RBI – Enhancement of Rates of Provisioning for Non-Performing Assets and Restructured Advances

RBI 2010-11/529; DBOD.No.BP.BC. 94/21.04.048/2011-12; May 18, 2011

The Chairman and Managing Directors / Chief Executive Officers; All Scheduled Commercial Banks (Excluding RRBs)

Enhancement of Rates of Provisioning for Non-Performing Assets and Restructured Advances

Please refer to paragraph 110 of the Monetary Policy Statement for the year 2011-12 (extract enclosed) wherein it was proposed to enhance the provisioning requirements on certain categories of non-performing advances and restructured advances. Accordingly, the revised provisioning requirements for the following categories of non-performing advances and restructured advances will be as under: (the current provisioning requirements are laid down in paragraph 5 of the Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances – Ref DBOD.No.BP.BC.21/21.04.048/2010-11 dated July 01, 2010).

1. Sub-Standard Advances :

Advances classified as sub-standard will attract a provision of 15 per cent as against the existing 10 per cent. The unsecured exposures classified as sub-standard assets will attract an additional provision of 10 per cent, i.e., a total of 25 per cent as against the existing 20 per cent. However, unsecured exposures in respect of Infrastructure loan accounts classified as sub-standard, in case of which certain safeguards such as escrow accounts are available as indicated in our circular DBOD.No.BP.BC.96/08.12.014/2009-10 dated April 23, 2010, will attract an additional provision of 5 per cent only i.e. a total of 20 per cent as against the existing 15 per cent.

2. Doubtful Advances :

Doubtful Advances will continue to attract 100% provision to the extent the advance is not covered by the realisable value of the security to which the bank has a valid recourse and the realisable value is estimated on a realistic basis. However, in respect of the secured portion, following provisioning requirements will be applicable:

  1. The secured portion of advances which have remained in doubtful category up to one year will attract a provision of 25 per cent (as against the existing 20 per cent);
  2. The secured portion of advances which have remained in doubtful category for more than one year but upto 3 years will attract a provision of 40 per cent (as against the existing 30 per cent); and
  3. The secured portion of advances which have remained in doubtful category for more than 3 years will continue to attract a provision of 100%.

3. Restructured Advances:

  1. Restructured accounts classified as standard advances will attract a provision of 2 per cent in the first two years from the date of restructuring. In cases of moratorium on payment of interest/principal after restructuring, such advances will attract a provision of 2 per cent for the period covering moratorium and two years thereafter (as against existing provision of 0.25-1.00 per cent, depending upon the category of advances); and
  2. Restructured accounts classified as non-performing advances, when upgraded to standard category will attract a provision of 2 per cent in the first year from the date of upgradation (as against existing provision of 0.25-1.00 per cent, depending upon the category of advances).

4. All other instructions on provisioning will remain unchanged. The revised provisioning norms vis-à-vis the existing norms are also summarized in Annex.

Yours faithfully

(B. Mahapatra)
Chief General Manager – in Charge

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