What changed
RBI released a consolidated version of the 2003 guidelines and directions for SCs and RCs, updated as on June 30, 2007. This circular serves as a reference document incorporating all amendments made since the original issuance on April 23, 2003.
What it means for you
Banks and lenders dealing with SCs/RCs must ensure compliance with the updated prudential norms, including NPA classification (180-day overdue), fair value calculation, and disclosure requirements. The guidelines reinforce RBI's regulatory oversight to protect investor interests and maintain financial system stability.
What you must do
- Review the updated consolidated guidelines to ensure your SC/RC operations align with current prudential norms and disclosure requirements.
- Verify that NPA classification follows the 180-day overdue rule from acquisition or contract date, whichever is later.
- Update internal policies to reflect fair value calculation methods (mean of earning value and break-up value) for asset valuation.
- Ensure compliance with registration, owned fund, and permissible business requirements as per the SARFAESI Act.
Who it affects
Securitisation Companies (SCs), Reconstruction Companies (RCs), Banks and financial institutions dealing with SCs/RCs, Investors in securitised assets
What is the NPA classification period 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 due date per the contract between borrower and originator, whichever is later.
Are these guidelines applicable to trusts managed by SCs/RCs?
No, certain provisions (paragraphs 4, 5, 6, 9, 10(i), 10(iii), 12, 13, 14, and 15) do not apply to trusts mentioned in paragraph 8 of the guidelines.
What is the effective date of these updated guidelines?
The consolidated guidelines are effective from June 30, 2007, but the original directions came into force on April 23, 2003.