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Urban Banks Department, Central Office, 1 Floor, Garment House, Worli, Mumbai - 400 018
Phone: 022 - 2493 9930 - 49, Fax: 022 - 2497 4030 / 2492 0231, Email: [email protected]

RBI/2012-13/64
UBD.BPD.(PCB) MC No.3 /09.14.000/2012-13 J uly 2, 2012
The Chief Executive Officers
All Primary (Urban) Co-operative Banks
Madam / Dear Sir,
Master Circular- Income Recognition, Asset Classification, Provisioning and
Other Related Matters - UCBs
Please refer to our Master Circular UBD.BPD(PCB).MC.No. 3/09.14.000/2011-12 dated
J uly 1, 2011 on the captioned subject (available at RBI website www.rbi.org.in). The
enclosed Master Circular consolidates and updates all the instructions / guidelines on
the subject issued up to J une 30, 2012 and listed in the Appendix.
Yours faithfully


(A. Udgata)
Chief General Manager in Charge
Encl: as above

Master Circular
Income Recognition, Asset Classification, Provisioning and Other Related Matters
Contents

Sl
No
Particulars Page No.
1. GENERAL 1

2. NON-PERFORMING ASSETS (NPA) 1
2.1 Classification of assets as Non-Performing 1
2.2 Treatment of Accounts as NPAs 4
2.2.1 Record of Recovery 4
2.2.2 Treatment of NPAs Borrower wise and not Facility-wise 5
2.2.3 Agricultural Advances 5
2.2.4 Housing Loans to staff 5
2.2.5 Credit Facilities backed by Guarantees by Central/ State
Governments
6
2.2.6 Project Financing 6
2.2.7 Prudential Guidelines on Restructuring of Advances 6
2.2.8 Other Advances 13
2.2.9 Recognition of Income on Investment treated as NPA 14
2.2.10 NPA Reporting to Reserve Bank 14

3. ASSET CLASSIFICATION 14
3.1 Classification 14
3.2 Definitions 14
3.3 Guidelines for Classification of Assets 15
3.3.1 Basic Considerations 15
3.3.2 Advances Granted under Rehabilitation Packages Approved by
BIFR/Term Lending Institutions
16
3.3.3 Internal System for Classification of Assets as NPAs 16

4. INCOME RECOGNITION 16
4.1 Income Recognition Policy 16
4.2 Reversal of Income on Accounts Becoming NPAs 17
4.3 Booking of Income on Investments in Shares & Bonds 17
4.4 Partial Recovery of NPAs 18
4.5 Interest Application 17

5. PROVISIONING NORMS 19
5.1 Norms for provisioning on Loans & Advances 19
5.2 Provisioning for retirement benefits 22
5.3 Provisioning norms for sale of assets to SC/ RC 23
5.4 Guidelines for provisions in specific cases 23

6. Divergence in asset classification & provisioning due to non compliance
with RBI guidelines
25
Annex I: Direct Finance to Farmers for Agricultural Purposes 26
Annex 2: Proforma 27
Annex 3: Illustrative Accounting Entries to be passed in respect of
Accrued Interest on both the Performing and NPAs
31
Annex 4: Illustrative entries on the provisioning requirement for secured
portion of assets that are doubtful for more than three years
33
Annex 5: Clarification on certain frequently 34
Annex 6: Prudential Guideline on Restructuring - key concepts 37
Annex 7: Prudential Guideline on Restructuring - report format 39
Annex 8: Prudential Guideline on Restructuring - illustrations 40
Annex 9: IRAC norms for projects under implementation 42
Appendix 46

Master Circular
Income Recognition, Asset Classification, Provisioning and Other Related Matters
1. General
1.1 In order to reflect a bank's actual financial health in its balance sheet and as per
the recommendations made by the Committee on Financial System (Chairman
Shri M. Narasimham), the Reserve Bank has introduced, in a phased manner,
prudential norms for income recognition, asset classification and provisioning for
the advances portfolio of the banks.
1.2 Broadly, the policy of income recognition should be objective and based on
record of recovery rather than on any subjective considerations. Likewise, the
classification of assets of banks has to be done on the basis of objective criteria,
which would ensure a uniform and consistent application of the norms. The
provisioning should be made on the basis of the classification of assets into
different categories.
1.3 The requirements of the State Co-operative Societies Acts and / or rules made
thereunder or other statutory enactments may continue to be followed, if they are
more stringent than those prescribed hereby.
1.4 With the introduction of prudential norms, the Health Code based system for
classification of advances has ceased to be a subject of supervisory interest. As
such, all related reporting requirements, etc. also ceased to be a supervisory
requirement, but could be continued in the banks entirely at their discretion and
the management policy, if felt necessary.
2. Non-performing Assets (NPA)
2.1 Classification of Assets as Non-Performing
2.1.1 An asset becomes non-performing when it ceases to generate income for the
bank. Earlier an asset was considered as non-performing asset (NPA) based on
the concept of 'Past Due'. A 'non performing asset' (NPA) was defined as credit
in respect of which interest and / or installment of principal has remained 'past
due' for a specific period of time. The specific period was reduced in a phased
manner as under:
Year ended March, 31 Specific period
1993 4 quarters
1994 3 quarters
1995 2 quarters
An amount is considered as past due, when it remains outstanding for 30 days
beyond the due date. However, with effect from March 31, 2001 the 'past due'
1

