The Reserve Bank of India or RBI gives more flexibility and time to the banks to consider how they want to treat a defaulter account or NPA in India?

Now, the banks will have 30 days to declare an account as NPA and another six months to execute the recovery plan.

Banks that have sufficient capital to set aside can delay the implementation plan.

Highlights of the revision plan


  • The bank will have to incur an additional provision of 20 percent on the outstanding is the resolution plan goes delayed beyond 180 days.
  • In case the plan is not implemented within one year of default, then 35 percent of the outstanding amount will have to be provided.
  • In the new framework mandate, the inter-creditor agreement has been made compulsory for npa financial services.
  • To begin the resolution proceedings; it is sufficient to hold 75 percent of value and 60 percent in numbers by the bank.
  • From the dawn of the year 2020, amounts of 1500 cr and more will fall under the framework.


Lenders are required to enter into an Intercreditor Agreement or ICA within one month of the review period.

A bank can delay the resolution plan, but it has to incur steep provisioning for it. In case the window of 180 days is breached, the bank should keep additional provisioning of 20 percent of the outstanding.

In the situation of not implementing the plan within one year of the default, an additional 15 percent provision or 35 percent of outstanding is to be provided by the bank.

The revised NPA norm gives banks 30 days from default for npa recovery.

With the prudential framework for the resolution of NPA, the RBI gives enough operational freedom to banks for restructuring as per their wish. It is the freedom from the so-called ‘one-day default’ program.

Since it is sufficient to start the resolution process by lender representing 75 percent of value and 60 percent of lenders by number, the process becomes easy and straightforward.