What changed
RBI extended the 180-day NPA classification norm for small UCBs (unit banks or multi-branch within one district with deposits up to ₹100 crore) for three financial years ending March 31, 2005, 2006, and 2007. Previously, these banks were moving toward a 90-day norm; now they get a phased transition. The relaxation does not apply to reclassifying accounts already marked NPA before March 31, 2004.
What it means for you
Small UCBs get breathing room to manage asset quality without immediate pressure to shift to 90-day NPA recognition. This allows them to build provisions and strengthen credit processes gradually. However, the clock is ticking—they must be fully compliant with 90-day norms by FY2008. Banks not meeting the deposit threshold must continue with the existing 90-day norm.
What you must do
- Verify if your bank qualifies as a unit bank or single-district bank with average fortnightly NDTL ≤₹100 crore for the relevant financial year.
- Apply 180-day delinquency norm for term loans, OD/CC, bills, and other accounts for NPAs from financial years ending March 31, 2005, 2006, and 2007.
- Do not reclassify accounts already classified as NPA before March 31, 2004; only upgrade through normal recovery process.
- Plan provisioning and process improvements to ensure smooth transition to 90-day norm by March 31, 2008.
- For eligible banks, gold loans and small loans up to ₹1 lakh are also governed by 180-day norm until March 31, 2007; for other UCBs, the earlier exemption for gold loans and small loans up to ₹1 lakh based on 180-day norm continues until March 31, 2006.
Who it affects
Primary (Urban) Cooperative Banks (UCBs), Unit banks with single branch and deposits ≤₹100 crore, UCBs with multiple branches in one district and deposits ≤₹100 crore, All other UCBs not meeting the above criteria
Which UCBs are eligible for the 180-day NPA norm under this circular?
Only unit banks (single branch/HO) or banks with multiple branches within a single district, provided their average fortnightly net demand and time liabilities (deposits) do not exceed ₹100 crore in the financial year.
How long will this relaxation last?
The 180-day norm applies for three financial years: ending March 31, 2005, 2006, and 2007. After that, these banks must adopt the standard 90-day NPA classification norm from FY2008.
Can we reclassify older NPAs (before March 2004) under this relaxation?
No. The relaxation only applies to classification of NPAs from FY2005 onward. Accounts already classified as NPA in March 2004 or earlier cannot be reclassified except through normal upgradation.