RBI working to make JLF more transparent, says Deputy Governor

MUMBAI: The Reserve Bank is working to bring more transparency to the joint lending forum (JLF), which was set up to revitalise distressed assets, Deputy Governor SS Mundra said today.

"This system was put in place just a few months back and it takes some time for us to stabilise. Now, we are looking at it with more analytics around it.

"Also, we are seeing whether there would be a need or a structure for disclosure...these are the few things we are examining now and these are something which cannot be done in haste," he told reporters on the sidelines of an event here.

Bankers have been complaining about lack of transparency in the newly-created JLF, which replaced the CDR Cell.

With a massive increase in non-performing loans and the resultant spike in restructuring, the RBI had last year released a framework for revitalising distressed assets and replaced the previous corporate debt restructuring cell (CDR), which it feared was being misused both by lenders as well as by borrowers, with JLF.

The JLF framework outlined a corrective action plan that would incentivise early identification of problem cases, timely restructuring of stressed loan accounts which are considered to be viable, and taking prompt steps by banks for recovery or sale of unviable accounts.

It proposed that the RBI would set up a Central Repository of Information on Large Credits (CRILC) to collect, store, and disseminate credit data to lenders.

The framework advised that when an account is reported to the CRILC as Special Mention Account-2 (SMA-2), which has principal and interest payment overdue between 61 and 90 days, the banks should mandatorily form a committee to be called Joint Lenders Forum (JLF), if the aggregate exposure in that account is Rs 100 crore and more.

In the JLF, lenders with small exposures have complained about lack of transparency and the logic of the decision taken by the big lenders in the forum.

"The basic purpose of the JLF was that there should be a long-term solution which makes the project viable. The leaders, who have large exposure in an accout, in the JLF take decision just to try to protect the account from becoming NPA. They should look at long-term viability of the project also," said a senior banker from a state-run bank.

"We are just informed about the decision taken by the JLF, without properly mentioning the logic and details in the minute, which are disclosed to us," said another banker.

Bankers have been demanding detailed minutes and logic behind the decision taken by the JLF for a particular account.

It could be recalled that at the last meeting of the finance ministry, the RBI and public sector banks, which was held in Mumbai last month, to understand issues faced by large infrastructure projects, it was decided that all the bankers in JLF will have to follow the decision taken by the consortium leader.

"There were lots of issues with regards to JLF where the consortium leader was following one set of practices and others were not falling in line.

"So, today the decision has been taken that the all the banks have to fall in line in case 75 per cent by volume and 60 per cent by number the discussion has been finalised by the consortium leader," Indian Bank Association Chairman T M Bhasin had said.