RBI No. 2006-07/31 DBOD No. BP. BC. 15 / 21.04.048 / 2006-07, DT. 01/07/2006 (Part - II)
Master Circular-Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances
PREVIOUSTwo illustrations are furnished below for clarity in this regard.
Illustration 1. Existing stock of advances classified as 'doubtful more than 3 years' as on 31 March 2004
The outstanding amount as on 31 March 2004: Rs 25,000
Realisable value of security: Rs 20,000
Period for which the advance has remained in 'doubtful' category as on 31 March 2004: 4 years (i.e. Doubtful more than 3 years)
Provisioning requirement:
| As on … | Provisions on secured portion | Provisions on unsecured portion | Total(Rs) |
| % | Amount | % | Amount |
| 31 Mar 2004 | 50 | 10000 | 100 | 5000 | 15000 |
| 31 Mar 2005 | 60 | 12000 | 100 | 5000 | 17000 |
| 31 Mar 2006 | 75 | 15000 | 100 | 5000 | 20000 |
| 31 Mar 2007 | 100 | 20000 | 100 | 5000 | 25000 |
Illustration 2: Advances classified as 'doubtful more than three years' on or after 1 April 2004
The outstanding amount as on 31 March 2004: Rs 10,000
Realisable value of security: Rs 8,000
Period for which the advance has remained in 'doubtful' category as on 31 March 2004: 2.5 years
Provisioning requirement:
| As on | Asset classification | Provisions on secured portion | Provisions on unsecured portion | Total(Rs) |
| % | Amt | % | Amt | |
| 31 Mar 2004 | Doubtful 1 to 3 years | 30 | 2400 | 100 | 2000 | 4400 |
| 31 Mar 2005 | Doubtful more than 3 years | 100 | 8000 | 100 | 2000 | 10000 |
iii) Banks are permitted to phase the additional provisioning consequent upon the reduction in the transition period from substandard to doubtful asset from 18 to 12 months over a four year period commencing from the year ending March 31, 2005, with a minimum of 20 % each year.
Note: Valuation of Security for provisioning purposes
With a view to bringing down divergence arising out of difference in assessment of the value of security, in cases of NPAs with balance of Rs. 5 crore and above stock audit at annual intervals by external agencies appointed as per the guidelines approved by the Board would be mandatory in order to enhance the reliability on stock valuation. Collaterals such as immovable properties charged in favour of the bank should be got valued once in three years by valuers appointed as per the guidelines approved by the Board of Directors.
5.4 Sub-standard assets
A general provision of 10 percent on total outstanding should be made without making any allowance for ECGC guarantee cover and securities available.
The ‘unsecured exposures’ which are identified as ‘substandard’ would attract additional provision of 10 per cent, i.e., a total of 20 per cent on the outstanding balance. The provisioning requirement for unsecured ‘doubtful’ assets is 100 per cent. Unsecured exposure is defined as an exposure where the realisable value of the security, as assessed by the bank/approved valuers/Reserve Bank’s inspecting officers, is not more than 10 percent, ab-initio, of the outstanding exposure. ‘Exposure’ shall include all funded and non-funded exposures (including underwriting and similar commitments). ‘Security’ will mean tangible security properly discharged to the bank and will not include intangible securities like guarantees, comfort letters etc.
5.5 Standard assets
(i) Banks should make general provision for standard assets at the following rates for the funded outstanding on global loan portfolio basis:
(a) direct advances to agricultural and SME sectors at 0.25 per cent;
(b) advances to specific sectors, i.e., personal loans, loans and advances qualifying as capital market exposures, residential housing loans beyond Rs.20 lakh and commercial real estate loans at 1.0 per cent; and
(c) all other advances not included in (a) and (b) at 0.40 per cent.
(ii) The provisions on standard assets should not be reckoned for arriving at net NPAs.
(iii)The provisions towards Standard Assets need not be netted from gross advances but shown separately as 'Contingent Provisions against Standard Assets' under 'Other Liabilities and Provisions - Others' in Schedule 5 of the balance sheet.
5.6 Prudential norms on creation and utilisation of floating provisions
5.6.1 Principle for utilisation of floating provisions by banks
The floating provisions should not be used for making specific provisions as per the extant prudential guidelines in respect of non-performing assets or for making regulatory provisions for standard assets. The floating provisions can be used only for contingencies under extraordinary circumstances for making specific provisions in impaired accounts after obtaining board’s approval and with prior permission of RBI. The boards of the banks should lay down an approved policy as to what circumstances would be considered extraordinary.
5.6.2 Principle for creation of floating provisions by banks
The bank's board of directors should lay down approved policy regarding the level to which the floating provisions can be created. The bank should hold floating provisions for ‘advances’ and ‘investments’ separately and the guidelines prescribed will be applicable to floating provisions held for both ‘advances’ & ‘investment’ portfolios.
5.6.3 Accounting
Floating provisions cannot be reversed by credit to the profit and loss account. They can only be utilised for making specific provisions in extra-ordinary circumstances as mentioned above. Until such utilisation, these provisions can be netted off from gross NPAs to arrive at disclosure of net NPAs. Alternatively, they can be treated as part of Tier II capital within the over-all ceiling of 1.25 % of total risk-weighted assets.
