ partner(s) guarantor(s) and realisability thereof in due time without any lengthy/ costly court proceedings at the expense of the Bank. Present business activity of the borrower(s), partner(s) and guarantor(s) and source of funds for compromise/ negotiated settlement. Counter claim(s) filed by the borrower or some other litigation pending before any Court in respect of the assets charged to the Bank. Circumstances beyond the control of the Borrower/ Guarantor. Natural calamities e.g. Earth Quake, Floods, Drought, Tsunami etc. Dispute amongst partners/ promoters/ Directors. Labour problem/ Lock-out. Change in Govt. Policy. Losses suffered by the Unit/ Business. Stay obtained by the borrower(s)/ any other person from the Court/ DRT against the Bank for enforcing the charged securities through court or under the SARFAESI Act, Reference pending before BIFR. Statutory Liability towards the borrower(s). Security not available either primary or collateral. Cumbersome long drawn legal process of recovery. Settlement better than pursuing the matter in the Court. Failure of the Bank to sell charged securities under DRT Act/ SARFAESI Act due to absence of bids. In case of tenanted properties where there are less chances/ difficulty in vacation of the same or sale price may not be enough to square off the dues of the Bank. Assessment of the chances and extent of recovery for the bank, if recovery of the dues has to be achieved through Court proceedings. In the Suit Filed Accounts, possibility may be explored for compromise/ negotiated settlement without pursuing suits any further for early realization of Bank s dues. 65

66 Possibility to explore the compromise / negotiated settlement in decreed accounts would be advisable if (1) there are no assets available, (2)available assets may not fetch more than the compromise offer, (3) there are complications in executing the decree and realize the dues in short time at minimum expenses. Sometime, after slipping an account into NPA category or after filing of suit or obtaining decree, another party comes forward to purchase the Unit/ business interest of the Debtors(s). Bank can consider compromise/ negotiated settlement with the third party with the consent of the borrower(s)/ partner(s)/ guarantor(s) or without the consent of the borrower(s)/ partner(s)/ guarantor(s)under the SARFAESI Act,2002/direction of the Court or in special circumstances after permission from R& L Deptt. at Head Office. Order of court for winding up of the company. Insolvency of the borrower(s)/ guarantor(s). 6.2 Adjustment of Account from Sale of Collateral Securities No future interest from the date of settlement shall be charged in the account if the same is adjusted from sale proceeds of collateral security(ies) within 6 months of the date of settlement, failing which interest shall be charged from the date of approval of (Base Rate +2%) or applicable rate of interest, whichever is lower, on simple basis till the adjustment of account on reducing balance. 6.3 Govt. Sponsored Schemes The NPA accounts under Govt. Sponsored Schemes with sanction amount upto ` 2.00 lacs may be settled by RLCC-RH at settlement amount equivalent to total sum advanced i.e. loan amount and by giving 100% relief in the shape of income booked. However, miscellaneous expenses incurred by the bank on account of insurance etc. should be recovered. e.g. if `1.00 lac was advanced and Bank earned an income of `10,000/-, then the account can be settled by accepting ` 0.90 lac and granting concession of ` 10,000/- besides recovering misc. expenses. Such an action may be taken after exploring the possibility of recovery under the respective State Agriculture Recovery Act. No TPO in such cases shall be sent by Head Office to the Branches/Regional Offices. The Branches shall debit to CHARGES GENERAL (OTHERS)-DEBT SETTLEMENT REVERSAL EXPENSES to the extent of Scaling Down of principal amount after due approval from the competent authority. Under the CBS SYSTEM the necessary entries shall be passed by the user manually, so that details of amount reversed by way of scaling down are available at any point of time. The NPA accounts under Govt. Sponsored Schemes with sanction amount upto ` 2.00 lacs may be settled by RLCC-RH as per above norms or as per provisions of Para No. 3, whichever is lower, on merits of each case. 66

67 6.4 Settlement of Fund Based liability(ies) in which Non-Fund Based facilities remain outstanding In the cases where non-fund based facilities e.g. LC/Guarantee is/are outstanding in the books of the bank, the fund based outstanding shall be settled as above subject to the condition that the liability outstanding in non fund based facility(ies) is/are fully secured by way of collateral security/property and/or cash margin. The Regional Head shall have the power to settle the cases under the power delegated to them. However, where non-fund based facilities are secured by less than100% margin, the settlement proposal shall be submitted to next higher authority at Head Office. In such cases, Conditional No Dues Certificate shall be issued stating therein the outstanding in non fund based facility (ies). 7. REPAYMENT MODE The obligants shall honour the settlement as approved by the competent authority by accepting the same within 7 days of conveying the same to them in writing. To prove their bonafides, the obligants shall deposit upfront amount, i.e. 10% to 25% of the settlement amount or negotiated amount, while submitting/ approving the settlement proposal. The same shall be kept in No Lien Account. If the settlement is approved by the competent authority, the said amount shall be appropriated immediately without referring to the borrower/ third party. In case the settlement proposal is rejected by the competent authority, the amount kept in No Lien Account shall be refunded to the obligants / borrowers. The Regional Head shall have the power to refund the amount kept in No Lien Account irrespective of the fact that the settlement was rejected by the authority other than the Regional Head. If the upfront amount is deposited by a third party other than the borrower and kept in No Lien Account, the same shall also be immediately credited to the account on approval of the settlement proposal by the competent authority. An undertaking shall be obtained from the third party to the effect that the amount kept in No Lien Account shall be appropriated by the bank in case of approval of the settlement proposal without referring to the said person/party. In the cases where the amount is to be refunded before approval/ consideration of settlement proposal, the decision to refund shall be taken by Regional Head, irrespective of the fact that the case falls under the power of Head Office, as these cases will not be treated as approved/settled. As far as possible, the entire settlement amount may be recovered in lump-sum in cash/draft within stipulated time under the terms of settlement. In case the settlement amount is to be repaid in installments, post-dated cheques may be obtained, wherever possible, from the obligants for repayment of dues of the Bank. In such cases future interest as approved shall be charged. 67

68 No interest will be paid on the amount kept in No Lien Account. However, in case the settlement proposal is approved, the amount shall be deemed to have been credited in the account on the date of deposit thereby giving the benefit of interest. 8. DEVIATION IN SPECIAL CIRCUMSTANCES In those cases, where despite prolonged negotiations with the borrower, the offered amount is lower than the minimum Settlement Amount arrived at as per policy, Competent Authority one rank above the normal Competent Authority may consider deviation in the settlement amount within their delegated powers in exceptional cases keeping in view availability of security, statutory dues, natural calamities and other circumstances on merits of the each case. This will be applicable upto the level of RLCC-RH at respective Regional Offices. The Higher authority can approve the deviation cases also within their powers. Any other deviation, if any, shall also be dealt as above. In case of Agriculture advances having outstanding upto` lacs, RLCC-RH at respective Regional Offices can settle the cases with deviation with proper justification on merits basis provided the total relief falls within its powers. 8.1 Cases before Lok Adalat / DRT Lok Adalat In respect of cases to be settled before Lok Adalat /DRT Lok Adalat, the GM (Rec. & Law)/ Executive Director/ Chairman and Managing Director may delegate powers, if deemed fit, to Regional Head or any other officer at Head Office/ Regional Office for taking on the spot decision before the Lok Adalats. Thereafter, such cases shall be placed before the HLCC-ED/ CAC for ratification of action. 8.2 Cases before Civil Court/ DRTs in special circumstances In respect of a specific case with special circumstances to be settled before Civil Courts/DRTs, the GM (Rec. & Law)/ Executive Director/ Chairman and Managing Director may delegate powers, if deemed fit, to the Regional Head or any other officer at Head Office/ Regional Office for taking on the spot decision before the said court/ DRT. Thereafter, such cases shall be placed before the HLCC-ED/ CAC for ratification of action. 8.3 Important and Exceptional Cases In respect of important, intricate and exceptional cases, the proceedings of which are going on before court, the GM (Rec. & Law)/ Executive Director/ Chairman and Managing Director may exercise the powers of HLCC-ED/ CAC/ MCB/ Board under exigencies. However, they will get their action ratified from the competent authority, immediately, in the next meeting of the respective Committee. The Bank may enter into settlement with the borrowers by deviating from the above norms keeping in view the factors mentioned, realizable value of security (ies), time to be taken for recovery, time value of money and applying commercial wisdom. 68

69 9. PARTIAL LIQUIDATION / SETTLEMENTS/ RELEASE OF SECURITY(IES) Generally, the charged security (ies), movable or immovable, continue to remain charged to the Bank till full and final adjustment of the account as per the terms of settlement. However, in cases where settlement amount has been agreed to be repaid through sale of security(ies), the same may be/are being released in stages ensuring that the balance dues of the Bank are fully secured and protected and there is no dilution of security. In the cases where the settlement proposal is proposed to be approved by release of any of the properties charged to the bank, the settlement proposal shall expressly contain the mode in which the borrower/ obligants intend to liquidate/ settle the remaining dues of the Bank. In such cases, the Bank may issue conditional No Objection Certificate to the obligants for sale of the charged security(ies) with the condition that the entire sale proceeds shall be deposited directly with the Bank towards liquidation of the account as per terms of approval. In the event of partial settlement of an account by release of mortgaged property (ies), the entire sale proceeds of mortgaged property (ies) shall be appropriated in the account. For the recovery of remaining amount, if any, the bank shall continue / adopt legal recourse. The property (ies) owned by the defaulting borrower(s)/ guarantor(s), which are not charged to the bank shall be got attached through court after ascertaining the detail of such property (ies). However, where there is no other property(ies) available with the guarantor/ borrower, the bank may continue / adopt legal recourse as provided in the law of the land. 9.1 Power to Release / Substitution of Security (Ies) The securities charged to the Bank may be released by obtaining liquid securities in the shape of Term Deposits, NSCs/ LICs (equivalent to surrender value)/ KVPs/ Indra Vikas Patras and other Govt. securities after creation of proper charge / lien / assignment and execution of necessary documents. The bank may consider substitution of existing property/ security by accepting alternate property/ security of value equivalent to or more than the value of the existing property at the time of settlement of an account subject to satisfaction of Regional Head. In such cases, the competent authority shall be the authority who has approved the settlement proposal. As regards the settlement proposals approved by MCB, the competent authority shall be HLCC-ED/ CAC. 69

70 10. SETTLEMENT OF BANK S DUES BY PURCHASING THE PROPERTY OF OBLIGANT(S) In the settlements containing purchase of properties by the bank, the matter shall have to be first referred to Services Department, Head Office for their concurrence, whereafter the matter shall be placed before the competent authority. The guidelines issued by Services Department, Head Office, for purchase of property of the borrower by the Bank towards liquidation of its dues may be adhered to, while entering into settlement with the borrowers. However, the following points may be kept in mind while negotiating settlements in NPA accounts. The Bank may settle NPA accounts by purchasing the property(ies) charged/mortgaged to the bank in a particular account if the same is/ are residential/commercial in nature. The Bank will not purchase industrial/ agricultural property. The Bank will not purchase tenanted/ disputed properties Absolving Guarantor S. No The Bank may consider absolving guarantor / any of the guarantors (if they are more than one) in an account after receiving part of settlement amount / part payment on obtaining written consent from the borrower and other guarantors (if they are more than one). Wherever necessary, legal opinion from the Legal Retainer at Regional Office / Head Office may be obtained for taking a decision in the matter. In the event of partial liquidation of dues, the bank may consider to absolve one or more guarantors/ partners/ directors by accepting their share of dues or by retaining the existing securities or obtaining the additional securities on merits, as the case may be, provided the bank remains fully secured for the remaining amount of dues and wherever necessary legal opinion from the Legal Retainer at Regional Office / Head Office may be obtained for arriving at a decision for settlement of such account. The different functionaries shall exercise the power to absolve the guarantor/partner/director as per schedule given below: Total Recoverable dues including O/S, TWO, RI, ECGC/DICGC claim received/appropriated and misc. expenses as on the date of decision. Authority 1 Upto ` 1.00 crore RLCC-RH provided the account is fully secured. 2 Above ` 1.00 crore and less than ` 5.00 HLCC-ED crore 3 ` 5.00 crore and above CAC 70

71 10.2 Settlement by Change of Management and takeover of the Business / Unit of the Borrower There may be instances where the borrower comes forward for settlement of an account through change of Management and / or takeover of the business/unit by third party. In such cases, the bank may consider and agree to the proposal for change of management, change/transfer of ownership through transfer of shares of the company (controlling rights), change in partnership and sale of the Industrial Unit/ Shop provided acceptable settlement for repayment of bank s dues is arrived at with the consent of the defaulting borrower/ guarantors/ directors/ members/ partners. In case of sale of the unit charged to the bank, the bank s dues / settlement amount shall be appropriated out of the sale proceeds of the unit. If the prospective buyer intends to raise loan for purchase of unit, its loan proposal may be considered by the Competent Authority on merits and as per Credit Policy of the Bank subject to the condition that the bank dues shall be recovered from the proceeds of loan sanctioned to such a buyer. 11. DECLARATION (TAMASUK DEED) TO BE OBTAINED AFTER THE APPROVAL OF SETTLEMENT With a view to ensure that the parties coming forward for the settlements may not go back from their commitments and offers, a declaration deed (Tamasuk Deed) is / shall be obtained at the time of settlement/ after approval of the settlement from the obligants individual / Proprietor / Partners / Directors, as the case may be, on the prescribed format. Tamasuk Deed is to be obtained on stamp paper of requisite value and signed by all the obligants viz. Borrowers I Guarantors. Tamasuk Deed shall contain the terms of sanction of settlement / compromise besides default clause to the effect that in case of default in repayment of settlement amount, the obligants shall be liable to pay the whole amount due on the date of default alongwith upto date interest liability on entire dues of the Bank and litigation expenses incurred/ to be incurred by the Bank. 12. COMPROMISE/ CONSENT DECREE Reserve Bank of India vide circular No.DBOD.BP.BC.55/ / dated has advised / directed for obtaining Compromise / Consent Decree. The said directions were circulated vide Circular No.: HO/REC & LAW/03/ dated The said directions are as under:- 1. The cases where action has been initiated before the Courts/DRTs/BIFR, the settlement under the guidelines should be subject to the consent decree being obtained from the Courts/DRTs/BIFR. 2. The Debt Recovery Tribunal, Ernakulam has observed in a case that although the bank and the defendant borrowers had reached a settlement under the Compromise Settlement Scheme, the bank had not only failed to obtain the consent decree from the DRT, but had also suppressed from the DRT the fact of 71

72 settlement for more than two and half years thereby violating the aforesaid RBI guidelines and causing the Tribunal to unnecessary waste its valuable time. 3. The banks are, therefore, hereby advised to invariably ensure that once a case is filed before a Court/DRT/BIFR, any settlement arrived at with the borrower is subject to obtaining a consent decree from the Court/DRT/BIFR concerned. Therefore, in all Suit Filed cases, where offer of the obligants to settle the dues of the Bank is acceded to by the competent authority and the borrower deposits the settlement amount as per approved terms, pending suit shall be withdrawn as satisfied after repayment of entire settlement amount including interest. Meanwhile a Compromise Decree is / shall be obtained from respective Court / DRT to safeguard the interest of the Bank on the undernoted terms and conditions: 12.1 For Suits Pending Before Civil Courts The defendants hereby consent to suffer simple money decree against them and in favour of the plaintiff Bank. The Bank's case shall be decreed for entire suit amount with costs & pendentelite/ future interest as claimed in the suit from the date of filing of suit till realization with the stipulation that if the defendants repay the settlement amount with or without interest as per the terms of settlement, the whole decretal amount shall be deemed to have been satisfied. In cases where the dues of the Bank are secured by mortgage of immovable property, final mortgage decree shall be obtained as per the provisions of Order 34 CPC in favour of the Bank so that the Bank is not required to move in the Court again for obtaining a separate final mortgage decree in its favour. The securities held with the Bank shall continue to remain charged to the Bank till the adjustment of the account in full. The consent decree must contain a default clause to the effect that in case the defendants/judgment debtors commit default in repayment of the agreed installments, all the concessions allowed under the settlement shall stand withdrawn automatically and the entire suit / decretal amount with cost and pendentelite /future interest as claimed in the plaint / awarded by the court shall become recoverable and the Bank shall be entitled to execute the simple decree or mortgage decree for the entire amount For Claims Pending Before Debts Recovery Tribunal Joint petition for compromise on approved terms will be filed for the entire amount as claimed in the Claim Application under Section 19 of the Recovery of Debts Due to the Banks and Financial Institutions Act, 1993 for passing of Award/Recovery Certificate for the entire amount with costs & interest as claimed in the Claim Application with the stipulation that if the opposite party/ respondents repay the settlement amount with or without interest as agreed under the settlement approved 72