concept has been dispensed with and the period is reckoned from the due date
of payment.
2.1.2 With a view to moving towards international best practices and to ensure greater
transparency, '90 days' overdue* norms for identification of NPAs have been
made applicable from the year ended March 31, 2004. As such, with effect from
March 31, 2004, a non-performing asset shall be a loan or an advance where:
(i) Interest and / or installment of principal remain overdue for a period of
more than 90 days in respect of a Term Loan.
(ii) The account remains 'Out of order'
@
for a period of more than 90
days, in respect of an Overdraft / Cash Credit (OD/CC).
(iii) The bill remains overdue for a period of more than 90 days in the
case of bills purchased and discounted,
(iv) In the case of direct agricultural advances as listed in Annex 1, the
overdue norm specified at para 2.1.5 would be applicable. In respect of
agricultural loans, other than those specified in Annex 1, identification of
NPAs would be done on the same basis as non-agricultural advances.
(v) Any amount to be received remains overdue for a period of more
than 90 days in respect of other accounts.
* Any amount due to the bank under any credit facility, if not paid by the
due date fixed by the bank becomes overdue.
@ "An account should be treated as 'out of order' if the outstanding
balance remains continuously in excess of the sanctioned limit / drawing
power. In cases where the outstanding balance in the principal operating
account is less than the sanctioned limit / drawing power, but there are no
credits continuously for 90 days or credits are not enough to cover the
interest debited during the same period, these accounts should be treated
as 'out of order'".
2.1.3 Tier I Banks
#
were permitted to classify loan accounts including gold loans and
small loan upto `1 lakh as NPAs based on 180 days delinquency norm instead of
the extant 90 days norm. This relaxation was in force upto March 31, 2009. The
relaxations were given for the explicit purpose of enabling the UCBs concerned
to transit to the 90 day NPA norm in the year 2009-10 by building up adequate
provisions and strengthening their appraisal, disbursement and post
disbursement procedures. Accordingly, with effect from 1 April 2009, Tier I UCBs
would also classify an account as NPA based on 90-day NPA norm as indicated
in para 2.1.2 above
-----------------------------------------------------------------------------------------------
#(i) Banks having deposits below `100 crore, operating in a single district.
2

ii) Banks with deposits below `100 crore operating in more than one district,
provided the branches are in contiguous districts and deposits and advances of
branches in one district separately constitute at least 95% of the total deposits
and advances respectively of the bank.
iii) Banks with deposits below `100 crore, whose branches were originally in a
single district but subsequently, became multi-district due to reorganization of the
district.
The deposits and advances as referred to in the definition may be reckoned as
on 31st March of the immediate preceding financial year.
2.1.4 All UCBs shall classify their loan accounts as NPA as per 90-day norm with effect
from 1 April 2009.
2.1.5 Agricultural Advance
(i) With effect from September 30, 2004 the following revised norms are applicable
to all direct agricultural advances (Annex 1):
a) A loan granted for short duration crops will be treated as NPA, if the
installment of principal or interest thereon remains overdue for two crop seasons.
b) A loan granted for long duration crops will be treated as NPA, if the
installment of principal or interest thereon remains overdue for one crop season.
(ii) For the purpose of these guidelines, "long duration" crops would be crops with
crop season longer than one year and crops, which are not "long duration" crops
would be treated as "short duration" crops.
(iii) The crop season for each crop, which means the period up to harvesting of the
crops raised, would be as determined by the State Level Bankers' Committee in
each state.
(iv) Depending upon the duration of crops raised by an agriculturist, the above NPA
norms would also be made applicable to agricultural term loans availed of by
him. In respect of agricultural loans, other than those specified in the Annex 1
and term loans given to non-agriculturists, identification of NPAs would be done
on the same basis as non-agricultural advances, which, at present, is the 90
days delinquency norm.
(v) Banks should ensure that while granting loans and advances, realistic repayment
schedules are fixed on the basis of cash flows / fluidity with the borrowers.
2.1.6 Identification of Assets as NPAs should be done on an ongoing basis
The system should ensure that identification of NPAs is done on an on-going
basis and doubts in asset classification due to any reason are settled through
specified internal channels within one month from the date on which the account
3

