Special provision regarding interest on bad and doubtful debts of financial institutions, banks, etc

The provisions of section 43D shall apply in the case of every public financial institution, scheduled bank, State financial corporation and State industrial investment corporation where its income by way of interest pertains to the following categories of bad and doubtful debts, namely:- (a) (i) Non-viable or sticky advances, i.e., where irregularities of the nature specified in sub-clause (ii) are noticed in the accounts of the borrowers for a period of six months and more and there are no minimum prospects of regularisation of accounts, or where the accounts or information in relation to such accounts reflect usual signs of sickness, such as,- (1) apparent stagnation in the business as a result of the slow or negligible turnover; (2) frequent requests for overdrawing or issue of cheques without ensuring availability of funds in the account; (3) bills purchased or discounted remain overdue for 3 months and more or the recovery of such bills from the borrower poses difficulties; (4) in the case of term-loans, instalments which are overdue for 6 months or more; (5) unexplained delays by the borrower in submission of quarterly or half-yearly operating statements or stock statements or balance sheets and other information required by the bank; (6) slow movement or stagnation of stocks observed during inspections; (7) low or negligible level of activity observed during inspections or suspension or closure of the business; (8) persistent delay in compliance with vital requirements like execution of documents, producing additional security when required or non-compliance with such requirements; (9) diversion of funds to sister units or acquiring capital assets not relevant to the business or large personal withdrawals by the borrowers; (10) intentional non-adherence to project schedules leading to sub-stantial cost escalations and requirement of additional term-finance; (11) the pressure on the liquidity leading to non-payment of wages to workers or statutory dues or rents of office and factory premises; (12) the current liabilities exceeding current assets; (13) any grave irregularities observed by the auditors of the borrowers which remain to be rectified; (14) basic weakness revealed by the financial statements of the unit, for example, continued cash loss beyond one year. (ii) The irregularities referred to in sub-clause (i) in the accounts of the borrowers are,- (1) where the accounts are overdrawn beyond the drawing power or the sanctioned limit, for a temporary period; (2) instalments in respect of term-loans are overdue for less than 6 months or import bills under letters of credit or instalments under deferred payment carried are overdue for less than 3 months; (3) bills not exceeding 10% to 15% of the total outstandings in the bills purchased or discounted account of the borrower are overdue for payment for a period of less than 3 months and refund in respect of unpaid bills is not forthcoming immediately. (b) Advances recalled, i.e., where the repayment is highly doubtful and revival of the unit is not considered worthwhile and a decision has been taken to recall the advances. (c) Suit-filed accounts, i.e., where legal action or recovery proceedings have been initiated and suits are pending for recovery of advances. (d) Decreed debts, i.e., where suits have been filed and decree obtained and such decree is pending for execution. (e) Debts recoverability whereof has become doubtful on account of shortfalls in value of security, difficulty in enforcing and realising the securities, or inability or unwillingness of the borrower to repay the banks dues, partly or wholly, and such debts have not been included in preceding clauses (a) to (d).