5.6.4 Disclosures
Banks should make comprehensive disclosures on floating provisions in the “notes on accounts” to the balance sheet on (a) opening balance in the floating provisions account, (b) the quantum of floating provisions made in the accounting year, (c) purpose and amount of draw down made during the accounting year, and (d) closing balance in the floating provisions account.
5.6.5 Provisions for advances at higher than prescribed rates
A bank may voluntarily make specific provisions for advances at rates which are higher than the rates prescribed under existing regulations provided such higher rates are approved by the Board of Directors and consistently adopted from year to year. Such additional provisions are not to be considered as floating provisions.
5.7 Provisions on Leased Assets
i) Sub-standard assets
a) 10 percent of the sum of the net investment in the lease and the unrealised portion of finance income net of finance charge component. The terms ‘net investment in the lease’, ‘finance income’ and ‘finance charge’ are as defined in ‘AS 19 - Leases’ issued by the ICAI.
b) Unsecured lease exposures, as defined in paragraph 5.4 above, which are identified as ‘substandard’ would attract additional provision of 10 per cent, i.e., a total of 20 per cent.
ii) Doubtful assets
100 percent of the extent to which the finance is not secured by the realisable value of the leased asset. Realisable value to be estimated on a realistic basis. In addition to the above provision, provision at the following rates should be made on the sum of the net investment in the lease and the unrealised portion of finance income net of finance charge component of the secured portion, depending upon the period for which asset has been doubtful:
| Period | Percentage of provision |
| Up to one year | 20 |
| One to three years | 30 |
More than three years
(i) outstanding stock of NPAs as on March 31, 2004 | - 60 per cent with effect from March 31, 2005
- 75 per cent with effect from March 31, 2006
- 100 per cent with effect from March 31, 2007 |
(ii) advances classified as ‘doubtful more than three years’ on or after April 1, 2004 | - 100 percent |
iii) Loss assets
The entire asset should be written-off. If for any reason, an asset is allowed to remain in books, 100 percent of the sum of the net investment in the lease and the unrealised portion of finance income net of finance charge component should be provided for.
5.8 Guidelines for Provisions under Special Circumstances
5.8.1 Advances granted under rehabilitation packages approved by BIFR/term lending institutions
(i) In respect of advances under rehabilitation package approved by BIFR/term lending institutions, the provision should continue to be made in respect of dues to the bank on the existing credit facilities as per their classification as sub-standard or doubtful asset.
(ii) As regards the additional facilities sanctioned as per package finalised by BIFR and/or term lending institutions, provision on additional facilities sanctioned need not be made for a period of one year from the date of disbursement.
(iii) In respect of additional credit facilities granted to SSI units which are identified as sick [as defined in Section IV (Para 2.8) of RPCD circular RPCD.PLNFS.BC. No 83 /06.02.31/2004-2005 dated 1 March 2005] and where rehabilitation packages/nursing programmes have been drawn by the banks themselves or under consortium arrangements, no provision need be made for a period of one year.
5.8.2 Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs, and life policies would attract provisioning requirements as applicable to their asset classification status.
5.8.3 However, advances against gold ornaments, government securities and all other kinds of securities are not exempted from provisioning requirements.
5.8.4 Treatment of interest suspense account
Amounts held in Interest Suspense Account should not be reckoned as part of provisions. Amounts lying in the Interest Suspense Account should be deducted from the relative advances and thereafter, provisioning as per the norms, should be made on the balances after such deduction.
5.8.5 Advances covered by ECGC guarantee
In the case of advances classified as doubtful and guaranteed by ECGC, provision should be made only for the balance in excess of the amount guaranteed by the Corporation. Further, while arriving at the provision required to be made for doubtful assets, realisable value of the securities should first be deducted from the outstanding balance in respect of the amount guaranteed by the Corporation and then provision made as illustrated hereunder:
Example
| Outstanding Balance | Rs. 4 lakhs |
| ECGC Cover | 50 percent |
| Period for which the advance has remained doubtful | More than 3 years remained doubtful (as on March 31, 2004) |
| Value of security held (excludes worth of Rs.) | Rs. 1.50 lakhs |
Provision required to be made
| Outstanding balance | Rs. 4.00 lakhs |
| Less: Value of security held | Rs. 1.50 lakhs |
| Unrealised balance | Rs. 2.50 lakhs |
| Less: ECGC Cover(50% of unrealisable balance) | Rs. 1.25 lakhs |
| Net unsecured balance | Rs. 1.25 lakhs |
| Provision for unsecured portion of advance | Rs. 1.25 lakhs (@ 100 percent of unsecured portion) |
| Provision for secured portion of advance (as on March 31, 2005) | Rs.0.90 lakhs (@ 60 per cent of the secured portion) |
| Total provision to be made | Rs.2.15 lakhs (as on March 31, 2005) |
5.8.6 Advance covered by CGTSI guarantee
In case the advance covered by CGTSI guarantee becomes non-performing, no provision need be made towards the guaranteed portion. The amount outstanding in excess of the guaranteed portion should be provided for as per the extant guidelines on provisioning for non-performing advances. Two illustrative examples are given below:
Example I
| Asset classification status: | Doubtful-More than 3 years (as on March 31, 2004) |
