IRAC NORMS OF RBI, EXECUTION
GUIDANCE ON CERTAIN IMPORTANT
COMPLIANCES AND GUIDELINES FOR
PREPARATION OF PROPER LFAR
By:
CA. MAHENDRA K.
AGRAWALA,
FCA, DISA(ICA)
Email: magrawala@yahoo.com
INTRODUCTION
• MASTER CIRCULAR CONCEPT
SINCE LAST FEW YEARS HAS
BEEN A FINE CONCEPT
• ITS SIGNIFICANCE IN BANK
AUDIT
CONTENTS OF MASTER
CIRCULAR:
THREE MAJOR ASPECTS IN THE
MASTER CIRCULAR:
• ASSET CLASSIFICATION
• INCOME RECOGNITION
• PROVISIONING
ASSET CLASSIFICATION
• STANDARD – ADVANCE WHICH IS NOT NPA
• NON-PERFORMING ASSETS (NPA) – LOAN OR ADVANCE
CEASING TO GENERATE INCOME FOR THE BANK
• THREE CATEGORIES OF CLASSIFICATION OF NPA:
a) SUBSTANDARD ASSET – NPA FOR A PERIOD LESS
THAN OR EQUAL TO 12 MONTHS FROM THE DATE OF
NPA
b) DOUBTFUL ASSET – SUBSTANDARD ASSET FOR A
PERIOD OF 12 MONTHS OR MORE FROM THE DATE
OF NPA AND LESS THAN 12 MONTHS IN CASE OF
SERIOUS CREDIT IMPAIRMENT AND INADEQUATE
SECURITY
c) LOSS ASSET – IDENTIFIED AS UNCOLLECTIBLE WITH
NEGLIGIBLE SALVAGE OR RECOVERY VALUE AND
NOT WRITTEN OFF
CONT…
• THREE ASPECTS OF CHECKING FROM NPA
POINT OF VIEW:
a) FRESH IDENTIFICATION
b) PROPER MOVEMENT OF CLASSIFICATION
FROM ONE CATEGORY TO ANOTHER FOR
EXISTING NPAs
c) UPGRADATION OF LOAN ACCOUNTS
EARLIER CLASSIFIED AS NPA.
FRESH IDENTIFICATION
BROADLY SIX CATEGORIES OF ADVANCES
FROM NPA POINT OF VIEW:
a)

LOANS WITH FIXED REPAYMENT PERIOD
SUCH AS TERM LOANS, PERSONAL LOANS,
DEMAND LOANS
IF INSTALLMENT OR INTEREST BECOMES
OVERDUE FOR MORE THAN 90 DAYS.
CONT…
b) CASH CREDIT/OVERDRAFT, LOANS REPAYABLE ON
DEMAND
 IF OUT OF ORDER IN ANY OF THE FOLLOWING
THREE SITUATIONS:
o OUTSTANDING BALANCE CONTINUOUSLY IN
EXCESS OF SANCTIONED LIMITS FOR MORE THAN
90 DAYS
o OUTSTANDING BALANCE CONTINUOUSLY IN
EXCESS OF THE DRAWING POWER FOR MORE
THAN 90 DAYS
o NO CREDITS OR CREDITS NOT ENOUGH DURING
90 DAYS TO COVER INTEREST DEBITED DURING
SUCH 90 DAYS.
CONT…
c) BILLS PURCHASED AND DISCOUNTED
 IF THE BILL PURCHASED OR DISCOUNTED
BECOMES OVERDUE FOR MORE THAN 90 DAYS
d) CROP LOANS
 PRINCIPAL OR INTEREST OVERDUE FOR TWO
CROP SEASONS IN CASE OF SHORT DURATION
CROPS AND OVERDUE FOR ONE CROP SEASON FOR
LONG DURATION CROPS
e) PROJECT LOANS
f) RESTRUCTURED ADVANCES
ACTION POINTS: FOR FIRST
FOUR CATEGORIES
A) PLANNING
• DECIDE THE CUTOFF LIMIT ABOVE WHICH THE
ADVANCES ARE TO BE CHECKED BY GOING
THROUGH THE BORROWER WISE ADVANCES
STATEMENT AS ON 31ST MARCH.
