Joint Lenders Forum (JLF)

In order to revitalise distressed assets, the Reserve Bank of India introduced Joint Lenders Forum. JLF is a body consists of lenders/banks who have granted credit (loan) facility to concerned borrower.  These guidelines will be applicable for lending under Consortium and Multiple Banking Arrangements (MBA).

Banks are advised that as soon as an account is reported by any of the lenders to CRILC as SMA-2, they should mandatorily form a committee to be called Joint Lenders’ Forum (JLF):

  • If the aggregate exposure (AE) [fund based and non-fund based taken together] of lenders in that account is Rs 1000 million and above.
  • Lenders also have the option of forming a JLF even when the AE in an account is less than Rs.1000 million and/or when the account is reported as SMA-0 or SMA-1.

The JLF should explore the possibility of the borrower setting right the irregularities/weaknesses in the account. It may explore various options to resolve the stress in the account.

The options under Corrective Action Plan (CAP) by the JLF would generally include:

  • Rectification – Obtaining a specific commitment from the borrower to regularise the account so that the account comes out of SMA status or does not slip into the NPA category.
  • Restructuring – Consider the possibility of restructuring the account if it is prima facie viable and the borrower is not a wilful defaulter, i.e., there is no diversion of funds, fraud or malfeasance, etc.
  • Recovery – Once the first two options at (a) and (b) above are seen as not feasible, due recovery process may be resorted to.

The JLF is required to arrive at an agreement on the option to be adopted for CAP within 45 days from

  • The date of an account being reported as SMA-2 by one or more lender, or
  • The receipt of request from the borrower to form a JLF, with substantiated grounds, if it senses imminent stress.

The JLF should sign off the detailed final CAP within the next 45 days from the date of arriving at such an agreement.

Wilful defaulters will normally not be eligible for restructuring.

This framework shall also be applicable to NBFCs

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