RBI TIGHTENS PROVISIONING NORMS
The Reserve Bank of India (RBI) has increased the provisioning requirements. Under the new guidelines, loans classified as sub-standard will attract a provision of 15 per cent as against the
existing 10 per cent requirement. For unsecured loans that are classified as sub-standard assets an additional 10 per cent provision has to be made over the 15 per cent. So, the total provisioning for
sub-standard unsecured loans will now be 25 per cent instead of 20 per cent as mandated earlier. The central bank also raised the provision required for the secured portion of advances, which
have remained in the doubtful category for up to one year, to 25 per cent from the present 20 per cent. The secured advances in this category for more than one year but up to three years will now attract a provision of 40 per cent instead of 30 per cent. The restructured loans classified under the standard category will need a provision of two per cent in the first two years from the date of restructuring. In case of moratorium on payment of interest and principal after restructuring, two per cent provision has to be maintained for the period covering the moratorium and two years thereafter, RBI said. If restructured loans, which are classified as non-performing advances, are upgraded to the standard category, banks have to make a provision of two per cent in the first year from the date of upgrade. The existing provision on these loans was 0.25-1.00 per cent depending on the category of advances.
existing 10 per cent requirement. For unsecured loans that are classified as sub-standard assets an additional 10 per cent provision has to be made over the 15 per cent. So, the total provisioning for
sub-standard unsecured loans will now be 25 per cent instead of 20 per cent as mandated earlier. The central bank also raised the provision required for the secured portion of advances, which
have remained in the doubtful category for up to one year, to 25 per cent from the present 20 per cent. The secured advances in this category for more than one year but up to three years will now attract a provision of 40 per cent instead of 30 per cent. The restructured loans classified under the standard category will need a provision of two per cent in the first two years from the date of restructuring. In case of moratorium on payment of interest and principal after restructuring, two per cent provision has to be maintained for the period covering the moratorium and two years thereafter, RBI said. If restructured loans, which are classified as non-performing advances, are upgraded to the standard category, banks have to make a provision of two per cent in the first year from the date of upgrade. The existing provision on these loans was 0.25-1.00 per cent depending on the category of advances.
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