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RBI directive on NPA selling

Special Correspondent

MUMBAI: The Reserve Bank of India on Thursday asked banks that the sale price should generally not be lower than the net present value arrived at, while selling non-performing assets (NPAs).

“Bank should, while selling NPAs, work out the net present value of the estimated cash flows associated with the realisable value of the available securities net of the cost of realisation.

“The sale price should generally not be lower than the net present value arrived at in that manner,” the RBI stated in a notification to all banks and term lending institutions.

Banks’ boards are required to lay down policies and guidelines covering, among other things, valuation procedure to be followed to ensure that the economic value of financial assets is reasonably estimated based on the assessed cash flows arising out of repayments and recovery prospects.

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