RBI / 2004-05/194
UBD.PCB.Cir.21 /12.05.05/2004-05
September 27, 2004
The Chief Executive Officers of All Primary (Urban) Co-operative
banks
Dear Sir/Madam,
Annual Policy Statement for the Year 2004-05: Additional provisioning
requirements for NPAs
Please refer to our circular UBD.BPD.PCB.
Cir 55/12.05.05/03-04 dated June 30, 2004, wherein UCBs were advised about
the enhanced provisioning requirement on the secured portion of advances classified
as doubtful for more than three years.
2. The Reserve Bank has received requests from banks and Federation/
Association of UCBs for giving UCBs some more time to restructure their accounts
and progressively meet stricter prudential norms. Taking into account the submissions
made in this regard, it has been decided to grant more time to the banks to
meet the 100 % provisioning norm for advances identified as doubtful for more
than three years, as under :
A. Secured portion
|
Period for which the advance has remained in 'doubtful' category |
Provision requirement on secured portion |
|
More than three years
(i) outstanding stock of NPAs as on March 31, 2006
(ii) advances classified as 'doubtful more than three years' on or after April 1, 2006 |
(i) 50 percent upto March 2006, as hitherto
60 per cent as on March 31, 2007
75 per cent as on March 31, 2008
100 per cent as on March 31, 2009
(ii) 100 per cent |
B (i) Please note that for the portion of the advance, which
is not covered by the realizable value of tangible security to which
the bank has a valid recourse and the realizable value is estimated on a realistic
basis, provision will be to the extent of 100 per cent as hitherto.
(ii) Similarly, 100% provision has to be made for loss assets
as hitherto.
(iii) A few illustrations are furnished in annexure
for clarity in this regard.
3. Banks are further advised in their own interest to make
suitable additional provisions in the intervening years to ensure a smooth transition
to the revised norms, which becomes effective from March 31, 2007.
4. Please acknowledge receipt of this circular to the concerned Regional Office.
Yours faithfully,
(K.R.Ananda)
Chief General Manager-in-Charge
Encl : As above
Annexure
Illustrations:
I. Existing stock of advances classified as 'doubtful more than
3 years' as on 31 March 2006
The outstanding amount as on 31 March 2006:
Rs. 25,000
Realisable value of security: Rs. 20,000
Period for which the advance has remained in
'doubtful' category as on 31 March 2006: 4 years (i.e. Doubtful > 3 years)
Provisioning requirement :
|
As on … |
Provisions on secured portion |
Provisions on unsecured portion |
Total
(Rs.) |
|
% |
Amt |
% |
Amt |
|
31 Mar 2006 |
50
|
10000 |
100 |
5000 |
15000 |
|
31 Mar 2007 |
60
|
12000 |
100 |
5000 |
17000 |
|
31 Mar 2008 |
75
|
15000 |
100 |
5000 |
20000 |
|
31 Mar 2009 |
100
|
20000 |
100 |
5000 |
25000 |
II. Advances classified as 'doubtful more than three years' on or after
1 April 2006
The outstanding amount as on 31 March 2006 :
Rs. 10,000
Realisable value of security : Rs. 8,000
Period for which the advance has remained in
'doubtful' category as on 31 March 2006 : 2.5 years
Provisioning requirement :
|
As on … |
Asset classification |
Provisions on secured portion |
Provisions on unsecured portion |
Total
(Rs.) |
|
% |
Amt |
% |
Amt |
|
|
31 Mar 2006
|
Doubtful
1 to 3 years |
30
|
2400 |
100 |
2000 |
4400 |
|
31 Mar 2007 |
Doubtful
> 3 years |
100
|
8000 |
100 |
2000 |
10000 |
|