73 by the Competent Authority, the entire debt specified in the Recovery Certificate issued by the Debts Recovery Tribunal shall be deemed to have been satisfied. The securities held with the Bank shall remain charged to the Bank till the adjustment of the account in full as per the terms of settlement and in other cases as per the orders of the Tribunal. In case of default, all the concessions allowed under the settlement shall stand withdrawn automatically and the entire debt, as mentioned in Recovery Certificate issued by the Debts Recovery Tribunal with costs and interest shall be recovered by attachment and sale of the movable and immovable property(ies) of the defendants through the Debts Recovery Tribunal Decreed Accounts In decreed accounts, the terms of settlement shall be got recorded with the Executing Court I DRT so that the dues of the Bank are recovered in terms of the compromise arrived at with the borrower(s) along with the stipulation that in the event of default of any of the terms of settlement, the concession(s) allowed shall automatically stand withdrawn and the entire dues of the Bank shall be recovered as per the terms of decree passed by the respective Court/ DRT and Bank is at liberty to file fresh execution application for the full amount. Note : Recovery of OTS amount shall not be delayed for obtaining Joint Compromise Decree (JCD) especially in cases where settlement amount is to be paid within a short span of time Communicating the OTS approval to the borrowers: On receipt of sanction of OTS or other relaxations or concessions or part release of securities/ obligants, from the competent authority, the branch should immediately send a communication to the borrower/ obligants conveying detailed terms and conditions of OTS/approval of such relaxations/ concessions/ part release of securities/ obligants including the terms relating to payment of interest. 13. STAFF ACCOUNTABILITY Staff Accountability aspect shall also be looked into by the Competent Authority while considering settlement in NPA accounts as per Staff Accountability Policy circulated vide Establishment Circular No. HO/HRD/70/45/ /614 dated or as amended from time to time. However, it would be ensured that Staff accountability aspect must be reported in all settlement cases by mentioning its status/ outcome while recommending the settlement proposal to H.O. or for the cases settling under R.O. powers. 73

74 14. REPORTING OF SETTLEMENTS All compromise settlements approved by the Competent Authorities at HO/ RO shall be placed before the next higher authority to fall in line with RBI guidelines Settlement approved by Regional Office The Regional Offices shall submit the consolidated Report of all cases approved by Branch Heads/ RLCC-RH during the month to Recovery & Law Department, Head Office by 7 th of the succeeding month Settlement approved at Head Office Minutes of the meetings of HLCC-ED shall be reported to CAC at Head Office and that of the meetings of CAC shall be placed before the Management Committee of the Board. 15. CIRCULATION OF DEFAULTER S LIST All settlements /compromises approved by the Head Office shall be circulated to the Branches as a Caution List on half yearly basis. Generally, such defaulting borrowers shall not be accommodated in future in any way what so ever. Proper record shall be prepared and maintained for such settlements/ compromises by all the branches. 16. SETTLEMENT IN CASE OF BORROWAL ACCOUNTS RELATED TO STAFF MEMBERS In case of borrowers who are related to staff members and where there is no guarantee or any undertaking from the concerned employee, such matters shall be dealt with by the competent authority purely on merits of the case. In all those borrowal accounts, where an Officer/ award staff member has stood as guarantor, the settlement proposal shall be considered/ allowed by CAC at Head Office provided that the single borrower exposure is upto ` Crore and amount of relief/ sacrifice does not exceed ` 4.00 Crore (as per Module Approach). Cases involving single borrower exposure of above ` Crore and amount of relief/ sacrifice involving above ` 4.00 Crore (as per Module Approach), will be placed before MCB. In case of all those borrowal accounts, wherein Officer/ award staff has guaranteed / availed the loan and has retired or is not alive, the settlement proposal shall be considered / allowed by CAC at Head Office provided that the single borrower exposure is upto ` Crore and amount of relief/ sacrifice does not exceed ` 4.00 Crore (as per Module Approach). Cases involving single borrower exposure of above ` Crore and amount of relief/ sacrifice involving above ` 4.00 Crore (as per Module Approach), will be placed before MCB. 74

75 17. SANCTION OF FRESH CREDIT FACILITIES TO EX-CLIENTS OF OUR BANK / CLIENTS OF OTHER BANKS WHO HAD ADJUSTED THEIR ACCOUNTS UNDER COMPROMISE / NEGOTIATED SETTLEMENT The bank has been meticulously following the guidelines by not permitting the fresh credit limits to defaulting borrower(s) who had adjusted their accounts through compromise/ negotiated settlements. After approval of Board of Directors by way of amendments in the said policy vide BR No. F-7 dated , the request for fresh credit facilities by previous borrower(s) and borrowers of other banks who have adjusted their accounts through settlement / compromise can be considered by the bank on the following terms and conditions: The Board has directed that whenever a proposal for fresh approval in a compromise account is put up, the same be clearly indicated on the first page of the note. Besides, copy of the last settlement proposition must be enclosed. The aforesaid directions of the Board shall be meticulously followed while considering fresh proposal for approval in a compromise account Ex-Clients of our Bank The request of former clients of the bank for sanction of fresh credit facilities, while settling their previous account(s), may be considered on merits on the following terms and conditions :- 1. The applicant(s) had not been a wilful defaulter and account has not been declared fraud. 2. The account became bad in normal course for the reasons which were beyond their control. 3. Rebate was in respect of interest portion only. 4. The applicants agree to make good the sacrifice (on account of settlement/ comprise ) made by the Bank alongwith simple interest at Base Rate. However, in the case of Direct Agriculture loan to individual farmer, the NPA borrower will be eligible for lending again after settlement, subject to the following conditions that:- a) Facility is sanctioned for the next crop season. b) There was no sacrifice in principal amount while settling the account and if there was any sacrifice in principal, the same is compensated to the Bank at the time of fresh loan Clients of other Banks Clients of other Banks who had adjusted their accounts with their previous Bankers under a Compromise/Settlement may also apply for sanction of credit facilities. Their request shall be considered on merits provided that they had liquidated their dues in those Banks. 75

76 . The above provision now enables the Bank to sanction credit facilities in genuine cases, to all types of borrowers, including Non Industrial Units, on merits, after critical examination of their financial papers, who have adjusted their previous account(s) through settlement by availing certain concessions Competent Authority The Management Committee of the Board will be the competent authority to consider and sanction the credit facility(ies) to such clients. 18. SETTLEMENT OF CASES OF WILFUL DEFAULT, MALFEASANCE & FRAUD Since the data of Wilful Defaulter involving principal outstanding of ` lac and above is submitted to RBI/CIBIL/EQUIFAX/EXPERIAN, such cases for settlement are presently being placed before Management Committee of the Board for approval. With the constitution of Credit Approval Committee (CAC), it has been approved that if the single borrower exposure is upto ` Crore and amount of relief/ sacrifice does not exceed ` 4.00 Crore (as per Module Approach), such settlement proposal will be placed before CAC for its approval. Cases involving single borrower exposure of above ` Crore and amount of relief/ sacrifice involving above ` 4.00 Crore (as per Module Approach), will be placed before MCB. The cases of wilful default less than ` lac may be settled by the competent authority under whose powers the case falls and it will be deemed to be a commercial decision based on merits of each case. All cases of fraud and malfeasance, reported to Vigilance Deptt. / I&C Deptt. at Head Office, irrespective of amount involved, are presently being placed before Management Committee of the Board for approval. Now with the constitution of Credit Approval Committee (CAC), it has been approved that if the single borrower exposure is upto ` Crore and amount of relief/ sacrifice does not exceed ` 4.00 Crore (as per Module Approach), such settlement proposal will be placed before CAC for its approval. Cases involving single borrower exposure of above ` Crore and amount of relief/ sacrifice involving above ` 4.00 Crore (as per Module Approach), will be placed before MCB. 19. FORMATS TO BE USED FOR SETTLEMENT OF NPA CASES The proforma enclosed as Annexure-I (Part I to V) may be used by the branches while forwarding the case to Regional office/head office, as the case may be, depending upon the amount of relief claimed. Format of No Dues Certificate to be issued in accounts adjusted through Compromise/Negotiated settlements is enclosed as Annexure-II. Format of Tamsuk Deed is enclosed as Annexure-III. Format of Statement of settlement /compromise of debts approved under R.O. power is enclosed as Annexure-IV. Format of Statement of claim of T.P.O. for the amount written off for the cases settled / approved below principal outstanding under R.O. power for the month is enclosed as Annexure-V. If in future, any amendment is required in the Format for Settlement (Annexure-I), the ED/ CMD shall have the powers to amend the same. 76

77 ANNEXURE I ORIENTAL BANK OF COMMERCE PROFORMA FOR SETTLEMENT/ COMPROMISE IN NPA ACCOUNTS (REVISED) BO/RO/HO Date: Reg: One Time Settlement in NPA account of: B/o R/o Under General Recovery/ Special policy Settlement falling under the Powers of Gist Of Proposal: (` in lacs ) 1 Offered Settlement Amount:` 2 Recoverable dues as per module approach 3 NPVRV of charged securities Market value Rs /Realisable Distress value Rs Minimum Indicative Settlement amount 5 Sacrifice (2-1) 6 Deviation (4-1) 7 Principal/ TWO Amount 8 Total dues as per Books/decree (as on last completed quarter) 9 Date and amount of NPA (Dt ) 10 Staff Accountability: 77

78 Part-I A. Details of Proposal: (Amount in `) 1. Name of the Account (Branch/Region) 2. Constitution (Individual/Sole Prop./ Partnership/Pvt. Ltd./Ltd.) 3. Name of Prop./Partners/ Directors etc. 4. Name of Guarantors 5. Type of Activity 6. Dealing with our Bank since 7. Date of Last Sanction and Limits Sanctioned 8. Date & amount of NPA (Date) ` 9. Asset Classification 10. Provision as on 11. Recoverable Dues as per policy as on date (Recoverable Dues will be calculated as per Annexure I Part-IV ) 12. Security At the time of sanction Market Value Valuation- 1 Name of valuer--- Dt. Of valuation i)principal O/s ii)t.w.o Amount iii)amount of interest as per Module approach iv)legal/ Other expenses v) DICGC/ ECGC/ CGTMSE claim settled and appropriated vi) Charges to be Paid to the Enforcement Agent (If SARFAESI action started) Total Recoverable Dues At the time of Settlement Valuation- 2 Name of valuer--- Dt. Of valuation MV RV MV RV RV High er of two NPVR V Primary Security (Stock & bookdebts) (Description of security. Please mention the securities and their values separately) Collateral Security (Description of security. Please mention the securities and their values separately) Total of Primary Security & collateral security) In cases where the market value of any individual property exceeds ` 1.00 crores, two valuation reports are required to be obtained. 78

79 13. Efficacy of Charged Security (Whether the securities are effectively charged and enforced in the Court of Law) 14. Charges to be Paid to the Enforcement Agent (In case SARFAESI Action started in the account and the account has been assigned to an Enforcement Agent) 15. Minimum Indicative Settlement Amount as per Policy (Basis ) 16. Minimum Indicative Settlement Amount (14+15) 17. Settlement Offer ` 18. Deviation, if any (16-17) 19. Sacrifice on Settlement ` Item No. (11-17) To be accounted for as under: -Write-off in Principal Amount ` -Sacrifice in T.W.O. Amount ` -Waiver of Recorded Interest upto ` (date) & future Interest - Waiver of legal & other charges ` 20. Impact on Profitability 21. Percentage of Settlement Amount to Book outstanding (Based on Principal O/s) 22. Mode of Repayment 23. Manner of Appropriation i) Amount to be appropriated towards Principal O/s ii)amount to be taken to Commission Recd (Bad Debt written off recovered account) iii) Amount to be taken to Revenue Account (Recorded Interest received account) iv) Amount to be taken to 24. Source of Payment for Settlement amount 25. Status of SARFAESI Action 26. Status of Suit Date of Suit Commission Received (Others) e.g. Legal expenses etc. v)share of DICGC/ ECGC to be remitted vi) Charges to be Paid to the Enforcement Agent (If SARFAESI action started) Vii) Total amount to Revenue (ii+iii+iv) Amount of Suit (`) Next date of hearing with purpose 27. Status of Decree Date of Decree Amount of Decree Terms of Decree Present status 79

80 28. Total Dues as per Books as on last completed quarter* 29. Whether RBI reported fraud/wilful defaulter/criminal complaint case (if yes, give reasons) 30. Adverse remarks of Internal/ External/ RBI Inspectors/ Statutory Auditors of the period when the account became NPA. 31. Staff Accountability *In suit filed cases contractual rate be calculated Principal O/s Recorded Interest Other Recoverable Charges Total Dues B. Back Ground/ History of Account: (Indicate the original amount advanced/ facilities sanctioned for ` on (date), for what activity, further enhancements. Indicate the reasons as to how the account became irregular (non-payment of Interest and/or instalments is not sufficient) / difficulty of recovery (specify Internal/External reasons). Steps taken for regularization of account; details/dates of last visit to the unit/checking of securities/ inventory etc. Latest developments in the account: Action taken under SARFAESI/Latest Position. (Specify the reasons, if no action under SARFAESI Act, 2002) C. Justification: (Cases where the Settlement amount is below indicative Settlement amount, also give justification for considering the proposal below the indicative Settlement amount). D. Terms and Conditions ( Delete/amend whichever is not applicable) 1. Entire Settlement amount of ` shall be paid within days/months from the date of conveying approval in writing to the party. 2. ` ( % of Settlement amount deposited as upfront shall be appropriated / will be deposited before/ simultaneously at the time of conveying the approval. 3. Balance amount of ` will be paid in equal monthly/ quarterly instalments alongwith p.a. (simple) on reducing balance basis from the date of conveying approval till the date of final payment. 4. Post dated cheques for the instalments be obtained simultaneously at the time of conveying approval. However, the last instalment shall be paid for the balance amount plus remaining interest, if any, on the Settlement amount. 5. In case of compromise agreement reached with the borrower/s in non-suit filed cases, a Tamasuk Deed (Deed of Declaration) shall be obtained from all the obligants on Non- Judicial Stamp Paper of requisite value and same be kept on records. 6. Consent decree/ Settlement agreement/ Memorandum of Settlement in respect of debt due, shall be obtained. Consent decree for full debt as claimed with default clause shall be obtained. The draft of the consent decree to be obtained should be got approved/ vetted by law officer at Regional Office. However, on receipt of the payment in terms of the Settlement, the satisfaction of the consent decree be recorded. On non-adherence to any 80

81 of the terms and conditions of the Compromise/ Settlement, the consent decree as obtained by the bank shall be enforced/ executed. 7. Delay in obtention of consent decree/settlement agreement shall not be taken as a ground by the borrower for non-compliance of the terms and conditions of the Settlement arrived at with the Bank. 8. In case of any default for non-payment of one/two instalments, all the concession allowed under the Settlement shall stand withdrawn by the bank automatically and the Bank shall be entitled to recover the entire dues outstanding in the account with uptodate interest thereon. In addition to it, the proceedings under the SARFAESI Act, 2002 initiated by the Bank shall automatically stand continued without any further notice, and the bank shall be fully authorized and entitled to take over the physical possession of the mortgaged properties for which borrower(s)/guarantor(s) shall not raise any objection thereto and shall hand over the vacant and peaceful possession to the Bank besides initiating legal recourse. 9. The NOC for sale of immovable property mortgaged to the Bank shall be issued by the Bank. A tripartite agreement will be executed between the borrower, prospective purchaser of the mortgaged property and the Bank and sale proceeds will be directly deposited with the Bank. In case of more than one property, the request for release of charge on specific property in stages may be considered to provide clear title to the buyer for expeditious recovery of Settlement amount. However, it is to be ensured that at no point of time, the value of the charged securities should fall short of amount recoverable in terms of Settlement. 10. Compromise is being considered by the Bank as a commercial decision and shall have no bearing whatsoever on the ongoing criminal case/investigation, if any, being carried out by the CBI/Police/any other agency and the same shall proceed as per law. 11. Party shall withdraw their claims/ counter claim /criminal case, if any, filed against the Bank/its officials immediately. 12. Default in payment as per sanction of Settlement shall render the Settlement as failed and all reliefs and concessions shall lapse automatically and bank will be entitled to recover the entire dues as per documents/ prayer in the plaint after adjusting the payment received, if any. 13. Charge on security/ title deeds shall be released only after receipt of entire Settlement amount alongwith interest, if any. 14. The Obligants shall not be allowed any credit facility in any shape in future. 15. In case borrower seeks no due certificate after depositing the entire Settlement amount, it should be mentioned that account has been adjusted through concession rather than liquidation in normal due course. E. Recommendation of the Branch Incumbent: DEPARTMENTAL INCHARGE BRANCH INCUMBENT F. Recommendations of the Regional Office: MANAGER/ARM CHIEF MANAGER ASSTT. GEN. MANAGER/ DY. GEN. MANAGER REGIONAL HEAD 81

