**Summary:**
This Reserve Bank of India (RBI) circular, DOR.STR.REC.1021.04.048/2021-22, issued on May 5, 2021, addresses the utilization of floating provisions and countercyclical provisioning buffers by all scheduled commercial banks (excluding Regional Rural Banks and Payments Banks).
The circular permits banks to utilize 100% of their floating provisions and countercyclical provisioning buffer, held as of December 31, 2020, for making specific provisions for non-performing assets (NPAs). This measure is intended to mitigate the adverse impact of COVID-19 related stress on banks and enable capital conservation. This utilization is effective immediately and is permitted until March 31, 2022, with the prior approval of the bank's Board.
This circular builds upon previous RBI circulars, including DBOD.No.BP.BC.89/21.04.048/2005-06 dated June 22, 2006, DBOD.No.BP.BC.68/21.04.048/2006-07 dated March 13, 2007, DBOD.No.BP.BC.87/21.04.048/2010-11 dated April 21, 2011, DBOD.No.BP.95/21.04.048/2013-14 dated February 7, 2014, and DBR.No.BP.BC.79/21.04.048/2014-15 dated March 30, 2015, which initially outlined the creation, accounting, disclosures, and utilization of floating provisions and countercyclical provisioning buffers. Prior to this circular, banks were allowed to utilize a smaller percentage of these buffers.
For further information, contact Manoranjan Mishra, Chief General Manager, Reserve Bank of India (www.rbi.org.in).
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking system.
Scheduled Commercial Banks: Banks in India that are listed in the Second Schedule of the Reserve Bank of India Act, 1934.
Regional Rural Banks: Regional Rural Banks are financial institutions in India that operate at a regional level to provide banking and financial services to rural areas.
Payments Banks: A type of bank in India that can accept deposits, offer remittance services, and provide internet banking, but cannot issue loans or credit cards.
Floating Provisions: General provisions made by banks to cover potential losses from unforeseen events.
Counter Cyclical Provisioning Buffer: A buffer of capital that banks are required to build up during periods of strong credit growth, which can be used to absorb losses during economic downturns.
COVID 19: The coronavirus disease 2019 pandemic.
Manoranjan Mishra: Chief General Manager at Reserve Bank of India.
भारतीय �रज़व र् बक�
------------------------------------- RESERVE BANK OF INDIA -----------------------------------
www.rbi.org.in
RBI/2021-22/28
DOR.STR.REC.10/21.04.048/2021-22 May 5, 2021
All Scheduled Commercial Banks
(Excluding Regional Rural Banks and Payments Banks)
Dear Sir/ Madam,
Utilisation of Floating Provisions/Counter Cyclical Provisioning Buffer
Please refer to our circular DBOD.No.BP.BC.89/21.04.048/2005-06 dated June 22,
2006 and DBOD.No.BP.BC.68/21.04.048/2006-07 dated March 13, 2007 on creation,
accounting, disclosures and utilisation of floating provisions by banks. Banks may also
refer to our circular DBOD.No.BP.BC.87/21.04.048/2010-11 dated April 21, 2011 on
creation and utilisation of ‘countercyclical provisioning buffer’, wherein we had advised
that the buffer will be allowed to be used by banks for making specific provisions for
non-performing assets, inter alia, during periods of system wide downturn, with the
prior approval of RBI.
2. Accordingly, in terms of our circulars DBOD.No.BP.95/21.04.048/2013-14 dated
February 7, 2014 and DBR.No.BP.BC.79/21.04.048/2014-15 dated March 30, 2015,
banks were allowed to utilise upto 33 per cent and 50 per cent of floating provisions/
countercyclical provisioning buffer held by them as on March 31, 2013 and December
31, 2014 respectively, for making specific provisions for non-performing assets, as per
their Board approved policy.
3. In order to mitigate the adverse impact of COVID 19 related stress on banks, as a
measure to enable capital conservation, it has been decided to allow banks to utilise
100 per cent of floating provisions/ countercyclical provisioning buffer held by them as
on December 31, 2020 for making specific provisions for non-performing assets with
prior approval of their Boards. Such utilisation is permitted with immediate effect and
upto March 31, 2022.
Yours faithfully,
(Manoranjan Mishra)
Chief General Manager