What changed
RBI specified that for active monitoring under the Supervisory Action Framework, the Credit-Deposit ratio calculation should include 75% of capital funds (as per the July 2, 2012 Master Circular on Prudential Norms on Capital Adequacy) added to deposits. Additionally, the reference date for gross NPAs is clarified to be the balance sheet date of March 31.
What it means for you
UCBs must adjust their CD ratio computation by factoring in 75% of capital funds, which could affect supervisory triggers. The fixed NPA reference date ensures consistency in reporting and action initiation. Banks need to align internal monitoring with these definitions to avoid adverse supervisory actions.
What you must do
- Update your CD ratio calculation formula to include 75% of capital funds as defined in the July 2, 2012 Master Circular.
- Ensure all gross NPA figures used for SAF monitoring are as of the March 31 balance sheet date.
- Review internal reporting systems to comply with these clarified definitions for supervisory action triggers.
Who it affects
All Primary (Urban) Co-operative Banks (UCBs), Compliance and risk management teams at UCBs, RBI supervisory teams monitoring UCBs
What is the exact formula for CD ratio under SAF?
For SAF monitoring, CD ratio = (Advances) / (Deposits + 75% of capital funds). Capital funds are as defined in the July 2, 2012 Master Circular on Prudential Norms on Capital Adequacy.
Why is the NPA reference date fixed as March 31?
To ensure uniformity in supervisory action triggers, gross NPAs must be taken from the audited balance sheet as of March 31 each year, not from any interim date.