82 ANNEXURE I Part-II ORIENTAL BANK OF COMMERCE BO/RO/HO ACCOUNT : Sh./Smt./Ms./M/s CBS ACCOUNT No.: ADDITIONAL INFORMATION: 1. a. Limits originally permitted at BO/RO/HO: b. Sanctioning/Renewing/Reviewing Authority: Particular Date of sanction Original Sanction Last Renewal/ Enhancement Amount Sanction of Name Designation Present Place of Posting 2. Proposal/ Last communication received on (date): At Branch Level At RO Level 3. Movement in the Account: i) Date of NPA ` ii) Amount of NPA ` iii) Credits in the Account on account of Recovery after the date of NPA ` iv) Other Credits in the Account (specify) after the date of NPA ` v) Interest, if any, debited in the Account after the date of NPA ` vi) Debits (other than interest) after the date of NPA ` vii) Present Ledger Outstanding as on (date) (ii-iii-iv+v+vi) ` 4. Details of Primary/ Collateral Securities: (Amount: ` in lac) Security At the time of sanction Market Value Primary Security (Description/detail as under) Collateral Security (Description/ Details as under) BM s Valuation Certificate dated is enclosed. **Calculation Sheet enclosed as Annexure A Part-III. At the time of Settlement Date of Valuation & Market Value NPVRV** Name of the Valuer 82

83 Comments on Valuation: (Large variation in value of Property at the time of Settlement as against the value at the time of Sanction should be explained in detail) 5. Financial Net Worth(FNW) of Proprietor/Partners/Directors: S. No. Name (Sh./Smt./Ms.) FNW at the time of Sanction FNW at the time of Settlement (Amount: ` in lac) CR Date (Latest) 6. Financial Net Worth(FNW) of Guarantor(s): S. No. Name (Sh./Smt./Ms.) FNW at the time of Sanction FNW at the time of Settlement (Amount: ` in lac) CR Date (Latest) 7. Present Business Activity: (Present level of activity of the Unit and present business activity of the Obligants and their Financial Standing) 8. Limitation Aspects: Limitation for filing suit(s) is available upto. 9. Details of Alllied/ Associate Concern(s): (Comments on the conduct of the account(s). If Settlement approved, present status.) MANAGER/ARM CHIEF MANAGER ASSTT. GEN. MANAGER/ DY. GEN. MANAGER REGIONAL HEAD 83

84 Calculation of NPVRV Account: Annexure-I Part-III (a) Reasilable Value of charged primary/ collateral securities / [1 + r / 100] n r = Prevailing Base Rate + 2 % Simple Interest. n = No. of years for realization of securities based on the complicity of the case. (b) From the amount calculated as (a) above, expenses towards cost/ expenses/ Fee payable to Enforcement Agent etc. for realization of securities be deducted. (c) Net Present Value of Realizable Value of Charged Securities = (a) (b) *The number of years for realization of securities taken should invariably be backed by cogent reasons and justifications. **The expenses deducted should invariably be backed by the documentary evidence. NPVRV of the Charged Securities: 84

85 CALCULATION OF RECOVERABLE DUES (In Case of All Suit filed and Non-Suit filed NPA Accounts) 1. Principal Outstanding as on the date of NPA 2. Add: Interest as per Amended Module Approach i) Interest reversed on the date of NPA ii) Base Rate p.a. simple or contracted rate of interest, whichever is lower, on principal outstanding (as above) after giving due effect of recoveries, if any, after the date of NPA till the last completed quarter iii) Total Interest (i + ii) 3. Add: Legal Charges/ Charges paid to Enforcement Agent /Any Other Charges incurred 4. Less: Total Recovery Effected After Account became NPA ANNEXURE I Part-IV Total Recoverable Dues As per Amended Module Approach ( ) *In case of all suit filed or non-suit filed agriculture loans, interest is to be 7% p.a. simple or contracted rate, whichever is lower, on principal outstanding (as above) after giving due effect of recoveries, if any, after the date of NPA till the last completed quarter 1. Suit Amount (In Case of All Decreed NPA Accounts) 2. Add: Interest as per Amended Module Approach (i.e. **Intt. as per terms of decree or Base Rate p.a. simple or contracted rate of interest, whichever is lower, on suit amount after giving due effect of recoveries, if any, from date of filing suit upto the last completed quarter) 3. Add: Cost as per terms of decree and other miscellaneous charges incurred after the date of decree 4. Less: Total Recovery Effected from the Date of NPA Total Recoverable Dues As per Amended Module Approach ( ) **In case of all decreed agriculture loans, interest is to be charged as per terms of decree or 7% p.a. simple or contracted rate, whichever is lower, on suit amount after giving due effect of recoveries, if any, after the date of filing suit upto the last completed quarter. Note:- The Interest Calculation Sheet be attached separately. 85

86 ANNEXURE I Part-V BRANCH MANAGER VISIT REPORT -CUM CERTIFICATE OF ASSESSED VALUE Name of the Account Total Liabilities Outstanding as on date Description of the Property Visited with complete Address Principal O/s T.W.O. Amount Recorded Intt. Other Expenses Total Liability Primary Security Collateral Security Views from the aspect of Marketability Value as per Latest Valuation Report by Approved Valuer Value at the time of Original Sanction Date of Visit Assessed Market Value by Branch Incumbent Sources of Assessment/ Persons Contacted Whether there is decline in the Value of Property as compared to that at the time of last sanction? Reasons for the decline in the value of property Branch Incumbent Name : Designation : 86

87 ANNEXURE-II PROFORMA OF NO DUES CERTIFICATE TO BE ISSUED IN ACCOUNTS ADJUSTED THROUGH COMPROMISE/ NEGOTIATED SETTLEMENTS Dated : TO WHOM IT MAY CONCERN ACCOUNT : M/S.. This is to certify that the subject account has been adjusted by the obligants through concessions granted to them under a settlement entered into between the party and the Bank rather than liquidation in normal due course. BRANCH INCUMBENT 87

88 TAMASUK DEED ANNEXURE - III PROFORMA OF UNDERTAKING TO BE OBTAINED AT THE TIME OF SETTLEMENT OF NPA ACCOUNTS FROM THE BORROWER(S)/ GUARANTOR(S) This undertaking is made here at on this day of by the following : 1. Shri s/o aged years R/o. 2. Shri s/o aged years R/o. 3. Shri s/o aged years R/o. Whereas we, the above named, are the proprietor/ partners/ Director of M/s with its registered office at confirm that Oriental Bank of Commerce, had sanctioned limit of ` on to M/s bearing over PLR with a minimum of p.a. on quarterly rests in accordance with the agreement with them and other documents executed by the partners. This facility was enhanced to ` lacs w.e.f. against the securities of and personal guarantee of. Our firm/company accordingly availed the said loan facilities. However, due to bad luck, the activities of the firm/company had to be stopped due to reasons and the account of M/s with the Oriental Bank of Commerce B/o became irregular. Whereas the amount in subject account of M/s outstanding as on is `. The amount as outstanding liability/debt is acknowledged and confirmed by us on behalf of the firm. Whereas pursuant to the legal/demand notices dated and served on us as well as on M/s by the Oriental Bank of Commerce, the Bank has informed us about its intentions to institute civil suit/ action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 for recovery of their outstanding amount. However, we as proprietor/ partners/ director(s) of the firm / company as well as in our personal capacity as guarantors do not want any suit to be filed against us and/or against the firm. Now, therefore, we, and in our personal capacity as well as on behalf of M/s 88

89 as its proprietor/ partners/ director(s)/ guarantor(s) hereby agree to settle on verifying the security documents executed, signed and delivered by us and statement of account and undertake as follows :- We undertake to pay ` with/without the incidence of future interest towards the full and final payment and clearance of the outstanding liability of firm/ company. The said amount will be jointly paid by the firm/ company and by us, and if required, through our personal sources in instalments of ` p.m. w.e.f. by the second week of every month. In case of default on our part or on the part of the proprietor/ partners/ director(s) / guarantor(s) for non-payment of one /two consecutive instalments, we and M/s shall be liable to pay the whole amount of ` or such amount as outstanding on the date of default alongwith complete interest liability, due on full amount of ` w.e.f. and litigation expenses incurred/to be incurred by the bank to recover the amount. OR Terms as approved by the Competent Authority be substituted in place of 1,2 & In case of any such default for non payment of one/ two instalments as aforesaid, all the concessions allowed under the settlement shall stand withdrawn by the Bank automatically and the Bank shall be entitled to recover the entire dues outstanding in the account with uptodate interest thereon. In addition to it, the proceedings under the Securitisation Act initiated by the Bank shall automatically stand continued without any further notice, and the Bank shall be fully authorized and entitled to take over the physical possession of the mortgaged properties for which we shall not raise any objection thereto and shall hand over the vacant and peaceful possession to the Bank besides initiating legal recourse. In witness whereof, we the executants have set our hands on these presents at on the date, month and year first above written

90 ORIENTAL BANK OF COMMERCE REGIONAL OFFICE: ANNEXURE-IV Sr. N o. Date of Appro val Bran ch STATEMENT OF SETTLEMENT /COMPROMISE OF DEBTS APPROVED UNDER R.O. POWER DURING THE MONTH OF Borro wer Prese T.W.O./DI R.I. & Total Recovera Net nt CGC claim other Recovera ble dues Present O/S appropriat Charge ble dues as per realisea in the ed if any s/ on the Module ble d book Expens date of approach value of s es as settleme security per nt (NPRV) docum (5+6+7) ent rate Amou nt offere Amt. Of relief as per Modul e approa ch (9-11) (` in thousands) Amount Amt. Staff Remark Recove to be Accountab s in red as Writt ility, if any upfront en amount off (5-11) case of Govt. sponso red scheme income already booked be mention ed if settlme nt is below the prinicpa l amount CERTIFIED THAT ABOVE SETTLEMENTS HAVE BEEN APPROVED AS PER THE SETTLEMENT POLICY OF THE BANK. ARM CHIEF MANAGER/ ASSTT. GENERAL MANAGER REGIONAL HEAD 90

91 ANNEXURE V ORIENTAL BANK OF COMMERCE REGIONAL OFFICE : STATEMENT OF CLAIM OF TPO FOR THE AMOUNT WRITTEN OFF FOR THE CASES SETTLED / APPROVED BELOW PRINCIPAL OUTSTANDING UNDER RO POWER FOR THE MONTH ENDED (Amount in `) S.No. Branch Name of Date the Approval Borrower Settlement of Principal O/S Amount of Amount of as on date of settlement recovered settlement Amount to be written off for which TPO is claimed Certified that above settlements were approved as per settlement policy of the Bank and settlement amount has been recovered from the concerned borrowers as per terms of approved settlements and the branch has closed the accounts. TPO for ` be sent to us for reversal of suspense entry at our end. ARM CM / AGM / DGM REGIONAL HEAD 91

92 CHAPTER - 5 LOK ADALAT INTRODUCTION Article 39 A of the Constitution provides that the State shall secure the operation of the legal system which promotes justice on the basis of equal opportunity and shall in particular provide free legal aid by suitable legislation or schemes or in any other way, to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or other disabilities. Following the report of the Committee for implementing Legal Aid Schemes under the Chairmanship of Mr. Justice P N Bhagwati, the Government of India enacted Legal Services Authorities Act, Most of the states in India also implemented the Act in their states. Under the Act, the National Committee and the State Committees have been constituted to supervise the effective Legal Aid Schemes. Under this Act, Lok Adalats have been constituted at various places in the country for disposal of disputes in a summary way and through the process of arbitration and settlement. Functioning of Lok Adalat is entirely voluntary and conciliatory. Thus, it is a speedier system of administration of justice. Lok Adalats have taken justice to the door-steps of the poor and needy and made justice quicker and less expensive. The Awards passed by the Lok Adalats are enforceable like the decrees of civil court and are binding on all the parties to the dispute. These Awards are final as there does not lie any appeal against an Award passed by a Lok Adalat. All legal disputes pending in civil, criminal, revenue Courts or a tribunal as well as the matters which are not pending in any court can be taken to Lok Adalats for amicable settlement except criminal cases which are non-compoundable PERMANENT LOK ADALATS The Legal Services Authorities Act, 1987 as amended in 2002 enables the establishment of Permanent Lok Adalats for pre-litigation, conciliation and settlement in respect of disputes of Public Utility Services. The permanent and continuous Lok Adalats have been established in almost all the Districts in the country to provide a statutory forum to the public for amicable settlement of legal disputes. The Bank has taken recourse to this cost effective mechanism of dispensation of justice in the Northern States and system is proving useful in settlement of NPA cases particularly in the State of Delhi. It is observed that some Regional Offices are not taking whole hearted interest in participating Lok Adalats by referring maximum number of cases even after advise by Head Office as well as by the concerned Legal Authority from time to time. 92

93 GUIDELINES FOR COMPROMISE SETTLEMENT OF DUES OF BANKS AND FINANCIAL INSTITUTIONS THROUGH LOK ADALATS 1. DIRECTIONS OF THE APEX BANK Reserve Bank of India vide letter DBOD NO.LEG.BC.114/ / dated issued guidelines for compromise settlement of dues of Banks and Financial Institutions through Lok Adalats. The Apex Bank informed that Indian Banks' Association reviewed the position of the cases referred to Lok Adalats by the Banks for the settlement of their NPAs. Since the settlement of cases through Lok Adalats is inexpensive and there are other advantages also, it was decided by RBI to make increasing use of the forum of Lok Adalats to settle banking disputes involving smaller amounts. Important guidelines regarding Lok Adalat are given below. Lok Adalat guidelines should be correlated with guidelines contained in Chapter-4 for settlement of NPAs so as to settle the maximum cases before the Lok Adalats. 2. CEILING OF AMOUNT FOR COVERAGE UNDER LOK ADALATS Ministry of Finance, Govt. of India vide their letter No. F 10/43/2000-BOA dated has enhanced the monetary ceiling of cases to be referred to the Lok Adalats, organized by Civil Courts from ` 5.00 lac to ` lac with immediate effect. 3. COVERAGE OF BORROWERS In order to make a definite impact on reduction of NPAs, the policy covers all NPAs, both suit filed and non-suit filed accounts. (No cut off date and amount has been suggested since Lok Adalat is an on-going process). 4. SETTLEMENT FORMULA/ AMOUNT The RBI directed that settlement formula would be flexible and left to the Board of Directors of each institution. The bank has introduced an entirely new approach towards settlement of NPAs in Chapter-4 of the Policy keeping in view the present scenario. The existing settlement formula for both suit filed and non suit filed cases, require reconsideration, as not many cases have been settled before Lok Adalats. The settlement amount may be arrived at in NPAs in the cases before Lok Adalats in accordance with the guideline on compromise & negotiated settlement in Chapter 4 of this Recovery Policy. 5. REPAYMENT PERIOD RBI has suggested repayment period of 1-3 years in order to make immediate impact on reduction of NPAs. The repayment of bank s dues may be considered even beyond 36 months period approved earlier depending upon merits & circumstances of each case. 93

94 6. PAYMENT The amount of settlement arrived at in both the above cases, should preferably be paid in lump sum. In cases where the borrowers are unable to pay the entire amount in lump sum, 10-20% of the settlement amount or negotiated amount must be deposited at the time settlement and balance amount may be recovered in monthly installments within the stipulated period under the terms of settlement. 7. DEFAULT CLAUSE The negotiated agreement with the borrower shall contain a default clause in terms of which if the borrower does not pay two installments due regularly, within the repayment period, the entire debt will fall due for payment and bank may initiate legal proceedings while withdrawing all the concessions allowed as per settlement. 8. CONDONATION OF DELAY The delay in repayment of settlement amount may be considered by the Competent Authority as per the provisions at Para No.5.5 of Chapter-4 of this Recovery Policy. 9. AWARD BY LOK ADALAT The award given by the Lok Adalat is a deemed decree of the Court, which can be executed in case of default by the borrower(s) /judgment debtor(s). through court of competent jurisdiction. The court fee already paid in suit filed matters shall be refunded in the manner provided under Court Fee Act, However, there is no provision for refund of fee paid in the DRT. 10. ORGANISATION ARRANGEMENTS The Apex Bank directed that individual banks and financial institutions should be more pro-active and should take the responsibility of organizing Lok Adalats. The experience of implementation of RBI guidelines issued to public sector banks on onetime settlement from time to time may be kept in view. They further directed that the institutions should get in touch with State/District/Taluk level Legal Services Authorities for organizing Lok Adalats. The Banks / Financial Institutions should prescribe clear guidelines to their operating staff and monitor the progress regularly and report the same on quarterly intervals within one week from the quarters ending March, June, September and December as per format. RBI would monitor the progress made by the institutions in effecting recovery under the scheme. The convener banks of State Level Bankers' Committee (SLBC) and lead banks of districts should give necessary publicity to the Scheme on behalf of our bank through various modes, under their areas of operations, the expenses of which will be shared by our bank. 11. SYSTEM FOLLOWED BY THE BANK In order to implement the guidelines for settlement through Lok Adalats, a Lok Adalat 94