would have been classified as NPA as per prescribed norms. Banks should also
make provisions for NPAs as at the end of each calendar quarter i.e as at the
end of March / J une / September / December, so that the income and
expenditure account for the respective quarters as well as the P&L account and
balance sheet for the year end reflects the provision made for NPAs.
2.1.7 Charging of Interest at monthly rests
(i) Banks should charge interest at monthly rests in the context of adoption of 90
days norm for recognition of loan impairment w.e.f. from the year ended
March 31, 2004 and consequential need for close monitoring of borrowers'
accounts. However, the date of classification of an advance as NPA as stated
in preceding paras, should not be changed on account of charging of interest
at monthly basis.
(ii) The existing practice of charging / compounding of interest on agricultural
advances would be linked to crop seasons and the instructions regarding
charging of interest on monthly rests shall not be applicable to agricultural
advances.
(iii) While compounding interest at monthly rests effective from April 1, 2003,
banks should ensure that in respect of advances where administered interest
rates are applicable, they should re-align the rates suitably keeping in view
the minimum lending rate charged by the bank (in view of the freedom given
to them for fixing lending rates) so that they comply with the same. In all other
cases also, banks should ensure that the effective rate does not go up merely
on account of the switchover to the system of charging interest on monthly
rests.
(iv) Banks should take into consideration due date/s fixed on the basis of fluidity
with borrowers and harvesting / marketing season while charging interest and
compound the same if the loan / installment becomes overdue in respect of
short duration crops and allied agricultural activities.
2.2 Treatment of Accounts as NPAs
2.2.1 Record of Recovery
(i) The treatment of an asset as NPA should be based on the record of
recovery. Banks should not treat an advance as NPA merely due to
existence of some deficiencies which are of temporary in nature such as
non-availability of adequate drawing power, balance outstanding
exceeding the limit, non-submission of stock statements and the non-
renewal of the limits on the due date, etc. Where there is a threat of loss,
or the recoverability of the advances is in doubt, the asset should be
treated as NPA.
4

(ii) A credit facility should be treated as NPA as per norms given in

paragraph 2.1 above. However, where the accounts of the borrowers have
been regularised by repayment of overdue amounts through genuine
sources (not by sanction of additional facilities or transfer of funds
between accounts), the accounts need not be treated as NPAs. In such
cases, it should, however, be ensured that the accounts remain in order
subsequently and a solitary credit entry made in an account on or before
the balance sheet date which extinguishes the overdue amount of interest
or installment of principal is not reckoned as the sole criteria for treatment
the account as a standard asset.
2.2.2 Treatment of NPAs - Borrower-wise and not Facility-wise
(i) In respect of a borrower having more than one facility with a bank, all
the facilities granted by the bank will have to be treated as NPA and not
the particular facility or part thereof which has become irregular.
(ii) However, in respect of consortium advances or financing under
multiple banking arrangements, each bank may classify the borrowal
accounts according to its own record of recovery and other aspects having
a bearing on the recoverability of the advances.
2.2.3 Agricultural Advances - Default in repayment due to Natural
Calamities
(i) Where natural calamities impair the repaying capacity of agricultural
borrowers, as a relief measure, banks may decide on their own to :
(a) convert the short-term production loan into a term loan or re-
schedule the repayment period, and
(b) sanction fresh short-term loans
(ii) In such cases of conversion or re-schedulement, the term loan as
well as fresh short-term loan may be treated as current dues and need not
be classified as non performing asset (NPA). The asset classification of
these loans would, therefore, be governed by the revised terms and
conditions and these would be treated as NPA under the extant norms
applicable for classifying agricultural advances as NPAs.
2.2.4 Housing Loan to Staff
In the case of housing loan or similar advances granted to staff members
where interest is payable after recovery of principal, interest need not be
considered as overdue from the first quarter onwards. Such loans /
advances should be classified as NPA only when there is a default in
repayment of instalment of principal or payment of interest on the
respective due dates.
5

2.2.5 Credit facilities Guaranteed by Central / State Government

(i) The credit facilities backed by guarantee of the Central Government
though overdue should not be treated as NPA
(ii) This exemption from classification of government guaranteed
advances as NPA is not for the purpose of recognition of income.
(iii) From the year ended March 31, 2006, State Government guaranteed
advance and investment in State Government guaranteed securities
would attract asset classification and provisioning norms, if interest and
/ or principal or any other amount due to the bank remains overdue for
more than 90 days irrespective of the fact whether the guarantee have
been invoked or not.
2.2.6 Project Financing
'Project Loan' would mean any term loan which has been extended for the
purpose of setting up of an economic venture. Banks must fix a Date of
Commencement of Commercial Operations (DCCO) for all project loans at
the time of sanction of the loan / financial closure (in the case of multiple
banking or consortium arrangements).
For the purpose of Income Recognition and Asset Classification norms, all
project loans may be divided into the following two categories; (i) Project
Loans for infrastructure sector (ii) Project Loans for non-infrastructure
sector. Detailed guidelines are given in Annex 9.
In the case of bank finance given for industrial projects where moratorium
is available for payment of interest, payment of interest becomes due only
after the moratorium or gestation period is over. Therefore, such amounts
of interest do not become overdue and hence NPA, with reference to the
date of debit of interest. They become overdue after due date for payment
of interest, if uncollected.
2.2.7 Prudential Guidelines on Restructuring of Advances
The prudential guidelines on restructuring of advances are detailed as
under :
(a) Asset Classification Norms
2.2.7.1 Restructuring of advances could take place in the following
stages :
(a) before commencement of commercial production / operation;
(b) after commencement of commercial production / operation
but before the asset has been classified as 'sub-standard';
6

