What changed
RBI addressed misinterpretations of earlier circulars (Aug 27, 2008; Jan 2, 2009; Feb 4, 2009). It clarified that asset classification continues during application pendency, and the incentive for quick implementation (restoring pre-NPA status) applies for accounts standard on Sep 1, 2008 that turned NPA, if the package is implemented within 120 days from date of approval (CDR) or 90 days from date of receipt of application (non-CDR). For accounts standard on Sep 1, 2008 that slipped to NPA before March 31, 2009, standard reporting on March 31, 2009 requires full package implementation before March 31, 2009.
What it means for you
Banks cannot treat a restructuring application as a shield against NPA classification; normal asset classification rules apply until the package is implemented. The temporary relaxation for Sep 1, 2008 standard accounts is time-bound and conditional—only implemented packages restore status. This prevents regulatory capital relief without actual resolution, ensuring accurate risk reporting.
What you must do
- Ensure asset classification continues normally during restructuring application pendency; do not hold accounts as standard solely due to application receipt.
- For accounts standard on Sep 1, 2008 that turned NPA, implement the restructuring package before March 31, 2009 to report them as standard on that date.
- Report accounts with packages in process or approved but not implemented before March 31, 2009 as NPA if they slipped in normal course.
- After package implementation within prescribed timelines, report accounts as standard with retrospective effect from application/reference date, without reopening finalized balance sheets.
Who it affects
All Scheduled Commercial Banks (excluding RRBs & LABs), Banks handling CDR and non-CDR restructuring cases, Credit officers and risk management teams
Can a bank classify an account as standard just because a restructuring application is received?
No. Normal asset classification norms continue during application pendency. The account may slip to NPA if it turns NPA in the normal course, regardless of the application.
What is the deadline for implementing a restructuring package to get retrospective standard status for Sep 1, 2008 standard accounts?
The package must be implemented by March 31, 2009. If implemented after that date but within 120/90 days, the account can be reported as standard retrospectively from the application date in subsequent reporting, but not on March 31, 2009.