95 Cell was constituted at each Regional Office. The Regional Offices were advised to post trained staff preferably having legal background in this Cell on the lines of Asset Recovery Management Branches who are responsible for preparing and submitting the Process Sheet of each case to Regional Office for seeking their prior approval before presenting them in the Lok Adalats in coordination with the parent branch. The officials from the Parent Branch have also to be present before Lok Adalats on the date of hearing/settlement. The same system shall be continued to be followed. 12. PUBLICITY All the Regional Office were advised to carry out necessary publicity to the scheme of Settlement of cases through Lok Adalats through various modes under their areas of operation i.e. giving advertisements in the leading newspapers in Hindi, English and vernacular language in the local newspapers to make the borrower(s) aware of the scheme. 13. REPORTING OF PROGRESS The progress of cases settled under the forum of Lok Adalats is called on quarterly basis on the prescribed format (enclosed as Annexure-I) from the Regions and after consolidation, the same is placed before the board and also reported to the Apex Bank for the quarter ending March, June, September and December every year. 14. HOLDING OF LOK ADALATS BY DRTs RBI vide letter DBOD NO. BC.36/ / dated informed all the scheduled commercial banks and FIs that some of DRTs/ DRATs decided to hold Lok Adalat of pending matters on an experimental basis. In this connection a doubt was raised by banks whether, in view of the limitation of ceiling of ` 5 lacs for disposal by Lok Adalats, they should participate in the Lok Adalats convened by various DRTs/DRATs for resolving cases involving ` 10 lacs and above. The issue was examined in consultation with Government of India and it was advised that there is no objection for DRTs/ DRATs organizing Lok Adalats to take up matters where outstanding are ` 10 lacs and above. Accordingly, banks were permitted to participate in the Lok Adalats organized by the DRTs/DRATs The apex bank further advised the banks to derive benefit out of above arrangement and reduce the stock of NPAs in view of advantages in using the forum of Lok Adalats in compromise settlement. All the Regional Heads have already been advised to take up matters pending before DRTs of outstanding of ` lacs and above for settlement through concerned DRT. 15. POWER STRUCTURE The decision on sacrifice amount during settlement shall be taken as per power structure in chapter 4 on Compromise & Negotiated Settlement in NPA Accounts. 95

96 16. REPORTING OF PROGRESS OF CASES SETTLED BEFORE DRT LOK ADALATS The progress of cases settled under the forum of Lok Adalats is being called on quarterly basis on the prescribed format (enclosed as Annexure-I) from the Regions. After consolidation the same is placed before the Top Management for the quarter ending March, June, September and December every year. 17. PARTICIPATION IN LOK ADALAT All the Regional Offices have been requested on regular basis that the branches in their region may be advised to approach the Distt Legal Services Authorities for holding of Lok Adalats and participate in them in a big way so as to settle maximum number of bank s cases through this forum. They have also been requested to approach the concerned DRT for holding of DRT Lok Adalats since the mechanism of Lok Adalat is a cost/ time saving mode of effecting recoveries in NPA accounts. They have been advised to accord due importance for settlement of NPA cases through Lok Adalat simultaneously with other recourses. It is also advised to undertake proper ground work and adequate exercise at RO as well as at Branch level before the date of Lok Adalat. All Regional Heads have been requested to ensure that maximum number of NPA cases at litigative as well as at pre-litigative stage are referred to Lok Adalats which will help in improving the recovery position of the Bank, reducing the level of NPA and thereby increasing the profitability of the Bank. Encl.: Annexure I. 96

97 ANNEXURE-I (Part-A) ORIENTAL BANK OF COMMERCE REGION : PROGRESS MADE IN RECOVERY UNDER THE FORUM OF LOK ADALATS IN RESPECT OF CASES WITH OUTSTANDING BALANCE UP TO ` LACS FOR THE QUARTER ENDED * (Amount: ` in lac) PERIOD CASES REFERRED No. of Accounts Amt. O/S. CASES DECIDED No. of Amt. OF Accounts SETTLEMENT. RECOVERY EFFECTED No. of Accounts DECIDED CASES WHERE REPAYMENT IS DUE BEYOND THE AGREED TIME Amt. No. of Amt. Accounts O/S. EXECUTION FILED No. of Accounts Amt. 1. Opening Balance as On 2. During the Quarter Total (1+2) ( Closing Balance for the quarter) Number of Lok Adalats held during the quarter under Report Date and Names of Centres / places where Lok Adalats were held during the quarter under report. ARM CHIEF MANAGER REGIONAL HEAD * Separate information be given for DRT and Non- DRT Lok Adalat. 97

98 CHAPTER 6 THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 INTRODUCTION The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Bill having passed by both the houses of Parliament received the assent of the President on 17 th December, It came on the Statutes Book as THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 (54 of 2002) and was amended time to time. GUIDELINES OF THE BANK FOR TAKING ACTION UNDER THE SARFAESI ACT, EMPOWERMENT TO BANKS/FIs By virtue of the said Act, Banks/FIs have been empowered to take action against their defaulting borrower(s) for recovery of their dues by enforcing the secured assets without intervention of the courts. 2. ELIGIBILITY OF ACCOUNT FOR TAKING ACTION UNDER THE ACT All the accounts classified as NPAs in accordance with the definition of asset classification of RBI are eligible for taking action under the said Act, namely : Sub-standard Doubtful Loss 3. IDENTIFICATION OF NPAS FOR ISSUE OF NOTICE Units where business is running but they are not paying the Bank s dues. Unit which is not working and business is not running and they have not paid the dues of the Bank. The value of primary and collateral security is sufficient to realize the entire or part outstanding with up-to-date interest and other charges. All non-suit filed / Suit Filed cases subject to availability of limitation. It is pertinent to mention that in accordance to judgment of Supreme Court of India dated in the case of M/s Transcore, the Banks/FIs can take simultaneous action under SARFAESI Act and the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (RDDBF Act) for recovery of their dues. In this regard, the details on the said judgment have already been sent to all the Regional Offices vide 98

99 our Circular letter dated and reiterated in Circular No. HO / REC & Law / 04 / / 279 dated As such, the possibilities of simultaneous action be explored and action be taken accordingly. It is left to the discretion of Regional Head / Branch Incumbent to judge faster recourse to effect recovery on case to case basis, taking into account limitation aspect, value of securities charged in the account etc. In cases where reference is pending before BIFR, such reference shall abate if the secured creditors representing not less than 60% in value of the amount outstanding against financial assistance disbursed to the borrower, have taken any measure to recover their secured debt under Section 13 (4). We may also give consent to other lenders /consortium leader for issue of joint notice on behalf of all other banks /FIs including our Bank on the defaulting borrowers where reference is pending before BIFR. Explanation: The bank can independently go in for action under SARFAESI Act, 2002 where it has an exclusive charge over a property/third party collateral security in the shape of immovable property without obtaining consent of secured creditors representing not less than 60% in value of the amount outstanding. ABATEMENT OF REFERENCE BEFORE BIFR Reference before BIFR shall abate only if the secured creditors, representing not less than ¾ in value of the amount outstanding against financial assistance disbursed to the borrower have taken any measures to recover their secured debt u/s 13(4) of the Act. The cases where restructuring/ reschedulement is possible or is under consideration of the Bank or cases where the amount due is less than 20% of the principal amount and interest thereon, the Branches/ Regional Offices shall not issue notice in such cases. Issue notice to any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to borrower. In case of rented properties, the rent may be claimed by the bank by issuing the notice to the tenant. 3.1 EXCEPTIONS The Act is not applicable to certain rights / security interest namely, Lien on goods, money of security Pledge of movables Security interest over Aircraft or Ship / Vessel Security interest under Conditional Sale, Hire Purchase or Lease and such transactions. Rights of Unpaid seller Properties not liable to attachment under Code of Civil Procedure. Security Interest in Agricultural land Security Interest in Loans below ` 1 lac Any case in which the amount due is less than 20% of the Principal amount and interest thereon. 99

100 3.2 LIMITATION Before issuing notices Under Section 13 (2) to the borrower (s)/guarantor ( s), the branches have to ensure that reasonable period of limitation is available for taking further action in the matter which shall not be less than twelve months. The twelve months period has been suggested because in case of non recovery of 100% dues of the Bank, a suit in Court of Competent jurisdiction might/will have to be pursued. As regards limitation under SARFAESI Act 2002, we had clarified this aspect vide our circular letter dated as under:- As per Section 36 of the SARFAESI Act, the secured creditor is entitled to take action U/Sec 13 (4) if the claim in respect of the financial asset is made within the period of limitation under the Limitation Act That for money claims, the limitation available is 3 years and in respect of enforcement of mortgage, the same is 12 years. As the SARFAESI Act does not specify as to the exact period of limitation, we have referred the matter to the IBA. In the meeting of select member Banks held at IBA on 28 th March 2008, at Mumbai, amongst other issues, the above matter was also discussed and the general opinion of the participants and also of Shri. Umarji, Legal Advisor, IBA was that, we give a liberal interpretation of the provisions of SARFAESI Act. Accordingly, for sale of the secured immovable property, the provisions applicable is Article 62 of Limitation Act, which gives 12 years period from the date when the money sued for becoming due to sell the mortgaged property under Section 13 (4) of the SARFAESI Act. For the sale of Secured assets other than mortgaged ones, it shall be 3 years. As regards completing the steps for the sale of the secured assets, once the claim in respect of the financial assets is made within limitation, the opinion formed at the meeting was that what was required to be done was it to be followed up by the measures under sub-section (4) of Section 13. However, since the provision is not clear about limitation for claiming the deficit amount after realizing the secured asset, it is always safer to file suit in court or original application in DRT, as the case may be, along with taking measures under SARFAESI Act, as at present simultaneous steps are allowed PERMISSION BY COMPETENT AUTHORITY FOR INITIATING ACTION UNDER SARFAESI ACT, 2002 It has been approved that in NPA accounts wherever realisable security is available, the Branch Head will initiate action under SARFAESI Act, 2002 immediately after account/s turn NPA. In case the Branch is not headed by officer of atleast scale IV, the Branch Head will refer it to the Regional Office for getting the notice issued APPOINTMENT OF AUTHORISED OFFICERS FOR TAKING ACTION UNDER THE PROVISIONS OF SECURITISATION ACT, 2002 As per the Security Interest Enforcement Rules 2002, given under the SARFAESI Act, 100

101 2002, the authorized officer means an officer not less than a Chief Manager of a Public Sector Bank. The Rule reads as under:- 2(a) authorized officer means an officer not less than a chief manager of a public sector bank or equivalent, as specified by the Board of Directors or Board of Trustees of the secured creditor or any other person or authority exercising powers of superintendence, direction and control of the business or affairs of the secured creditor, as the case may be, to exercise the rights of a secured creditor under the Ordinance. The Board of Directors of the Bank has, vide BR No. 48 dated , approved that the policy of the bank with respect to appointment of Authorised Officers be amended and the officers of the rank of Chief Manager and above shall only be appointed as Authorised Officers. In view of the same, the Bank shall appoint only Chief Managers and above as Authorized Officers under SARFAESI Act and in the pending matters wherever officers less than Chief Managers are Authorized Officers, they shall be replaced with Chief Managers or above to proceed further with the matter under the Act. 3.4 ISSUE OF NOTICE Non-Suit Filed Cases After identification of the account, notice will be issued on the prescribed format to the borrower & guarantor u/s 13(2) as per Annexure-I & Annexure-II respectively Suit Filed Cases In respect of suit field cases notice has to be served on the borrower/guarantor as per Annexure-III. In such cases, the concerned court/drt has to be informed as per Annexure-IV. In case any restraint orders or attachment before judgement has been obtained from the court/ DRT, the same shall be got modified for the purpose of taking steps under the SARFAESI Act, 2002 by moving appropriate application before the court/ DRT concerned through Bank s advocate dealing with the matter. Where the authorized officer has reason to believe that the borrower or his agent is avoiding the service of the notice, the service shall be effected by affixing a copy of demand notice on the outer door or some other conspicuous part of the house or building in which borrower ordinarily resides or carries on business or personally works for gain and also by publishing the contents of the demand notice in two leading newspapers, one in vernacular language, having sufficient circulation in that locality. Reply to the representation of borrower If the borrower makes any representation or raises any objection to the notice served by the bank under Sec 13(2), the authorized officer shall in consultant with the competent authority, decide on the representation/ objection and shall communicate the same to the borrower within 15 days of receipt of such representation /objection. 101

102 3.5 EXPIRY OF 60 DAYS NOTICE PERIOD If the borrower(s) / guarantor(s) do not come forward for liquidation /settlement of their account, after expiry of 60 days notice period, the Authorized Officer should take possession of the secured assets as per the norms laid down in the Rules, 2002 and obtain an undertaking as per Annexure V from borrower(s)/ guarantor(s)/ Director(s)/ Partner(s)/ mortgagor(s), as the case may be. Wherever the possession of the secured assets is resisted by the borrowers / guarantors or otherwise deemed fit, the Authorized Officers have to file an application under Section 14 of the Act before Chief Metropolitan Magistrate /Distt. Magistrate, as the case may be, seeking his help for physical possession of the assets, draft of the said application duly approved by the Legal Advisor of the Bank is enclosed as Annexure-VI. In respect of suit/claim filed cases, (i) where the Court/DRT has appointed a Receiver for the assets (ii) where interim orders like injunction/attachment is in operation (iii) where certificate has been issued by DRTs and steps have been taken to realize the assets as per the certificate, application before CMM/DM may not be filed. However, in other cases, the bank may simply inform the Court/DRT and file necessary application before CMM/DM. 3.6 NORMS FOR TAKING OVER THE SECURED ASSETS All the ROs/branches have been requested that out of all the securities / assets available in the account, it must be specifically mentioned in the notice as to which security /asset they intend to enforce against the defaulting borrowers e.g. if plant & machinery, land & building, a plot, residential house, hypothecated assets are available in an account, it must be specifically mentioned as to which asset the bank intends to enforce. In order to create further awareness at grass root level, we are giving below the order in which the securities have to be enforced out of all the securities available in an account after ensuring that the bank has a clear title and that they are validly charged to the bank and do not come under the exceptions under Section 31 of the Act Bill i.e. agricultural land etc. Residential House(s). Shops. Plots. Commercial Property. Factory Land & Building. Moveable Assets, i.e. Hypothecated Stocks, Plant & Machinery, Debtors etc. Possession of factory land & building should be avoided, if Statutory Dues, viz. Income Tax, Sales Tax, Electricity Bill, Excise/Custom Duty etc. and Labour Dues are on higher side. 102

103 The Branches /Regional Offices may follow the above seriatim while enforcing securities against a particular borrower for realization of its dues. 3.7 PROCEDURE FOR TAKING POSSESSION OF MOVABLE / IMMOVABLE ASSETS The Authorized Officer of the Bank shall take possession of the secured assets, moveable/ immovable, in accordance with the rules specified in Rules 4-8 of the Security Interest (Enforcement) Rules, As per Rule 8(1) & 8(2), possession of immovable property can be taken by the Authorized Officer by 1) delivering a possession notice to the borrower / guarantor as nearly as possible in Appendix II to the Rules 2) affixing the possession notice on the outer door or at such conspicuous place of the property. 3) publishing the possession notice within 7 days of taking possession in two leading newspapers, one in vernacular language having sufficient circulation in that locality. The Authorized Officer shall also obtain valuation of the property obtained from Bank s Approved valuer and fix the Reserve price of the property in consultation with the secured creditor before its sale thereof. The valuer must be registered as a valuer under section 34 AB of the Wealth Tax Act, 1957 and should produce the registration certificate, an attested copy of which should be kept in Bank s records. 3.8 FIXATION OF UPSET PRICE (RESERVE PRICE) UNDER SARFAESI ACT, 2002: It has now been decided that the upset price (reserve price) be fixed at Realisable Value. The valuation for the same should be done by an approved valuer on Bank s Panel under SARFAESI Act, The valuation done by the approved valuer will be further corroborated by the Branch Manager after visiting the site of the property and ascertaining fair realisable value from local sources. Proper survey has to be conducted and a report thereof will be kept on record giving full justification. In case, the Realisable Value is less than Market Value by more than 20%, the valuer should give proper justification for the same with cogent reasons in the valuation report. One valuation from the approved valuer on Bank s Panel under SARFAESI Act, 2002 is sufficient for the fixation of upset price (reserve price) and the Authorised Officer alongwith the Branch Incumbent should visit and satisfy himself of the same from the prevailing circle rates, recent sales in the area and by contacting Real Estate Agents etc., so as to fix up a realistic price. If the Realisable value of the charged individual property at the time of going for auction under the said Act is less than that assessed at the time of sanction of credit facilities, the valuer must give the reasons for the same and the Authorised Officer must satisfy himself of the same from the market sources, so as to fix up a realistic price and should also record the same alongwith justifications. If the Authorized Officer still feels that the auction will not be successful at this price, 103