(c) after commencement of commercial production / operation

and the asset has been classified as 'sub-standard' or 'doubtful'.
2.2.7.2 The accounts classified as 'standard assets' should be
immediately re-classified as 'sub-standard assets' upon restructuring.
2.2.7.3 The non performing assets, upon restructuring, would slip
into further lower asset classification category as per extant asset
classification norms with reference to the pre-restructuring repayment
schedule.
2.2.7.4 All restructured accounts which have been classified as non-
performing assets upon restructuring, would be eligible for up-
gradation to the 'standard' category after observation of 'satisfactory
performance' during the 'specified period' (Annex-6).
2.2.7.5 In case, however, satisfactory performance after the
specified period is not evidenced, the asset classification of the
restructured account would be governed as per the applicable
prudential norms with reference to the pre-restructuring payment
schedule.
2.2.7.6 Any additional finance may be treated as 'standard asset', up
to a period of one year after the first interest / principal payment,
whichever is earlier, falls due under the approved restructuring
package. However, in the case of accounts where the pre-
restructuring facilities were classified as 'sub-standard' and 'doubtful',
interest income on the additional finance should be recognised only on
cash basis. If the restructured asset does not qualify for upgradation at
the end of the above specified one year period, the additional finance
shall be placed in the same asset classification category as the
restructured debt.
2.2.7.7 In respect of loan accounts which enjoy special regulatory
treatment as per para 2.2.7.25, upon restructuring, such non-
performing assets would continue to have the same asset
classification as prior to restructuring. In case satisfactory
performance of the account is not evidenced during the 'specified
period', it would slip into further lower asset classification categories
as per extant asset classification norms with reference to the pre-
restructuring repayment schedule.
2.2.7.8 In case a restructured asset, which is a standard asset on
restructuring, is subjected to restructuring on a subsequent occasion,
it should be classified as substandard. If the restructured asset is a
sub-standard or a doubtful asset and is subjected to restructuring, on
a subsequent occasion, its asset classification will be reckoned from
the date when it became NPA on the first occasion. However, such
7

advances restructured on second or more occasion may be allowed to

be upgraded to standard category after one year from the date of first
payment of interest or repayment of principal whichever falls due
earlier in terms of the current restructuring package subject to
satisfactory performance.
(b) Income Recognition Norms
2.2.7.9 Subject to provisions of paragraphs 2.2.7.6 and 2.2.7.22
interest income in respect of restructured accounts classified as
'standard assets' will be recognized on accrual basis and that in
respect of the account classified as 'non performing assets' will be
recognized on cash basis.
(c) Provisioning Norms
2.2.7.10 Normal Provisions
Banks will hold provision against the restructured advances as per
the existing provisioning norms.
2.2.7.11 Provision for Diminution in the Fair Value of restructured
Advances
The erosion in the fair value of the advance should be computed as
the difference between the fair value of the loan before and after
restructuring. Fair value of the loan before restructuring will be
computed as the present value of cash flows representing the interest
at the existing rate charged on the advance before restructuring and
the principal, discounted at a rate equal to the bank's BPLR as on the
date of restructuring plus the appropriate term premium and credit risk
premium for the borrower category on the date of restructuring". Fair
value of the loan after restructuring will be computed as the present
value of cash flows representing the interest at the rate charged on
the advance on restructuring and the principal, discounted at a rate
equal to the bank's BPLR as on the date of restructuring plus the
appropriate term premium and credit risk premium for the borrower
category on the date of restructuring".
2.2.7.12 It may please be noted that the above formula moderates
the swing in the diminution of present value of loans with the interest
rate cycle and will have to be followed consistently in future. No
request for changing the same, particularly for reversion to the present
formula, will be entertained in future.
2.2.7.13 Further, it is reiterated that the provisions required as above
arise due to the action of the banks resulting in change in contractual
terms of the loan upon restructuring which are in the nature of
8

financial concessions. These provisions are distinct from the

provisions which are linked to the asset classification of the account
classified as NPA and reflect the impairment due to deterioration in
the credit quality of the loan. Thus, the two types of the provisions are
not substitute for each other.
2.2.7.14 It is also re-emphasised that the modifications effected to
the guidelines on restructuring of advances by RBI are aimed at
providing an opportunity to banks and borrowers to preserve the
economic value of the units and should not be looked at as a means
to evergreen the advances.
2.2.7.15 In their published annual Balance Sheets for the year
ending March 2009, in addition to the disclosures regarding
restructured loans required in terms of paragraph 9 of the guidelines
enclosed to Circular dated March 6, 2009, banks should also disclose
the amount and number of accounts in respect of which applications
for restructuring are under process, but the restructuring packages
have not yet been approved.
2.2.7.16 In the case of working capital facilities, the diminution in the
fair value of the cash credit / overdraft component may be computed
as indicated in para 2.2.7.11 above, reckoning the higher of the
outstanding amount or the limit sanctioned as the principal amount
and taking the tenor of the advance as one year. The term premium in
the discount factor would be as applicable for one year. The fair value
of the term loan components (Working Capital Term Loan and Funded
Interest Term Loan) would be computed as per actual cash flows and
taking the term premium in the discount factor as applicable for the
maturity of the respective term loan components.
2.2.7.17 In the event any security is taken in lieu of the diminution in
the fair value of the advance, it should be valued at Re.1/- till maturity
of the security. This will ensure that the effect of charging off the
economic sacrifice to the Profit & Loss account is not negated.
2.2.7.18 The diminution in the fair value may be re-computed on
each balance sheet date till satisfactory completion of all repayment
obligations and full repayment of the outstanding in the account, so as
to capture the changes in the fair value on account of changes in
BPLR, term premium and the credit category of the borrower.
Consequently, banks may provide for the shortfall in provision or
reverse the amount of excess provision held in the distinct account.
2.2.7.19 If due to lack of expertise / appropriate infrastructure, a
bank finds it difficult to ensure computation of diminution in the fair
value of advances extended by small branches, as an alternative to
9