• IN CASE OF BILLS PURCHASED & DISCOUNTED,
TAKE A PRINTOUT OF THE BILLS OVERDUE AS ON
31ST MARCH FOR MORE THAN THREE MONTHS OR
GO THROUGH THE BILLS PURCHASED REGISTER
TO IDENTIFY SUCH OVERDUE BILLS.
CONT…
B) TERM LOANS:
• GO THROUGH THE TERMS OF SANCTION AND
MATHEMATICALLY CALCULATE THE “SHOULD
BE" BALANCE AS ON 31ST MARCH, AS PER TERMS
OF SANCTION AND COMPARE WITH THE ACTUAL
BALANCE.
• IN CASE OF ACTUAL BALANCE BEING HIGHER,
ENSURE THAT THE DEFAULT OF PRINCIPAL
INSTALLMENT OR INTEREST NOT MORE THAN 90
DAYS.
• IN CASE OF MORATORIUM PERIOD EITHER AT
THE TIME OF SANCTION OR SUBSEQUENTLY, 90
DAYS TO BE CALCULATED AFTER THE
MORATORIUM IS OVER.
CONT…
•
•
•
CHECKUP WHETHER MORATORIUM IS FOR
INTEREST ALSO. FOR INSTANCE, LOANS TO
STAFF MEMBERS.
IN CASE OF FIXED INSTALLMENTS INCLUDING
BOTH PRINCIPAL & INTEREST AND
MORATORIUM ALLOWED SUBSEQUENT TO
SANCTION, ENSURE THAT THE ORIGINAL
INSTALLMENTS ARE RECOMPUTED.
OBTAIN THE LIST OF POTENTIAL NPA HAVING
IRREGULARITIES BUT NOT EXCEEDING 90
DAYS AND EXAMINE SUCH ACCOUNTS MORE
THOROUGHLY. THIS LIST IS USEFUL FOR
OTHER CATEGORIES OF ADVANCES ALSO.
CONT…
•
AS PER RBI GUIDELINES ALMOST ALL THE
BANKS HAVE GONE FOR SYSTEM DRIVEN NPA
STATEMENTS WHERE ENSURE THAT ALL THE
ACCOUNTS SHOWN AS NPA IN THE
STATEMENT ARE ACTUALLY NPA AND
ACCORDINGLY CLASSIFIED. THIS ACTION IS
REQUIRED FOR OTHER CATEGORIES ALSO.
CONT…
C) CASH CREDITS:
• OBTAIN THE EXCESS REPORT REFLECTING THE
ACCOUNTS WHERE EXCESS REGULARLY ALLOWED.
• OBTAIN THE CREDIT SUMMATION REPORT OF
MAJOR ADVANCES.
• ENSURE THAT THE CREDIT SUMMATION IN ANY
ACCOUNT IN ANY QUARTER IS NOT LESS THAN
THE INTEREST DEBITED DURING THE QUARTER.
• CHECK THE MONTH WISE DRAWING POWER
AMOUNT ENTERED IN THE DP REGISTER WITH
REFERENCE TO THE DETAILS IN THE
STOCK/BOOK DEBTS STATEMENTS, TERMS OF
SANCTION, SUNDRY CREDITORS DECLARED OR
NOT PROPERLY DECLARED IN THE STOCK/BOOK
DEBTS STATEMENT, LAST AUDITED BALANCE
SHEET.
CONT…
•
•
OBTAIN THE STOCK AUDIT REPORTS
WHEREVER APPLICABLE AND ENSURE THAT
THE DRAWING POWER IS ADJUSTED TO THE
EXTENT OF ADJUSTMENT TYPE
OBSERVATIONS IN THE REPORT.
ENSURE THAT THE DRAWING POWER
CALCULATION DOES NOT CONSIDER THE
OLD STOCKS & OLD DEBTORS AS PER THE
TERMS OF SANCTION. MATHEMATICALLY
CALCULATE WHERE OLD DETAILS NOT
GIVEN.
CONT…
•
•
IN CASE OF C/C ACCOUNTS HAVING LARGE
TRANSACTIONS MAKING SCANNING
DIFFICULT, PREPARE A MONTH WISE TABLE
OF THE DRAWING POWER, SANCTIONED
LIMIT AND THE MINIMUM BALANCE
OUTSTANDING FOR THE MONTH.
