Master Circular: Income Recognition & Asset Classification for UCBs

What changed

This master circular consolidates and updates all instructions issued up to March 31, 2022, replacing the previous master circular of November 1, 2021. No new substantive changes were introduced; the circular serves as a single reference document listing all consolidated circulars in Annex 9.

What it means for you

UCBs now have a single, updated reference for prudential norms, reducing compliance ambiguity. The 90-day NPA recognition rule and objective income recognition policy remain unchanged, ensuring consistency across the sector. Banks must ensure their internal systems align with the consolidated guidelines, especially for asset classification and provisioning.

What banks were required to do at the time

• Review and update internal policies to align with the consolidated master circular.
• Ensure NPA classification follows the 90-day overdue rule for term loans and 'out of order' status for OD/CC accounts.
• Verify that income recognition is based on actual recovery records, not subjective criteria.
• Check that provisioning norms are applied uniformly across all asset categories as per the circular.
• Maintain records of all circulars listed in Annex 9 for audit and compliance purposes.

Who it affects

All Primary (Urban) Co-operative Banks, Chief Executive Officers of UCBs, Compliance and risk management teams at UCBs, Auditors and regulators overseeing UCBs