| CGTSI Cover | 75% of the amount outstanding or 75% of the unsecured amount or Rs.18.75 lakh, whichever is the least |
| Realisable value of Security | Rs.1.50 lakh | |
| Balance outstanding | Rs.10.00 lakh | |
| Less Realisable value of security | Rs. 1.50 lakh | |
| Unsecured amount | Rs. 8.50 lakh | |
| Less CGTSI cover (75%) | Rs. 6.38 lakh | |
| Net unsecured and uncovered portion: | Rs. 2.12 lakh | |
| | | Provision Required (as on March 31, 2005) |
| Secured portion | Rs.1.50 lakh | Rs. 0.90 lakh (@ 60%) |
| Unsecured & uncovered portion | Rs.2.12 lakh | Rs. 2.12 lakh (100%) |
| Total provision required | | Rs. 3.02 lakh |
Example II
| Asset classification status | Doubtful-More than 3 years (as on March 31, 2005); |
| CGTSI Cover | 75% of the amount outstanding or 75% of the unsecured amount or Rs.18.75 lakh, whichever is the least |
| Realisable value of Security | Rs.10.00 lakh | |
| Balance outstanding | Rs.40.00 lakh | |
| Less Realisable value of security | Rs. 10.00 lakh | |
| Unsecured amount | Rs. 30.00 lakh | |
| Less CGTSI cover (75%) | Rs. 18.75 lakh | |
| Net unsecured and uncovered portion: | Rs. 11.25 lakh | |
| | | Provision Required (as on March 31, 2005) |
| Secured portion | Rs.10.00 lakh | Rs. 10.00 lakh (@ 100%) |
| Unsecured & uncovered portion | Rs.11.25 lakh | Rs.11.25 lakh (100%) |
| Total provision required | | Rs. 21.25 lakh |
5.8.7 Take-out finance
The lending institution should make provisions against a 'take-out finance' turning into NPA pending its take-over by the taking-over institution. As and when the asset is taken-over by the taking-over institution, the corresponding provisions could be reversed.
5.8.8 Reserve for Exchange Rate Fluctuations Account (RERFA)
When exchange rate movements of Indian rupee turn adverse, the outstanding amount of foreign currency denominated loans (where actual disbursement was made in Indian Rupee) which becomes overdue, goes up correspondingly, with its attendant implications of provisioning requirements. Such assets should not normally be revalued. In case such assets need to be revalued as per requirement of accounting practices or for any other requirement, the following procedure may be adopted:
· The loss on revaluation of assets has to be booked in the bank's Profit & Loss Account.
· Besides the provisioning requirement as per Asset Classification, banks should treat the full amount of the Revaluation Gain relating to the corresponding assets, if any, on account of Foreign Exchange Fluctuation as provision against the particular assets.
5.8.9 Provisioning for country risk
Banks shall make provisions, with effect from the year ending 31 March 2003, on the net funded country exposures on a graded scale ranging from 0.25 to 100 percent according to the risk categories mentioned below. To begin with, banks shall make provisions as per the following schedule:
| Risk category | ECGCclassification | Provisioning requirement(per cent) |
| Insignificant | A1 | 0.25 |
| Low | A2 | 0.25 |
| Moderate | B1 | 5 |
| High | B2 | 20 |
| Very high | C1 | 25 |
| Restricted | C2 | 100 |
| Off-credit | D | 100 |
Banks are required to make provision for country risk in respect of a country where its net funded exposure is one per cent or more of its total assets.
The provision for country risk shall be in addition to the provisions required to be held according to the asset classification status of the asset. In the case of ‘loss assets’ and ‘doubtful assets’, provision held, including provision held for country risk, may not exceed 100% of the outstanding.
Banks may not make any provision for ‘home country’ exposures i.e. exposure to India. The exposures of foreign branches of Indian banks to the host country should be included. Foreign banks shall compute the country exposures of their Indian branches and shall hold appropriate provisions in their Indian books. However, their exposures to India will be excluded.
Banks may make a lower level of provisioning (say 25% of the requirement) in respect of short-term exposures (i.e. exposures with contractual maturity of less than 180 days).
5.8.10 Provisioning norms for sale of financial assets to Securitisation Company (SC) / Reconstruction company (RC)-
(i) If the sale of financial assets to SC/RC, is at a price below the net book value (NBV) (i.e. book value less provisions held), the shortfall should be debited to the profit and loss account of that year.
(ii) If the sale is for a value higher than the NBV, the excess provision will not be reversed but will be utilized to meet the shortfall/loss on account of sale of other financial assets to SC/RC.
(iii) With a view to enabling banks to meet the shortfall, if any, banks are advised to build up provisions significantly above the minimum regulatory requirements for their NPAs, particularly for those assets which they propose to sell to securitisation/reconstruction companies.
6. Guidelines on purchase/ sale of Non Performing Financial Assets
In order to increase the options available to banks for resolving their non performing assets and to develop a healthy secondary market for non-performing assets, where securitisation companies and reconstruction companies are not involved, guidelines have been issued to banks on purchase / sale of Non-Performing Assets. Since the sale/purchase of non-performing financial assets under this option would be conducted within the financial system the whole process of resolving the non performing assets and matters related thereto has to be initiated with due diligence and care warranting the existence of a set of clear guidelines which shall be complied with by all entities so that the process of resolving non-performing assets by sale and purchase of NPAs proceeds on smooth and sound lines. Accordingly guidelines on sale/purchase of non-performing assets have been formulated and furnished in the below. The guidelines may be placed before the bank's/FI's /NBFC's Board and appropriate steps may be taken for their implementation.
