RBI issues instructions regard to asset classification and provisioning

Apr 22, 2020 | by Avantis RegTech Legal Research Team

Industry Specific Compliance

The Reserve Bank of India (RBI) on April 17, 2020, issues instructions regard to asset classification and provisioning aiming at alleviating the lingering impact of Covid-19 pandemic on the businesses and financial institutions in India.

The instructions are as follows:

1. The lending institutions were permitted to grant a moratorium of three months on payment of all term loan instalments falling due between March 1, 2020 and May 31, 2020 vide RBI Circular DOR.No.BP.BC.47/21.04.048/2019-20 dated March 27, 2020. The moratorium period in respect of all accounts classified as standard as on February 29, 2020 shall be excluded by the lending institutions from the number of days past-due for the purpose of asset classification under the IRAC norms.

2. The Regulatory Package permitted the recovery of interest applied during the period from March 01, 2020 upto May 31, 2020 to be deferred in respect of working capital facilities sanctioned in the form of cash credit/overdraft. Such deferment period, wherever granted shall be excluded for the determination of out of order status.

3. Where the provisions of paragraphs (2) and (3) above are applicable, asset classification benefit is extended, lending institutions shall make general provisions of not less than 10% of the total outstanding of such accounts, to be phased over two quarters as under: 

a) Quarter ended March 31, 2020 – not less than 5% 

b) Quarter ending June 30, 2020 – not less than 5%

4. The residual provisions at the end of the financial year can be written back or adjusted against the provisions required for all other accounts.

5. The exclusions permitted in terms of para 2 and 3 above shall be duly reckoned by the lending institutions in their supervisory reporting as well as reporting to credit information companies as on March 1, 2020 will remain unchanged till May 31, 2020.

6. NBFCs which are required to comply with Indian Accounting Standards (IndAS), shall continue to be guided by the guidelines duly approved by their Boards and as per ICAI Advisories for recognition of the impairments.

7. The lending institutions shall disclose the ‘Notes to Accounts’ while preparing their financial statements for the half year ending September 30, 2020 as well as the financial years 2019-20 and 2020-2021.

[Notification No. DOR.No.BP.BC.63/21.04.048/2019-20]


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