IF THE MINIMUM BALANCE IS MORE THAN
THE SANCTIONED LIMIT OR DRAWNG
POWER FOR MORE THAN THREE MONTHS,
THEN THE ACCOUNT IS NPA.
CONT…
D) BILLS PURCHASED & DISCOUNTED:
• OBTAIN BILL PURCHASED/DISCOUNTED
REGISTER HAVING THE DETAILS OF DATE
OF PURCHASE/ DISCOUNT, DUE DATES,
DATE OF PAYMENT.
• IDENTIFY THE BILLS HAVING GAP OF MORE
THAN 90 DAYS BETWEEN DUE DATE AND
THE CLOSING DATE.
• FOREIGN BILLS OVERDUE FOR LESS THAN 90
DAYS ARE CRYSTALLIZED AT TIMES
THROUGH RUPEE PAYMENTS TO AVOID NPA
AND IN SUCH CASES, CONCESSIONAL
INTEREST RATES FOR EXPORT CREDITS TO
BE WITHDRAWN.
CONT…
E) CROP LOAN:
• OBTAIN THE HARVESTING DATES OF BOTH SHORT
DURATION AND LONG DURATION CROPS AFTER
WHICH THE LOANS TAKEN ARE NORMALLY REPAID.
• ENSURE THAT THE OUTSTANDINGS ARE CLEARED
BEFORE THE END OF :
1.
2.
•
TWO CROP SEASONS SUBSEQUENT TO THE CROP SEASON IN
WHICH THE LOANS TAKEN FOR SHORT DURATION CROPS
BEFORE THE END OF ONE CROP SEASON SUBSEQUENT TO
THE CROP SEASON IN WHICH THE LOANS ARE TAKEN FOR
LONG DURATION CROP.
SPECIAL RELAXATION AT TIMES GIVEN BY RBI FOR
NATURAL CALAMITIES WHERE THE DUE DATES GET
ACCORDINGLY CHANGED.
SOME OTHER IMPORTANT POINTS
RELATED TO FRESH IDENTIFICATION:
•
•
•
•
90 DAYS CRITERIA NOT APPLICABLE TO ADVANCES
AGAINST TERM DEPOSITS, NSC, KVP, IVP AND LIFE
POLICIES PROVIDED ADEQUATE MARGIN IS AVAILABLE IN
THE ACCOUNTS.
ADVANCES AGAINST GOLD ORNAMENTS, GOVT.
SECURITIES AND ALL OTHER SECURITIES ARE VERY
MUCH COVERED UNDER 90 DAYS CRITERIA.
SOLITARY OR FEW CREDITS IN THE ACCOUNTS BEFORE
COMPLETION OF 90 DAYS IRREGULARITY PREVENTING
THE ACCOUNT FROM BECOMING NPA MAY BE IGNORED
IN ACCOUNTS HAVING CHRONIC FINANCIAL
WEAKNESSES.
CREDITS IN THE ACCOUNT PREVENTING THE NPA
SITUATION SHOULD NOT BE OUT OF AD HOC
SANCTION/ADDITIONAL FACILITIES GRANTED.
CONT…
•
•
L/C DEVOLVEMENT IF PARKED IN SEPARATE
ACCOUNTS ARE TO BE AGGREGATED WITH THE
BALANCES IN MAIN ACCOUNT TO CHECK 90 DAYS
OUT OF ORDER STATUS.
ONE FACILITY BECOMING NPA EVEN IF SMALLEST
SHALL MAKE ALL OTHER FACILITIES OF THE
BORROWER NPA OTHER THAN THE BILLS
DISCOUNTED UNDER LC :
o
o
SHALL NOT BE NPA TILL NON-ACCEPTANCE OF THE
PRESENTATION OF DOCUMENTS UNDER LC BY THE
DRAWEE OR PAYMENT UNDER LC NOT MADE BY DUE
DATE
IN CASE OF ADVANCES TO PACS AND FSS UNDER THE
ONLENDING SYSTEM, ONLY THE PARTICULAR
FACILITY OVERDUE AS PER NPA NORMS SHALL
BECOME NPA.
CONT…
•
ACCOUNTS WITH DEFICIENCIES SUCH AS OUTSTANDINGS
EXCEEDING SANCTIONED LIMITS/ DRAWING POWER,
NON SUBMISSION OF STOCK STATEMENTS, NON
RENEWAL OF LIMITS ETC. FOR TEMPORARY PERIOD
NEED NOT BE IDENTIFIED AS NPA.
