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 you must do
- 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
What is the key NPA classification rule under this master circular?
A loan or advance becomes NPA if interest or principal remains overdue for more than 90 days for term loans, or if an overdraft/cash credit account remains 'out of order'.
Does this circular introduce any new requirements for UCBs?
No, it consolidates all existing instructions up to March 31, 2022, without introducing new substantive changes. It replaces the previous master circular of November 1, 2021.
How should UCBs treat income recognition for NPAs?
Income recognition must be objective and based on actual recovery records. Once an account becomes NPA, any income accrued but not realized must be reversed.