the methodology prescribed above for computing the amount of

diminution in the fair value, banks will have the option of notionally
computing the amount of diminution in the fair value and providing
therefor, at five percent of the total exposure, in respect of all
restructured accounts where the total dues to bank(s) are less than
rupees one crore till the financial year ending March 2011. The
position would be reviewed thereafter.
2.2.7.20 The total provisions required against an account (normal
provisions plus provisions in lieu of diminution in the fair value of the
advance) are capped at 100% of the outstanding debt amount.
(d) Prudential Norms for Conversion of Unpaid Interest into 'Funded
Interest Term Loan' (FITL)
2.2.7.21 Asset Classification Norms
The FITL created by conversion of unpaid interest will be classified in
the same asset classification category in which the restructured
advance has been classified. Further movement in the asset
classification of FITL would also be determined based on the
subsequent asset classification of the restructured advance.
2.2.7.22 Income Recognition Norms
(i) The income, if any, generated may be recognised on accrual
basis, if FITL is classified as 'standard', and on cash basis in the
cases where the same has been classified as a non-performing asset.
(ii) The unrealised income represented by FITL should have a
corresponding credit in an account styled as "Sundry Liabilities
Account (Interest Capitalization)".
(iii) Only on repayment in case of FITL, the amount received will be
recognized in the P&L Account, while simultaneously reducing the
balance in the "Sundry Liabilities Account (Interest Capitalisation)".
(e) Special Regulatory Treatment for Asset Classification
2.2.7.23 The special regulatory treatment for asset classification, in
modification to the provisions in this regard stipulated in para 2.2.7.1
to 2.2.7.8, will be available to the borrowers engaged in important
business activities, subject to compliance with certain conditions as
enumerated in para 2.2.7.29 below. Such treatment is not extended to
the following categories of advances:
(i) Consumer and personal advances including advances to
individuals against the securities of shares / bonds / debentures etc
10

(ii) Advances to traders

2.2.7.24 The asset classification of the above two categories of
accounts as well as that of other accounts which do not comply with
the conditions enumerated in para 2.2.7.29, will be governed by the
prudential norms in this regard described in para 2.2.7.1 to 2.2.7.8
above.
2.2.7.25 As real estate sector is facing difficulties, it has been
decided to extend special regulatory treatment to commercial real
estate exposures, which are restructured up to J une 30, 2009.
Further, housing loans granted by banks would also be eligible for
special regulatory treatment, if restructured.
(f) Elements of Special Regulatory Framework
2.2.7.26 The special regulatory treatment has the following two
components :
(i) Incentive for quick implementation of the restructuring package.
(ii) Retention of the asset classification of the restructured account
in the pre restructuring asset classification category
2.2.7.27 Incentive for Quick Implementation of the Restructuring
Package
During the pendency of the application for restructuring of the
advance with the bank, the usual asset classification norms would
continue to apply. The process of reclassification of an asset should
not stop merely because the application is under consideration.
However, as an incentive for quick implementation of the package, if
the approved package is implemented by the bank within 120 days
from the date of receipt of application by the bank, the asset
classification status may be restored to the position which existed
when the restructuring application was received by the bank: Further,
all accounts which were standard accounts as on September 1, 2008
would be treated as standard accounts on restructuring provided the
restructuring package is put in place within 120 days from the date of
taking up the restructuring package. The 120 days norm for quick
implementation of the restructuring package would stand reduced to
90 days in respect of all restructuring packages implemented after
J une 30, 2009.
2.2.7.28 Asset Classification Benefits
Subject to the compliance with the undernoted conditions in addition
to the adherence to the prudential framework laid down in para 2.2.7.1
to 2.2.7.8:
11

(i) In modification to para 2.2.7.2, an existing 'standard asset' will not

be downgraded to the sub-standard category upon restructuring.
(ii) In modification to para 2.2.7.3 during the specified period, the
asset classification of the sub-standard / doubtful accounts will not
deteriorate upon restructuring, if satisfactory performance is
demonstrated during the specified period.
2.2.7.29 However, these benefits will be available subject to
compliance with the following conditions :
i) The dues to the bank are 'fully secured' as defined in Annex 6 The
condition of being fully secured by tangible security will not be
applicable in the following cases :
a) SSI borrowers, where the outstanding is up to `25 lakh.
(b) infrastructure projects, provided the cash flows generated from
these projects are adequate for repayment of the advance, the
financing bank(s) have in place an appropriate mechanism to escrow
the cash flows, and also have a clear and legal first claim on these
cash flows.
(c) The value of security is relevant to determine the likely losses
which a bank might suffer on the exposure should the default take
place. This aspect assumes greater importance in the case of
restructured loans. However, owing to the current downturn, the full
security cover for the WCTL created by conversion of the irregular
portion of principal dues over the drawing power, may not be available
due to fall in the prices of security such as inventories. In view of the
extraordinary situation, this special regulatory treatment is available to
'standard' and 'sub standard accounts' even where full security
cover for WCTL is not available, subject to the condition that
provisions are made against the unsecured portion of the WCTL, as
under :
Standard Assets : 20%
Substandard Assets : 20% during the first year and to be increased
by 20% every year thereafter until the specified period (one
year after the first payment is due under the terms of
restructuring)
If the account is not eligible for upgradation after the specified
period, the unsecured portion will attract provision of 100%
ii) The unit becomes viable in 10 years, if it is engaged in
infrastructure activities, and in 7 years in the case of other units.
12