•
NON SUBMISSION OF STOCK STATEMENTS FOR MORE
THAN SIX MONTHS SHALL MAKE THE ACCOUNT NPA.
•
NON RENEWAL OF REGULAR LIMITS AND NON
REGULARIZATION OF AD HOC LIMITS FOR MORE THAN
180 DAYS FROM THE DUE DATE SHALL MAKE THE
ACCOUNT NPA.
CONT…
•
CONSORTIUM ADVANCES:
o
THE RECORD OF RECOVERY OF THE INDIVIDUAL
BANK IRRESPECTIVE OF THE STATUS IN OTHER
MEMBER BANKS.
EXPRESS CONSENT FROM THE LEAD BANK FOR
THE TRANSFER OF SHARE OF RECOVERY IS
SUFFICIENT.
• CENTRAL GOVERNMENT GUARANTEED ADVANCES
EVEN IF OVERDUE FOR MORE THAN 90 DAYS NEED
NOT BE NPA TILL THE INVOCATION OF GUARANTEE
AND REPUDIATION BY GOVERNMENT.
o
PROJECT LOANS
•
•
•
FOR INFRASTRUCTURE PROJECTS
FOR NON-INFRASTRUCTURE PROJECTS
FOR COMMERCIAL REAL ESTATE
EXPOSURES (CRE)
PROJECT LOANS FOR
INFRASTRUCTURE PROJECTS
• INFRASTRUCTURE SECTOR AS DEFINED IN
EXTANT – RBI CIRCULAR DT 29/11/2013
• NPA IF COMMERCIAL OPERATION NOT
COMMENCED WITHIN TWO YEARS FROM THE
DATE OF ORIGINAL DCCO UNLESS FRESH DCCO IS
FIXED AS PER RBI GUIDELINES
• NPA IF RESTRUCTURED ANYTIME FOR REASONS
OTHER THAN DCCO AND NOT ELIGIBLE FOR
SPECIAL REGULATORY TREATMENT AS PER PARA
15 OF MASTER CIRCULAR
• NORMAL 90 DAYS CRITERIA FOR NPA IS ALSO
APPLICABLE
CONT…
• FRESH FIXATION OF DCCO
o APPLICATION TO BE RECEIVED BEFORE THE EXPIRY OF 2
YEARS FOR EXTENSION UPTO ANOTHER 2 YEARS IN CASE OF
COURT/ARBITRATION CASES AND UPTO ANOTHER 1 YEAR
INCASE OF REASONS BEYOND THE CONTROL OF PROMOTERS
AND THE PROPOSED DCCO ACCORDINGLY REFIXED BY THE
BANK
o SECOND OR MULTI TIME REFIXATION OF DCCO –
CONSIDERED AS REPEATED RESTRUCTURING EARLIER AND
HENCE NPA BUT PRESENTLY SECOND OR MULTITIME
REFIXATION OF DCCO WHERE FRESH DCCO FIXED IS WITHIN
THE ABOVE LIMITS (UPTO 2 YEARS FROM ORIGINAL DCCO
EARLIER) IS NOT RESTRUCTURING AND HENCE NOT NPA.
CONT…
• IN CASE OF INFRASTRUCTURE PROJECTS MAINLY
ROAD SECTOR, CHANGE IN APPOINTED DAY AS PER
CONCESSION AGREEMENT LEADING TO CHANGE
IN DCCO IS NOT RESTRUCTURING UNDER THE
FOLLOWING CIRCUMSTANCES.
o BEING INFRASTRUCTURE PROJECT UNDER PPP
MODEL AWARDED BY PUBLIC AUTHORITY
o DISBURSEMENT NOT STARTED
o SUPPLEMENTARY AGREEMENT FOR CHANGE IN
DCCO
o VIABILITY REASSESSED AND SANCTIONED FROM
COMPETENT AUTHORITY
PROJECT LOANS FOR NON –
INFRASTRUCTURE SECTOR
• ALL THE POINTS ARE SIMILAR TO
INFRASTRUCTURE EXCEPT THAT THE
ALLOWED DELAY OF 2 YEARS FROM THE
ORIGINAL DCCO IS 1 YEAR AND INCASE OF
REFIXATION OF DCCO, FURTHER
EXTENDABLE PERIOD IS ONE YEAR ONLY.
