Please find the following update under RBI
Policy Framework
ARCs must have a Board-approved policy covering:
Eligibility criteria for one-time settlements.
Permissible sacrifices for different exposure categories.
Methodology for determining the realizable value of securities.
Conditions for Settlement
Settlement is permissible only after exploring all recovery options and when it is the best alternative.
The settlement amount’s Net Present Value (NPV) should not be less than the realizable value of securities unless reasons for significant differences are documented.
Payment Terms
Preferably, settlements should be paid in a lump sum.
If instalments are allowed, they must align with a viable business plan, including projected earnings and cash flows.
High-Value Settlements (Over ₹1 Crore)
Independent Advisory Committee (IAC): Settlement proposals must be assessed by an IAC comprising professionals in technical, finance, or legal fields.
Board Approval: The Board or a designated committee, including at least two independent directors, must review the IAC’s recommendations and record detailed rationale in meeting minutes.
Low-Value Settlements (₹1 Crore or Below)
Conflict of Interest: Officials involved in the asset acquisition cannot participate in settlement decisions.
Reporting: A quarterly report must be presented to the Board, covering trends, fraud/wilful default classifications, and recovery timelines.
Fraud and Wilful Default Cases
Settlements involving fraud or wilful defaulters must follow the guidelines for high-value settlements.
Criminal proceedings against such borrowers remain unaffected.
Legal Provisions
Settlements are subject to other prevailing statutes.
For cases under judicial proceedings, settlements require a consent decree from the concerned judicial authority.
Link – https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12771&Mode=0
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