What changed
This master circular updates and consolidates all IRAC instructions for UCBs issued up to June 30, 2011, replacing the previous master circular dated July 1, 2010. It includes revised guidelines on asset classification, provisioning norms, and prudential restructuring, with detailed annexes on agricultural advances, project financing, and accounting entries.
What it means for you
UCBs must align their NPA classification and provisioning practices with this consolidated circular to ensure uniform application of prudential norms. The circular emphasizes objective income recognition based on recovery records and mandates stricter provisioning for non-performing assets, impacting capital adequacy and profitability. Banks should review their internal systems to comply with the updated guidelines, especially for restructuring and project finance.
What you must do
- Replace the July 2010 master circular with this updated version for all IRAC-related operations.
- Ensure NPA classification is borrower-wise, not facility-wise, and follows the objective criteria in Section 2.
- Review provisioning norms for loans, retirement benefits, and asset sales to SC/RC as per Section 5.
- Update internal systems for income recognition and reversal on NPA accounts as per Section 4.
- Train staff on the new annexes, especially for agricultural advances and project financing.
Who it affects
All Primary (Urban) Co-operative Banks (UCBs), Chief Executive Officers of UCBs, Credit and risk management teams in UCBs, Compliance and audit departments of UCBs
Does this circular apply to all UCBs?
Yes, it applies to all Primary (Urban) Co-operative Banks, as addressed to their Chief Executive Officers.
What is the key change from the 2010 master circular?
This circular consolidates all instructions issued up to June 30, 2011, including updates on restructuring, project financing, and provisioning norms, replacing the 2010 version.
Are state co-operative society acts still applicable?
Yes, if state acts or rules are more stringent than RBI norms, they continue to apply, as per Section 1.3.