iii) The repayment period of the restructured advance including the

moratorium, if any, does not exceed 15 years in the case of
infrastructure advances and 10 years in the case of other advances.
However the ceiling of 10 years would not apply in case of housing
loans and the Board of Directors of the banks should prescribe the
maximum period not exceeding 15 years for restructured advances
keeping in view the safety and soundness of advances.
iv) The restructured housing loans would be assigned additional risk
weight of 25 percentage points over the prescribed risk weights.
v) Promoters' sacrifice and additional funds brought by them should
be a minimum of 15% of banks' sacrifice.
vi) Personal guarantee is offered by the promoter except when the
unit is affected by external factors pertaining to the economy and
industry.
vii) The restructuring under consideration is not a 'repeated
restructuring' as defined in para (iv) of Annex 6. However, as a one
time measure, second restructuring carried out by banks of exposures
(other than commercial real estate, capital market exposures,
personal / consumer loans and loans to traders) upto J une 30, 2009
shall be eligible for special regulatory treatment.
(g) Disclosures
2.27.30 Banks should disclose in their published annual Balance
Sheets, under 'Notes on Accounts', information relating to number and
amount of advances restructured and the amount of diminution in the
fair value of the restructured advances in Annex-7.
(h) Illustrations
2.2.7.31 A few illustrations on the asset classification of restructured
accounts are given in Annex-8.
2.2.8 Other Advances
(i) Advances against term deposits, NSCs eligible for surrender, IVPs,
KVPs and Life policies need not be treated as NPAs although interest
thereon may not have been paid for more than 90 days provided
adequate margin is available in the accounts.
(ii) Banks should fix monthly / quarterly instalments for repayment of
gold loans for non-agricultural purposes taking into account the
pattern of income generation and repayment capacity of the
borrowers and such gold loan accounts may be treated as NPAs if
13

instalments of principal and / or interest thereon are overdue for more

than 90 days.
(iii) As regards gold loans granted for agricultural purposes, interest is
required to be charged as per Supreme Court judgement at yearly
intervals and payment should coincide with the harvesting of crops.
Accordingly, such advances will be treated as NPA only if instalments
of principal and / or interest become overdue after due date.
2.2.9 Recognition of Income on Investment Treated as NPAs
The investments are also subject to the prudential norms on income
recognition. Banks should not book income on accrual basis in respect of
any security irrespective of the category in which it is included, where the
interest / principal is in arrears for more than 90 days.
2.2.10 NPA Reporting to Reserve Bank
Banks should report the figures of NPAs to the Regional Office of the
Reserve Bank at the end of each year within two months from the close of
the year in the prescribed proforma given in the Annex 2.

3. Asset Classification
3.1 Classification
3.1.1 Banks should classify their assets into the following broad groups, viz. -
(i) Standard Assets
(ii) Sub-standard Assets
(iii) Doubtful Assets
(iv) Loss Assets
3.2 Definitions
3.2.1 Standard Assets
Standard Asset is one which does not disclose any problems and which
does not carry more than normal risk attached to the business. Such an
asset should not be an NPA.
3.2.2 Sub-standard Assets
(i) With effect from March 31, 2005 an asset would be classified as sub-
standard if it remained NPA for a period less than or equal to 12 months.
In such cases, the current net worth of the borrowers / guarantors or the
14

current market value of the security charged is not enough to ensure

recovery of the dues to the banks in full. In other words, such assets will
have well defined credit weaknesses that jeopardise the liquidation of the
debt and are characterised by the distinct possibility that the banks will
sustain some loss, if deficiencies are not corrected.
(ii) An asset where the terms of the loan agreement regarding interest
and principal have been re-negotiated or rescheduled after
commencement of production, should be classified as sub-standard and
should remain in such category for at least 12 months of satisfactory
performance under the re-negotiated or rescheduled terms. In other
words, the classification of an asset should not be upgraded merely as a
result of rescheduling, unless there is satisfactory compliance of this
condition.
3.2.3 Doubtful Assets
With effect from March 31, 2005, an asset is required to be classified as
doubtful, if it has remained NPA for more than 12 months. For Tier I
banks, the 12-month period of classification of a substandard asset in
doubtful category is effective from April 1, 2009. As in the case of sub-
standard assets, rescheduling does not entitle the bank to upgrade the
quality of an advance automatically. A loan classified as doubtful has all
the weaknesses inherent as that classified as sub-standard, with the
added characteristic that the weaknesses make collection or liquidation in
full, on the basis of currently known facts, conditions and values, highly
questionable and improbable.
3.2.4 Loss Assets
A loss asset is one where loss has been identified by the bank or internal
or external auditors or by the Co-operation Department or by the Reserve
Bank of India inspection but the amount has not been written off, wholly or
partly. In other words, such an asset is considered un-collectible and of
such little value that its continuance as a bankable asset is not warranted
although there may be some salvage or recovery value.
3.3 Guidelines for Classification of Assets
3.3.1 Basic Considerations
(i) Broadly speaking, classification of assets into above categories should
be done taking into account the degree of well defined credit
weaknesses and extent of dependence on collateral security for
realisation of dues.
(ii) In respect of accounts where there are potential threats to recovery on
account of erosion in the value of security and existence of other
15

