These guidelines should be understood as a one-time measure and the scheme ended in March 2006. However, the details are being given for understanding and appreciating the concern of the RBI in resolving the exit problems of the SMEs.
“Guidelines on One-Time Settlement Scheme for SME Accounts: Following are the guidelines for one-time settlement of dues relating to NPAs of public sector banks in SME sector, issued by RBI in the September 2005.
These guidelines will provide a simplified, non-discretionary and non-discriminatory mechanism for one-time settlement of chronic NPAs in the SME sector.
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ADVERTISEMENTS:
All public sector banks are required to uniformly implement these guidelines. However, these guidelines will not cover cases of willful default, fraud and malfeasance. Banks shall identify cases of willful default, fraud and malfeasance and initiate prompt action.
(i) Coverage:
(a) The revised guidelines will cover all NPAs in the SME sector which have become doubtful or loss as on March 31, 2004 with outstanding balance of Rs. 1 0 crore and below on the date on which the account was classified as doubtful.
(b) The guidelines will also cover NPAs classified as sub-standard as on 31st March, 2004, which have, subsequently, become doubtful or loss where the outstanding balance was Rs. 10 crore and below on the date on which the account was classified as doubtful.
ADVERTISEMENTS:
(c) These guidelines will cover cases on which the banks have initiated action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and also cases pending before the Courts/DRTs/BIFR, subject to consent decree being obtained from the Courts/DRTs/BIFR.
(d) Cases of wilful default, fraud and malfeasance will not be covered.
(e) The last date for receipt of applications from borrowers will be as at the close of business on March 31, 2006. The processing under the revised guidelines shall be completed by June 30, 2006.
(ii) Settlement Formula – amount:
(a) NPAs classified as Doubtful or Loss as on March 31, 2004
ADVERTISEMENTS:
The minimum amount that shall be recovered under the revised guidelines in respect of one-time settlement of NPAs classified as doubtful or loss as on March 31, 2004 will be 100 per cent of the outstanding balance in the account as on the date on which the account was categorised as doubtful NPA.
(b) NPAs classified as sub-standard as on March 31, 2004 which became doubtful or loss subsequently.
The minimum amount that shall be recovered in respect of NPAs classified as sub-standard as on March 31, 2004 which became doubtful or loss, subsequently, would be 100 per cent of the outstanding balance in the account as on the date on which the account was categorised as doubtful NPA, plus interest at existing Prime Lending Rate from April 1, 2004 till the date of final payment.
(iii) Payment:
The amount of settlement arrived at in both the above cases, shall preferably be paid in one lump sum. In cases where the borrowers are unable to pay the entire amount in one lump sum, at least 25% of the amount of settlement shall be paid upfront and the balance amount of 75% should be recovered in installments within a period of one year together with interest at the existing Prime Lending Rate from the date of settlement up to the date of final payment.
(iv) Sanctioning Authority:
The decision on the one-time settlement and consequent sanction of waiver or remission or write-off shall be taken by the competent authority under the delegated powers.
(v) Non-Discretionary Treatment:
Banks shall follow the above guidelines for one-time settlement of all NPAs covered under the scheme, without discrimination and a monthly report on the progress and details of settlements should be submitted by the concerned authority to the next higher authority and their Central Office.
Banks may go for wide publicity and also give notice by January 31, 2006 to the eligible defaulting borrowers to avail of the opportunity for one-time settlement of their outstanding dues in terms of these guidelines. Adequate publicity to these guidelines through various means must be ensured.
(vi) Reporting to the Board:
Banks shall submit a report on the progress in the one-time settlement of chronic NPAs under the revised guidelines every quarter to the Board of Directors. A copy of the quarterly progress report may also be sent to RBI.”
The Banks are permitted to entertain fresh applications from the units who settled their dues if the same units either through induction of fresh capital or change in management or moving to newer ways of production or accessing new markets would like to commence their activity.