What changed
This master circular consolidates and updates all previous instructions on income recognition, asset classification, and provisioning for UCBs issued up to June 30, 2013. It replaces the earlier master circular dated July 2, 2012, and includes updated guidelines on restructuring and project financing.
What it means for you
UCBs must now follow the consolidated prudential norms strictly, ensuring objective income recognition based on recovery records. The circular mandates uniform asset classification and provisioning, which will improve transparency in financial reporting. Banks need to align their internal systems with these updated guidelines to avoid supervisory action.
What you must do
- Review and update internal policies on income recognition and asset classification to align with the consolidated circular.
- Ensure NPA classification is borrower-wise and not facility-wise, and report NPAs to RBI as per prescribed formats.
- Implement provisioning norms for all loan categories, including agricultural advances and restructured assets.
- Train staff on the updated guidelines, especially on restructuring and project financing provisions.
Who it affects
Primary (Urban) Co-operative Banks, Chief Executive Officers of UCBs, Credit and risk management teams, Compliance and audit departments
What is the key change in NPA classification under this circular?
The circular reiterates that NPA classification must be borrower-wise, not facility-wise, meaning if one facility of a borrower becomes NPA, all facilities to that borrower are classified as NPA.
Does this circular affect income recognition for investments?
Yes, it includes guidelines on recognition of income on investments treated as NPAs, requiring reversal of income on such investments.
Are state co-operative society laws still applicable?
Yes, if state laws are more stringent than RBI norms, they continue to apply. Banks must follow the stricter of the two.