Provisioning Norms For Non Performing Assets

 

 

Non Performing Asset means an asset or account of borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the directions or guidelines relating to asset classification issued by RBI.

An amount due under any credit facility is treated as "past due" when it has not  been paid within 30 days from the due date

With a view to moving towards international best practices and to ensure greater transparency, it has been decided to adopt the '90 days overdue' norm for identification of NPAs, form the year ending March 31, 2004. Accordingly, with effect form March 31, 2004, a non-performing asset (NPA) shall be a loan or an advance where;

 i.            interest and /or installment of principal remain overdue for a period of more than 90 days in respect of a Term Loan,

ii.            the account remains 'out of order' for a period of more than 90 days, inrespect of an overdraft/ cash Credit(OD/CC),

iii.            the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,

iv.            interest and/ or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purpose, and

 v.            any amount to be received remains overdue for a period of more than 90 days in respect of other accounts

 

An account should be treated as 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit/ drawing power. In case where the outstanding balance in the principal operating account is less than the sanctioned limit/ drawing power, but there are no credits continuously for six months as on the date of balance sheet or credits are not enough to cover the interest debited during the same period, these account should be treated as 'out of order'.

 

Any amount due to the bank under any credit facility is 'overdue' if it is not paid on the due date fixed by the bank.