Corrective Action Plan (CAP) by JLF
The options under Corrective Action Plan (CAP) by the JLF would generally include –
a) Rectification: Obtaining a specific commitment from the borrower to regularise the account so that the account comes out of SMA status or does not slip into the NPA category. Commitment supported by identifiable cash flows without loss or sacrifice to existing lenders, additional funding through equity/strategic investors. These measures without any changes to the terms and conditions of the loan.
b) Restructuring: At this stage, commitment from promoters for extending their personal guarantees along with their net worth statement supported by copies of legal titles to assets may be obtained along with a declaration that they would not undertake any transaction that would alienate assets without the permission of the JLF.
c) Recovery: Once the first two options at (a) and (b) above are seen as not feasible, due recovery process may be resorted to. The JLF may decide the best recovery process to be followed, among the various legal and other recovery options available, with a view to optimising the efforts and results.
The decisions agreed upon by a minimum of 75% of creditors by value and 60% of creditors by number in the JLF would be considered as the basis for proceeding with the restructuring of the account, and will be binding on all lenders under the terms of the ICA (Inter creditor agreement). However, if the JLF decides to proceed with recovery, the minimum criteria for binding decision, if any, under any relevant laws/Acts would be applicable.
The JLF is required to arrive at an agreement on the option to be adopted for CAP within 45 days from (i) the date of an account being reported as SMA-2 by one or more lender, or (ii) receipt of request from the borrower to form a JLF, with substantiated grounds, if it senses imminent stress. The JLF should sign off the detailed final CAP within the next 30 days from the date of arriving at such an agreement.
If the JLF decides on option of rectification or restructuring given above, but the account fails to perform as per the agreed terms under the option, the JLF should initiate recovery.