Question

    RBI has mandated banks to form JLFs when the account is

    classified SMA-2. What does JLF stands for?
    A Joint Liability Finance Correct Answer Incorrect Answer
    B Joint Liability Forum Correct Answer Incorrect Answer
    C Joint Lenders’ Forum Correct Answer Incorrect Answer
    D Joint Legal Forum Correct Answer Incorrect Answer
    E Joint Liquidity Forum Correct Answer Incorrect Answer

    Solution

    When the principal or interest payment for a particular loan is overdue between 61 and 90 days (and not exceeding 90 days), this is called special mention account-2 or SMA-2.JLFs meetings are held to revitalise stressed assets. In JLF banks attempt to red-flag stress early and check them by putting in place a corrective action plan (CAP). RBI has lowered the threshold needed for implementing the corrective action plan (CAP). Now, the decisions agreed to by a minimum of 60% of creditors by value and 50% of creditors would now be valid to implement the CAP. Decision taken by the JLFwould be binding on all other lenders.

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