Formation of Joint Lenders’ Forum
Bank is required to classify the loan accounts into 3 categories as special mention accounts as given below:
1) SMA-0: Principal or interest payment not overdue for more than 30 days but account showing signs of incipient stress as given in appendix to Part C of Master Circular no. RBI/2015-16/101DBR.No.BP.BC.2/21.04.048/2015-16 dated July 1, 2015.
2) SMA-1: Principal or interest payment overdue between 31-60 days.
3) SMA-2: Principal or interest payment overdue between 61-90 days.
Banks are required to report credit information, including classification of an account as SMA to CRILC (Central Repository of Information on Large Credits)on all their borrowers having aggregate fund-based and non-fund based exposure of Rs.50 million and above. Except the exemption granted for Crop loans, interbank exposure and exposure to NABARD, SIDBI, EXIM Bank and NHB from reporting as per Reserve Bank of India circular no. DBOD.BP.BC.No.45/21.04.132/2014-15 dated October 21, 2014.
Reserve Bank of India vide circular no. DBOD.BP.BC.No.45/21.04.132/2014-15 dated October 21, 2014 clarified that bank must report Cash credit (CC) and Overdraft (OD) accounts, including overdraft arising out of devolved LCs/Invoked guarantees to CRILC as SMA 2 when these are ‘out of order’ for more than 60 days. Similarly, bills purchased or discounted (other than those backed by LCs issued by banks) and derivative= exposures with receivables representing positive mark to market value remaining overdue for more than 60 days should be reported to CRILC as SMA-2.
Further, Banks should continue to report the credit information and SMA status to CRILC on loans including loans extended by their overseas branches. However, formation of JLF will not be mandatory in cases of offshore borrowers which do not have any presence in India, either by way of a subsidiary, parent or a group entity. Further, the inclusion of offshore lenders as part of JLF shall not be mandatory. Formation of JLF will not be mandatory on reporting of investment portfolio as SMA, except in cases of bonds/debentures acquired on private placement basis or due to conversion of debt under restructuring of advances.
1) Banks should mandatorily form a committee to be called Joint Lenders’ Forum (JLF) if the aggregate exposure (AE) [fund based and non-fund based taken together] of lenders in that account is Rs 1000 million and above and the account is reported by any of the lenders to CRILC as SMA- 2.
2) Lenders also have the option of forming a JLF even when the AE in an account is less than Rs.1000 million and/or when the account is reported as SMA-0 or SMA-1.
Existing Consortium Arrangement for consortium accounts will serve as JLF with the Consortium Leader as convener, for accounts under Multiple Banking Arrangements (MBA), the lender with the highest AE will convene JLF.
In case of a borrower’s request for formation of JLF, the account should be reported as SMA-0 on such request to CRILC and the lender should form the JLF immediately if the AE is Rs 1000 million and above. The formation of JLF is optional for other cases of SMA-0 reporting.
All the lenders should formulate and sign an Agreement (which may be called JLF agreement) incorporating the broad rules for the functioning of the JLF. The Indian Banks’ Association (IBA) has prepared a Master JLF agreement and operational guidelines for JLF which can be adopted by all lenders.
JLF formation and subsequent corrective actions will be mandatory in accounts having AE of Rs.1000 million and above, in other cases also the lenders will have to monitor the asset quality closely and take corrective action for effective resolution as deemed appropriate.