104 with his recommendations based on cogent reasons, the RLCC-RH may lower down the reserve price upto the range of 20% of the Realsiable Value, so that the auction is made successful at the first attempt. If this also does not materialize, HLCC-ED can allow total reduction not exceeding 30% of the Realsiable Value on the recommendations of the RLCC-RH. CAC at Head office can allow total reduction not exceeding 40% of the Realsiable Value on the recommendations of the HLCC-ED. Note:- Once SARFAESI Notice is issued, symbolic/constructive/actual possession cannot be deferred by the Branch Incumbents unless concurred by the Regional Head / Head Office. 3.9 SALE OF SECURED ASSETS The Authorized Officers shall sell the property in accordance with the Rule 6 for movable property and Rule 8 for immovable property of the Security Interest (Enforcement) Rules, 2002 by any of the following modes by serving 30 days notice for sale of the secured assets: a. tenders from the public; or b. by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying such assets; or c. by inviting holding public auction; or d. by private treaty* * In all cases, where any assets are being disposed off through private treaty, the assets are to be necessarily auctioned unless the amount being received from private treaty is sufficient to pay dues of all banks. In case of private Treaty, Ministry of Finance has suggested that the recourse of Private treaty should be generally resorted to only if the other more transparent methods mentioned in a, b, or c above are uncessful and further suggested that for accounts with value of ` 1.00 crores and above, two attempts are made. However, the alternative of private treaty can be considered without resorting to the other methods, if all the dues of the Banks/s are being fully recovered APPROPRIATION OF SALE PROCEEDS In the absence of any contract to the contrary, the sale proceeds shall be applied firstly in payment of such costs, charges and expenses incurred by the secured creditor in connection with the sale and secondly in discharge of the dues of the Secured Creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests RECOVERY OF BALANCE DUES Where dues of the Bank are not fully satisfied with the sale proceeds of the secured 104

105 assets, the Bank may file an application before DRT having jurisdiction or a Competent Court, as the case may be, for recovery of balance amount from the borrower within limitation For better understanding of the procedures, the branches/regional offices are advised to go through the Rules carefully while taking action against NPA borrowers under the Act and if necessary, the Legal Retainer at Regional Office be consulted. 4 SECURITIZATION CELLS AT HEAD OFFICE / REGIONAL OFFICES 4.1 SECURITIZATION CELL at Head Office and at all the Regional Offices has been created for exclusively dealing with the cases under the Act. It is headed by Chief Manager / Asstt. General Manager at REGIONAL OFFICE and necessary staff has been posted in this Cell so as to expedite action under the Act. Many of them have been imparted training to develop in-house expertise for exercising the rights of the secured creditors under the Act. Besides, Seminars, Workshops, group discussions were also conducted to provide first hand experience to the concerned staff. 4.2 ENGAGEMENT OF COUNSEL For the convenience of the Branches/ Regional Offices, draft of the application (as Annexure - VI) duly approved by the Legal Advisor of the Bank is enclosed which may be filed before CMM/ DM by the Authorized Officer for seeking his help in taking possession of the secured assets in the cases where the borrowers have refused /resisted taking possession of the assets by the Bank after expiry of 60 days notice period. Fees payable for the issuance of demand notices, the filing of application before Chief Metropolitan Magistrate/ District Magistrate and the application/ appeal u/s 17(1) or 18(1) of SARFAESI Act 2002 through advocates has been given under Para 13.1.XXV, 13.1.XVI and 13.1.XV of Chapter 7 on Recovery through Legal Recourse. Although service of demand notice U/s 13(2) or 13(11) is to be effected by the concerned branch under the signature of the Authorised Officer, the fee has been proposed envisaging complications in certain cases which require expert handling by an advocate. The option may be exercised judiciously, sparingly and the fee may be paid in lump sum after seeking permission from the concerned Regional Office. The decision regarding engagement of counsel for filing application before CMM/DM shall be taken by the concerned Regional Head only in those cases where possession of secured assets is resisted by the Borrower / guarantor/mortgagor. 4.3 TAKING POSSESSION OF ASSETS We have to be very careful in choosing the borrowers on whom the notice has to be issued under the Act. The aim of our bank is to effect maximum recovery in NPAs and we may take possession of only those assets for which there are ready buyers so that we may not incur undue expenditure on account of maintenance, safeguard, and 105

106 insurance of the seized assets. An exhaustive exercise may be carried out to ascertain the assets charged to the Bank in NPA accounts, which can be disposed easily in the market. The Branches/Regional Offices are requested to carefully go through the provisions of the Act, The Rules and the guidelines issued by the Bank as above for taking action against defaulting borrowers so that maximum recovery is effected in NPA accounts and ultimately the quantum of NPAs of the Bank is reduced in the current fiscal as well as the succeeding years. 5. REPORTING The progress of the notices issued, recovery effected under the Act shall be furnished by the Branches to the Regional Offices on quarterly basis and which in turn have to submit the same to Head Office on prescribed format Annexure-IX. 6. CASES WHERE EXECUTION PROCEEDINGS HAVE NOT BEEN INITIATED AFTER OBTAINING DECREE FROM THE CIVIL COURT In certain instances, where execution proceedings by filing Execution Application before the competent Court are yet to be initiated after obtaining decree from the concerned Court, the Bank can take benefit of the Securitisation Act, 2002 by taking action against such defaulters under the said Act. It is pertinent to mention that recovery through filing of execution application in the decreed cases is a very long drawn and cumbersome process unlike the recovery proceedings in the DRT cases where Recovery Officer starts the recovery proceedings on the basis of recovery certificate obtained by the Bank after passing of the final orders by the DRT. As such, it was approved by the Board vide item No. F-3, dated that Branches/ROs may be permitted to initiate action under the Securitisation Act, 2002 against those defaulting borrower(s) against whom civil Courts have awarded decree but execution proceedings have not been initiated by the branch by filing of execution application before the concerned Court and where there are sufficient securities to fall back upon in the account. 7. ISSUE OF FRESH NOTICE UNDER SARFAESI ACT, 2002 IN THE ACCOUNTS WHERE BANK HAS ENTERED IN TO SETTLEMENT WITH A BORROWER WHO HAS DEFAULTED Instance has been brought to our notice where the bank has entered into settlement with an NPA borrower after issuing notice under section 13(2) of the Securitisation Act, But, the settlement has not been honored by the concerned borrower by making regular payment of monthly installments. A pertinent query has been raised as to whether it would be in order to take possession pursuant to the notice under Act or notice would legally be deemed to have been waived after the bank accepted repayment of partial dues under OTS. The matter was deliberated, discussed and placed before the Legal Advisor of the Bank and it has been opined as under: An undertaking may be obtained from the borrower with whom the settlement has 106

107 been entered into to the effect that the settlement by the bank is without prejudice to its right under the Securitisation Act and/or any other legal remedy that may be available to the bank for recovery of its outstanding dues and Authorized Officer shall take possession of the secured assets in case of default by the borrower without giving any fresh notice thereof under the Act. Format of the undertaking to be got executed from the borrower(s) /guarantor(s) mortgagor(s) on stamp paper of adequate stamp value duly purchased in the name of the borrower at the time of conveying the approval of settlement of the account to the borrowers is enclosed as Annexure-XI (Tamsuk Deed). Separate undertaking may be obtained from the guarantor(s)/mortgagor(s) as the case may be. Such an undertaking will dispense with the need of issuing fresh notice under SARFAESI Act 2002 in case of default of settlement by the borrower pursuant to issue of notice under the said Act. In a situation, where the bank has settled the account(s) by obtaining an undertaking stated above, there is no need to issue a fresh notice in case the settlement is not honoured by the concerned borrower. However, in cases where such undertaking has not been obtained and settlement is arrived at after issuance of notice, the earlier notice is deemed to have been waived off thereby occasioning the need for issuing a fresh notice to the concerned borrower. The branches have to ensure before issuing of second notice that reasonable period of limitation is available in an account so that in case of need, suit/claim may be filed against the borrower before expiry of the limitation. 8. EMPANELMENT OF ENFORCEMENT /SUPPORTING AGENTS FOR ENFORCEMENT OF SECURITY INTEREST OF THE BANK UNDER THE ACT The Board of Directors vide Item No.F-8 dated approved the guidelines for empanelling the enforcement / security agents. At Head Office level, 69 agents have been empanelled and circulated to all Regional Offices on To facilitate faster decision at the Regional Office level, the Regional Head has also been empowered to empanel /depanel any agency for enforcing the rights of the Bank. The Regional Heads while empanelling the agents under their power must adhere to the guidelines as approved by the Board of Directors vide abovementioned Resolution. The Bank should issue the empanelment letter as per the Annexure-XV to the approved enforcement agents containing terms and conditions mentioned in our letter dated , which should be duly accepted by the Enforcement Agents and thereafter assign the job /work to the Enforcement Agents after getting the approval from Head Office, if falls under H.O. power. It is pertinent to mention that cases be assigned preferably to local Agents who are well versed with the activity/ working to minimize the cost and to have quick results. While assigning the case to an Agent, nature and details of assignment of job should be specifically mentioned. 8.1 Under any method of sale, sale shall not take place before the expiry of 30 days from the date on which public notice of sale is published in news papers or notice of sale served on borrowers. 8.2 The first auction under the SARFAESI Act for immovable properties would be E-auction 107

108 only. In DRT matters, Bank will pray for E-auction only for immovable properties. General Manager (Rec. & Law) will be competent authority to allow deviation in eligible cases. 9. SALE OF SECURED ASSETS THROUGH TENDERS / PUBLIC AUCTION All the Regional Offices are further requested to go through the provisions of the said Act/ Rules carefully and the secured assets/ properties be sold through any of the modes available under the Law and in consultation with the Legal Retainer at their Office so as to avoid any scope for challenging the action of the Bank by the borrower(s)/ guarantor(s) / mortgager(s) and only those securities will be sold in respect of which notice was issued under the Act. Government of India, Ministry of Finance has directed to upload all the auction notices issued under SARFAESI Act immediately on website tender.gov.in and to ensure that no auction take place without auction notice being put on the Government web portal for at least 30 days. As per direction of Ministry of Finance, all the concerned Authorized Officers in the Bank have been directed to upload all auction notices issued under the said Act after w.e.f and ensure that the auction notice is displayed at least for 30 days on the website tender.gov.in. In this regard, Regional Offices are advised to submit required information i.e., soft copy of auction notices (clearly visible auction notice) under SARFAESI Act-2002, issued along with duly filled in Annexure XVI through mail at recovery@obc.co.in, well in time, so that the auction notice is uploaded on the Government website tender.gov.in, in time and it is retained on the site for at least for 30 days. For this purpose, a Nodal Officer has been appointed at Recovery and Law Officer, Head Office. Apart from above, the information of properties (both commercial and residential), which are on sale towards recovery under SARFEASI Act or otherwise, will continue to be uploaded on the Bank s website by the DIT Department, Head Office. Further in case of sale of secured assets through tenders/public auction, the following guidelines may be followed by the Authorized Officer: 1. The Authorized Officer at Regional Office shall invite OFFERS in sealed cover for purchase of each lot of movable and immovable properties on AS IS WHERE IS BASIS and AS IS WHAT IS BASIS giving detailed particulars of immovable/movable property as per Annexure-XIII/XIV. 2. The properties shall not be sold below the reserve price. 3. The Authorized Officer shall serve to the borrowers notice of 30 days for the sale of secured assets (Annexure XII) and shall also issue a public notice in two leading news papers, one in vernacular language having sufficient circulation in the locality by setting out the terms of sale. 4. Intending bidders will deposit the earnest money by way of pay order/ demand draft payable at (Name of Place) and favouring Oriental Bank of Commerce 108

109 A/c (Name of the Account) drawn on any nationalized or scheduled bank. The said deposit shall be adjusted in the case of successful bidder, otherwise refunded on the date of opening the tenders itself / within a week of finalization of tenders/ within a week of opening tender, as the case may be. The earnest money deposit will not carry any interest. 5. The offer alongwith the Earnest Money Deposit (EMD) should be called in a sealed cover superscribed Offer for Purchase of Property (ies) (description of property) so as to reach the office of Oriental Bank of Commerce (Address of Regional Office) on or before (date) by 5.00 PM. 6. Offers so received by the Authorized Officer will be opened and considered on (Date) at Oriental Bank of Commerce, (Address of Regional Office) at (time). Offers received may be opened before the committee formed for the purpose and proper records be maintained. 7. Inspection of property (ies) will be permitted at site to the intending Offerers on (date) at (time) Site : (Complete address of the Property (ies). In case of movable assets, complete address where the assets are located. 8.1Tenders from public: The successful purchaser shall deposit 25% of the amount of sale price, adjusting the EMD paid already, within 48 hours of the acceptance of offer by the Authorized officer in respect of the sale failing which the earnest deposit shall be forfeited. The balance 75% of the sale price is payable on or before 15 th day of confirmation of the sale by the Authorized Officer or such extended period as agreed upon in writing by and solely at the discretion of the Authorized Officer. In case of failure to deposit this balance amount within the prescribed period, the amount deposited shall be forfeited. 8.2 Public Auction:. Successful bidder shall have to deposit 25% of the sale price, adjusting the EMD paid already, within 48 hours of the acceptance of bid price by the Authorized officer in respect of the sale by way of pay order / demand draft favouring Oriental Bank of Commerce A/C (Name of the Account) drawn on any nationalized or scheduled bank immediately after the fall of hammer failing which the earnest deposit shall be forfeited. The purchaser shall deposit the balance 75% of the sale price on or before 15th day of confirmation of the sale by the Authorized Officer or such extended period as agreed upon in writing by and solely at the discretion of the Authorized Officer. In case of failure to deposit the balance amount within the prescribed period, the amount deposited shall be forfeited. 109

110 All properties are being sold subject to conditions prescribed in the Second Schedule to the Income Tax Act, 1961 and rules made thereunder. The highest bid will be approved by Authorized Officer. Inspection of property(ies) will be permitted at site to the Intending Offerers on (date) at AM/PM (time). Site: (Complete address of the Property(ies). In case of movable assets, complete address where the assets are located. The venue of the auction shall be informed to the public. 9. Authorized Officer is not bound to accept the highest offer or any or all offers and reserves the right to accept or reject any or all the tenders without assigning any reasons thereof. In case all the tenders are rejected, authorized officer can negotiate with any of the tenderors or other parties for sale of the properties by private treaty. 10. To the best of knowledge and information of the Authorized Officer, it must be mentioned in the public notice that no other encumbrance exists on the property. In case there is an encumbrance known to the Authorized Officer, the same must be mentioned in the notice. The drafts of Notice/Calling Tenders/e-auction duly approved by the Legal Advisor at Head Office are enclosed as Annexures-XII, XIII & XIV respectively, which may be used by branches for carrying out sale of the secured assets through Tender / e- Auction. 9A. SALE ON CONSTRUCTIVE / SYMBOLIC /PAPER POSSESSION The language of Section 13(4) (a), 13(6) of the ACT and Appendix III & V of the RULES talks about the possession of the secured assets and the delivery of the possession of moveable or immovable property. The said provisions do not say anything about symbolic, constructive or physical possession of secured assets. The Mortgagee under the Transfer of Property Act and the secured creditor under the ACT can pass on the right, title or interest to the 3 rd parties on the sale of said assets, which the mortgagee himself has, in the said asset. As far as moveable assets are concerned, the possession can normally be physical possession only. But in the case of immovable properties, the possession of the property may not mean only the physical possession of the same unless specifically so provided. Therefore, as a general proposition, it may not be appropriate to say that possession of immovable property cannot be passed on without handing over the physical possession. As per Section 14 of the ACT, the CMM/ DM shall assist the secured creditors in taking possession of the secured assets. If the meaning of the possession is restricted to symbolic /constructive possession, the assistance of CMM/ DM would not be necessary and it will be required only where physical possession of the asset is contemplated. Therefore, combined reading of Section 13 and 14 of the ACT envisages taking over physical possession of the assets before the Secured creditor take steps for sale of the same. If the Bank goes in for sale of secured assets on the basis of constructive/ symbolic possession, it can pass on to the purchaser only symbolic/ constructive possession of the said secured asset. 110