COMMERCIAL REAL ESTATE
EXPOSURES
• GENERALLY NPA ON THE FIRST
RESTRUCTURING ITSELF AS THE ASSET
CLASSIFICATION BENEFIT LIKE OTHER
LOANS IN PARA 15 OF MASTER CIRCULAR NOT
AVAILABLE
• EXTENSION OF DCCO NOT TO BE
CONSIDERED AS RESTRUCTURING IF FRESH
DCCO FALLS WITHIN ONE YEAR FROM THE
ORIGINAL DCCO
OTHER ISSUES IN PROJECT LOANS
REPAYMENT SCHEDULE:
• ANY CHANGE IN REPAYMENT SCHEDULE DUE
TO INCREASE IN PROJECT OUTLAY ON
ACCOUNT OF INCREASE IN SCOPE AND SIZE OF
THE PROJECT IS NOT RESTRUCTURING UNDER
CERTAIN CONDITIONS
• INCREASE BEFORE DCCO
• COST OVERRUN IS 25% OR MORE THAN
ORIGINAL OUTLAY
• VIABILITY IS REASSESSED
• NEW RATING NOT BELOW THAN PREVIOUS
RATING BY MORE THAN ONE NOTCH.
COST OVERRUNS:
•
•
•
•
EXTENSION OF DCCO LOANS LEADS TO COST
OVERRUNS AND ANY ADDITIONAL FINANCE FOR
COST OVERRUNS USED TO BE RESTRUCTURING
EARLIER BUT NOT NOW AS PER RBI CIRCULAR DT
14.08.2014 PROVIDED FOLLOWING CONDITIONS ARE
FULFILLED
ADDITIONAL FINANCE CONSISTS OF ADDITIONAL
INTEREST DURING CONSTRUCTION AND OTHER
COST OVERRUNS EXCLUDING INTEREST UPTO
MAXIMUM 10% OF ORIGINAL PROJECT COST.
P/E RATIO SHOULD BE SAME OR BETTER AND
REVISED DSCR SHOULD BE ACCEPTABLE TO THE
BANK.
DISBURSEMENT TO START ONLY AFTER PROMOTERS
CONTRIBUTION OF HIS SHARE.
ALL OTHER TERMS TO REMAIN SAME.
RESTRUCTURING OF ADVANCES
• UNDER CDR MECHANISM
• UNDER NON-CDR MECHANISM
• UNDER SME DEBT RESTRUCTURING
MECHANISM
GENERAL PRINCIPLES FOR RESTRUCTURING
UNDER ALL MECHANISM
• ASSET CLASSIFICATION STATUS ON THE DATE OF
APPROVAL OF RESTRUCTURED PACKAGE IS RELEVANT
TO DECIDE ASSET CLASSIFICATION AFTER
RESTRUCTURING
• EVEN THOUGH UNDER RESTRUCTURING, USUAL
CLASSIFICATION NORMS OF 90DAYS CRITERIA TO APPLY
TILL THE APPROVAL.
• CONSENT OF THE BORROWER FOR THE CHANGES IS A
MUST –
• ONLY FINANCIAL VIABLE PROJECTS NEED TO THE
RESTRUCTURED
• FRAUDULENT BORROWERS NOT ELIGIBLE FOR
RESTRUCTURING BUT WILLFUL DEFAULTERS MAY BE
ELIGIBLE WITH BOARD’S APPROVAL
• BIFR CASES ARE NOT ELIGIBLE WITHOUT THEIR
EXPRESS APPROVAL
ASSET CLASSIFICATION NORMS
FOR RESTRUCTURED ACCOUNTS
•
•
•
•
•
STANDARD ASSETS ON RESTRUCTURING OTHER THAN DCCO
REFIXATION IS CLASSIFIED AS SUBSTANDARD IF SPECIAL
REGULATORY TREATMENT UNDER PARA 15 OF MASTER
CIRCULAR NOT AVAILABLE
NPA ACCOUNTS AFTER RESTRUCTURING SHALL CONTINUE IN
THE SAME CLASSIFICATION OR FURTHER LOWER
CLASSIFICATION AS PER EXTANT NORMS TILL ONE YEAR
AFTER WHICH IN CASE OF SATISFACTORY PERFORMANCE, MAY
BE UPGRADED
IF SATISFACTORY PERFORMANCE AFTER THE SPECIFIED
PERIOD NOT EVIDENCED, THEN RESTRUCTURING PACKAGE IS
CONSIDERED AS FAILED AND THE ASSET CLASSIFICATION TO
BE AS PER PRE-RESTRUCTURING REPAYMENT SCHEDULE
SECOND TIME RESTRUCTURING OTHER THAN DCCO CASES
SHALL MAKE THE STANDARD AS NPA UNDER ALL
CIRCUMSTANCES
ADDITIONAL FINANCE TREATED AS STANDARD ASSET TILL
THE END OF THE SPECIFIED PERIOD
SPECIAL REGULATORY TREATMENT UNDER
PARA 15 OF MASTER CIRCULAR:
• NOT AVAILABLE TO CONSUMER AND PERSONAL ADVANCES,
CAPITAL MARKET AND COMMERCIAL REAL ESTATE
EXPOSURES.
