What changed
The definition of 'out of order' now covers all overdraft facilities, not just business loans, and the 'previous 90 days' period includes the day-end process day. For borrowers with multiple credit facilities, all accounts must have full arrears cleared before any can be upgraded from NPA to standard. No changes were made to CRILC reporting or Ind-AS guidelines for NBFCs.
What it means for you
Banks must ensure that for any borrower with multiple loans, all accounts are fully regularized before upgrading any single account. This tightens NPA upgrade discipline and prevents selective repayment. The expanded 'out of order' definition brings more overdraft products under stricter monitoring, potentially increasing NPA recognition for non-business OD accounts.
What you must do
- Review all overdraft facilities to apply the 'out of order' definition uniformly, including non-business and interest-only repayment products.
- Update system logic to include the day-end process day in the 'previous 90 days' calculation for CC/OD accounts.
- Ensure NPA upgrade processes check for full arrears repayment across all credit facilities of a borrower before upgrading any single account.
- For NBFCs, plan system changes to implement the upgrade rule by September 30, 2022.
Who it affects
All Commercial Banks including Small Finance Banks, Local Area Banks, and RRBs, All Primary (Urban) Co-operative Banks, State Co-operative Banks, and District Central Co-operative Banks, All-India Financial Institutions (Exim Bank, NABARD, NHB, SIDBI), All Non-Banking Financial Companies including Housing Finance Companies
Does this circular change CRILC reporting requirements?
No, the circular explicitly states that CRILC reporting continues to be governed by existing instructions for respective entities.
What is the timeline for NBFCs to implement the upgrade rule?
NBFCs have until September 30, 2022, to put in place necessary systems for the provision that loan accounts can be upgraded only if entire arrears are paid. Other instructions apply as per earlier timelines.