111 In the given circumstances, the secured assets be put to auction on the basis of symbolic possession first if the secured assets is occupied by the borrower / mortgager themselves. In other matters, it would be appropriate to expedite our application before CMM/ DM to obtain physical possession of the assets by making submission that the delay in disposal of application will frustrate the very purpose for which the ACT has been enacted. In cases where the security is not occupied by the borrower/mortgagor, after obtaining the physical possession of the asset, you may resort to the sale of the same. However, each case has to be considered separately / individually on merits and if satisfied as to the urgency of the sale of secured assets, the assets may be sold in accordance with the provision of ACT and RULES provided there is no stay order in that case. The instructions contained in our circular dated regarding the circumstances in which the Bank has to file application before CMM/DM for taking possession of the secured assets may be followed. 10. RELEASE OF SECURITY(IES) In case the borrower(s)/guarantor(s) approached the bank for release of the security/ Property (ies) mortgaged to the bank after issuance of 60 days notice period the bank may consider the request of the borrower(s) / Guarantor(s) on merits by accepting cash / draft equivalent to the realizable value of the security / property (ies) for which fresh valuation be got done from Bank s approved valuer. However, the borrower(s)/ guarantor(s) shall not be discharged from its/their liability to repay the bank s dues, if outstanding, and the bank will continue with the recovery process till the adjustment of the account. Power to Release Security:- RLCC-RH shall be empowered for release of these security/ ies in the case the credit facility/ies is/are sanctioned by the Branch/ RO. In case the credit facility/ies is/are sanctioned under HO power, power to release security/ ies will vest with HLCC-ED. 11. DELEGATION OF POWER FOR ENGAGING EMPANELLED/ TO BE EMPANELLED OUTSIDE AGENCIES The Bank, where there is resistance from the obligants, may take the help of Advocates on Bank s Panel for filing of application before CMM/ DM for obtaining physical possession of the secured assets. The help of the outside agencies for enforcement of Secured Assets may be taken, if needed, for filing application before CMM/DM, Security/ Maintenance/ Insurance / Advertisement, Valuation, Auction & Sale of Secured Assets and Management of the Unit. The powers for engaging the empanelled agencies have been approved by the Board of Directors vide Item No. F-9 dated and vide BR-F-1 dated as under : 111

112 At Regional Office Region headed by General Manager Region headed by Dy. General Manager Region headed by Asstt. General Manager At Head Office Chief Manager Asstt. General Manager (R&L) Dy. General Manager (R&L) General Manager at H.O. (R&L) Upto ` 5.00 crore Upto ` 2.50 crore Upto ` 1.00 crore NIL Upto ` 2.50 crore Upto ` 5.00 crore Full powers The above powers shall be exclusive of recorded interest and other charges. 12. FEE STRUCTURE FOR PAYMENT TO EMPANELLED / TO BE EMPANELLED OUTSIDE AGENCIES FOR RECOVERY UNDER SARFAESI ACT 2002 The Board of Directors vide BR No. F-1 in its meeting held on has approved the revision of fee structure for payment to the empanelled/ to be empanelled agencies for recovery under SARFAESI Act Similarly, the revision and ratioanlisation of legal fees was approved by the Board of Directors vide Agenda Item No. 42 in its meeting held on The above noted revisions were circulated vide Circulars No. HO/REC & LAW/ 01/ /29 dated and HO/R&L/ CIRCULAR No.11/ /761 dated respectively. The salient features of the same are as under: 12.1 VALUATION OF IMMOVABLE PROPERTY / MOVABLE ASSETS For fixing the reserve price of immovable property (ies), moveable assets / machinery etc., fee schedule for valuation of immovable property and movable assets / machinery etc. shall be applicable as approved by the Board of Directors vide Item No. RM - 2 dated and circulated by Risk Management Deptt. at Head Office vide HO Circular No. HO/Risk Management / 42 / dated which is reproduced hereunder: Value of Immovable Property /movable assets Amount of fee in Rupees Ist ` 50000/- of property so ½% of the value Maximum of ` 250/- On the next ` 1 lac of the property so ¼% of ` 250/- the value For property of ` 1.5 lac ` 500/- On the balance of the value of properties so ` 125 per lac The above rates are indicative only and the rates may be fixed depending upon the local conditions and in consultation with other banks operating in the area. An upper cap of ` 10000/- (` Ten Thousand) only may be fixed. For very specialized or high value properties the rates may have to be negotiated on case-to-case basis in consultation with the owners of the property. 112

113 Service Tax as per rules and applicable from time to time shall be paid in addition to the charges mentioned hereinabove. The Fee alongwith service tax is to be recovered from the borrower. Fee schedule for valuation of immovable properties / movable assets shall be changed in accordance to policy of Risk Management Deptt. from time to time. As per clause 2 (d) of SARFAESI Rules, 2002, valuers are to be approved by the Board of Directors for the purpose of valuation of properties to be auctioned under the said act. The guidelines in this matter include that the valuers are to be registered as valuer under the Wealth Tax Act, 1957 and should be Chartered Engineers/Members of the Institute of Architects/ Members of the Institute of Valuers. In case of Partnership Firms practicing as registered valuers, all the partners should be registered as valuers under the Wealth Tax Act, Companies and Corporate bodies are banned under section 34AD of the Wealth Tax Act, 1957 from practicing/describing itself or held out as registered Valuers. The other guidelines in this matter remain the same. The list of approved valuers is to be reviewed on annual basis or earlier in case of exigencies and General Manager (R&L) is empowered to empanel any valuer for a short period, if any exigency arises. Further for empanelment on regular basis, the same is to be approved from the Board. In case, services of approved valuers are not found satisfactory, the Bank may de-list/ de-panel their names from the approved panel and General Manager (R&L) is empowered to de-panel such valuers. Accordingly, the Board should be apprised of such depanelment from time to time. Fee shall be paid to the approved valuers strictly as per guidelines already approved by the Board vide Item No. RM-2 in its meeting held on Regional Offices are advised to assign the task of valuation under SARFAESI Act, 2002 to approved valuers, taking into consideration location of their offices/branches in order to minimize the cost and no extra payment shall be made to the approved valuers in addition to the fee schedule as approved by the Board SECURITY AGENCIES /AUCTIONEERS The engagement of these agencies may be considered by Regional Office/ Head Office, as the case may be, and the expenses may be paid on actual basis after negotiating the same with the said agencies. 113

114 12.3 ENFORCEMENT/ SUPPORTING AGENTS The enforcement/ supporting agents may be paid the following fee for effecting recovery in the accounts: S.No. Amt. Recovered Fee Payable 1. Upto ` 1.00 lac 10% i.e. ` 10,000/- 2. From ` 1.01 lac to ` 10% upto ` 1.00 lac + 7.5% of amt. recovered lac in excess of ` 1.00 lac with a maximum fee of ` 3. From ` lacs to ` lac 4. From ` lac onwards 1,90,000/- (10000/- + 1,80,000/-) 10% upto ` 1.00 lac + 7.5% of amt. recovered in excess of ` 1.00 lac upto ` 25 lac + 5% in excess of ` 25 lacs with a maximum fee of ` 3,15,000/- (10,000/-+1,80,000/-+1,25,000/-) 10% upto ` 1.00 lac + 7.5% of amt. recovered in excess of ` 1.00 lac upto ` 25 lacs + 5% in excess of ` 25 lacs + 2.5% in excess of ` 50 lacs It is further informed that expenses for engaging counsel(s), valuers, insurance, security/detective agencies and / or any other agency, legal/ statutory compliances shall also be paid in addition to the above expenses. In respect to payment of fee to Enforcement/Supporting Agents in case recovery is effected in assigned NPA accounts after assignment but before sale of secured assets, following additional provisions in the fee schedule are to be taken into consideration: a) In case the defaulting borrower approaches the Bank for OTS or adjustment of account after assignment of the case to Enforcement/Supporting Agent but: Before taking physical possession of secured assets After taking physical possession of secured assets but before sale of secured assets 25% of fee schedule as above or as agreed, whichever is less out of recovery. 50% of fee schedule as above or as agreed, whichever is less out of recovery. b) Full amount of fee as per schedule or as agreed, whichever is less, shall be payable only if the recovery is effected due to sale of secured assets and out of sale proceeds/recovery. c) Service Tax as per rules and applicable from time to time shall be paid in addition to the charges mentioned hereinabove. d) In case of OTS, fee payable to Enforcement/ Supporting Agent shall be recovered from the borrower in addition to OTS amount. 114

115 PAYMENT OF FEE The Regional Heads shall exercise the power for payment of fee in respect of all cases assigned to Agents without any deviation as per power chart mentioned above. Fee shall be payable to Enforcement/Supporting Agent in relation to amount of recovery. Fee payable may be negotiated and settled within the range of fee schedule for different types of services while entrusting the work to the outside agencies Deferment/Discontinuation of Action It is possible that during the course of enforcement action, the borrower may come forward and make the payment to the Bank in full or in part. In case of part payment, the decision to defer/ discontinue the SARFAESI action will be taken with the approval of the General Manager- Rec. & Law by making reference through Regional Head. If the enforcement action is to be deferred temporarily or discontinued, the necessary intimation shall be given to the Enforcement/ Supporting Agent. In case of discontinuation of enforcement action, no fee will be paid to the Enforcement Agent on any further recovery in the account TRAVELING/ BOARDING/ LODGING In addition to the expenses to be paid to Valuers/ Security and the Enforcement Agents as above, if the Bank assigns the job for valuation/ security and sale of assets at a place other than where these agents normally carry out their work, they may be reimbursed on actual basis the expenses incurred for traveling/ boarding / lodging etc. However, no traveling /boarding / lodging will be paid if the job is carried out within local municipal limits of Metros and/or area of functioning of such agencies. It is suggested that for Delhi, National Capital Territory region may be taken as the Municipal limits. In case of other Metros i.e. Chennai, Kolkata & Mumbai and Other Centres, Municipal limits of the concerned Metro/City may be taken into consideration for payment of such expenses CLASSIFICATION OF ENFORCEMENT AGENTS The enforcement agents have been classified into three broad groups as under: S.No. Category Value of Asset which can be assigned (O/S in the a/c) 1. Enforcement agents having No limit International / All India presence 2. Partnership Firms and Local ` lacs to ` 1.00 crore Corporates 3. Individuals Upto ` lacs Those Enforcement Agents may be considered by the Bank, which are a One Stop Shop providing all the services under One Roof i.e. the advocates, security agencies, 115

116 detective agencies, valuers and auctioneers etc DEVIATION Chairman & Managing Director / Executive Director has been vested with the power of engaging any agency without any ceiling depending upon peculiar circumstances and merits of the case and taking into account degree of difficulty involved in realization of assets EMPANELMENT OF ENFORCEMENT / SUPPORTING AGENTS The guidelines for empanelment / depanelment of enforcement / supporting agents for recovery of bank dues under SARFAESI Act 2002, duly approved by the Board of Directors vide BR No. F-8 dated , have been circulated to all Regional Offices vide our circular letter dated However, for ready reference of the Field Functionaries, the salient features of the same are enumerated hereunder: To facilitate faster decision making at the Regional Office/ Head Office level, the Regional Heads and the General Manager (R&L) has been empowered to empanel/depanel any agency for enforcing the rights of the Bank. Empanelment of enforcement agents by the Regional Heads will also ensure availability of sufficient number of agencies offering each type of service to all the branches situated in the Region. Such a list of Enforcement/Supporting Agents be sent to us for perusal and record. The Regional Heads have been empowered to de-panel any agency empanelled by them. All other cases shall be referred by Regional Offices to Head Office for necessary consideration GROUND RULES TO BE APPLICABLE TO / OBSERVED BY ENFORCEMENT AGENTS / OUTSIDE AGENCIES 1. The term referred to as 'Enforcement Agent' shall apply to the agencies engaged for facilitating Bank in activities like seizure of securities/ taking possession of movable and/or immovable assets; obtaining assistance of District Magistrate/ Metropolitan Magistrate for taking over possession of securities; to act as custodian of secured assets; to provide security for preservation and protection of assets taken in possession; assisting Bank for sale of acquired assets through auction or otherwise. 2. The term 'Enforcement Agent' shall apply to the agencies that approach the Bank and evince interest in providing service of 'Enforcement Agent' and the Bank agrees to engage the services of the 'Enforcement Agent' in the required matters. 3. The 'Enforcement Agent' shall hold all requisite Government and other licenses, approvals and consents as required for providing the services to the Bank and shall undertake to maintain the same valid and subsisting during the period of arrangement with the Bank. 4. The 'Enforcement Agent' shall agree to provide its services in the matter referred at the fee to be decided on case-to-case basis while entrusting the work as per fee / payment schedule duly approved by the Bank. 5. Payment of fees will be made by the respective branches after getting the approval from concerned Regional Offices subject to statutory deduction of Income Tax and Service 116

117 Tax as applicable. 6. The 'Enforcement Agent' shall agree to carry out its functions at his risks and liabilities. 7. The 'Enforcement Agent' shall agree and declare that he shall not divulge the information received from the Bank/ gathered during the course of performing its assigned functions for anyone else except as required for the specific assignment. 8. The 'Enforcement Agent' shall agree and undertake that he shall exercise due care and caution to protect the information which a reasonable and prudent person would exercise to protect and maintain the confidentiality of information and prevent the unauthorized use or disclosure of such information to third parties. 9. All information/ documents provided by the Bank to the 'Enforcement Agent' shall remain the property of the Bank and nothing therein shall be construed as granting or conferring any rights in on such information/documents to the 'Enforcement Agent' or any third party. 10. The obligation of the 'Enforcement Agent' to keep the information confidential shall continue and survive even after termination of the arrangement. 11. The 'Enforcement Agent' upon termination of the arrangement by the Bank, shall promptly return all copies of information/ documents in whatsoever form or media, to the Bank or to any person authorized by the Bank or at the discretion of the Bank destroy the same without retaining any copies thereof. The 'Enforcement Agent' shall certify in writing to the Bank such return or destruction. 12. In case services of 'Enforcement Agent' are not found satisfactory, the Bank may de-list/ de-panel its name from the approved panel of the Bank and the Bank shall be entitled to terminate the arrangement without assigning any reason at any time after issuing notice and it will come into effect as stated in the notice. 13. The 'Enforcement Agent' shall not collect any amount in any form whatsoever from the borrower or any other liable party. 14. The 'Enforcement Agent' shall not use any force or any pressure or commit any wrongful act or offence against person/ property of the borrower, guarantor or any liable party. The guidelines issued by the Government and/or RBI in this regard, if any, shall be scrupulously followed by the 'Enforcement Agent'. 15. The 'Enforcement Agent' shall not further delegate the job assigned to it by the Bank to any other agency without obtaining prior written consent of the Bank. 16. The 'Enforcement Agent' shall not do any act which shall be prejudicial to the interest of the Bank or which shall adversely affect image of the Bank. 17. The 'Enforcement Agent' shall expressly indemnify and keep the Bank and its personnel indemnified against all loss, liability or obligations arising out of its conduct or that of any of its personnel. 18. In cases of any contravention of any obligation on the part of 'Enforcement Agent', the Enforcement Agent shall be liable for the damages including special damages as demanded by the Bank. 19. The 'Enforcement Agent' shall not be assigned/ shall not accept any enforcement job in respect of the account/ property in which that 'Enforcement Agent' is having direct/ indirect interest. 117

