RBI Hikes Standard Asset Provisions & Risk Weights (Jan 2007)

Notifications - Reserve Bank of India Skip to main content Selected Selected Change Language हिंदी Search the Website Search Home About Us ▼ About Us Organisation & Functions ▶ Organisation Structure Departments Offices Training Establishment ▶ College of Agricultural Banking Reserve Bank Staff College College of Supervisors RBI's Functions and Working Governors Deputy Governors Executive Directors Communication Policy of RBI Sources of Information ▶ Annual Publications Half-yearly Publications Quarterly Publications Monthly Publications Weekly Publications Occasional Publications SDDS NSDP Data Releases Publications available on Subscription General Information RBI History Museum ▶ The RBI Museum RBI Monetary Museum Notification ▼ Notifications Master Directions Master Circulars Amendment Directions Draft Notifications/Guidelines ▶ Draft Notifications/Guidelines Draft Directions (RE-wise) Index To RBI Circulars Standalone Circulars Circulars Withdrawn Press Releases Speeches & Media Interactions ▼ Speeches Media Interactions Memorial Lectures Podcasts Publications ▼ Biennial Annual Half-Yearly Quarterly Bi-monthly Monthly Weekly Occasional Reports Working Papers Legal Framework ▼ Act Rules Regulations Schemes Research ▼ External Research Schemes RBI Occasional Papers Working Papers RBI Bulletin History DRG Studies KLEMS State Statistics and Finances Statistics ▼ Data Releases Database on Indian Economy Public Debt Statistics Regulatory Reporting ▼ List of Returns Data Definition Validation rules/ Taxonomy List of RBI Reporting Portals FAQs of RBI Reporting Portals Home Notifications Notifications ( 590 kb ) Third Quarter Review of the Annual Statement on Monetary Policy for the year 2006-07- Provisioning Requirement for Standard Assets and Risk Weights for Capital Adequacy RBI/2006-2007/240 DBOD.No.BP.BC. 53 / 21.04.048 / 2006-2007 January 31, 2007 All Scheduled Commercial Banks (Excluding RRBs) Dear Sir, Third Quarter Review of the Annual Statement on Monetary Policy for the year 2006-07- Provisioning Requirement for Standard Assets and Risk Weights for Capital Adequacy Please refer to paragraph 84 of the Third Quarter Review of the Annual Statement on Monetary Policy for the year 2006-07 issued on January 31, 2007 (copy of the paragraph enclosed). Standard Asset Provisions 2. In order to ensure that asset quality is maintained in the light of high credit growth, the general provisioning requirement on standard advances in certain specific sectors viz. personal loans, loans and advances qualifying as capital market exposure, residential housing loans beyond Rs.20 lakh and commercial real estate loans was raised from 0.40 per cent to 1.0 per cent in May 2006. The continued high credit growth in the real estate sector, personal loans, credit card receivables, and loans and advances qualifying as capital market exposure and a higher default rate in regard to personal loans and credit card receivables, as revealed in the data, is a matter of concern. It has, therefore, been decided to increase the provisioning requirement in respect of the standard assets in the following categories of loans and advances from the present level of one per cent to two per cent with immediate effect: a) Personal loans (including credit card receivables); b) Loans and advances qualifying as capital market exposure; and c) Real estate loans (excluding residential housing loans). 3. It has also been decided to increase the provisioning requirement for loans and advances in the standard assets category to Non-Deposit Taking Systemically Important Non-Banking Finance Companies (NBFC – ND – SI) from 0.40 per cent at present to two per cent with immediate effect. In terms of paragraph 16(A)(i) of our circular DNBS.PD/ CC.No.86/ 03.02.089/ 2006-07 dated December 12, 2006 , a Non-Deposit Taking NBFC with an asset size of Rs.100 crore or more as per the last audited balance sheet is considered as a NBFC – ND – SI. 4. In order to ensure continued and adequate availability of credit to highly productive sectors of the economy, the provisioning requirement for all other loans and advances, which are standard assets, including those to agriculture, SMEs, industry in general, and Asset Finance Companies, shall remain unchanged. The standard asset provisioning requirements for all categories, after the above changes, are summarised below. As hitherto, these provisions would be eligible for inclusion in Tier II capital for capital adequacy purposes to the permitted extent. Sr. No. Category of standard asset Rate of provisioning a Direct advances to agricultural and SME sectors 0.25 % b Residential housing loans beyond Rs. 20 lakh 1.00 % c Personal loans (including credit card receivables), Loans and advances qualifying as capital market exposures, Commercial real estate loans, and Loans and advances to Systemically Important NBFCs – ND 2.00 % d All other loans and advances not included in a, b and c above 0.40% Risk weights 5. It has also been decided to increase the risk weights for all exposures to NBFC – ND – SI to 125% from the present level of 100% with immediate effect. The risk weights for all other categories of exposures, including Asset Finance Companies, remain unchanged. 