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

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.