A Complete, Simple & Customer-Friendly Guide Based on the Latest SBI SOP

When a loan account becomes a Non-Performing Asset (NPA), customers often get confused about what happens next. Many borrowers worry about legal action, loan recall, or how banks handle such accounts. To bring more transparency and help customers understand the process, the State Bank of India (SBI) has issued a detailed Standard Operating Procedure (SOP) on how NPAs are transferred from the bank’s balance sheet to the AUCA (Advances Under Collection Account).

This blog explains the full process in simple English, based on SBI’s official guidelines, so that any borrower, guarantor, or interested customer can clearly understand what AUCA is, why accounts get transferred there, and how it affects recovery efforts.

What Is AUCA (Advances Under Collection Account)?

AUCA is an internal category in which SBI parks those NPA accounts that are doubtful or loss assets and already have full or nearly full provisioning made against them.
In simple words:

AUCA = Off-Balance Sheet bucket for NPAs that are very difficult to recover.

Even though the account is taken off the balance sheet, the bank does NOT stop recovery efforts. Legal actions such as SARFAESI, DRT cases, and court suits continue just as before.

Customers should understand that moving an account to AUCA does not mean waiver, write-off, or forgiveness of dues. Recovery efforts remain the same or sometimes even more aggressive.

1. When Does SBI “Recall” a Loan?

Before transferring an NPA to AUCA, SBI first moves the account to a Recalled Assets Account.

An account is “called up” when:

The business cannot be revived or rehabilitated.
The resolution plan has failed.
No chance of compromise settlement exists or the compromise is not beneficial for the bank.
Borrower’s integrity is doubtful (e.g., hiding assets, not cooperating, diversion of funds).

Steps followed before recalling the loan:

The branch reports all issues to the controlling authority.
The authority checks the situation and approves the “loan recall”.
Post approval, the outstanding amount is transferred to the Recalled Assets Account.

2. How SBI Selects Accounts for Transfer to AUCA

2.1 Eligible Accounts

The following categories of NPAs are eligible for transfer:

a) Doubtful & Loss Assets that are already in Recalled Assets

These are high-risk NPAs where chances of recovery are very low.

b) Accounts where cases are filed in DRT or Civil Courts

c) Accounts where SARFAESI action (Section 13(4)) has started

This includes possession notices or sale notices.

d) Accounts where legal action has been initiated or formally waived

e) Where legal action is approved and under process

f) Transfer before filing a suit

Only allowed after special permission from senior authorities such as CGM (Circle), CAG, CCG, or SARG.

Important Rule:

Accounts must be moved to Recalled Assets before shifting to AUCA.

2.2 Special Categories

SBI has special rules for certain types of accounts:

a) State Government Guaranteed Loans

Can be transferred to AUCA like normal NPAs.
But State Government guarantee must be invoked before it expires.
If the guarantee is not honoured, the bank must file a recovery suit.

b) Central Government Guaranteed Loans

Transfer to AUCA is normally NOT allowed.
Any exception must be approved by CCCC & ECCB.

c) NCLT (Insolvency Cases)

Transfer may be allowed selectively, based on opinion from NCLT Cell, especially:

Where a resolution plan is approved.
Where liquidation orders are issued or pending.

d) CGTMSE / CGFMU covered accounts

Before transferring to AUCA:

Guarantee claim period should have ended.
Received claim amount must be adjusted first.
Only the remaining balance is shifted to AUCA.

2.3 Fraud Cases

Fraud or vigilance-linked accounts may also be transferred to AUCA by the competent authority.

No extra administrative clearance is needed.
Civil and criminal cases continue independently.

This helps SBI keep its balance sheet cleaner while pursuing recovery through courts and law-enforcement agencies.

3. Partial Transfer of NPAs to AUCA

Sometimes SBI does not move the entire dues to AUCA.
Partial transfer is allowed in:

a) Doubtful Asset Category D-I & D-II

Only to the extent of available provision.

b) Accounts Under Certain Approval Authorities

Only RCC/SARCC-IV and above can approve partial transfers.

c) Same authority must approve future partial transfers

If part of the loan is already in AUCA, the next partial transfer must be approved by the same authority.

4. How Branches Prepare AUCA Transfer Proposals

Before proposing an account for AUCA transfer, SBI branches must ensure:

a) All possible recovery attempts have been made

Transfer to AUCA is done only when it is in the bank’s best interest.

b) Proposal must be prepared in prescribed Annexure formats

c) Internal Screening Committee must review write-off proposals

d) Staff Accountability Status must be mentioned

This helps identify if any staff negligence contributed to the NPA.

e) ECGC/CGTMSE claim adjustments

Claim amounts must be fully applied before sending the balance to AUCA.

f) Transfer must come through the Recalled Assets Account

g) For partial transfers (during compromise)

Branch must obtain approval to move the account into Recalled Assets first.

