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RBI revises joint lenders’ forum guidelines to rein in NPLs

These are incremental changes that the Reserve Bank of India (RBI) has made to ensure that banks get together and try and save assets from becoming NPLs.

The Reserve Bank of India (RBI) revised the guidelines for the Joint Lenders’ Forum today, making it compulsory for the Empowered Group to have representatives from the two systemically important banks State Bank of India and ICICI Bank .


These are incremental changes that the Reserve Bank of India (RBI) has made to ensure that banks get together and try and save assets from becoming NPLs. This is a continued effort and initially about a year ago the RBI had asked that as soon as a borrower does not pay for the second month in a row, that is for 60 days, the banks should convene a JLF.


The RBI has today said that there should be a JLF Empowered Group. There may be 14 or 20 lenders, but there should be a smaller group which is able to drive the decisions.


 That group shall have one member of the largest private sector bank and public sector bank – State Bank of India and ICICI Bank and then it should also have the top three lenders to that borrower. If SBI and ICICI themselves have lent then the third, fourth, fifth borrower should also be present in the empowered group, the idea being that it is a powerful group.


The central bank further wants two large banks, which don’t have exposure to that borrower, also to be part of the Empowered Group. The bank which convenes the JLF it is usually the consortium leader, the one with the largest exposure, that bank should provide the secretarial assistance.