Scope
6.1 These guidelines would be applicable to banks, FIs and NBFCs purchasing/ selling non performing financial assets, from/ to other banks/FIs/NBFCs (excluding securitisation companies/ reconstruction companies).
6.2 A financial asset, including assets under multiple/consortium banking arrangements, would be eligible for purchase/sale in terms of these guidelines if it is a non-performing asset/non performing investment in the books of the selling bank.
6.3 The reference to ‘bank’ in the guidelines on purchase/sale of non-performing financial assets would include financial institutions and NBFCs.
Structure
6.4 The guidelines to be followed by banks purchasing/ selling non-performing financial assets from / to other banks are given below. The guidelines have been grouped under the following headings:
i) Procedure for purchase/ sale of non performing financial assets by banks, including valuation and pricing aspects.
ii) Prudential norms, in the following areas, for banks for purchase/ sale of non performing financial assets:
a) Asset classification norms
b) Provisioning norms
c) Accounting of recoveries
d) Capital adequacy norms
e) Exposure norms
iii) Disclosure requirements
6.5 Procedure for purchase/ sale of non performing financial assets, including valuation and pricing aspects
i) A bank which is purchasing/ selling non-performing financial assets should ensure that the purchase/ sale is conducted in accordance with a policy approved by the Board. The Board shall lay down policies and guidelines covering, inter alia,
a) Non performing financial assets that may be purchased/ sold;
b) Norms and procedure for purchase/ sale of such financial assets;
c) Valuation procedure to be followed to ensure that the economic value of financial assets is reasonably estimated based on the estimated cash flows arising out of repayments and recovery prospects;
d) Delegation of powers of various functionaries for taking decision on the purchase/ sale of the financial assets; etc.
e) Accounting policy
ii) While laying down the policy, the Board shall satisfy itself that the bank has adequate skills to purchase non performing financial assets and deal with them in an efficient manner which will result in value addition to the bank. The Board should also ensure that appropriate systems and procedures are in place to effectively address the risks that a purchasing bank would assume while engaging in this activity.
iii) The estimated cash flows are normally expected to be realised within a period of three years and not less than 5% of the estimated cash flows should be realized in each half year.
iv) A bank may purchase/sell non-performing financial assets from/to other banks only on ‘without recourse’ basis, i.e., the entire credit risk associated with the non-performing financial assets should be transferred to the purchasing bank. Selling bank shall ensure that the effect of the sale of the financial assets should be such that the asset is taken off the books of the bank and after the sale there should not be any known liability devolving on the selling bank.
v) Banks should ensure that subsequent to sale of the non performing financial assets to other banks, they do not have any involvement with reference to assets sold and do not assume operational, legal or any other type of risks relating to the financial assets sold. Consequently, the specific financial asset should not enjoy the support of credit enhancements / liquidity facilities in any form or manner.
vi) Each bank will make its own assessment of the value offered by the purchasing bank for the financial asset and decide whether to accept or reject the offer.
vii) Under no circumstances can a sale to other banks be made at a contingent price whereby in the event of shortfall in the realization by the purchasing banks, the selling banks would have to bear a part of the shortfall.
viii) A non-performing asset in the books of a bank shall be eligible for sale to other banks only if it has remained a non-performing asset for at least two years in the books of the selling bank.
ix) Banks shall sell non-performing financial assets to other banks only on cash basis. The entire sale consideration should be received upfront and the asset can be taken out of the books of the selling bank only on receipt of the entire sale consideration.
x) A non-performing financial asset should be held by the purchasing bank in its books at least for a period of 15 months before it is sold to other banks. Banks should not sell such assets back to the bank, which had sold the NPFA.
(xi) Banks are also permitted to sell/buy homogeneous pool within retail non-performing financial assets, on a portfolio basis provided each of the non-performing financial assets of the pool has remained as non-performing financial asset for at least 2 years in the books of the selling bank. The pool of assets would be treated as a single asset in the books of the purchasing bank.
xii) The selling bank shall pursue the staff accountability aspects as per the existing instructions in respect of the non-performing assets sold to other banks.
6.6. Prudential norms for banks for the purchase/ sale transactions
(A) Asset classification norms
(i) The non-performing financial asset purchased, may be classified as ‘standard’ in the books of the purchasing bank for a period of 90 days from the date of purchase. Thereafter, the asset classification status of the financial asset purchased, shall be determined by the record of recovery in the books of the purchasing bank with reference to cash flows estimated while purchasing the asset which should be in compliance with requirements in Para 6.5 (iii).
(ii) The asset classification status of an existing exposure (other than purchased financial asset) to the same obligor in the books of the purchasing bank will continue to be governed by the record of recovery of that exposure and hence may be different.
(iii) Where the purchase/sale does not satisfy any of the prudential requirements prescribed in these guidelines the asset classification status of the financial asset in the books of the purchasing bank at the time of purchase shall be the same as in the books of the selling bank. Thereafter, the asset classification status will continue to be determined with reference to the date of NPA in the selling bank.
