GUIDELINES ON PURCHASE/ SALE OF NON PERFORMING ASSETS

Banks should, while selling Non Performing Assets (NPAs), work out the net present value of the estimated cash flows associated with the realizable value of the available securities net of the cost realization. The sale price should generally not be lower than the net present value arrived at in the manner described above. Same principle should be used in compromise settlements. As the payment of the compromise amount may be in installments, the net present value of the settlement amount should be calculated and this amount should generally not be less than the net present value of the realizable value of securities.