• ASSET CLASSIFICATION BENEFIT OF RETENTION IN PRERESTRUCTURING CATEGORY IS AVAILABLE SUBJECT TO
FOLLOWING CONDITIONS:
1. DUES FULLY SECURED EXCEPT IN CASE OF MSE
BORROWERS UP TO RS. 25 LAKHS AND
INFRASTRUCTURE HAVING CASH FLOWS UNDER THE
CONTROL OF BANK BEING MORE THAN ADEQUATE
FOR REPAYMENT OF ADVANCE.
2. VIABLE IN 8 YEARS FOR INFRASTRUCTURE AND 5 YEARS
FOR OTHERS .
3. REPAYMENT PERIOD INCLUDING MORATORIUM NOT
TO EXCEED 15 YEARS FOR INFRASTRUCTURE AND 10
YEARS FOR OTHER ADVANCES OTHER THAN HOME
LOANS WHERE BOARD HAS TO PRESCRIBE MAXIMUM
PERIOD.
CONT…
4.
5.
6.
7.
8.
PROMOTERS SACRIFICE AND ADDITIONAL FUNDS BY
PROMOTERS SHALL BE MINIMUM OF 20% OF THE
BANK’S SACRIFICE OR 2 % OF THE RESTRUCTURED
DEBT WHICHEVER IS HIGHER.
PROMOTERS SACRIFICE SHOULD BE FULLY BROUGHT
UPFRONT.
PROMOTER’S CONTRIBUTION CAN BE IN CASH AND
ALSO THROUGH DE-RATING OF EQUITY, CONVERSION
OF LOAN INTO EQUITY ETC.
NOT A REPEATED RESTRUCTURING
THE ABOVE DISPENSATION FOR THE STANDARD ASSET
TO CONTINUE IN THE SAME CATEGORY IS
WITHDRAWN FOR ALL THE RESTRUCTURING
EFFECTIVE FROM 1ST APRIL, 2015
THE ACCOUNTS SUBJECT TO RESTRUCTURING SHALL
BECOME NPA IF APPROVAL IS NOT OBTAINED BY 31ST
MARCH 2015 DESPITE GOOD RECORD OF RECOVERY.
CONT…
• INCENTIVE FOR QUICK IMPLEMENTATION OF
PACKAGE.
• WITHIN 120 DAYS FROM THE DATE OF APPROVAL
UNDER CDR.
• WITHIN 120 DAYS FROM THE DATE OF RECEIPT OF
APPLICATION BY THE BANK IN CASES OTHER THAN
CDR.
• USUAL CLASSIFICATION NORMS TO APPLY DURING
THE PENDENCY OF THE IMPLEMENTATION OF
PACKAGE AND ONCE IMPLEMENTED WITHIN THE
TIME SCHEDULE THEN ASSET CLASSIFICATION TO BE
RESTORED TO THE POSITION WHICH EXISTED ON
REFERENCE TO CDR AND IN NON – CDR CASES ON
THE DATE OF RECEIPT OF APPLICATION BY THE
BANK.
OTHER POINTS IN RESTRUCTURING
• CDR MECHANISM APPLICABLE TO
BORROWERS ENJOYING CREDIT FACILITIES
FROM MORE THAN ONE BANK / FI AND
OUTSTANDING (BOTH FB AND NON FB) IS RS.
