Credit Default/ Stressed Assets/NPAs
- In the case of direct lending: principal and or interest amount may not be repaid as per the terms of repayment
- In the case of guarantees or letters of credit: funds may not be forthcoming from the constituents upon crystallization of the liability
- In the case of treasury operations: the payment or series of payments due from the counter parties under the respective contracts may not be forthcoming or ceases
- In the case of securities trading businesses: funds/securities settlement may not be effected
- In the case of cross-border exposure: the availability and free transfer of foreign currency funds may either cease or restrictions may be imposed by the sovereign
Wilful Defaulters
- The unit has defaulted in meeting its payment / repayment obligations to the lender even when it has the capacity to honour the said obligations.
- The unit has defaulted in meeting its payment / repayment obligations to the lender and has not utilised the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes.
- The unit has defaulted in meeting its payment / repayment obligations to the lender and has siphoned off the funds so that the funds have not been utilised for the specific purpose for which finance was availed of, nor are the funds available with the unit in the form of other assets.
- The unit has defaulted in meeting its payment / repayment obligations to the lender and has also disposed off or removed the movable fixed assets or immovable property given by him or it for the purpose of securing a term loan without the knowledge of the bank/lender.
Options available to Banks for Stressed Assets:
- Exit from the account
- Rescheduling/ Restructuring
- Rehabilitation
- Compromise
- Legal action
- Government Machinery
- Civil Courts
- Lok Adalats
- Debt Recovery Tribunals (DRTs)
- SARFAESI Act, 2002
- The Insolvency and Bankruptcy Code,2016 (IBC)
- Write off