RBI issues guidelines for sale of stressed assets by banks

RBI issues guidelines for sale of stressed assets by banks

RBI issues guidelines for sale of stressed assets by banks

The Reserve Bank of India has allowed banks to sell stressed assets to securitisation companies, reconstruction companies, other banks, non banking financial companies and financial institutions apart from asset reconstruction companies.

According to the new guidelines issued by the central bank for sale of stressed assets, the head office/corporate office of the bank shall be actively involved in identification of stressed assets, including assets, which are classified as Special Mention Account (SMA), to be put on sale, and banks shall, with the approval of their board, identify and list internally, the specific financial assets identified for sale to other institutions atleast once a year.

All assets classified as ‘doubtful asset’ above a threshold amount should be reviewed by the board/board committee on periodic basis, RBI states, adding that banks may also offer the assets to other banks/NBFCs/FIs, who have the necessary capital and expertise in resolving stressed assets as participation of more buyers will result in better price discovery.

The Reserve Bank of India has also decided to restrict investment by banks in security receipts (SRs) backed by assets sold by them.

 According to the new norms which are effective from April 1, 2017, if the investment by a bank in SRs, backed by stressed assets sold by it is more than 50%, higher money will have to be set aside as provisions by the banks.

DH Newsletter Privacy Policy Get top news in your inbox daily
GET IT
Comments (+)