The Joint Lenders’ Forum (JLF)
JLF
is a committee formed by bankers if the principal or interest amount on a loan
is due for more than 60 days to a client .
This
committee can be formed if the total aggregate exposure of banks to a single
client is more than Rs 100 cr or more.
The joint lenders’ forum is a consortium of
lenders formed when a loan shows incipient signs of stress. Formation of the
JLF was mandated by the banking regulator last year in the wake of a secular
rise in bad loans in recent years. However, large banks had a grouse that forum
lenders with limited exposure were not cooperating to iron out the kinks.
The formation of the
JLF is a component of the new norms, which mandates lenders to form a group if
interest or principal is due for more than 60 days.
Job of JLF:
A loan becomes
non-performing if it is due for more than 90 days.
The consortium is supposed to come up with corrective action plan within 45 days after the formation of the committee. It is supposed to determine if it needs to initiate recovery or restructuring or suggest steps to decide on the given issue
The consortium is supposed to come up with corrective action plan within 45 days after the formation of the committee. It is supposed to determine if it needs to initiate recovery or restructuring or suggest steps to decide on the given issue
Execution of the Plan:
Any plan at the JLF can be sanctioned or approved
only if 75 % in numbers and 60 % of lenders in terms of exposure…number of lenders agree to the plan/proposal
Reserve Bank of India
(RBI) restrictions:
The Reserve Bank of India
(RBI) is planning to restrict the numbers of members
in the joint lenders’ forum (JLF) — a move aimed to break the logjam banks
often face in resolving distress.
The suggestion is to
have a regulatory limit on the number of members in a consortium, so that every
member will have a serious, independent credit appraisal, and credit mindset.
Unless there is proper
coordination between the interested parties, all efforts at revival are likely
to fall flat.
Formation of Central Repository of Information on Large Credits (CRILC)
It was also proposed in
the Frame Repository of Information on Large Credits (CRILC) work that the
Reserve Bank of India (RBI) will set up a Central Repository of Information on
Large Credits (CRILC) to collect, store, and disseminate credit data to
lenders. Now banks will be required to report credit information, including
classification of an account as SMA(Special Mention Account) to CRILC on
all their borrowers having aggregate fund-based and non-fund based exposure of
Rs.50 million and above with them.
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