(iv) Any restructure/reschedule/rephrase of the repayment schedule or the estimated cash flow of the non-performing financial asset by the purchasing bank shall render the account as a non-performing asset.
(B) Provisioning norms
Books of selling bank
i) When a bank sells its non-performing financial assets to other banks, the same will be removed from its books on transfer.
ii) If the sale is at a price below the net book value (NBV) (i.e., book value less provisions held), the shortfall should be debited to the profit and loss account of that year.
iii) If the sale is for a value higher than the NBV, the excess provision shall not be reversed but will be utilised to meet the shortfall/ loss on account of sale of other non performing financial assets.
Books of purchasing bank
The asset shall attract provisioning requirement appropriate to its asset classification status in the books of the purchasing bank.
(C) Accounting of recoveries
Any recovery in respect of a non-performing asset purchased from other banks should first be adjusted against its acquisition cost. Recoveries in excess of the acquisition cost can be recognised as profit.
(D) Capital Adequacy
For the purpose of capital adequacy, banks should assign 100% risk weights to the non-performing financial assets purchased from other banks. In case the non-performing asset purchased is an investment, then it would attract capital charge for market risks also. For NBFCs the relevant instructions on capital adequacy would be applicable.
(E) Exposure Norms
The purchasing bank will reckon exposure on the obligor of the specific financial asset. Hence these banks should ensure compliance with the prudential credit exposure ceilings (both single and group) after reckoning the exposures to the obligors arising on account of the purchase. For NBFCs the relevant instructions on exposure norms would be applicable.
6.7. Disclosure Requirements
Banks which purchase non-performing financial assets from other banks shall be required to make the following disclosures in the Notes on Accounts to their Balance sheets:
A. Details of non-performing financial assets purchased:
(Amounts in Rupees crore)
1. (a) No. of accounts purchased during the year
(b) Aggregate outstanding
2. (a) Of these, number of accounts restructured during the year
(b) Aggregate outstanding
B. Details of non-performing financial assets sold:
(Amounts in Rupees crore)
1. No. of accounts sold
2. Aggregate outstanding
3. Aggregate consideration received
C. The purchasing bank shall furnish all relevant reports to RBI, CIBIL etc. in respect of the non-performing financial assets purchased by it.
7. WRITING-OFF OF NPAS
7.1 In terms of Section 43(D) of the Income Tax Act 1961, income by way of interest in relation to such categories of bad and doubtful debts as may be prescribed having regard to the guidelines issued by the RBI in relation to such debts, shall be chargeable to tax in the previous year in which it is credited to the bank’s profit and loss account or received, whichever is earlier.
7.2 This stipulation is not applicable to provisioning required to be made as indicated above. In other words, amounts set aside for making provision for NPAs as above are not eligible for tax deductions.
7.3 Therefore, the banks should either make full provision as per the guidelines or write-off such advances and claim such tax benefits as are applicable, by evolving appropriate methodology in consultation with their auditors/tax consultants. Recoveries made in such accounts should be offered for tax purposes as per the rules.
7.4 Write-off at Head Office Level
Banks may write-off advances at Head Office level, even though the relative advances are still outstanding in the branch books. However, it is necessary that provision is made as per the classification accorded to the respective accounts. In other words, if an advance is a loss asset, 100 percent provision will have to be made therefor.
Annex I
Reporting Format for Non-Performing Assets-Gross and Net Position
[Vide paragraph 3.5]
Name of the Bank:
Position as on …………………………..
| (Rupees in crore up to two decimals) |
| Particulars | Amount |
| 1. GROSS ADVANCES * | |
| 2. Gross NPAs * | |
| 3. GROSS NPAS AS A PERCENTAGE OF GROSS ADVANCES | |
| 4. Total Deductions (i+ii+iii+iv) | |
| i) Balance in Interest Suspense account$ | |
| ii) DICGC/ECGC claims received and held pending adjustment | |
| iii) Part payment received and kept in suspense account | |
| iv) Total provisions held ** | |
| 5. Net advances (1-4) | |
| 6. Net NPAs (2-4) | |
| 7. NET NPAS AS A PERCENTAGE OF NET ADVANCES | |
*excluding Technical write off of Rs. ………. crore.
** excluding amount of technical write off (Rs…….. …crores) and provision on standard assets (Rs………..crore)
$ banks which do not maintain an Interest Suspense account to park the accrued interest on NPAs, may furnish the amount of interest receivable on NPAs as a foot note to this statement
Note: For the purpose of this Statement, ‘gross advances’ mean all outstanding loans and advances including advances for which refinance has been received but excluding rediscounted bills, and advances written off at Head Office level (Technical write off).
Annex II
Relevant extract of the list of direct agricultural advances from the Master Circular on lending to priority sector - RPCD.No.Plan.BC.21/04.09.01/2005-2006 dated 18 July 20051.1 Direct Finance to Farmers for Agricultural Purposes
1.1.1 Short-term loans for raising crops i.e. for crop loans. In addition, advances upto Rs.10 lakh to farmers against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months, where the farmers were given crop loans for raising the produce, provided the borrowers draw credit from one bank.
