Mumbai : Amid rising NPAs, RBI on Thursday asked banks to put in place clear policies for sale of stressed assets to securitisation and reconstruction firms and secure two external valuation reports in case the exposure tops Rs 50 crore.
In order to further strengthen banks’ ability to resolve their stressed assets effectively, RBI has come out with an “improved framework” governing sale of such assets by banks to securitisation companies (SCs), reconstruction companies (RCs), other banks or non-banking financial companies form financial institutions.
As per the framework, at least once in a year, preferably at the beginning of the year, banks will identify and list internally the specific financial assets identified for sale to other institutions, including SCs/RCs.
“At a minimum, all assets classified as ‘doubtful asset’ above a threshold should be reviewed by the board or board committee on a periodic basis and a view, with documented rationale, is to be taken on exit or otherwise,” it said.
In order to attract a wide variety of buyers, the guidelines said the invitation for bids should preferably be publicly solicited. An open auction process, apart from attracting a larger set of borrowers, is expected to result in better price discovery. “Banks should have clear policies with regard to valuation of assets proposed to be sold… However, in the case of exposures beyond Rs 50 crore, banks shall obtain two
external valuation reports,” the guidelines added. Further, the discount rate used by banks in the valuation exercise should be spelt out in the policy. To make sure sale of stressed assets by banks actually result in ‘true sale’ of assets and create a vibrant stressed assets market, RBI also decided to progressively restrict banks’ investment backed by their own stressed assets. To enhance SC/RCs’ ability to aggregate debt faster, a bank offering stressed assets for sale should offer the first right of refusal to an SC/RC which has already acquired the highest and significant share of the asset by matching the highest bid.
