CAIIB-ABM-LAST MINUTE REVISION

Credit Default

Credit Default means the inability or the unwillingness of a customer or counterparty to meet commitments in relation to lending, trading or any financial transactions.

Stressed Assets

Stressed Assets are those assets in which the default has either already occurred or which are facing a reasonably certain prospect of default. Stressed Assets are defined as an account where principal and/or interest remains overdue for more than 30 days.

Non Performing Assets (NPAs)

Once the borrower has failed to make interest or principle payments for 90 days the loan is considered to be a non-performing asset. NPAs are further classified into :

1. Sub-standard
2. Doubtful
3. Loss Assets

Corporate Debt Restructuring (CDR) Mechanism

Reference to CDR Mechanism may be triggered by:

Any or more of the creditors having minimum 20% share in either working capital or term finance, or
By the concerned corporate, if supported by a bank/FI having minimum 20% share as above.

CDR Standing Forum

The Forum comprises Chief Executives of All-India Financial institutions and Scheduled Banks and excludes Regional Rural Banks, co-operative banks, and Non-Banking Finance Companies.

It is a self-empowered body which lays down policies and guidelines to be followed by the CDR Empowered Group and CDR Cell for debt restructuring and ensures their smooth functioning and adherence to the prescribed time schedules for debt restructuring.

The Forum meets at least once every six months.

CDR Empowered Group

The individual cases of corporate debt restructuring are decided by the CDR Empowered Group (EG), which is the second tier of the structure of CDR Mechanism in India. The EG in respect of individual cases comprises Executive Director (ED) level representatives of Industrial Development Bank of India Ltd., ICICI Bank Ltd., State Bank of India as standing members, in addition to ED level representatives of financial institutions (FIs) and banks which have an exposure to the concerned company. 

The EG meets on two occasions to discuss (Flash and Final Report) in respect of each borrower account. This provides an opportunity to the participating members to seek proper authorization from their CEO/ED, in case of need.

CDR Cell

The CDR Cell, the third tier of the CDR Mechanism in India, is mandated to assist the CDR Standing Forum and the CDR Empowered Group (EG) in all their functions.

The EG can approve or suggest modifications to the restructuring plan, but ensure that a final decision is taken within a total period of 90 days. The period can be extended up to a maximum period of 180 days from the date of reference to the CDR Cell, if there are genuine reasons.

SME Debt Restructuring Mechanism

Units in Small and Medium Enterprises (SME) Sector will include all units in tiny and Small Scale industrial (SSI) sector and also those industrial units whose investment in plant and machinery is up to Rs. 10 Crore.

Credit Information Bureau (India) Limited (CIBIL)

Credit Information Bureau (India) Limited or CIBIL is a Credit Information Company (CIC) founded in August 2000. Post Inception, it has come to play a critical role in India’s financial system. Whether it is to help loan providers manage their business or help consumers secure credit faster and at better terms, the use of CIBIL’s products have led to a massive change in the way the credit life cycle is managed by both loan providers and consumers.

CIBIL collects and maintains records of an individual‘s payments pertaining to loans and credit cards. These records are submitted to CIBIL by banks and other lenders, on a monthly basis. This information is then used to create Credit Information Reports (CIR) and credit scores which are provided to lenders in order to help evaluate and approve loan applications.

Share holders of CIBIL