1.1.2 Medium and long-term loans (Provided directly to farmers for financing production and development needs).
(i) Purchase of agricultural implements and machinery
(a) Purchase of agricultural implements - Iron ploughs, harrows, hose, land-levellers, bundformers, hand tools, sprayers, dusters, hay-press, sugarcane crushers, thresher machines, etc.
(b) Purchase of farm machinery - Tractors, trailers, power tillers, tractor accessories viz., disc ploughs, etc.
(c) Purchase of trucks, mini-trucks, jeeps, pick-up vans, bullock carts and other transport equipment, etc. to assist the transport of agricultural inputs and farm products.
(d) Transport of agricultural inputs and farm products.
(e) Purchase of plough animals.
(ii) Development of irrigation potential through –
(a) Construction of shallow and deep tube wells, tanks, etc., and purchase of drilling units.
(b) Constructing, deepening clearing of surface wells, boring of wells, electrification of wells, purchase of oil engines and installation of electric motor and pumps.
(c) Purchase and installation of turbine pumps, construction of field channels (open as well as underground), etc.
(d) Construction of lift irrigation project.
(e) Installation of sprinkler irrigation system.
(f) Purchase of generator sets for energisation of pumpsets used for agricultural purposes.
(iii) Reclamation and Land Development Schemes
Bunding of farm lands, levelling of land, terracing, conversion of dry paddy lands into wet irrigable paddy lands, wasteland development, development of farm drainage, reclamation of soil lands and prevention of salinisation, reclamation of ravine lands, purchase of bulldozers, etc.
(iv) Construction of farm buildings and structures, etc.
Bullock sheds, implement sheds, tractor and truck sheds, farm stores, etc.
(v) Construction and running of storage facilities
Construction and running of warehouses, godowns, silos and loans granted to farmer for establishing cold storages used for storing own produce.
(vi) Production and processing of hybrid seeds for crops.
(vii) Payment of irrigation charges, etc.
Charges for hired water from wells and tube wells, canal water charges, maintenance and upkeep of oil engines and electric motors, payment of labour charges, electricity charges, marketing charges, service charges to Customs Service Units, payment of development cess, etc.
(viii) Other types of direct finance to farmers
(a) Short-term loans
To traditional/non-traditional plantations and horticulture.
(b) Medium and long term loans
1. Development loans to all plantations, horticulture, forestry and wasteland.
2. Financing of small and marginal farmers for purchase of land for agricultural purposes.
Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to AdvancesList of Circulars consolidated by the Master Circular
| No. | Circular No. | Date | Subject | Para No. |
| 1 | RBI/2005-06/394DBOD.NO.BP.BC.85/ 21.04.048/ 2005-06 | 29.05.2006 | Annual Policy Statement for the year 2006-07: Additional Provisioning Requirement for Standard Assets | 5.5(i) |
| 2 | RBI/2005-06/421DBOD.NO.BP.BC.89/ 21.04.048/ 2005-06 | 22.06.2006 | Prudential norms on creation and utilization of floating provisions | 5.6 |
| 3 | RBI/RRBI/2005-06/ DBOD.NO.BP.BC.45 /21.0421.04.048/2005-06 | 10.11.2005 | Revised Guidelines on Corporate Debt Restructuring(CDR) Mechanism | 4.2.15 |
| 4 | RBI/2005-06/DBOD.NO.BP.BC.46 /21.0421.04.048/2005-06 | 10.11.2005 | Debt restructuring mechanism for Small and Medium Enterprises (SMEs) | 4.2.16.A.(ii) |
| 5 | RBI/2005-06/198DBOD.NO.BP.BC.40/ 21.04.048/ 2005-06 | 04.11.2005 | Mid-Term Review of Annual Policy Statement for the year 2005-06: Additional Provisioning Requirement for Standard Assets | 5.5(i) |
| 6 | RBI/2005-06/159 DBOD.NO.BP.BC. 34 /21.04.132/2005-06 | 08.09.2005 | Debt restructuring mechanism for Small and Medium Enterprises (SMEs) - Announcement made by the Union Finance Minister | 4.2.16 |
| 7 | RBI/2005-06/54DBOD.NO.BP.BC.16/ 21.04.048/ 2005-06 | 13.07.2005 | Guidelines on purchase/sale of Non performing Assets | 6 |
