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narendra.s.p (Chief Manager(Law))     30 June 2011

NPA defination followed Banks

The Definition of “Non Performing Assets” defined by RBI in its Master Circular No.DBOD.No.BP.BC.17/21.04.048/2009 dated. July 1, 2009 followed by all the Banks is meant for implementing stringent financial discipline by the borrowers in conducting their loan account / portfolio and for implementing international prudential norms.


This definition if adopted as per clause 2(o) of the SARFAESI Act,2002 to enforce the security interest under Chapter III of the Act; for purpose of initiating action against the borrowers, more so against the Guarantor who has offered his property as collateral security; will lead to injustice.


The definition of NPA in the RBI master circular is very harsh & unjust. It is challenged in the High Court of Karnataka


 5 Replies

pervez (adviser)     30 June 2011

Any order from High Court to this effect..?

narendra.s.p (Chief Manager(Law))     15 July 2011

Judgment of the Karnataka HC in Writ Appeal is attached. Here the question was: Bank proceed to take possession of the mortgage security under SARFAESI. The mortgagor challenged the RBI defination of NPA. He however sought interim relief of stay against the Bank till disposal of the WP. The petitioner admits that he has no case against the Bank and that the Bank has complied with all the procedural requirement under SARFAESI. His relief is only against RBI (Respondent 2). However the interm stay is sougnt against the Bank.  

Attached File : 123913 194589 8 wp509 07 24 05 2011.pdf downloaded: 144 times

pervez (adviser)     16 July 2011

The judgement attached does not pertains to the subject. Anyway, RBI is very clear on the definition of NPA and all banks / FIs are following the same without any deviation....

Pl send the relevant judgement...

narendra.s.p (Chief Manager(Law))     17 July 2011

sorry, here it is attached

Attached File : 123913 195298 58 wa3721 11 22 06 2011.pdf downloaded: 164 times

RAJU O.F., (Advocate)     22 July 2011

Classification of an account as NPA as per RBI norms is not enough, for initiating proceedings under the SARFAESI Act. This subject is very well explained by Andhra Pradesh High Court  in 'Sravan Dall Mill (P) Ltd Vs. Central Bank of India reported in II(2010)Banking Cases 96 (DB).

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