What changed
The Government of India decided to pay interest on the 2nd, 3rd, and 4th instalments of the scheme at the prevailing Yield to Maturity rate on 364-day Treasury Bills, from November 2008 until each instalment's reimbursement. Consequently, RBI superseded earlier provisioning requirements for present value loss on amounts received from the Government for these accounts.
What it means for you
UCBs no longer need to set aside provisions for the loss in present value terms on government reimbursements under the Debt Waiver and Debt Relief Scheme. This reduces the provisioning burden and improves the financial position of banks for these specific accounts.
What you must do
- Stop making provisions for present value loss on government interest payments for accounts under the Debt Waiver and Debt Relief Scheme.
- Ensure all other prudential norms from the July 30, 2008 circular remain in place.
- Update internal accounting and reporting systems to reflect this exemption.
Who it affects
Primary (Urban) Co-operative Banks, Banks handling Agricultural Debt Waiver and Debt Relief Scheme accounts
Does this circular apply to all accounts under the Debt Waiver and Debt Relief Scheme?
Yes, but only for moneys received from the Government of India. The exemption from provisioning for present value loss is limited to government interest payments on the specified instalments.
What happens to the earlier provisioning instructions from the July 2008 circular?
The specific paragraphs (2.2 to 2.7, 3.2(a), and 3.4 to 3.8) are superseded for this purpose. All other conditions in the earlier circular remain unchanged.