10 CRS AND ABOVE.
• SME DEBT RESTRUCTURING MECHANISM
APPLICABLE TO TOTAL EXPOSURES OF LESS
THAN RS. 10 CRS FOR ALL TYPES OF
BORROWERS FOR WHICH BOARD MAY
FORMULATE THE SCHEME WITHIN
PRUDENTIAL NORMS OF RBI.
PROPER MOVEMENT OF CLASSIFICATION FROM
ONE CATEGORY TO ANOTHER FOR EXISTING
NPAs:
TO HAVE A COPY OF NPA ACCOUNTS INCLUDING
NPAS AND MOCS OF THE PREVIOUS YEARS AND
THEN CHECK THE FOLLOWINGS:
•
•
•
•
•
CHECK THE PROPER SHIFTING FROM ONE CATEGORY TO
ANOTHER DEPENDING UPON THE DATE OF NPA AS PER RBI
GUIDELINES
CHECK WHETHER STOCK AUDIT AT REGULAR ANNUAL INTERVALS
HAS BEEN CONDUCTED FOR NPAS OF 5CRS AND ABOVE.
CHECK WHETHER THE VALUATION OF COLLATERALS SUCH AS
IMMOVABLE PROPERTIES IS NOT MORE THAN THREE YEARS OLD
SHIFTING FROM ONE CATEGORY TO ANOTHER BASED ON
SERIOUS CREDIT IMPAIRMENT OR HEAVY EROSION IN THE VALUE
OF SECURITY IRRESPECTIVE OF NPA DATE.
SPECIAL ATTENTION FOR THE ACCOUNTS UPGRADED DURING
THE YEAR.
UPGRADATION OF LOAN ACCOUNTS
EARLIER CLASSIFIED AS NPA.
• UPGRADATION OF CURRENT YEAR’S NPA
• UPGRADATION OF PREVIOUS YEAR’S NPAS
• UPGRADATION OF ACCOUNTS OTHER THAN
RESTRUCTURED ACCOUNT ONLY ON FULL
REGULARISATION AND NOT THE RECOVERY OF
CRITICAL AMOUNT
• TREATMENT OF RECOVERIES IN YEAR END NPAS
IN THE MONTH OF APRIL
• RESTRUCTURED ACCOUNTS TO BE UPGRADED
ONLY AFTER SATISFACTORY PERFORMANCE
DURING THE SPECIFIED PERIOD.
INCOME RECOGNITION
•
•
•
•
ONCE NPA, THEN INCOME BY WAY OF INTEREST, FEES,
COMMISSIONS TO BE RECOGNISED ON RECEIPT BASIS
INSTEAD OF ACCRUAL BASIS
THE ABOVE RULE APPLICABLE TO GOVERNMENT
GUARANTEED – ADVANCES BOTH CENTRAL AND STATE
DESPITE CENTRAL GOVERNMENT GUARANTEED ADVANCES
BEING EXEMPTED FROM BEING CLASSIFIED AS NPA.
INTEREST ON ADVANCES AGAINST TERM DEPOSITS, NSG, IVP,
KVP AND LIFE POLICIES MAY BE TAKEN TO INCOME PROVIDED
ADEQUATE MARGIN IS AVAILABLE IN THE ACCOUNTS
REVERSAL OF INCOME BOOKED IN EARLIER PERIOD OR YEAR
INCLUDING FEES OR COMMISSIONS BUT NOT REALISED TILL
THE DATE OF FRESH IDENTIFICATION OF NPA.
CONT…
• AFTER NPA, INTEREST INCOME ACCOUNTED FOR ON
RECEIPT BASIS SHOULD NOT BE OUT OF FRESH OR
ADDITIONAL FACILITIES
• APPROPRIATION OF RECOVERY IN NPA ACCOUNTS
TOWARDS INTEREST, PRINCIPAL OR FEES/COMMISSIONS
OR LEGAL CHARGES AS PER THE AGREEMENT BETWEEN
BANK AND BORROWER AND IF NO AGREEMENT THEN AS
PER RECOVERY POLICY OF BANK.
