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

Last updated: 12 November 2021

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This Master Circular from the Reserve Bank of India (RBI) consolidates and updates guidelines for Urban Co-operative Banks (UCBs) concerning income recognition, asset classification, and provisioning. It aims to ensure a bank's balance sheet accurately reflects its financial health by using objective criteria for asset classification and income recognition, moving away from subjective considerations. The circular details the criteria for identifying Non-Performing Assets (NPAs), including the '90 days overdue' norm, and specific rules for agricultural advances.

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 ourMaster Circular DCBR.BPD. (PCB) MC No.12/09.14.000/2015-16 dated July 1, 2015on the captioned subject. The enclosedMaster Circularconsolidates and updates all the instructions / guidelines on the subject

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FAQ :

The primary purpose is to consolidate and update all instructions and guidelines on income recognition, asset classification, and provisioning for Urban Co-operative Banks (UCBs) to ensure their balance sheets accurately reflect their financial health.

The policy for income recognition should be objective and based on the record of recovery, while asset classification must be done using objective criteria to ensure uniform and consistent application of norms. Provisioning should generally be based on the classification of assets.

An asset becomes non-performing when it ceases to generate income. Specifically, a loan or advance is considered an NPA if interest and/or principal instalments remain overdue for more than 90 days, or if an account is 'out of order' for overdraft/cash credit facilities, or if bills purchased and discounted remain overdue for over 90 days.

Yes, for direct agricultural advances, a loan for short-duration crops becomes an NPA if principal or interest remains overdue for two crop seasons, and for long-duration crops, it's one crop season. For other agricultural loans, the 90-day delinquency norm applies.

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

Restructured accounts classified as standard assets are immediately reclassified as 'sub-standard'. Non-performing assets, 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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