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Informist, Monday, Jan. 20, 2025

 

MUMBAI – The Reserve Bank of India has revised the guidelines on settlement of dues payable by borrowers to asset reconstruction companies. According to the revised guidelines, asset reconstruction companies have to frame a board-approved policy for settlement of dues payable by the borrowers, the central bank said in a release.

 

The board-approved policy must cover aspects such as cut-off date for one-time settlement eligibility, permissible sacrifice for various categories of exposures and the methodology for arriving at the realisable value of the security.

 

Earlier, the settlement of dues with the borrower was to be done only after the proposal was examined by the Independent advisory committee, which would give its recommendations to the asset reconstruction company regarding the settlement.

 

Settlement with the borrower should be done only after all possible ways to recover the dues have been examined and settlement is considered as the best option available, the guidelines said. It also said that the net present value of the settlement amount should generally not be less than the realisable value of securities.

 

"If there is a significant variation between the valuation of the securities recorded at the time of acquisition of financial assets and the realisable value of the securities assessed at the time of entering into a settlement, reasons thereof shall be duly recorded," RBI said. The guidelines also mentioned that the settlement amount should preferably be paid lumpsum. 

 

The guidelines also said if the aggregate value of the settlement account is INR 10 million or less at the time of acquisition by the asset reconstruction company, then as per the board-approved policy, officials who were part of the acquisition should not be a part of processing the proposal. The companies must also make a quarterly report of the resolution of these accounts.

 

For settlement of dues payable by borrowers classified as frauds or wilful defaulters, asset reconstruction companies can undertake settlement of dues without prejudice to the criminal proceeding underway against such borrowers, the guidelines said.  End

 

Reported by Kshipra Petkar

Edited by Saji George Titus

 

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