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M S Ahluwalia
CAIIB Super-Notes
Sirf Business
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
Contents
Coverage:
1. Introduction
2. Asset Classification
3. Provisioning Norms
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
1.
INTRODUCTION
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
Introduction
If bank is not able to get/recover interest from the
counterparty within reasonable time, then the income should
not be accounted for or recognised, till it is actually received.
Accounting for interest is changed from accrual basis to
mercantile one
Asset is tagged non-performing
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
2.
ASSET CLASSIFICATION
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
Narsimham Committee
Committee on the Financial System chaired by M. Narsimham
August 1991
Recommendations:
Bank balance sheets should be transparent and compliant with
international accounting standards
Uniform accounting practices should be adopted
Prudential norms for income recognition, asset classification and
provisioning introduced by RBI based on the recommendations
Income recognition policy should be objective and based on record of
recovery
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
CAIIB Super-Notes
Sirf Business
Non-Performing Assets
Only if interest charged during any quarter is not serviced fully
within 90 days from the end of the quarter
Out of Order
Outstanding balance remains continuously in excess of the sanctioned
limit/drawing power
No credits continuously for 90 days
Credits not enough to cover interest debited during the period
Overdue
Amount not paid on due date fixed by the bank
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
Income Recognition
Process to be objective and based on record of recovery
Interest on advances against term deposits, NSCs, IVPs, KVPs and
life policies may be taken to income account on the due date,
provided adequate margin is available
Fees and commissions earned by the bank as a result of
CAIIB Super-Notes
Sirf Business
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
Reversal of Income
Interest accrued and credited to income account in the
corresponding previous year should year should be reversed
or provided for if same is not realised. For govt. guaranteed
accounts also.
Fees, commission and similar income shall cease to accrue
and should be reversed or provided for with respect to past
periods if uncollected
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
Leased Assets
Finance charge component of finance income accrued and
credited to income account and remaining unrealised should
be reversed or provided for
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
Categories of NPAs
Substandard Assets
Doubtful Assets
Loss Assets
Remained in
Substandard
category for a
period of 12
months
Weaknesses make
collection or
liquidation in full
highly
questionable and
improbable
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
90 days Out of
Order/Overdue:
Non-Performing
Asset
12 Months NPA:
Substandard
Asset
12 Months
Substandard:
Doubtful Asset
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
CAIIB Super-Notes
Sirf Business
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
3.
PROVISIONING NORMS
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
M S Ahluwalia
CAIIB Super-Notes
Substandard Assets
Doubtful Assets
Loss Assets
Norms
10% of Total
outstanding
For unsecured
exposures additional
10%, i.e., 20%
Sirf Business
M S Ahluwalia
CAIIB Super-Notes
Sirf Business
M S Ahluwalia
Sirf Business