RBI/2019-20/220
DOR.No.BP.BC.63/21.04.048/2019-20
April 17, 2020
All
Commercial Banks (including Small Finance Banks, Local Area Banks and
Regional Rural Banks)
All Primary (Urban) Co-operative Banks/State Co-operative Banks/ District
Central Co-operative Banks
All All-India Financial Institutions
All Non-Banking Financial Companies (including Housing Finance Companies)
Madam/Dear
Sir,
COVID19
Regulatory Package - Asset Classification and Provisioning
Please
refer to the Governor’s Statement of April 17, 2020 announcing
certain additional regulatory measures aimed at alleviating the lingering
impact of Covid19 pandemic on the businesses and financial institutions in
India, consistent with the globally coordinated action committed by the
Basel Committee on Banking Supervision. In this regard, the detailed
instructions with regard to asset classification and provisioning are as
follows:
(i) Asset
Classification under the Prudential norms on Income Recognition, Asset
Classification (IRAC)
2. In terms
of the circular DOR.No.BP.BC.47/21.04.048/2019-20 dated March 27, 2020 (‘Regulatory
Package’), the lending institutions were permitted to grant a moratorium of
three months on payment of all term loan instalments falling due between
March 1, 2020 and May 31, 2020 (‘moratorium period’). As such, in line with the clarification provided
by the Basel Committee on Banking Supervision, in respect of all accounts
classified as standard as on February 29, 2020, even if overdue, the
moratorium period, wherever granted, shall be excluded by the lending
institutions from the number of days past-due for the purpose of asset
classification under the IRAC norms.
3.
Similarly in respect of working capital facilities sanctioned in the form
of cash credit/overdraft (“CC/OD”), the Regulatory Package permitted the
recovery of interest applied during the period from March 1, 2020 upto May
31, 2020 to be deferred (‘deferment period’). Such deferment period, wherever granted in respect
of all facilities classified as standard, including SMA, as on February 29,
2020, shall be excluded for the determination of out of order status.
4. NBFCs
which are required to comply with Indian Accounting Standards (IndAS)
shall, as hitherto, continue to be guided by the guidelines duly approved
by their Boards and as per ICAI Advisories for recognition of the
impairments.
(ii)
Provisioning
5. In
respect of accounts in default but standard where provisions of paragraphs
(2) and (3) above are applicable, and asset classification benefit is
extended, lending institutions shall make general provisions of not less
than 10 per cent of the total outstanding of such accounts, to be phased
over two quarters as under:
(i) Quarter
ended March 31, 2020 – not less than 5 per cent
(ii)
Quarter ending June 30, 2020 – not less than 5 per cent
6. The
above provisions may be adjusted against the actual provisioning
requirements for slippages from the accounts reckoned for such provisions.
The residual provisions at the end of the financial year can be written
back or adjusted against the provisions required for all other accounts.
7. The
above provisions shall not be reckoned for arriving at net NPAs till they
are adjusted against the actual provisioning requirements as under
paragraph 6 above. Further, till such adjustments, these provisions shall
not be netted from gross advances but shown separately in the balance sheet
as appropriate.
8. All
other provisions required to be maintained by lending institutions,
including the provisions for accounts already classified as NPA as on
February 29, 2020 as well as subsequent ageing in these accounts, shall
continue to be made in the usual manner.
Other
Conditions
9. The
exclusions permitted in terms of para 2 and 3 above shall be duly reckoned
by the lending institutions in their supervisory reporting as well as
reporting to credit information companies (CICs); i.e., the days past due
and SMA status, where applicable, as on March 1, 2020 will remain unchanged
till May 31, 2020.
10. The
lending institutions shall suitably disclose the following in the ‘Notes to
Accounts’ while preparing their financial statements for the half year
ending September 30, 2020 as well as the financial years 2019-20 and
2020-2021:
(i)
Respective amounts in SMA/overdue categories, where the
moratorium/deferment was extended, in terms of paragraph 2 and 3;
(ii)
Respective amount where asset classification benefits is extended.
(iii)
Provisions made during the Q4FY2020 and Q1FY2021 in terms of paragraph 5;
(iv)
Provisions adjusted during the respective accounting periods against
slippages and the residual provisions in terms of paragraph 6.
Yours
faithfully,
(Saurav
Sinha)
Chief General Manager-in-Charge
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