6. Please acknowledge receipt. Yours faithfully, (Prashant Saran) Chief General Manager-In-Charge Paragraph 84 of the Third Quarter Review of Annual Statement on Monetary Policy for the year 2006-07 The continued high credit growth in the real estate sector, outstanding credit card receivables, loans and advances qualifying as capital market exposure and personal loans is a matter of concern. Furthermore, the data reveal higher default rates in regard to credit card receivables and personal loans. It has, therefore, become imperative to increase the provisioning requirement in respect of the standard assets in the aforesaid four categories of loans and advances (excluding residential housing loans) to two per cent from the existing level of one per cent. The provisioning requirement in respect of residential housing loans will remain unchanged at 0.4 per cent for loans up to Rs.20 lakh and at one per cent for loans in excess of Rs.20 lakh. It has also been decided to increase the provisioning requirement for banks’ exposures in the standard assets category to the non-deposit taking systemically important non-banking financial companies (NBFCs) to two per cent from the existing level of 0.4 per cent and to increase the risk weight for banks’ exposure to such NBFCs to 125 per cent from the existing level of 100 per cent. Provisioning requirements and risk weights for banks’ exposures to asset finance companies will remain unchanged. In order to ensure continued and adequate availability of credit to highly productive sectors of the economy, the risk weights for all other categories of exposures also remain unchanged. Similarly, the provisioning requirements in regard to agricultural loans, loans to SMEs and loans to industry, in general, remain unchanged. 2026 All Months January February March April May June July August September October November December 2025 All Months January February March April May June July August September October November December 2024 All Months January February March April May June July August September October November December 2023 All Months January February March April May June July August September October November December 2022 All Months January February March April May June July August September October November December 2021 All Months January February March April May June July August September October November December 2020 All Months January February March April May June July August September October November December 2019 All Months January February March April May June July August September October November December 2018 All Months January February March April May June July August September October November December 2017 All Months January February March April May June July August September October November December Archives 2016 All Months January February March April May June July August September October November December 2015 All Months January February March April May June July August September October November December 2014 All Months January February March April May June July August September October November December 2013 All Months January February March April May June July August September October November December 2012 All Months January February March April May June July August September October November December 2011 All Months January February March April May June July August September October November December 2010 All Months January February March April May June July August September October November December 2009 All Months January February March April May June July August September October November December 2008 All Months January February March April May June July August September October November December 2007 All Months January February March April May June July August September October November December 2006 All Months January February March April May June July August September October November December 2005 All Months January February March April May June July August September October November December 2004 All Months January February March April May June July August September October November December 2003 All Months January February March April May June July August September October November December 2002 All Months January February March April May June July August September October November December 2001 All Months January February March April May June July August September October November December 2000 All Months January February March April May June July August September October November December 1999 All Months January February March April May June July August September October November December 1998 All Months January February March April May June July August September October November December 1997 All Months January February March April May June July August September October November December 1996 All Months January February March April May June July August September October November December 1995 All Months January February March April May June July August September October November December 1994 All Months January February March April May June July August September October November December 1993 All Months January February March April May June July August September October November December 1992 All Months January February March April May June July August September October November December 1991 All Months January February March April May June July August September October November December Top Back to previous page More Links : Bank Holidays Banking Glossary Citizen's Charter Complaints Contact Us COVID-19 Measures E-LMS Events FAQs Financial Education Forms IFSC/MICR Codes Important Websites Opportunities @ RBI RBI Clarifications RBI Kehta Hai RBI’s Vision and Values (1257 kb)--> Right to Information Act Tenders Follow RBI RSS Twitter YouTube Instagram Facebook LinkedIn © Reserve Bank of India. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2006-2007/240 · issued 31 Jan 2007. The plain-English explanation above is BankPulse’s own independent summary.

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