Sir, I am studying the chapter of “Audit of Banks”from the PADHUKA where in I am facing some problems in topic of “Provisioning Norms for Loans and Advances Covered in Sub Standard Assets”. (Given at page No. 6.26 of June 2010 Edition) The definition of which reads as under:-
Where in it has been defined as “20% in respect of the gross aggregate outstanding funded exposure where the total security fails short of 10% of the total funded and unfunded exposures.”
In Illustration I (Given Below at page 2) have no doubt but after reading Illustration 2 (Given Below at page 2) I am confused whether the Illustration 1 is correct or Illustration 2, Regarding Provision for Sub Standard Assets. If Illustration 1 is correct than there is problem in Illustration2 or vice versa.
Because in Illustration 1 there is provision required is provided at 10% (Shown in Yellow Color) where as 20% (Shown in Green Color) in Illustration. 2. It seems that there is some typing mistake or there may be problem in my understanding the facts of the illustrations, as per my understanding there is no Difference.
please help me in clearing my doubts. If I am misunderstood than please clear me the technical point or if there is problem is typing mistake please help me. Please help me as soon as possible I will be ever grateful to you for such kindness
With Regards
Gopal Aggarwal
Gopal Aggarwal (CA Final)
M. 090345-50081
E Mail :- gopalaggarwalca @ gmail.com
Illustration 1
|
Exposure
|
Security Assessed (Tangible)
|
|
Nature
|
Amount
|
I
|
II
|
III
|
IV
|
V
|
VI
|
VII
|
|
Funded
|
100
|
129
|
99
|
39
|
19
|
10
|
8
|
2
|
|
Unfunded
|
200
|
21
|
21
|
21
|
21
|
21
|
21
|
19
|
|
Total Rs.
|
300
|
150
|
120
|
60
|
40
|
31
|
29
|
21
|
|
|
|
|
|
|
|
|
|
|
|
Security % of Total Exposure
|
|
50
|
40
|
20
|
13.33
|
10.33
|
9.66
|
7
|
|
Provision Required (based on % of Funded
|
|
10
|
10
|
10
|
10
|
10
|
20
|
20
|
Illustration 2
|
Exposure
|
Security Assessed (tangible)
|
|
Nature
|
Amount
|
I
|
II
|
III
|
IV
|
V
|
VI
|
VII
|
|
Funded
|
200
|
251
|
111
|
51
|
31
|
22
|
18
|
10
|
|
Unfunded
|
100
|
9
|
9
|
9
|
9
|
9
|
9
|
9
|
|
Total
|
300
|
260
|
120
|
60
|
40
|
31
|
27
|
19
|
|
|
|
|
|
|
|
|
|
|
|
Security % of Total Exposure
|
|
86.66
|
40
|
20
|
13.33
|
10.33
|
9
|
6.33
|
|
Provision Required (based on % of Funded
|
|
20
|
20
|
20
|
20
|
20
|
40
|
|
