What changed
RBI issued a consolidated version of the Mortgage Guarantee Companies Prudential Norms Directions, 2008, incorporating all amendments up to June 30, 2013. This replaces the earlier fragmented circulars with a single updated reference document.
What it means for you
Mortgage Guarantee Companies must now refer to this consolidated notification for all prudential requirements, including definitions of doubtful assets (12-month sub-standard), loss assets, and net owned fund calculations. The updated norms ensure uniformity and clarity in regulatory compliance.
What you must do
- Review the consolidated notification and update internal policies to align with the definitions of doubtful, loss, and non-performing assets.
- Recalculate net owned fund as per the revised formula, deducting investments in subsidiaries and group companies exceeding 10% of equity and free reserves.
- Ensure all mortgage guarantee assets acquired from credit institutions are classified as NPAs immediately upon trigger event and aged accordingly.
- Train compliance teams on the updated asset classification and provisioning norms to avoid regulatory gaps.
Who it affects
All Mortgage Guarantee Companies registered with RBI, Compliance officers of mortgage guarantee firms, Auditors reviewing prudential norms adherence
What is the definition of a doubtful asset under these directions?
A doubtful asset is one that has remained a sub-standard asset for more than 12 months.
How is net owned fund calculated for Mortgage Guarantee Companies?
Net owned fund is paid-up equity capital plus free reserves, minus accumulated losses, deferred revenue expenditure, intangible assets, and further reduced by investments in subsidiaries/group companies and loans to them exceeding 10% of the aggregate.
When is a mortgage guarantee asset classified as a non-performing asset?
An asset acquired from a credit institution upon a trigger event is immediately classified as an NPA and then aged according to the NPA classification rules.