118 CRITERIA FOR APPORVAL OF ENFORCEMENT AGENTS The following points be considered while empanelling the Enforcement Agents : Constitution of agency, viz. individuals, partnership firm or corporate, Geographical presence, Expertise, knowledge and experience in dealing with the impaired assets, Consideration of antecedents of promoters and availability of infrastructure, Ability and Utility in enforcing the rights of the secured assets, Already listed with the other Banks / FIs as enforcement agents, Agents who are One Stop Shop providing all the services under one roof, i.e., the advocate, security agencies, detective agencies, valuers/auctioneers and enforcement of security interest ISSUANCE OF EMPANELMENT LETTERS TO ENFORCEMENT AGENTS The Bank shall issue the empanelment letter as per the Annexure-XV to the approved enforcement agents containing terms and conditions mentioned as above which should be duly accepted by the Enforcement Agents and thereafter concerned Regional Offices will assign the job /work to the Enforcement Agents. 13.2: PARTICIPATION BY THE BANK IN THE AUCTIONS HELD UNDER THE SARFAESI ACT To take advantage of the recent amendment in SARFAESI Act, the Bank may participate in the auction to acquire immovable properties and following should be the power structure to accord sanction for the same The Recovery & Law Department at Corporate Office in consultation with Services Department will, after evaluating the proposal on merit, place the proposal for acquiring immovable property by participating in the auction being conducted by the Authorized Officer of the Bank under the SARFAESI Act before- 1. The HLCC if the cost of acquisition of such Residential Property is up to ` 5.00 crores 2. The CAC if the cost of acquisition of such immovable property is above ` 5.00 crores but upto ` crores. In case of acquisition of property having acquisition cost over ` crores, the same will be acquired with the approval of the Management Committee of the Board. Any official in Scale IV and above posted in the Regional Office under whose jurisdiction the said Property is situated will participate in auction and if the Bank is declared as successful auction purchaser, he / she will carry out all other formality in connection with such acquisition. The Recovery & Law Department in consultation with the Services Department will prepare operational guidelines which would be duly vetted by the Legal Advisor of the Bank. 118

119 Suggestion / Advice for Improvement of Progress under the Act. 1. Non- identification of the mortgaged immovable property or delay in taking steps under SARFAESI Act may provide an opportunity to the defaulting borrower to create third party rights or to create the tenancy rights in favour of his friends and relatives, thereby reducing the value of the property and jeopardizing bank s interest. It is, therefore, advised to speed up the process of identification of the cases under the Act. 2. The request of the Authorised Officers for permission for issuance of notice under the Act must be disposed of in a time bound manner, but not exceeding a week in any case. It is desired that pendency of such request must be placed on daily basis for information and necessary action to the Regional Head. 3. Suitable instructions must be issued to Authorised Officer to personally ensure that notices under the Act are issued and dispatched within two working days of receiving the permission. 4. It is reiterated that symbolic possession must be obtained immediately after completion of notice period by completing all the required formalities and as per guidelines already circulated. 5. It is a common knowledge that the property can be sold at a higher rate only when the bank is in physical possession of the same. It is, therefore, once again emphasized that all out efforts must be made to obtain physical possession of the charged assets after obtaining the symbolic possession without delay. The Regions / Authorised Officer may take the assistance of Enforcement Agents for this purpose, if required, as already circulated. It is advised that applications for physical possession before CMM / DM must be vigorously pursued and Authorised officer should be present at the time of hearing of the said application before CMM / DM. The progress of all such application filed and still pending should be reviewed by the Regional Head every month. 6. It is needless to say that the whole exercise will bear fruit only when the bank s dues are repaid. Therefore, it is once again emphasized that all out efforts for sale of charged assets as per SARFAESI Act, 2002 after completing all the legal formalities must be made by R.O. / Authorised Officer in consultation with the Legal Retainer / dealing Advocate, wherever deemed fit. 7. If any unnecessary delay is observed on the part of Authorised Officer, the competent authority will call for the explanation / comments of the concerned Authorised Officer for not acting promptly in the best interest of the bank as it delays recovery process unnecessarily. It is one of the fastest recourse of recovery to resort to SARFAESI Act, 2002 provided quick and timely actions are initiated as per the Act and followed up vigorously and taken to logical conclusion. It is felt that Regional Offices may organize Meetings / Seminars for Branch Incumbents / Branch Recovery Officers to emphasise the above points, to clear their doubts and to discuss the legal problems, if any, faced by them. Encls.: Annexure I - XII 119

120 TIPS FOR BRANCHES/REGIONAL OFFICES TO BE FOLLOWED WHILE TAKING ACTION UNDER THE ACT 1. PROCEDURE Borrower commits default and the account is classified as NPA. Secured Creditor (Bank) issues notice in writing to the borrower/guarantor in the format circulated to discharge the liabilities in full within 60 days from the date of notice. Borrower makes payment of Bank s dues - No further action required. Copy of notice served / returned alongwith remarks and other documents may be kept alongwith the loaning documents / file of the concerned account for future reference. Non payment of Bank s Dues Taking possession of movable secured assets by A.O. Preparation of inventory (Appendix I)* (Appendix II)* Sale of movable secured assets Issue of Certificate of sale for movable secured assets (Appendix III)* Taking possession of immovable secured assets (Appendix IV)* Issue of possession notice, affixing of possession notice and its publication in two leading newspaper - 30 days notice for sale of immovable secured asset. Time of sale, issue of certificate of sale and delivery of possession Immovable secured assets Procedure for recovery of shortfall of secured debt Application to DRT (Appendix V)* (Appendix VI)* Appointment of Manager * Refer BARE Act on SARFAESI Act and Rules for appendix I to VI 2. POINTS TO REMEMBER 2.1. Act Empowers Banks/FIs to take action against NPA borrowers without intervention of courts. So, immediately after an account becomes NPA, action to be initiated by issuing notice, for enforcement by branch without intervention of Court. 120

121 2.2 Excluded transactions The Act is not applicable to certain rights / security interest namely, Lien on goods, money of security Pledges of movables Security interest over Aircraft or Ship / Vessel Security interest under Conditional Sale, Hire Purchase or Lease and such transactions. Rights of Unpaid seller Properties not liable to attachment under Code of Civil Procedure. Security Interest in Agricultural land Security Interest in Loans below ` 1 lac Any case in which the amount due is less than 20% of the Principal amount and interest thereon. 2.3 JOINT FINANCING No secured creditor shall exercise any such right, unless exercise of such right is agreed upon by the secured creditors representing not less than 60% in value of the amount outstanding. Reference before BIFR abates when the 3/4 TH secured creditors have taken any measures u/s13(4) of the Act. The bank can independently going for action under SARFAESI Act, 2002 where it has an exclusive charge over a property/third party collateral security in the shape of immovable property without obtaining consent of secured creditors representing not less than 60% in value of the amount outstanding. 2.4 GENERAL The creditor may proceed against the guarantor and sell the pledged assets, without exhausting the other remedies available to him, under the Act, The assistance of Chief Metropolitan Magistrate or the District Magistrate can be sought for taking possession / control of the secured assets. No Civil Court shall have jurisdiction to entertain any suit or proceedings in respect of any matter which a DRT or DRAT is empowered by or under this Act to determine and no injunction shall be granted by any Court or other authority in respect of any action taken in pursuance of this Act. After serving of notice under section 13 (2), borrower / guarantor restrained from transferring the secured assets without prior written consent of the Bank. In case the borrower fails to discharge his liability in full within the period specified in the notice, the secured creditor is entitled to take possession of the secured assets of 121

122 the borrower including the right to sell, take over management, appoint persons to manage, call upon any person who has acquired, any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, by notice in writing to pay to the secured creditor. Persons aggrieved by any of the measures taken under Section 13 (4) and mentioned in the foregoing paragraph, by the Bank, may file an appeal before DRT within 45 days. However, if the action of the Bank is held by DRT as wrongful and directs for return of security, the borrower will be entitled for compensation and cost. Time-barred debts cannot be recovered If dues are not paid or balance is left after enforcement, DRT/ civil court, as the case may be, can be approached within the period of limitation. Since simultaneous actions for recovery of dues are permitted after the decision in the Transcore case by Hon ble Supreme Court, OA/ suit before the DRT/civil court, as the case may be, can also be filed while taking steps under the SARFAESI Act, This option is left to the competent authority to choose based on merits of each case. 122

123 ANNEXURE -I RECALL NOTICE UNDER SECTION 13(2) OF THE SECURITIZATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 TO BE ISSUED TO BORROWER(S) / PARTNER(S) / DIRECTOR (S) M/S /Shri DATE: Dear Sir/Madam Re: Account M/S Details of Outstandings (Amt. in `) Credit facilities sanctioned/ Balance O/s Recorded Total Rate of Intt availed (as on ) Interest Outstanding charged from time to time The above account has been running unsatisfactory for quite sometime and you are, therefore, in default as you have failed to take steps to regularize /adjust your account in respect of such debt as stated herein above. In view of the said default, your account has been classified as a non-performing asset by the Bank on In the circumstances, the Bank has decided to recall the advance granted to you in terms of Section 13(2) of The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, You are, therefore, now required to discharge in full the bank s liabilities with upto date interest as per the details mentioned above within a period of 60 days from the date of the notice failing which the bank shall take necessary action for enforcement of the secured assets to realize its dues. The details of the secured assets intended to be enforced by the bank, in event of non-payment of the full liabilities as stated herein above, are stated here under :- Details of Securities Yours faithfully, AUTHORIZED OFFICER Name & Address of Mortgagor / Hypothecator 123

124 ANNEXURE II RECALL NOTICE UNDER SECTION 13(2) OF THE SECURITIZATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 TO BE ISSUED TO GUARANTOR (S) M/S /Shri DATE: Dear Sir/Madam REG: M/S M/s/Sh. were granted the following credit facilities and the same were secured with your personal guarantee. (Amt. in `) Credit facilities sanctioned/ Balance O/s Recorded Total Rate of Intt availed (as on ) Interest Outstanding charged from time to time The above account has been classified non-performing assets on and no steps to regularize/adjust the said account have been taken by the subject party despite assurances.. In the circumstances, the Bank has decided to recall the advance granted to you in terms of Section 13(2) of The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and request the pay the same with upto date interest within a period of 60 days from the date of the notice failing which the bank shall without prejudice to its other rights against you or other borrowers, proceed against you or sell the pledged / hypothecated / mortgaged assets without first taking any action against the subject borrower(s) specified under section 13(4) of the said Act. The details of such assets in respect of which the action is proposed in case of non compliance of this notice are mentioned hereunder :- Details of pledged/hypothecated/mortgaged assets Name & Address of Mortgagor / Hypothecator Yours faithfully, AUTHORIZED OFFICER 124

125 On Bank s Letter head ANNEXURE -III DRAFT LEGAL NOTICE TO BE SENT TO THE PARTIES UNDER THE PROVISIONS OF SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT 2002 IN RESPECT OF SUIT FILED CASES Please note: The facts of each case are different therefore, the same be incorporated accordingly and duly verified by the authorized and empowered person. Further note that the facts of this notice be in conformity with the facts/pleading made in the suits/claim application pending in Courts/Tribunals. Regd. A/D/SPEED POST Dated: WITHOUT PREJUDICE 1. Shri/Smt/M/s Re: NOTICE UNDER SECTION 13(2) of SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST Act Dear Sirs/Madam, 1. That you addressee(s) No.1/.. doing the business of requested the bank for financial assistance(s) and the bank sanctioned/allowed the following facilities in the month of. The details of facilities be mentioned The above loan facilities were duly secured by way of hypothecation of.... (Details of hypothecated 125

126 goods/items/details, its nature, plant & machinaries, fixed assets etc., as far as possible must be specific) and the same was also secured by way of equitable mortgage/mortgage/charge in respect of immovable property i.e. (details of immovable property be given) belonging to addressee No.. (In case of companies, the details of assets charged and noted in the office of Registrar of Companies be given) 2. That you addressee No.1.. executed the various loaning documents, in respect of the above loan facilities on.. and also agreed to pay the rate of interest at the rate of per cent per annum with quarterly/monthly rests and internal guidelines of the bank from time to time, in respect of the above facilities. ( if there are more than one facility and rate of interest are different then, different rate of interest are to be mentioned) 3. That you addressee No. to stood guarantor(s) for addressee No.1 in consideration of the above said loan facilities and executed the deed of continuing guarantee(s)/agreement of guarantee(s) on in favour of the bank and thus the liability of you addressee(s) No. to No. is co-extensive and continuing with addressee No.1 and you all are jointly and severally liable to pay the dues including interest, costs and other usual bank charges to the bank. 4. That you addressees No. created equitable mortgaged/mortgage/ charge in respect of immovable property i.e. bearing to secure the dues the bank, in consideration of the above said loan facilities to addressee No.1 and thus the bank has a right to sell, transfer and assign the said property to recover/realise the dues of the bank with interest, costs and other usual bank charges. The details of the property mortgaged is as under:- a. Name of the mortgagor: addressee No. (Give name) b. Mortgagee: c. Sum secured: sanctioned/loan documents amount(s) d. Rate of interest:.. e. Details of the property mortgage: Give details/property number Details of the title deed(s) Deposited: a. Property bounded as: North: West: East: South: b. Present sum due: Give details of the title deed/sale deed/ any other document(s) 5. The said term loan amount was repayable in instalments/equated monthly instalments with interest/besides interest at the rate of per annum with quarterly/monthly rests, till the date of payment in full. (In case of term loan only) 126

127 6. That you agreed to pay the additional interest at the rate of percent per annum over and above the normal agreed rate of interest with quarterly/monthly rests, in case of default in terms and conditions of the sanction and loaning documents. 7. (Give details/facts in case of enhancement with amount, rate of interest, extension of charge/mortgage/guarantors etc.) 8. (Give details of the account date of non-performing assets, within the definition of section 2(o) of Act, 2002) 9. That since you had committed default of the repayment of the bank dues in the above mentioned loan account(s)/facility(ies), the bank filed suit/claim application for the recovery of ` alongwith pendentelite and future interest at the rate of % p.a. with quarterly rests, being case No. (In the matter of : Oriental Bank of Commerce Versus and other ) and the next date of hearing is. The amount due and recoverable as per the suit/claim application is `, which includes interest at the rate of % per annum with quarterly rests w.e.f. the date of filing of the suit till date i.e. which you are liable to pay to the bank. Apart from this costs of ` is due and payable by you and thus a total sum of ` as mentioned above with above mentioned rates and rests is due and payable by you. 10. That you shall not transfer, assign and lease or otherwise deal or part with the possession of the secured assets to anyone. 11. That this notice is without prejudice to the rights and contentions of the bank before the concerned court/tribunal in the above mentioned case. I, therefore, by virtue of this notice, hereby call upon all of you i.e. addressees No.1 to, jointly and severally to make the payment & discharge in full liabilities amounting to ` as per details mentioned above in para No.9 with interest w.e.f. with monthly/quarterly rests, to the bank within 60 days from the receipt of this notice, failing which the bank shall be constrained to take measures for the recovery of possession of the secured assets including the right to transfer by way of lease, assignment or sale thereof under the provisions of chapter III of SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT 2002, for the recovery of above secured dues and in that case you all will be jointly and severally liable to pay for all cost and other expenses arising there from and the balance amount thereof. Please note that the copy of this notice has been retained in our office and being filed in the suit/claim application pending in the Court/Tribunal. AUTHORIZED OFFICER 127

128 ANNEXURE - IV PROFORMA FOR INFORMING COURT/ DRT Before the L.D. Presiding Officer, Debt Recovery Tribunal No. Or Hon ble Justice (Name of Court) Original Application/ Original Suit No. Oriental Bank of Commerce: Applicant / Bank Versus Defendant/Judgment Debtors: Opposite Party The humble petition of the applicant / bank Named above Most Respectfully showeth : a. The aforesaid original application is pending before your Lordship. b. That in pursuance of the enforcement of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the applicant/bank has issued the notice U/s 13 (2) of the said Act to the defendant (s)/ opposite party. c. That the applicant/bank shall keep informed further developments of the said proceedings to your lordship from time to time Hence it is prayed that this application shall be kept with the record for the ends of justice and your petitioner / bank as is duty bound shall ever pray. (DEPONENT) AUTHORIZED OFFICER (Seal of the Bank) Notes : 1. This format may be used by the Branches/ROs for informing the Court/DRT where case is is pending and the bank has taken action against the said borrower(s)/guarantor(s) under the Securitisation Act, It should be got typed on a demi paper. 3. It should be duly signed by the Authorised Officer. 128

129 ANNEXURE-V (Undertaking to be obtained from the Borrower/ Guarantor/ Partner/ Director/ Mortgagors etc.) Authorised Officer / BM Oriental Bank Commerce Dear Sir, Regarding : This is to place on record : 1) I/We have received the notice dated served by the bank under Sec. 13 (2) of the Securitisation and Reconstruction of Financial assets and Enforcement of Security Interest Act, 2002 and on date received the notice under section 13 (4) of the said Act. 2) I/We,, the borrower/guarantor failed to pay the dues of the Bank in terms of the said notice, I/We hereby handover the symbolic possession of the property mentioned in the said notice U/S 13 (4) of the said Act on (date) to you, the Authorised Officer, peacefully and without demur. I/We/Am/Are occupying the said property merely as your agent. 3) I/We/the proprietor/partners/directors and the Guarantors undertake to give, vacant and peaceful physical possession of the said property to you, the Authorised Officer in case of non-payment of the aforesaid amount and in that case, you may sell the said property at your discretion and to appropriate the sale proceeds thereof towards the said loan account without having my/our any kind of right to resist or object in any manner whatsoever. Thanking you Yours faithfully, ( ) witness : 1) 2) 3) (In case of company Pvt. Ltd./Ltd. Board Resolution shall be enclosed) 129