| 8 | RBI No.2004-05/140DBOD.BP.BC.34/21.04.048/2004-05 | 26 .08.2004 | Repayment schedule of rural housing loans | 4.2.12(vi) |
| 9 | RBI No.2004-05/118DBOD.BP.BC.29/21.04.048/2004-05 | 13.08.2004 | Prudential norms-State Government guaranteed exposures | 4.2.13 |
| 10 | RBI/2004/266RPCD No. Plan.BC 92/04.09.01/2003-04 | 24.06.2004 | Flow of credit to Agriculture | 4.2.12 (iv) |
| 11 | RBI/2004/264DBOD No. BP.BC 102/21.04.048/2003-04 | 24.06.2004 | Prudential Norms for Agricultural Advances | 2.1.2(iv), (v) 4.2.9, 4.2.12(i) |
| 12 | RBI/2004/261DBOD No. BP.BC 99/21.04.048/2003-04 | 21.06.2004 | Additional Provisioning Requirement for NPAs | 5.3(ii), 5.7(ii), 5.8.5, 5.8.6 |
| 13 | RBI/2004/254DBOD No. BP.BC 97/21.04.141/2003-04 | 17.06.2004 | Prudential Guidelines on Unsecured Exposures | 5.4, 5.7(1) |
| 14 | RBI/2004/253DBOD No. BP.BC 96/21.04.103/2003-04 | 17.06.2004 | Country Risk Management Guidelines | 5.8.9 |
| 15 | DBOD No. BP.BC 96/21.04.048/2002-03 | 23.04.2003 | Guidelines on sale of financial assets to Securitisation / reconstruction company and related issues | 5.8.10 |
| 16 | DBOD BP.BC. NO. 74/21.04.048/2002-2003 | 27.02.2003 | Projects under implementation involving time overrun | 4.2.17 |
| 17 | DBOD No. BP.BC. 71/21.04.103/2002-2003 | 19.02.2003 | Risk Management Systems in Banks-Guidelines on Country Risk Management | 5.8.9 |
| 18 | DBOD BP.BC. No. 69/21.04.048/2002-03 | 10.02.2003 | Upgradation of loan accounts classified as NPAs | 4.2.4 |
| 19 | DBOD. BP.BC No. 44/21.04.048/2003-03 | 30.11.2002 | Agricultural loans affected by natural calamities | 4.2.12 |
| 20 | DBOD No.BP.BC. 108/ 21.04.048/2001-2002 | 28.05.2002 | Income recognition, asset classification and provisioning on advances - treatment of projects under implementation involving time overrun | 4.2.17 |
| 21 | DBOD No.BP.BC. 101/ 21.01.002/ 2001- 02 | 09.05.2002 | Corporate Debt Restructuring | 4.2.15 |
| 22 | DBOD No.BP.BC. 100/ 21.01.002/ 2001- 02 | 09.05.2002 | Prudential norms on asset classification | 4.1.2 |
| 23 | DBOD No.BP.BC. 59/ 21.04.048/2001-2002 | 22.01.2002 | Prudential norms on income recognition, asset classification and provisioning- agricultural advances | 4.2.12(i) |
| 24 | DBOD No.BP.BC. 25/ 21.04.048/2000-2001 | 11.09.2001 | Prudential norms on income recognition, asset classification and provisioning | 4.2.14 (v) |
| 25 | DBOD No.BP.BC. 15 / 21.04.114/2000-2001 | 23.08.2001 | Corporate Debt Restructuring | 4.2.15 |
| 26 | DBOD No.BP.BC. 132/ 21.04.048/2000-2001 | 14.06.2001 | Income Recognition, Asset Classification and Provisioning for Advances | 4.2.2, 4.2.3, 4.2.5, 4.2.6(ii), 4.2.7, 4.2.8 |
| 27 | DBOD No. BP.BC. 128/ 21.04.048/2000-2001 | 07.06.2001 | SSI Advances Guaranteed by CGTSI –Risk-weight and provisioning norms | 5.8.6 |
| 28 | DBOD No. BP. BC. 116 /21.04.048/ 2000-2001 | 02.05.2001 | Monetary & Credit Policy Measures 2001-02 | 2.1.2 |
| 29 | DBOD No. BP. BC. 98/ 21.04.048/ 2000-2001 | 30.03.2001 | Treatment of Restructured Accounts | 4.2.14 |
| 30 | DBOD No. BP. BC. 40 / 21.04.048/ 2000-2001 | 30.10.2000 | Income Recognition, Asset Classification and Provisioning - Reporting of NPAs to RBI | 3.5 |
| 31 | DBOD.No.BP.BC.161/21.04.048/ 2000 | 24.04.2000 | Prudential Norms on Capital Adequacy, Income Recognition, Asset Classification and Provisioning, etc. | 5.5 |
| 32 | DBOD.No.BP.BC.144/21.04.048/ 2000 | 29.02.2000 | Income Recognition, Asset Classification and Provisioning and Other Related Matters and Adequacy Standards - Takeout Finance | 4.2.19, 5.8.7 |
| 33 | DBOD.No.BP.BC.138/21.04.048/ 2000 | 07.02.2000 | Income Recognition, Asset Classification and Provisioning - Export Project Finance | 4.2.21 |
| 34 | DBOD.No.BP.BC.103/21.04.048/ 99 | 21.10.99 | Income Recognition, Asset Classification and Provisioning - Agricultural Finance by Commercial Banks through Primary Agricultural Credit Societies | 4.2.9 |
| 35 | DBOD.No.FSC.BC.70/24.01.001/ 99 | 17.07.99 | Equipment Leasing Activity - Accounting/ Provisioning Norms | 3.2.3, 5.7 |
