RBI Extends 180-Day NPA Norm for Small UCBs for Three Financial Years Ending March 2005, 2006, and 2007

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.

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2005-06/41 · issued 04 Jul 2005. The plain-English explanation above is BankPulse’s own independent summary.

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