RBI Master Circular- Income Recognition, Asset Classification, Provisioning and Other Related Matters - UCBs

Last updated: 09 November 2021

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The Reserve Bank of India (RBI) has issued a Master Circular consolidating and updating guidelines on Income Recognition, Asset Classification, and Provisioning for Urban Co-operative Banks (UCBs). This circular, effective from November 1, 2021, aims to ensure banks reflect their true financial health by using objective criteria for income recognition and asset classification, moving away from subjective considerations. It details the norms for identifying Non-Performing Assets (NPAs), including specific rules for agricultural advances and the implementation of system-based asset classification for larger UCBs.

RBI/2021-22/117 DOR.No.STR.REC.64/21.04.048/2021-22 November 1, 2021 The Chief Executive Officers All Primary (Urban) Co-operative Banks Madam / Dear Sir, Master Circular- Income Recognition, Asset Classification, Provisioning and Other Related Matters - UCBs Please refer to ourMast

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FAQ :

The circular aims to ensure that a bank's balance sheet accurately reflects its financial health by establishing objective criteria for income recognition and asset classification, moving away from subjective assessments.

An asset becomes non-performing when it ceases to generate income. Specifically, it's a loan or advance where interest and/or principal are overdue for more than 90 days, or the account is 'out of order' for overdraft/cash credit facilities, or bills remain overdue for over 90 days.

Yes, for direct agricultural advances, a loan for short-duration crops is an NPA if overdue for two crop seasons, and for long-duration crops, it's overdue for one crop season. Other agricultural loans follow the 90-day norm.

A Special Mention Account (SMA) is an account showing early signs of stress where the borrower is defaulting on debt obligations, but it hasn't yet been classified as an NPA. This allows banks to take timely action.

UCBs with total assets of ₹2000 crore or above as of March 31, 2020, were required to implement it from June 30, 2021. For those with assets between ₹1000 crore and ₹2000 crore (and meeting certain cyber security criteria), it was from September 30, 2021.

Restructured accounts classified as standard assets are immediately re-classified as 'sub-standard'. NPAs, upon restructuring, may slip into lower asset classification categories. Upgradation to 'standard' is possible after a 'satisfactory performance' period.

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Notification No : RBI/2021-22/117 DOR.No.STR.REC.64/21.04.048/2021-22
Published in Community & General
Source : https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12185&Mode=0

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