factors such as, frauds committed by borrowers, it will not be prudent

for the banks to classify them first as sub-standard and then as
doubtful after expiry of 12 months from the date the account has
become NPA. Such accounts should be straight away classified as
doubtful asset or loss asset, as appropriate, irrespective of the period
for which it has remained as NPA.
3.3.2 Advances Granted under Rehabilitation Packages Approved by BIFR /
Term Lending Institutions
(i) Banks are not permitted to upgrade the classification of any advance
in respect of which the terms have been re-negotiated unless the
package of re-negotiated terms has worked satisfactorily for a period of
one year. While the existing credit facilities sanctioned to a unit under
rehabilitation packages approved by BIFR / term lending institutions
will continue to be classified as sub-standard or doubtful as the case
may be in respect of additional facilities sanctioned under the
rehabilitation packages the income recognition and asset classification
norms will become applicable after a period of one year from the date
of disbursement.
(ii) A similar relaxation be made in respect of SSI units which are
identified as sick by banks themselves and where rehabilitation
packages / nursing programmes have been drawn by the banks
themselves or under consortium arrangements.
3.3.3 Internal System for Classification of Assets as NPA
(i) Banks should establish appropriate internal systems to eliminate the
tendency to delay or postpone the identification of NPAs, especially in
respect of high value accounts. The banks may fix a minimum cut-off
point to decide what would constitute a high value account depending
upon their respective business levels. The cut-off point should be valid
for the entire accounting year.
(ii) Responsibility and validation levels for ensuring proper asset
classification may be fixed by the bank.
(iii) The system should ensure that doubts in asset classification due to
any reason are settled through specified internal channels within one
month from the date on which the account would have been classified
as NPA as per extant guidelines.
(iv) RBI would continue to identify the divergences arising due to non-
compliance, for fixing accountability. Where there is wilful non-
compliance by the official responsible for classification and is well
documented, RBI would initiate deterrent action including imposition of
monetary penalties.
16

4. Income Recognition
4.1 Income Recognition - Policy
4.1.1 The policy of income recognition has to be objective and based on the
record of recovery. Income from non-performing assets (NPA) is not
recognised on accrual basis but is booked as income only when it is
actually received. Therefore, banks should not take to income account
interest on non-performing assets on accrual basis.
4.1.2 However, 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 in the accounts.
4.1.3 Fees and commissions earned by the banks as a result of re-
negotiations or rescheduling of outstanding debts should be
recognised on an accrual basis over the period of time covered by the
re-negotiated or rescheduled extension of credit.
4.1.4 If Government guaranteed advances become 'overdue' and thereby
NPA, the interest on such advances should not be taken to income
account unless the interest has been realised.
4.2 Reversal of Income on Accounts Becoming NPAs
4.2.1 If any advance including bills purchased and discounted becomes NPA
as at the close of any year, interest accrued and credited to income
account in the corresponding previous year, should be reversed or
provided for if the same is not realised This will apply to Government
guaranteed accounts also.
4.2.2 If interest income from assets in respect of a borrower becomes
subject to non-accrual, fees, commission and similar income with
respect to same borrower that have been accrued should ceased to
accrue in the current period and should be reversed or provided for
with respect to past periods, if uncollected.
4.2.3 Banks undertaking equipment leasing should follow prudential
accounting standards. Lease rentals comprises two elements - a
finance charge (i.e interest charge) and a charge towards recovery of
the cost of the asset. The interest component alone should be taken to
income account. Such income taken to income account, before the
asset became NPA, and remained unrealised should be reversed or
provided for in the current accounting period.
4.3 Booking of Income on Investments in Shares & Bonds
4.3.1 As a prudent practice and in order to bring about uniform accounting
practice among banks for booking of income on units of UTI and equity
17