130 ANNEXURE-VI BEFORE THE CHIEF METROPOLITAN MAGISTRATE/DISTRICT MAGISTRATE,, In the matter of: Oriental Bank of Commerce Versus Applicant Respondent APPLICATION ON BEHALF OF SECURED CREDITOR, BANK FOR TAKING ACTION IN TERMS OF SECTION 14 OF THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, The Applicant most respectfully and humbly submits as under:- 1. The applicant is a secured creditor and the respondent/s are its borrower/s, who are under a liability to repay the outstanding * to the applicant. That the borrower/s at the time of making the borrowings had entered into a security agreement and created security interest over the following scheduled property(s), which is valid and subsisting: **. However, the respondent/s are in default in respect to repayment of the aforesaid secured debt/ any instalment thereof and his/ their account in respect of such debt has been classified by the applicant as a non performing asset on and the claim of the Bank is within limitation period. 2. The applicant in order to enforce the said security interest created in its favour by respondent/s in accordance with the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, herein after referred to as the Act, had issued to respondent/s, a notice, referred to in sub-section 13(2) of the said Act, in writing to discharge in full his/its/their liabilities giving details of the amount payable by the respondent within 60 days from the date of the said notice. In addition to the aforesaid, the said notice also gives details of the secured assets intended to be enforced by the secured creditor in the event of non payment of secured debts, as stated herein above, by respondent/s. The copy of the said notice is annexed hereto as Annexure A. *Here the total amount of financial assistance granted and total claim shall be stated. ** Here the details of the property(s) to be mentioned. 130

131 3. The 60 days period in case of the aforesaid notice, referred to herein above and which was dated, expired on. Although the said period of 60 days from the date of the notice, as prescribed has expired but respondent/s have not come forward to repay the secured debt. 4. *** The objection/ representation in reply to the aforesaid notice received from the borrower has been considered by the applicant and reasons for non-acceptance of such objection/ representation had been communicated to the borrower within time vide letter dated. 5. Since respondent/s have failed to discharge his/their liability in full within the prescribed period, the applicant was entitled to take one or more recourse to any of the measures prescribed in section 13(4) read with section 14 of the said Act to recover its secured debt. In terms of Rule 8, the prescribed notice in appendix IV was also served by affixing the possession notice on the outer door or at such conspicuous place of the property as well as by publishing the same in two leading newspapers, one in vernacular language having sufficient circulation in the locality where the property is situated. 6. However, the physical possession of the secured asset/s and/or property/ies referred to in the said notice has not yet been handed over by the borrowers/respondents so far. The physical possession of the said assets/ properties is/ are required to be taken by the secured creditor/ applicant since the said secured asset/s referred to in the said notice is/are required to be sold or transferred by the applicant under the provisions of the said Act. 7. The provisions of the Securitisation and Reconstitution of Financial Assets and Enforcement of Security Interest Act, 2002 and the rules made thereunder had been complied with. Description of the Immovable Property/ies a. All that is part and parcel of the property consisting of Flat No. /Plot NO., which is registered as Document No., Book No., Addl. Book No. at page No. to with Sub- Registrar, and bounded as under:- North South East West b. All that is part and parcel of the property consisting of Flat No. /Plot NO., which is registered as Document No., Book No., Addl. Book No. at page No. to with Sub- Registrar, and bounded as under:- North South East West ***If the borrower has raised objections within 60 days, then only the para should be incorporated here. 131

132 1. In facts and circumstances stated herein above and for purposes of securing compliance with the provisions of section 13 of the said Act, the applicant craves leave of this Hon ble Court to take or cause to be taken such steps and issue any appropriate directions, orders etc., to any authority or official or cause to be used, such force, as may be necessary in order to provide physical possession of the secured property/ies. It is, therefore, respectfully prayed before this Hon ble Court : a) to take or cause to be taken such steps and issue any appropriate directions, orders etc., to any authority or official or cause to use, such force, as may be necessary in order to provide physical possession of the following property/ies : (i) All that is part and parcel of the property consisting of Flat No. /Plot No., which is registered as Document No., Book No., Addl. Book No. at page No. to with Sub-Registrar,l and bounded as under : North South East West (ii) All that is part and parcel of the property consisting of Flat No. /Plot No., which is registered as Document No., Book No., Addl. Book No. at page No. to with Sub-Registrar,l and bounded as under :- North South East West b) Any other or further order may be issued in facts and circumstances as stated herein above to protect the interest of the certificate holder bank. It is prayed accordingly. AUTHORISED OFFICER Place : Dated: 132

133 BEFORE THE CHIEF METROPOLITAN MAGISTRATE/DISTRICT MAGISTRATE,, In the matter of: Oriental Bank of Commerce Versus Applicant Respondent AFFIDAVIT Affidavit of aged about years Manager, posted at Oriental Bank of Commerce, Branch,. The above named deponent does hereby solemnly affirm and declare as under ;- 1. That the deponent is Manager of the applicant bank and is conversant with the facts and circumstances of the present case on the basis of the records maintained by the applicant bank and as such the deponent is competent to swear the present affidavit. 2. That I state that the accompanying application for taking action in terms of Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, is being drafted and filed on behalf of the applicant bank and the contents of the same are true and correct to the best of my knowledge and belief. 3. That aggregate amount of financial assistance (fund based and non-fund based) granted is ` and the total claim of the Bank is ` as on the date of filing the application. 4. That the borrower has created security interest over various properties and that the Bank is holding a valid and subsisting security interest over such properties and the claim of the Bank is within limitation. 5. That the borrower has created security interest over the property(s) details of which is/are given hereunder: 6. That the borrower has committed default in repayment of the financial assistance granted aggregating the specified amount as given above at Point No That the consequent to default, the account has been classified as NPA. 8. That the period of 60 days notice has lapsed after duly serving the notice under section 13 (2) on the borrower. 133

134 9. *That the objections/ representation, if any, of the borrower has been considered and reasons for non acceptance of such objections/ representation has been communicated to the borrower vide letter dated. 10. That the borrower has not made any repayment inspite of the above notice and the Authorized Officer is, therefore, entitled to take possession of the secured assets under the provision of sub-section (4) of section 13 read with section 14 of the SARFAESI Act, That the provision of this Act and rules made thereunder for taking physical possession had been complied with. DEPONENT VERIFICATION Verified at on this day of 2014 that the contents of the affidavit are true and correct based on the records maintained by the applicant bank and nothing material has been concealed there from. DEPONENT *If the borrower has raised objections within 60 days, then only the para should be incorporated here. 134

135 TAMASUK DEED ANNEXURE - VII PROFORMA OF UNDERTAKING TO BE OBTAINED AT THE TIME OF SETTLEMENT OF PROTESTED BILL/ SUIT FILED/ DECREED ACCOUNTS FROM THE BORROWER(S)/ GUARANTOR(S) This undertaking is made here at on this day of by the following : 1. Shri s/o aged years R/o. 2. Shri s/o aged years R/o. 3. Shri s/o aged years R/o. Whereas we, the above named, are the proprietor/ partners/ Director of M/s with its registered office at confirm that Oriental Bank of Commerce, had sanctioned limit of ` on to M/s bearing over PLR with a minimum of p.a. on quarterly rests in accordance with the agreement with them and other documents executed by the partners. This facility was enhanced to ` lacs w.e.f. against the securities of and personal guarantee of. Our firm/company accordingly availed the said loan facilities. However, due to bad luck, the activities of the firm/company had to be stopped due to reasons and the account of M/s with the Oriental Bank of Commerce B/o became irregular. Whereas the amount in subject account of M/s outstanding as on is `. The amount as outstanding liability/debt is acknowledged and confirmed by us on behalf of the firm. Whereas pursuant to the legal/demand notices dated and served on us as well as on M/s by the Oriental Bank of Commerce, the Bank has informed us about its intentions to institute civil suit/ action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 for recovery of their outstanding amount. However, we as proprietor/ partners/ director(s) of the firm / company as well as in our personal capacity as guarantors do not want any suit to be filed against us and/or against the firm. Now, therefore, we, and 135

136 in our personal capacity as well as on behalf of M/s as its proprietor/ partners/ director(s)/ guarantor(s) hereby agree to settle on verifying the security documents executed, signed and delivered by us and statement of account and undertake as follows :- We undertake to pay ` with/without the incidence of future interest towards the full and final payment and clearance of the outstanding liability of firm/ company. The said amount will be jointly paid by the firm/ company and by us, and if required, through our personal sources in instalments of ` p.m. w.e.f. by the second week of every month. In case of default on our part or on the part of the proprietor/ partners/ director(s) /guarantor(s) for non-payment of one /two consecutive instalments, we and M/s shall be liable to pay the whole amount of ` or such amount as outstanding on the date of default alongwith complete interest liability, due on full amount of ` w.e.f. and litigation expenses incurred/to be incurred by the bank to recover the amount. OR Terms as approved by the Competent Authority be substituted in place of 1,2 & In case of any such default for non payment of one/ two instalments as aforesaid, all the concessions allowed under the settlement shall stand withdrawn by the Bank automatically and the Bank shall be entitled to recover the entire dues outstanding in the account with uptodate interest thereon. In addition to it, the proceedings under the Securitisation Act initiated by the Bank shall automatically stand continued without any further notice, and the Bank shall be fully authorized and entitled to take over the physical possession of the mortgaged properties for which we shall not raise any objection thereto and shall hand over the vacant and peaceful possession to the Bank besides initiating legal recourse. In witness whereof, we the executants have set our hands on these presents at on the date, month and year first above written

137 Annexure-VIII NOTICE TO BE SERVED UPON BORROWER/GUARANTOR/MORTGAGOR BEFORE EFFECTING SALE OF SECURED ASSETS Shri Date : M/S REG. : SALE OF SECURED ASSETS UNDER SARFEASI ACT, 2002 M/S (name of the borrower with account number) This is to inform you that pursuant to the possession taken by the undersigned as Authorized Officer under SARFAESI Act, 2002 on (date) vide possession notice dated for recovery of the secured debts of Oriental Bank of Commerce (name of the Branch) amounting to ` and interest thereon from (date) and with costs and charges from M/s (name of borrower), the undersigned intends to sell the following secured assets for recovery of the entire dues for which necessary steps including publication in Newspapers have been taken / are being taken : Secured Assets: The valuation report of the aforesaid secured assets is/are enclosed with the request to send your suggestions, if any, within 30 days time of receipt of this notice. The Reserve Price (below which the property may not be sold) for the property has been fixed at `. Authorized Officer Note : 1. The notice as above may be got typed or neatly handwritten on the letter pad of the concerned branch before it is served on the borrower/guarantor/mortgagor. 1. The above notice shall also contain the following: i) The secured debt for recovery of which the property is to be sold. ii) Reserve price, below which the property may not be sold. 137

138 TENDER NOTICE Annexure-IX PUBLIC NOTICE FOR SALE OF ASSETS OF Sh./ M/s (In terms of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 Pursuant to the possession taken by the Authorized Officer under SARFAESI Act, 2002 for recovery of the secured debts of Oriental Bank of Commerce amounting to ` and interest thereon from (date) and with costs and charges from M/s (name of borrower), OFFERS are invited by the undersigned in sealed cover for purchase of each lot of movable and immovable properties on AS IS WHERE IS BASIS and AS IS WHAT IS BASIS as per brief particulars given hereunder : Sl. No. Description of Properties (with All the details) Reserve Price (`) Earnest Money Deposit (`) A. Immovable B. Movable The aforesaid properties shall not be sold below the reserve price mentioned above. Intending bidders are required to deposit the earnest deposit stated above by way of pay order/demand draft payable at (Name of Place) and favouring Oriental Bank of Commerce A/c (Name of the Account) drawn on any nationalized or scheduled bank. The said deposit shall be adjusted in the case of successful bidder, otherwise refunded on the date of opening the tenders itself / within a week of finalization of tenders/ within a week of opening tender, as the case may be. The earnest money deposit will not carry any interest. The offer alongwith the aforesaid Earnest Money Deposit (EMD) should be made in a sealed cover superscribed Offer for Purchase of Property(ies) (description of property) so as to reach the office of Oriental Bank of Commerce 138

139 (Address of Regional Office) on or before (date) by 5.00 PM. 2. Offers so received by the undersigned will be opened and considered on (date) at Oriental Bank of Commerce, (Address of Regional Office) at (time). 3. Inspection of property (ies) will be permitted at site to the intending Offerers on (date) at (time). Site : (Complete address of the Property (ies). In case of movable assets, complete address where the assets are located.) 4. The successful purchaser shall deposit 25% of the amount of sale price, adjusting the EMD paid already, within 48 hours of the acceptance of offer by the Authorized officer in respect of the sale failing which the earnest deposit shall be forfeited. The balance 75% of the sale price is payable on or before 15 th day of confirmation of the sale by the Authorized Officer or such extended period as agreed upon in writing by and solely at the discretion of the Authorized Officer. In case of failure to deposit this balance amount within the prescribed period, the amount deposited shall be forfeited. 5. Authorized Officer is not bound to accept the highest offer or any or all offers and reserves the right to accept or reject any or all the tenders without assigning any reasons thereof. In case all the tenders are rejected, authorized officer can negotiate with any of the tenderors or other parties for sale of the properties by private treaty. 6. To the best of knowledge and information of the Authorized Officer, no other encumbrance exists on the property. (In case there is an encumbrance known to the branch, the same may be mentioned here). Date : Place: Authorized Officer Oriental Bank of Commerce (Address of Regional Office) Note : The above notice shall also contain the following: i) The description of the movable/immovable property to be sold, including the details of the encumberances known to the secured creditors. ii) The secured debt for recovery of which the property is to be sold. iii) Reserve price, below which the property may not be sold. iv) Time and place of public auction or the time after which sale by any other mode shall be completed. v) Depositing earnest money as may be stipulated by the Bank. vi) Any other thing which the Authorised Officer considers it material for a purchaser to know in order to judge the nature and value of the property. 139

140 ORIENTAL BANK OF COMMERCE (A GOVERNMENT OF INDIA UNDERTAKING)... Annexure-X PUBLIC NOTICE FOR E-AUCTION FOR SALE OF MOVABLE & IMMOVABLE PROPERTIES LAST DATE & TIME OF SUBMISSION OF EMD (Earnest Money) AND DOCUMENTS.. UPTO.P.M. Sale of immovable property mortgaged to Bank under Securitization and Reconstruction of Financial assets and Enforcement of Security Interest (SARFAESI) Act, 2002 (No.54 of 2002) Whereas, the Authorized Officer of Oriental Bank Of Commerce had taken possession of the following property/ies pursuant to the notice issued under Sec 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 in the following loan accounts with our Branch with a right to sell the same on AS IS WHERE IS BASIS AND AS IS WHAT IS BASIS for realization of Bank s dues. The sale will be done by the undersigned through e-auction platform provided at the website:. Name of the Branch & Borrower DESCRIPTION OF IMMOVABLE / MOVABLE PROPERTIES Demand Notice Reserve Price Date Description & owner of property Outstanding Amount (Secured debt) EMD REMITTANCE ACCOUNT DETAILS EMD Bid Increase Amount Date/ Time of e-auction TERMS & CONDITIONS: 1. The e-auction is being held on AS IS WHERE IS and AS IS WHAT IS BASIS. 2. LAST DATE & TIME OF SUBMISSION OF EMD AND DOCUMENTS..UPTO P.M. 3. To the best of knowledge and information of the Authorised Officer, there is no encumbrance on the property. However, the intending bidders should make their own independent inquiries regarding the encumbrances, title of property/ ies & to inspect & satisfy themselves. 4. The intended bidders who have deposited the EMD and require assistance in creating Login ID & Password, uploading data, submitting bid, training on e-bidding process etc., may contact M/s.., Help Line No..., Help Line ID: and for any property related query may contact Branch Manager/Authorised Officer of (Name of Branch with contact No.) during the office hours on any working days. 5. The Bank has designated its Branch Office at as facilitation centre to help the intending bidders in putting the bid on line. ****** (FOR DETAILED TERM AND CONDITIONS PLEASE REFER TO OUR WEBSITE and.. (Name of e-auction site) Date: Authorised Officer Place:.. ORIENTAL BANK OF COMMERCE ****** (This cl no 5 be included for properties in small/rural areas, where awareness of technology is not very high) 140