UTILIZATION OF FLOATING PROVISIONS BY BANKS

Reserve Bank of India (RBI) has directed all Scheduled Commercial Banks not to utilize the floating provisions for making specific provisions in respect of NPAs or for making regulatory provisions for
standard assets. RBI has clarified that the floating provisions can only be used for contingencies under extraordinary circumstances for making specific provisions in impaired accounts after obtaining board's approval and with prior permission of RBI. Floating provisions cannot be reversed by credit to the P & L Account. Pending utilization as mentioned above, floating provisions can be netted off from gross NPAs to arrive at disclosure of net NPAs. Alternatively, these can be treated as part of Tier II capital within the overall ceiling of 1.25% of total risk-weighted assets. Disclosures on Floating Provisions to be made in "Notes to accounts" to the Balance Sheet on (i) Opening balance of
floating provisions; (ii) Additions made during the year; (iii) Amount withdrawn during the year; (iv) Closing balance of Floating Provisions.