This circular, issued by the Reserve Bank of India (RBI) on February 15, 2022, with reference number RBI/2021-2022/158 DOR.STR.REC.8521.04.048/2021-22, provides clarifications on prudential norms for Income Recognition, Asset Classification and Provisioning pertaining to advances. It supplements the circular DOR.STR.REC.6821.04.048/2021-22 dated November 12, 2021.
The key clarifications are as follows:
* The definition of "out of order" applies to all overdraft facilities, including those not for business purposes or with only interest repayments.
* The 90-day period for determining "out of order" status for Cash Credit/Overdraft (CC/OD) accounts includes the day the day-end process is run.
* For borrowers with multiple credit facilities, loan accounts can only be upgraded from Non-Performing Asset (NPA) to standard asset status upon repayment of all interest and principal arrears across all credit facilities.
* The circular does not alter existing Credit Repository of Information on Large Credits (CRILC) reporting requirements.
* The circular does not interfere with existing guidelines on the implementation of Indian Accounting Standards (IndAS) by Non-Banking Financial Companies (NBFCs).
* NBFCs have until September 30, 2022, to implement systems to ensure loan accounts classified as NPAs are upgraded to standard assets only after the borrower pays all outstanding interest and principal. All other instructions from the original circular remain in effect as per their specified timelines.
The circular applies to All Commercial Banks (including Small Finance Banks, Local Area Banks, and Regional Rural Banks excluding Payments Banks), All Primary Urban Cooperative Banks, State Cooperative Banks, District Central Cooperative Banks, All India Financial Institutions (Exim Bank, NABARD, NHB, and SIDBI), and All Non-Banking Financial Companies (including Housing Finance Companies).
Manoranjan Mishra, Chief General Manager, signed the circular.
Key Entities Referenced
Reserve Bank of India: The central bank of India, also referred to as RBI.
Commercial Banks: All Commercial Banks including Small Finance Banks, Local Area Banks and Regional Rural Banks excluding Payments Banks
Primary Urban Cooperative Banks: A type of cooperative bank in India.
State Cooperative Banks: A type of cooperative bank that operates at the state level in India.
District Central Cooperative Banks: A type of cooperative bank that operates at the district level in India.
All India Financial Institutions: Financial institutions like Exim Bank, NABARD, NHB and SIDBI
Non-Banking Financial Companies: Financial institutions that provide banking services without holding a banking license, including Housing Finance Companies.
Prudential norms on Income Recognition, Asset Classification and Provisioning: Refers to the regulations and guidelines set by the RBI regarding how banks and financial institutions should recognize income, classify assets, and make provisions for potential losses.
RBI/2021-2022/158
DOR.STR.REC.85/21.04.048/2021-22
February 15, 2022
All Commercial Banks (including Small Finance Banks, Local Area Banks and Regional
Rural Banks) excluding Payments Banks
All Primary (Urban) Co-operative Banks/State Co-operative Banks/District Central Co-
operative Banks
All-India Financial Institutions (Exim Bank, NABARD, NHB and SIDBI)
All Non-Banking Financial Companies (including Housing Finance Companies)
Madam/Dear Sir,
Prudential norms on Income Recognition, Asset Classification and Provisioning
pertaining to Advances – Clarifications
Please refer to the clarifications issued in respect of Prudential norms on Income
Recognition, Asset Classification and Provisioning vide circular
DOR.STR.REC.68/21.04.048/2021-22 dated November 12, 2021 (‘Circular’).
2. In view of several queries received seeking certain clarifications, it is advised as under:
(i) The definition of ‘out of order’, as clarified in the Circular, shall be applicable to all loan
products being offered as an overdraft facility, including those not meant for business
purposes and/or which entail interest repayments as the only credits.
(ii) The ‘previous 90 days period’ for determination of ‘out of order’ status of a CC/OD
account shall be inclusive of the day for which the day-end process is being run.
(iii) In case of borrowers having more than one credit facility from a lending institution, loan
accounts shall be upgraded from NPA to standard asset category only upon
repayment of entire arrears of interest and principal pertaining to all the credit facilities.
(iv) The circular does not make any changes to the requirements related to reporting
of information to CRILC, which will continue to be governed in terms of extant
instructions for respective entities1.
1
Circular No. DBS.Dir.OSMOS.No.3327/33.01.001/2013-14 dated September 11, 2013 (SCBs)
Circular No. DNBS (PD) CC.No.371/03.05.02/2013-14 dated March 21, 2014 (NBFCs)
Circular No. DBS.OSMOS.No.14703/33.01.001/2013-14 dated May 22, 2014 (AIFIs)
Circular No. DOR (PCB).BPD.Cir.No.7/13.05.000/2019-20 dated December 27, 2019 (UCBs)(v) The circular does not, in any way, interfere with the extant guidelines on
implementation of Ind-AS by NBFCs.
3. Paragraph 10 of the Circular stipulates that loan accounts classified as NPAs may be
upgraded as ‘standard’ asset only if entire arrears of interest and principal are paid by the
borrower. NBFCs shall have time till September 30, 2022 to put in place the necessary
systems to implement this provision. All other instructions of the Circular shall continue to be
applicable as per the timelines specified therein.
Yours faithfully,
(Manoranjan Mishra)
Chief General Manager