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THE GAZETTE OF IND1A. EXTRAORDINARY

|PARTI1- SR.-. 3(ii)l

MINISTRY OF AGRICULTURE

(Department of Agriculture and Cooperation)

ORDER

New Delhi, the 3rd April, 2002

S.O. 375(E).—Whereas, rule 8 of the Multi-state Co-operative Societies (Privileges, Properties and Funds, Ac-

counts. Audit. Winding up and Execution of Decrees. Orders and Decisions) Rules. 1985 (herein referred lo as the said

rules) makes provision for writing off of bad debts and losses:

And whereas, the Reserve Bank of India has issued certain guidelines for One Time Settlement of Non-Performing

Assets (NPAs) of Urban Co-operative Banks and lias given a formula for settlement of debts which had become doubtful

oHoss assets as on the 31st March, 1998 subject to following :

(i) tha t the competent authority to sanction waiver or remission of penal interest shall be vested with the Board,

and

(ii) the scheme shall remain operative upto the 30th June 2002, and the applications received for one time

settlement upto the 30th June, 2002. shall be processed and decisions taken thereon not later than the 30th

day of September. 2002;

And whereas, it is found that if the procedure as prescribed in rule 8 of the said rules is followed, the Urban Co-

operative Banks registered under the Multi-State Co-operative Societies Act. 1984 (51 of 1984) (herein referred to as the said,

Act) may not be benefited by the One Time Settlement Scheme as formulated by the Reserve Bank oflndia:

And whereas, the Central Government after careful consideration is satisfied that it will be expedient to exempt all

Urban Co-operative Banks registered under the said Act from the provisions of rule 8 of the said rules for implementation

of the One Time Sclllcmenl Scheme in terms of guidelines of the Reserve Bank oflndia subject lo the exposure limits oft

individual and institution borrowers;

Now. therefore, in exercise of the powers conferred by sub-section (2) of Section 99 of the said Act. the Central

Government hereby exempts all Urban Co-operative Banks registered under the provisions of the said Act, from (he

provisions of rule 8 of the said rules for the purposes of One Time Settlement Scheme as formulated by the Reserve Bank

of India subject to the following conditions, namely

(1) The scheme shal I be implemented as per I he guidelines of tlie Rescn^re Bank of 1 ndia. given m the Annexure

to this Order, and

(2) Assets amounts shall be to the e.Mcnt of stipulated sanction and exposure limits.

[F No. R-11017/24/2001-L&M1

K.S.BHORIA. Jt Sec?'.

ANNEXURE

Guidelines for One Time Settlement (OTS) of Non Performing Assets (NPAs) by U rhan Cooperative Banks

1. Coverage

The guidelines will apply to all non-performing accounts, in all sectors irrespective of the nature of business/

activity/purpose of advances, which had become doubtful or loss assets as on 31 March 1998. The guidelines will also

cover NPAs which were classified as sub-standard as on 31 March 1998, and which have subsequently become doubtful or

loss assets. However, the Registrar of Co-operative Societies (RCS) may fix any other cut-off date prior to Man* 31, i The so

desires. The following categories of loans will not be covered by the scheme •

(a) Cases of willful default, frauds and malfeasance

(b) Loans with tie-up arrangement for recovery {c g loans availed by salary- earners)

institutions in which the Directors ai c interested or by ex-Directors of respective urban co-operative banks

(d) Loans guaranteed by Government (including cases where Government guarantee has been i n voked but not

honoured by the Government)

(f) Loans under Government directed programmes

2. Cut-off levels in the NPAs accounts identified as per (i) above

ThcRCS should fix the cut-off limit for individual borrowers and institutional borrowers (i.e firms/companies/

other institutions), under all loan accounts. The cut-off limits may be fixed based on cither loans outstanding or working

capital of the bank or its deposits as on 31 March_ 2001, as may be decided the RCS on the basis of the above norms, say

for banks having loans/working capitalYdcposits upto Rs. 25 crore, above Rs. 25 crore but upto Rs. 50 crorc and so on. There

should be a uniform criteria for this purpose.

3. Settlement formula

(i) NPAs classified as Doubtful or Loss Assscts as on 31 March, 1998

Minimum amount to be recovered : 100 per cent of the outstanding balance in the account inclu-

sive of interest as on the date on which the account was categorised as doubtful asset.