5. Approval Process for AUCA Transfer

Once an account is eligible:

a) Branch must first ensure it is in the Recalled Assets Account

b) In exceptional cases, both approvals may be taken together

– recall + AUCA transfer

c) Proposal goes to the Screening Committee

Using Annexure-II.

d) Important Rule

The authority approving AUCA transfer must not be the person who originally sanctioned the loan.

e) Full provision available cases

When 100% provision exists:

Transfer is just a book entry.
No reporting required for this movement.
But legal action and recovery process must continue.

6. Accounting Entries for AUCA Transfer

After approval:

Branch passes the write-off entry in CBS
- Menu: Common Processing → Overdue NPA → NPA Write-off
Loan account is credited.
AUCA account is simultaneously opened.
Debit goes to LHO/Corporate Centre.

This is purely an accounting movement and does not stop recovery.

7. Technical Transfer of NPAs to AUCA

SBI may also carry out technical transfers at the Corporate Centre:

a) Some NPAs are identified quarterly

If they are substantially provided for, they are taken off the balance sheet.

b) Branches must then transfer these accounts to AUCA

c) SARFAESI and other recovery methods continue normally

d) Branches must send individual proposals for approval

Following standard AUCA procedures.

e) Staff accountability must be completed

8. Removing (Reversing) AUCA Entries

Sometimes, if no recovery is possible, SBI may remove the AUCA entry.

a) Removal after 2 years

Only if:

No recovery has happened.
Last 4 review reports are attached.

b) Early removal before 2 years

Allowed when:

Decree is 3+ years old.
No recovery possible.
All borrower/guarantor assets sold.
No collateral or primary security remains.
Borrowers/guarantors cannot be traced.

c) Cases under Revenue Recovery Certificate (RRC)

RRC older than 3 years.
No security available.
No recovery possible.
Revenue recovery will continue even after AUCA removal.

d) Partial removal allowed for compromise settlement

Only the amount above the compromise value is removed.

e) Government Guarantee Cases

If no security exists, the amount over and above the guarantee value may be removed.

f) Sale of Stressed Assets to ARCs

Remaining balance after credit of sale proceeds may also be removed.

What This Entire Process Means for Customers

Many borrowers think that once their account is moved to AUCA, they are safe from recovery.
This is not true.

Here is what customers must understand:

1. AUCA Transfer ≠ Loan Write-Off

The dues still exist. Customers still owe the bank.

2. Recovery and legal action continue

SARFAESI notices, auctions, court cases — all continue even when the loan is not on the balance sheet.

3. CIBIL Score remains affected

NPA status continues until full repayment.

4. Negotiation and settlement options remain open

Borrowers can still request:

One-time settlement (OTS)
Compromise settlement
Restructuring (if eligible)
Full and final with concessions

5. AUCA benefits the bank, not the borrower

It helps SBI clean its balance sheet but has no financial benefit for the borrower.

6. If the bank sells assets (ARC sale), dues may transfer

The borrower will then owe the amount to the ARC, not the bank.

7. Legal liabilities remain

Even if AUCA removal happens, revenue recovery or legal actions continue.

Why Does SBI Transfer NPAs to AUCA?

From a bank’s point of view, AUCA helps:

Present a cleaner financial statement
Separate non-recoverable assets from active portfolio
Improve provisioning discipline
Ensure focused recovery efforts

This process is widely used by banks worldwide.

Frequently Asked Questions (FAQs)

Q1. Does transferring to AUCA mean my loan is waived?

No. Your dues remain payable.

Q2. Will SBI stop legal action after AUCA transfer?

No. Legal action continues with full force.

Q3. Can I still settle the loan?

Yes. Settlement options remain available.

Q4. Will my CIBIL score improve after AUCA transfer?

No. CIBIL improves only after full repayment or settlement.

Q5. Will SBI auction my property after AUCA transfer?

Yes, if SARFAESI is already initiated.

Q6. Is AUCA an advantage for the customer?

Not directly. It is an internal accounting adjustment for the bank.

Conclusion: AUCA Is an Internal Process — Recovery Continues for the Customer

The SBI circular makes it clear that AUCA is only a change in accounting treatment.
It does NOT:

Stop recovery
Reduce borrower liability
Close the loan
Waive dues
End legal action

For customers, the best approach is to:

Stay in communication with the bank
Explore settlement options
Avoid delaying recovery
Try to protect collateral by negotiating early

This detailed SOP by SBI brings transparency and a systematic procedure for handling NPAs, ensuring that the bank follows consistent rules while customers are given fair opportunities at every stage.