|
RBI/2005-06/41
UBD (PCB).Cir.No.1/09.140.00/05-06
July 4, 2005
The Chief Executives of all Primary(
Urban) Cooperative Banks
Dear Sir/Madam,
Income Recognition and Asset Classification
Norms-UCBs
Please refer to Master Circular
dated UBD.BSD.IP.MC.No.15/12.05.05/2004-05
dated December 2, 2004 on Prudential Norms on Income Recognition, Asset
Classification, Provisioning and Other Related Mattes as also the following
circulars on the above subject:
i. UBD.BSD.I.PCB.No.12/12.05.05/2001-02
dated October 5, 2001
ii. UBD.BSD.I.15/12.05.05/2002-03 dated
September 9, 2002
iii. UBD.PCB.Cir.17/13.04.00/2004-05
dated September 4, 2004
2. Taking into consideration requests
received from the UCB Sector, it has been decided to permit the following categories
of UCBs to classify Loan Accounts as NPAs based on 180 days delinquency norm
instead of the extant 90 days norm.
i.Unit banks i.e. banks having
a single branch / HO with deposits upto Rs. 100 crore*
ii. Banks having multiple branches within a single
district with deposits upto Rs. 100 crore*
* The deposit base of Rs. 100 crore
will be determined on the basis of average of the fortnightly Net Demand and
Time Liabilities in the financial year concerned.
For the above category of banks,
an account would be classified as Non Performing Asset if the
i. Interest and/or installment
of principal remain overdue** for a period of more than 180 days in respect
of a Term Loan.
ii. The account remains 'Out of
order' for a period of more than 180 days, in respect of an Overdraft/Cash Credit
(OD/CC).
iii. The bill remains overdue** for a period
of more than 180 days, in the case of bills purchased and discounted.
iv. Any amount to be received remains overdue**
for a period of more than 180 days in respect of other accounts.
**Any amount due to the
bank under any credit facility, if not paid by the due date fixed
by the bank becomes overdue.
3. All UCBs other than those
referred to at para 2 above shall classify their loan accounts as NPA as per
90 day norm as hitherto. The exemption given for classification of gold loans
and small loans upto Rs.1 lakh based on 180 days norm will however continue
till March 31, 2006.
4. The relaxation in classification
of NPA accounts for the banks referred to at para 2 above will be in force for
three financial years i.e. financial years ended/ending March 31, 2005, 2006
and 2007. The details of the changes and the consequent impact on the existing
instructions with regard to asset classification and income recognition in respect
of these banks are given in the Annexure.
5. The above modifications are
subject to condition that the changes will take effect for classification of
NPAs in the year ended March 31, 2005 and onwards upto March 31, 2007 and should
not result in reclassification of accounts already classified as NPA in the
year March 31, 2004 or earlier except through the normal process of up-gradation.
The relaxations are given for the explicit purpose of enabling the UCBs concerned
to transit to the 90 day NPA norm in the year 2007-2008 by building up adequate
provisions and strengthening their appraisal, disbursement and post disbursement
procedures.
Yours faithfully
(K.R. Ananda)
Chief General Manager-in-charge
Annexure
Annexure to Circular UBD.(PCB).Cir.
No.1 /09.140.00/2005-06 dated July 4, 2005 Relaxed Prudential Norms on income
recognition,
asset classification and provisioning for UCBs referred to in paragraph 2 of
the Circular.
|
Sl.No.
|
Circulars referred to:
|
Existing Norms
|
New Norms
|
|
1
|
Asset Classification norm:
(i) UBD.No.BSD.1.PCB.12/ 12.05.05/2001-2002
dated 05.10.2001
(ii) UBD.PCB.Cir 17/13.04.00/2004-05 dated
04.09.2004.
(iii) UBD.No.BSD.I.15 /12.05.05/2002-03 dated
11.09.2002.
|
(i) W.e.f 31.03.2004 the norm for classification
of an asset as non performing has been reduced to 90 days from 180 days.
(ii) Gold loans and small loans up to Rs
1 lakh will be governed by the 90 days norm with effect from the year
ending 31.03.2007.
(iii) W.e.f 31.03.2005 an asset would be
classified as doubtful if it remained in the sub-standard category for
12 months.
|
(i) These banks will be required
to identify NPAs on the basis of 180 day delinquency norm for three more
years commencing March 31 2005, i.e. upto March31, 2007. However, these
banks should build up adequate provisions in the BDDR over the next three
years such that they would be able to transit to 90 day NPA norm by March
31 2008. Since the 90 day norm for asset classification came into force
w.e.f. March 31 2004, revised asset classification norm should not result
in any write back of provisions. Moreover, accounts classified as NPA
as on March 31, 2004 or earlier should not be reclassified as standard
merely on the basis of 180 days norm, but should be upgraded through the
normal process of upgradation.
(ii) In view of (i) above,
gold loans and small loan upto Rs 1 lakh will also be governed by 180
days norm upto March 31, 2007
(iii) A Sub standard account
will continue to be classified as doubtful after 18 months instead of
12 months upto March 31, 2007.
|
|
2
|
Provisioning Norms:
(i) UBD.PCB.Cir21/ 12.05.05/2004-05 dated
27.09.2004
(ii) UBD.BSD.IP.MC.No.15/ 12.05.05/2004-05
dated 02.12.2004
|
(i) Sub standard- 10%
(ii) Doubtful (up to one
year):100% of unsecured portion plus 20% of secured portion
(iii) Doubtful (one to three
years) : 100% of unsecured portion plus 30% of secured portion
(iv) Doubtful for more than
3 years: 100% of unsecured portion. For secured portion the provision
are as under:
Outstanding stock of NPAs
as on March 31, 2006
- 50 percent upto March 2006.
- 60 per cent as on March 31, 2007
- 75 per cent as on March 31, 2008
- 100 per cent as on March 31, 2009
Advances classified
as 'doubtful more than three years' on or after April 1, 2006-100 %.
-
(v) Loss: 100%.
|
The provisioning norms will
be as under from year ended31.03.2005 upto year ending 31.03.2007:
(i) Sub standard- 10%
(ii) Doubtful (up to one
year):100% of unsecured portion plus 20% of secured portion
(iii) Doubtful (one to three
years) : 100% of unsecured portion plus 30% of secured portion
(iv) Doubtful for more than
3 years: 100% of unsecured portion plus 50% of secured portion
(v) Loss: 100%.
Note:
Implementation of the instructions
requiring classification of substandard account into doubtful category
after 12 months and 100 % provisioning for secured portion of doubtful
assets of over 3 years would be deferred by three years. As such the banks
should build up adequate provisions over this period to facilitate smooth
transition.
|
|