• IN CASE OF MORATORIUM FOR INTEREST FOR PROJECT
LOANS FOR INFRASTRUCTURE AND NONINFRASTRUCTURE, INTEREST INCOME FOR PERIOD
BEYOND 2 YEARS AND 1 YEAR RESPECTIVELY FROM THE
ORIGINAL DCCO SHOULD NOT BE BOOKED.
• INTEREST OVERDUE EITHER FUNDED OR CONVERTED
INTO EQUITY RECOGNISED AS INCOME HAS TO BE FULLY
PROVIDED FOR.
PROVISIONING NORMS
• PRIMARY RESPONSIBILITY IS OF MANAGEMENT
AND STATUTORY AUDITORS
• PROVISIONS MADE AT HO BUT THE NECESSARY
DETAILS COLLECTED FROM THE BRANCH LEVEL
• SUBSTANDARD ASSETS:
o 15% ON TOTAL OUTSTANDING IRRESPECTIVE OF THE
SECURITY VALUE AND ECGC COVER.
o ADDITIONAL 10% ON UNSECURED EXPOSURES
WHERE THE REALISABLE VALUE OF THE SECURITY
NOT MORE THAN 10%, AB-INITIO OF THE
OUTSTANDING EXPOSURE (BOTH FUND AND NON
FUND) AND ADDITIONAL 5% FOR INFRASTRUCTURE
LENDING WITH SAFEGUARDS AS ESCROW ACCOUNTS
CONT…
• DOUBTFUL ASSETS:
o 100% FOR UNSECURED PORTION
o FOR SECURED PORTION, 25% FOR D1
CATEGORY UPTO ONE YEAR, 40% FOR D2
CATEGORY FROM ONE TO THREE YEARS AND
100% FOR D3 CATEGORY OF MORE THAN
THREE YEARS
o REFER THE TABLE IN THE MASTER CIRCULAR
FOR COMPUTATION OF PROVISION WHERE
SECURITIES VALUE AND ECGC/CGTSI COVER
ARE AVAILABLE.
CONT…
• LOSS ASSETS:
o SHOULD BE WRITTEN OFF. IF NOT, THEN 100 %
PROVISION.
• STANDARD ASSETS:
o DIRECT ADVANCES TO AGRICULTURAL AND SMALL AND
MICRO ENTERPRISES (SMES) SECTORS AT 0.25 PER CENT.
o ADVANCES TO COMMERIAL REAL ESTATE (CRE) SECTOR
AT 1.00 PER CENT.
o ADVANCES TO COMMERCIAL REAL ESTATE –
RESIDENTIAL HOUSING SECTOR (CRE-RH) AT 0.75 PER
CENT
o HOUSING LOANS EXTENDED AT TEASER RATES AND
RESTRUCTURED ADVANCES AS INDICATED IN PARA 5.9.13
12.4 RESPECTIVELY.
o ALL OTHER LOANS AND ADVANCES NOT INCLUDED IN
(A), (B) AND (C) ABOVE AT 0.40 PER CENT.
CONT…
o CERTAIN PROVISIONS ON STANDARD ADVANCES MENTIONED
ELSEWHERE IN MASTER CIRCULAR:
i.
FOR DCCO EXTENDED BEYOND 2 YEARS AND 1 YEAR
FROM ORIGINAL DCCO FOR PROJECT LOANS FOR
INFRASTRUCTURE & NON-INFRASTRUCTURE
RESPECTIVELY, PROVISIONS ARE MADE AT HIGHER RATE
FOR WHICH REFER THE TABLES IN PARAGRAPH 4.2.15 OF
THE MASTER CIRCULAR
ii.
FOR RESTRUCTURED ACCOUNTS CLASSIFIED AS
STANDARD ADVANCES AND RESTRUCTURED ACCOUNTS
CLASSIFIED EARLIER AS NPA WHEN UPGRADED TO
STANDARD CATEGORY, PROVISIONS ARE MADE AT
HIGHER RATES FOR WHICH REFER PARA 12.4.1 OF MASTER
CIRCULAR
iii. INCASE OF DIMINUTION IN FAIR VALUE OF
RESTRUCTURED ADVANCES (BOTH STANDARD AND NPA)
PROVISION TO BE MADE AS PER THE DETAILS AT PARA
12.4.2 OF MASTER CIRCULAR BUT THE PROVISION
INCLUDING NORMAL PROVISION FOR NPA ACCOUNTS
NOT TO EXCEED 100%.