RBI clarification on Prudential norms on Income Recognition, Asset Classification & Provisioning

RBI clarification on Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances 

RBI in November 2021 had issued a Circular on Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances. 

In response to the queries received seeking certain clarifications, the RBI has clarified as under:

1. The definition of ‘out of order’, as clarified in the Circular, shall be applicable to all loan products being offered as an overdraft facility, including those not meant for business purposes and/or which entail interest repayments as the only credits.

2. The ‘previous 90 days period’ for determination of ‘out of order’ status of a CC/OD account shall be inclusive of the day for which the day-end process is being run.

3. In case of borrowers having more than one credit facility from a lending institution, loan accounts shall be upgraded from NPA to standard asset category only upon repayment of entire arrears of interest and principal pertaining to all the credit facilities.

4. The circular does not make any changes to the requirements related to reporting of information to CRILC, which will continue to be governed in terms of extant instructions for respective entities.

5. The circular does not, in any way, interfere with the extant guidelines on implementation of Ind-AS by NBFCs.

It has been further clarified that paragraph 10 of the Circular stipulates that loan accounts classified as NPAs may be upgraded as ‘standard’ asset only if entire arrears of interest and principal are paid by the borrower. NBFCs shall have time till September 30, 2022 to put in place the necessary systems to implement this provision. 

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