| 36 | DBOD.No.BP.BC.45/21.04.048/99 | 10.05.99 | Income Recognition, Asset Classification and Provisioning - Concept of Commencement of Commercial Production | 4.2.14 |
| 37 | DBOD.No.BP.BC.120/21.04.048/ 98 | 29.12.98 | Prudential Norms on Income Recognition, Asset Classification and Provisioning - Agricultural Loans Affected by Natural Calamities | 4.2.12(ii) & (iii) |
| 38 | DBOD.No.BP.BC.103/21.01.002/ 98 | 31.10.98 | Monetary & Credit Policy Measures | 4.1.1, 4.1.2, 5.5, |
| 39 | DBOD.No.BP.BC.17/21.04.048/98 | 04.03.98 | Prudential Norms on Income Recognition, Asset Classification and Provisioning - Agricultural Advances | 4.2.12 |
| 40 | DOS. No. CO.PP. BC.6/ 11.01.005/ 96-97 | 15.05.97 | Assessments relating to asset valuation and loan loss provisioning | 5.1.1 |
| 41 | DBOD.No.BP.BC.29/21.04.048/97 | 09.04.97 | Income Recognition, Asset Classification and Provisioning - Agricultural Advances | 4.2.12 |
| 42 | DBOD.No.BP.BC.14/21.04.048/97 | 19.02.97 | Income Recognition, Asset Classification and Provisioning - Agricultural Advances | 4.2.12 |
| 43 | DBOD.No.BP.BC.9/21.04.048/97 | 29.01.97 | Prudential Norms - Capital Adequacy, Income Recognition, Asset Classification and Provisioning | 4.2.3, 4.2.4, 4.2.7, 4.2.8 |
| 44 | DBOD.No.BP.BC.163/21.04.048/ 96 | 24.12.96 | Classification of Advances with Balance Less than Rs. 25,000/- | 4.1 |
| 45 | DBOD.No.BP.BC.65/21.04.048/96 | 04.06.96 | Income Recognition, Asset Classification and Provisioning | 4.2.7 |
| 46 | DBOD.No.BP.BC.26/21.04.048/96 | 19.03.96 | Non-Performing Advances - Reporting to RBI | 3.5 |
| 47 | DBOD.No.BP.BC.25/21.04.048/96 | 19.03.96 | Income Recognition, Asset Classification and Provisioning | 4.2.7, 4.2.13, 7.4 |
| 48 | DBOD.No.BP.BC.134/21.04.048/ 95 | 20.11.95 | EXIM Bank's New Lending Programme Extension of Guarantee-cum-Refinance to Commercial Bank in respect of Post-shipment Supplier's Credit | 4.2.20 |
| 49 | DBOD.No.BP.BC.36/21.04.048/95 | 03.04.95 | Income Recognition, Asset Classification and Provisioning | 3.2.2, 3.3, 4.2.20, 5.8.1(i), (ii) |
| 50 | DBOD.No.BP.BC.134/21.04.048/ 94 | 14.11.94 | Income Recognition, Asset Classification, Provisioning and Other Related Matters | 4.2.20, 5.8.1 |
| 51 | DBOD.No.BP.BC.58/21.04.048-94 | 16.05.94 | Income Recognition, Asset Classification and Provisioning and Capital Adequacy Norms - Clarifications | 5.8.5 |
| 52 | DBOD.No.BP.BC.50/21.04.048/94 | 30.04.94 | Income Recognition, Asset Classification and Provisioning | 5.8.5 |
| 53 | DOS.BC.4/16.14.001/93-94 | 19.03.94 | Credit Monitoring System - Health Code System for Borrowal Accounts | 1.3 |
| 54 | DBOD.No.BP.BC.8/21.04.043/94 | 04.02.94 | Income Recognition, Provisioning and Other Related Matters | 3.1.2, 3.4, 4.2.10, 4.2.22, 5.8.2, 5.8.3, 5.8.4 |
| 55 | DBOD.No.BP.BC.195/21.04.048/ 93 | 24.11.93 | Income Recognition, Asset Classification and Provisioning - Clarifications | 4.2.13 |
| 56 | DBOD.No.BP.BC.95/21.04.048/93 | 23.03.93 | Income Recognition, Asset Classification, Provisioning and Other Related Matters | 7.1 to 7.3 |
| 57 | DBOD.No.BP.BC.59/21.04.043-92 | 17.12.92 | Income Recognition, Asset Classification and Provisioning - Clarifications | 3.2.1, 3.2.2, 4.2.6(i), 4.2.7, 4.2.8(ii), 4.2.11, 4.2.12, 4.2.13, 4.2.15 |
| 58 | DBOD.No.BP.BC.129/21.04.043-92 | 27.04.92 | Income Recognition, Asset Classification, Provisioning and Other Related Matters | 1.1, 1.2, 2.1.1, 2.2, 3.1.1,3.1.3, 4.1, 4.1.1, 4.1.2, 4.1.3, 4.2, 5.1, 5.2, 5.3, 5.4 |
| 59 | DBOD.No.BP.BC.42/C.469(W)-90 | 31.10.90 | Classification of Non-Performing Loans | 3.1.1 |
| 60 | DBOD.No.Fol.BC.136/C.249-85 | 07.11.85 | Credit Monitoring System - Introduction of Health Code for Borrowal Accounts in Banks | 1.3 |
| 61 | DBOD.No.BP.BC.35/21.01.002/99 | 24.04.99 | Monetary & Credit Policy Measures | 4.2.13(i), 4.2.13 (iv) |
| 62 | DBOD.No.FSC.BC.18/24.01.001/ 93-94 | 19.02.94 | Equipment Leasing, Hire Purchase, Factoring, etc. Activities | 2.1, 3.2.3 |
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