(ii) NPAs classified as Sub-standard as on 31 March, 1998 which became Doubtful or Loss Assets subse-

quently

Minimum amount to be covered : 100 percent of the outstanding balance in the account inclusive

of interest as on the date on which the account was classified as doubtful plus interest at a rate not less than

the minimum lending rate per annum thereafter till the date of final payment.

(iii) Penal interest, other charges and payment of settlement amount in instalments

(i) Penal interest, legal charges and other charges could be waived.

(ii) Amount of settlement arrived at as above should be recovered preferably in one lumpsum. In cases

where the borrowers are unable to pay the entire amount in one lumpsum, at least 25 per cent ofthc

amount of settlement should be recovered upfront and the balance amount of 75 per cent recovered in

instalments within a maximum period of one year together with interest at minimum lending rate from

the date of settlement upto the date of final payment.

THE GAZETTE Of INDIA: EXTRAORDINARY

[PAWII—S»\3(ii)]

4. Competent Authority

The scheme is to be approved by the Board of Directors of the concerned bank $ within the provisions of the Co-

operative Societies Acts/Rules/Notification/Administrative guidelines issued by the concerned Registrar of Co-operative

Societies. A Settlement Advisory Committee should be constituted by the banks to review all applications received and to

recommend eligible cases to the Competent Authority for sanction. The powers to sanction waiver/remission of penal

interest, charges and to take all related decisions may be vested with the Board within the provisions of the Co-operative

Societies Acts/Rules/Notification/Administrative Guidelines issued by the concerned RCS. The Scheme will be non-

discretionary and non-discriminatory.

5. Non-discretionary and*Non-discriminatory treatment

The banks should follow the guidelines for compromise settlement of all NPAs covered, without discrimination

among borrowers. The guidelines are non-discretionary inasmuch as the CEO/Board of Directors should not deviate from

the parameters indicated in the guidelines for compromise settlement of NPAs.

6. Operative period of the Scheme

The Scheme will remain operative upto June 30. 2002. The applications received for OTS upto June 30.2002 should

be processed and decisions taken thereon at the earliest but not later than September 30. 2002.

7. Settlement Advisory Committees (SACs)

(i) Constitution of SACs

The Board at the Head Office may constitute SAC comprising officials ofthe bank. The Committee may

comprise of the Chairman, Directors, ChiefExccutive Officer ofthe bank, another Senior Official and/or a Consult-

ant who has experience in the field of banking, management or law. The official who had sanctioned the particular

loan which has become NPA under his delegated authority should not participate in the SAC meeting where that

loan account is under consideration for settlement. Tlie SAC constituted as above may review requests for

compromise settlements from eligible borrowers.

(ii) Functioning of SAC

(a) ThcBoards of banks may draw broad guidelines and procedures for Ihe functioning of SAC. SAC may

recommend eligible cases for approval of compromise settlements within the powers delegated under

the Co-operative Societies Act/Rulcs/Administrative instructions. Powers for compromise proposals,

wherever delegated to the Board of Directors of urban banks as per the Co-operative Societies Act/

Rules should be exercised only on tlie recommendation of SAC.

(b) The Board should review the decisions (aken by the SAC every monin ana ensure mat the process of

settlement is complete within the stipulated period

8. Action against other defaulters

In cases where restructuring is not feasible ordcfaullers have not come forward for compromise settlement, suits

must be filed promptly for recovery ofducs Banks should follow up suit filed cases vigorously and effectively in the Courts

to decide the cases and realization of dues at the earliest.

9. General

(i) In cases of NPAs where arbitration/execution petitions have been filed and/or deci ec obtained and recovery

certificates issued, the settlement as per these guidelines will be with the consent ofthe Competent Author-

ity

(ii) A long term multi-pronged and cffcclive NPA m?,iiagcmenl strategy should be pui in plnce in each institu-

tion to arrest Ihc incidence of fresh NP/Vs

(iii) The wmver that may be allowed by the banks in terms (<f these guidelines will have to be ci their own

strength and no fijiancml support from Government or RBI would be extended.

(iv) The banks should submit a report on the progress in recovery of NPAs under the guidelines every quarter

to the Board of Directors.

(v) A copy of the final guidelines issued by the Slate Govci ainenl may be sent to us for our information and

record,

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