The Reserve Bank of India in its draft comprehensive framework for the sale of loan exposures said that the lenders can sell the stressed assets only on a cash basis. The assets can be taken out of the books of the transferor only on the availability of receipt of the complete sales.
Also before selling it to other parties the lender must hold the purchased stressed asset on their books for a period of at least 12 months. The Reserve Bank of India has mandated assigning 100% risk weight for all the Non-performing Assets acquisition, in case the acquirer is classifying it as ‘standard asset’.
The recoveries in excess of the acquisition cost in respect of NPA shall be recognized as profit as per the given guidelines. The Reserve Bank of India has barred loan transfer to any party related to the stressed company as specified in Section 29A of the Insolvency and Bankruptcy Code,2016.
For exposures beyond 50 crores, the seller of the bad loans shall have to obtain two external valuation reports in addition to signing an inter-creditor agreement (ICA) in case the transferred account is under the resolution process.
The regulator has also released a chart for a minimum number of payments made before selling a standard loan.
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