What changed
RBI directed that the IRAC guidelines issued to banks via circular DBOD.No.BP.BC.No.46/21.04.048/2009-10 dated September 24, 2009, shall apply mutatis mutandis to select AIFIs. This aligns NPA computation and provisioning norms for these institutions with those applicable to commercial banks.
What it means for you
AIFIs must now follow the same NPA recognition and provisioning rules as banks, ensuring uniformity in asset quality reporting. This could tighten their provisioning requirements and impact reported profitability, especially for institutions with higher delinquent advances.
What you must do
- Review your institution's current asset classification and provisioning practices against the September 2009 bank guidelines.
- Update internal policies and systems to align NPA computation with the bank-level IRAC norms.
- Train credit and risk teams on the revised classification and provisioning rules.
- Prepare for potential impact on capital adequacy and profitability due to stricter provisioning.
Who it affects
Exim Bank, NABARD, NHB, SIDBI, Other select All-India Financial Institutions
Which specific guidelines are being extended to AIFIs?
The circular extends the prudential norms on income recognition, asset classification, and provisioning pertaining to advances, as outlined in the September 24, 2009 bank circular, to select AIFIs.
When do these norms become effective for AIFIs?
The circular was issued on March 26, 2010, and the norms apply immediately from that date.
Do these norms apply to all financial institutions?
No, they apply only to select All-India Term-lending and Refinancing Institutions, specifically Exim Bank, NABARD, NHB, and SIDBI, as mentioned in the circular.