What changed
RBI issued a consolidated version of the 2003 Guidelines and Directions for Securitisation Companies and Reconstruction Companies, incorporating all amendments up to June 30, 2011. The notification brings together scattered instructions into one updated document for easier compliance. Key definitions like 'date of acquisition' (added via amendment) and 'non-performing asset' (180 days or more overdue) are included as amended.
What it means for you
Banks and lenders that transfer financial assets to SCs/RCs must ensure these entities comply with the consolidated prudential norms and NPA recognition rules. The 180-day overdue threshold for NPAs in SC/RC books affects how banks assess asset quality post-transfer. This consolidation reduces ambiguity, making regulatory expectations clearer for all parties involved in securitisation and asset reconstruction.
What you must do
- Review your bank's agreements with SCs/RCs to ensure they reference the updated consolidated guidelines.
- Train credit and risk teams on the 180-day NPA classification rule for assets transferred to SCs/RCs.
- Update internal policies to align with the consolidated definitions, especially 'date of acquisition' and 'fair value'.
- Verify that SCs/RCs you deal with are registered under Section 3 of the SARFAESI Act, 2002.
Who it affects
Banks transferring financial assets to SCs/RCs, Securitisation Companies (SCs), Reconstruction Companies (RCs), Credit and risk management teams in banks, Compliance departments handling SARFAESI-related transactions
What is the NPA classification rule for SCs/RCs under these guidelines?
An asset is classified as non-performing if interest or principal is overdue for 180 days or more from the date of acquisition or the contractual due date, whichever is later.
Does this notification change any existing rules for banks?
No, it consolidates existing instructions as of June 30, 2011, without introducing new requirements. Banks should use this as a single reference document.
Which entities must comply with these directions?
All Securitisation Companies and Reconstruction Companies registered with RBI under Section 3 of the SARFAESI Act, 2002 must comply.