RBI tweaks conditions of disclosure of divergence in the asset classification & provisioning by banks

RBI specify threshold percentage for disclosure of divergence in asset classification & provisioning by banks with additional provisioning assessed by RBI 

The RBI vide Notification dated 18.04.2018 mandated disclosures by banks on divergences from prudential norms on income recognition, asset classification and provisioning exceed certain thresholds.

It had been stated that banks shall make suitable disclosures wherever: 

(a) the additional provisioning requirements assessed by RBI exceed 15 percent of the published net profits after tax for the reference period or

(b) the additional Gross NPAs identified by RBI exceed 15 percent of the published incremental Gross NPAs1 for the reference period, or both.

RBI has observed that in view of the above, some banks, on account of low or negative net profit after tax, are required to disclose divergences even where the additional provisioning assessed by RBI is small, which is contrary to the regulatory intent that only material divergences should be disclosed.

Therefore, now it has been stated that henceforth, banks should disclose divergences, if either or both of the following conditions are satisfied:

  1. the additional provisioning for NPAs assessed by RBI exceeds 10 per cent of the reported profit before provisions and contingencies for the reference period, and

  2. the additional Gross NPAs identified by RBI exceed 15 per cent of the published incremental Gross NPAs for the reference period.

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