What changed
RBI directed select All-India Financial Institutions (AIFIs) to follow the provisioning coverage guidelines issued to banks via circular DBOD.No.BP.BC.64/21.04.048/2009-10 dated December 1, 2009. The norms apply mutatis mutandis, meaning AIFIs must adopt the same provisioning requirements for advances as commercial banks.
What it means for you
AIFIs like Exim Bank, NABARD, NHB, and SIDBI now face stricter provisioning norms, potentially increasing their provisioning costs and impacting profitability. This aligns their risk coverage with banks, ensuring uniform prudential standards across the financial system. Lenders must review their loan portfolios to comply with the enhanced provisioning requirements.
What you must do
- Review the enclosed bank provisioning circular (DBOD.No.BP.BC.64/21.04.048/2009-10) for detailed norms.
- Update internal provisioning policies to match bank-level standards for all advances.
- Assess impact on capital adequacy and profitability due to higher provisioning requirements.
- Ensure compliance reporting aligns with the new guidelines from the effective date.
Who it affects
Exim Bank, NABARD, NHB, SIDBI, All-India Financial Institutions (AIFIs)
When did this circular take effect?
The circular was issued on December 8, 2009, as part of the Second Quarter Review of Monetary Policy for 2009-10. The effective date of the provisioning norms is not specified in this circular; refer to the enclosed bank circular for details.