Notifications

(12 kb)
Time Extended for UCBs to make Additional Provisioning for NPAs

RBI / 2004-05/194
UBD.PCB.Cir.21 /12.05.05/2004-05

September 27, 2004

The Chief Executive Officers of All Primary (Urban) Co-operative banks

Dear Sir/Madam,

Annual Policy Statement for the Year 2004-05: Additional provisioning requirements for NPAs

Please refer to our circular UBD.BPD.PCB. Cir 55/12.05.05/03-04 dated June 30, 2004, wherein UCBs were advised about the enhanced provisioning requirement on the secured portion of advances classified as doubtful for more than three years.

2. The Reserve Bank has received requests from banks and Federation/ Association of UCBs for giving UCBs some more time to restructure their accounts and progressively meet stricter prudential norms. Taking into account the submissions made in this regard, it has been decided to grant more time to the banks to meet the 100 % provisioning norm for advances identified as doubtful for more than three years, as under :

A. Secured portion

Period for which the advance has remained in 'doubtful' category

Provision requirement on secured portion

More than three years

(i) outstanding stock of NPAs as on March 31, 2006

 

 

(ii) advances classified as 'doubtful more than three years' on or after April 1, 2006

(i) 50 percent upto March 2006, as hitherto

60 per cent as on March 31, 2007

75 per cent as on March 31, 2008

100 per cent as on March 31, 2009

(ii) 100 per cent

 

B (i) Please note that for the portion of the advance, which is not covered by the realizable value of tangible security to which the bank has a valid recourse and the realizable value is estimated on a realistic basis, provision will be to the extent of 100 per cent as hitherto.

(ii) Similarly, 100% provision has to be made for loss assets as hitherto.

(iii) A few illustrations are furnished in annexure for clarity in this regard.

3. Banks are further advised in their own interest to make suitable additional provisions in the intervening years to ensure a smooth transition to the revised norms, which becomes effective from March 31, 2007.

4. Please acknowledge receipt of this circular to the concerned Regional Office.

Yours faithfully,

(K.R.Ananda)

Chief General Manager-in-Charge

Encl : As above


Annexure

Illustrations:

I. Existing stock of advances classified as 'doubtful more than 3 years' as on 31 March 2006

The outstanding amount as on 31 March 2006: Rs. 25,000

Realisable value of security: Rs. 20,000

Period for which the advance has remained in 'doubtful' category as on 31 March 2006: 4 years (i.e. Doubtful > 3 years)

Provisioning requirement :

As on …

Provisions on secured portion

Provisions on unsecured portion

Total

(Rs.)

%

Amt

%

Amt

31 Mar 2006

50

10000

100

5000

15000

31 Mar 2007

60

12000

100

5000

17000

31 Mar 2008

75

15000

100

5000

20000

31 Mar 2009

100

20000

100

5000

25000

II. Advances classified as 'doubtful more than three years' on or after 1 April 2006

The outstanding amount as on 31 March 2006 : Rs. 10,000

Realisable value of security : Rs. 8,000

Period for which the advance has remained in 'doubtful' category as on 31 March 2006 : 2.5 years

Provisioning requirement :

As on …

Asset classification

Provisions on secured portion

Provisions on unsecured portion

Total

(Rs.)

%

Amt

%

Amt

 

31 Mar 2006

Doubtful

1 to 3 years

30

2400

100

2000

4400

31 Mar 2007

Doubtful

> 3 years

100

8000

100

2000

10000



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