of All India Financial Institutions, such income should be booked on

cash basis and not on accrual basis.
4.3.2 However, in respect of income from Government securities / bonds of
public sector undertakings and All India Financial Institutions, where
interest rates on the instruments are predetermined, income may be
booked on accrual basis, provided interest is serviced regularly and is
not in arrears.
4.4 Partial Recovery of NPAs
Interest realised on NPAs may be taken to income account provided
the credits in the accounts towards interest are not out of fresh /
additional credit facilities sanctioned to the borrower concerned.
4.5 Interest Application
4.5.1 In case of NPAs where interest has not been received for 90 days or
more, as a prudential norm, there is no use in debiting the said account
by interest accrued in subsequent quarters and taking this accrued
interest amount as income of the bank as the said interest is not being
received. It is simultaneously desirable to show such accrued interest
separately or park in a separate account so that interest receivable on
such NPA account is computed and shown as such, though not
accounted as income of the bank for the period.
4.5.2 The interest accrued in respect of performing assets may be taken to
income account as the interest is reasonably expected to be received.
However, if interest is not actually received for any reason in these
cases and the account is to be treated as an NPA at the close of the
subsequent year as per the guidelines, then the amount of interest so
taken to income in the corresponding previous year should be reversed
or should be provided for in full.
4.5.3 With a view to ensuring uniformity in accounting the accrued interest in
respect of both the performing and non-performing assets, the
following guidelines may be adopted notwithstanding the existing
provisions in the respective State Co-operative Societies Act :
(i) Interest accrued in respect of non-performing advances should not be
debited to borrowal accounts but shown separately under 'Interest
Receivable Account' on the 'Property and Assets' side of the balance
sheet and corresponding amount shown under 'Overdue Interest
Reserve Account' on the 'Capital and Liabilities' side of the balance
sheet.
(ii) In respect of borrowal accounts, which are treated as performing
assets, accrued interest can alternatively be debited to the borrowal
18

account and credited to Interest account and taken to income account.

In case the accrued interest in respect of the borrowal account is not
actually realised and the account has become NPA as at the close of
subsequent year, interest accrued and credited to income account in
the corresponding previous year, should be reversed or provided for.
(iii) The illustrative accounting entries to be passed in respect of accrued
interest on both the performing and non-performing advances are
indicated in the Annex 3.
4.5.4 In the above context, it may be clarified that overdue interest reserve is
not created out of the real or earned income received by the bank and
as such, the amounts held in the Overdue Interest Reserve Account
can not be regarded as 'reserve' or a part of the owned funds of the
banks. It will also be observed that the Balance Sheet format
prescribed under the Third Schedule to the Banking Regulation Act,
1949 (As Applicable to Co-operative Societies) specifically requires the
banks to show 'Overdue Interest Reserve' as a distinct item on the
'Capital and Liabilities' side vide item 8 thereof.
5. Provisioning Norms
5.1 Norms for Provisioning on Loans & Advances
5.1.1 In conformity with the prudential norms, provisions should be made on
the non-performing assets on the basis of classification of assets into
prescribed categories as detailed in paragraph 3 above.
5.1.2 Taking into account the time lag between an account becoming
doubtful of recovery, its recognition as such, the realisation of the
security and the erosion over time in the value of security charged to
the bank, the banks should make provision against loss assets,
doubtful assets and sub-standard assets as below :
(i) Loss Assets
(a) The entire assets should be written off after obtaining necessary
approval from the competent authority and as per the provisions of the
Co-operative Societies Act / Rules. If the assets are permitted to
remain in the books for any reason, 100 per cent of the outstanding
should be provided for.
(b) In respect of an asset identified as a loss asset, full provision at 100
per cent should be made if the expected salvage value of the security
is negligible.


19

(ii) Doubtful Assets

(a) Provision should be for 100 per cent of the extent to which the
advance is not covered by the realisable value of the security to which
the bank has a valid recourse should be made and the realisable
value is estimated on a realistic basis.
(b) In regard to the secured portion, provision may be made on the
following basis, at the rates ranging from 20 per cent to 100 per cent
of the secured portion depending upon the period for which the asset
has remained doubtful:
Tier I Bank

Period for which the advance
has remained in 'doubtful'
category
Provision Requirement
Up to one year 20 per cent
One to three years 30 per cent
More than three years (D-III)
- 60 per cent with effect
from March 31, 2011
- 75 per cent with effect
from March 31, 2012
(i) outstanding stock of NPAs as
on March 31, 2010
- 100 per cent with
effect from March 31,
2013
(ii) advances classified as
'doubtful for more than three
years' on or after April 1, 2010
- 100 percent




20

Tier II Bank
Period for which the advance
has remained in 'doubtful'
category
Provision Requirement
Up to one year 20 percent
One to three years 30 percent
More than three years (D-III) 100 percent

Illustration for Tier-I bank is given at Annex 4
(iii) Sub-standard Assets
A general provision of 10 per cent on total outstanding should be
made without making any allowance for DICGC / ECGC guarantee
cover and securities available.
(iv) Provision on Standard Assets
(a) From the year ended March 31, 2000, the banks should make a
general provision of a minimum of 0.25 per cent on standard
assets.
(b) However, Tier II banks (as defined in Circular dated May 6, 2009)
will be subjected to higher provisioning norms on standard assets
as under :
The general provisioning requirement for all types of 'standard
advances' shall be 0.40 per cent. However, direct advances to
agricultural and SME sectors which are standard assets, would
attract a uniform provisioning requirement of 0.25 per cent of the
funded outstanding on a portfolio basis, as hitherto.
Further, with effect from Dec 8, 2009, all UCBs (Both Tier I & Tier
II) are required to make a provision of 1.00 percent in respect of
advances to Commercial Real Estate Sector classified as
'standard assets'.
The standard asset provisioning requirements for all UCBs are
summarized as under :
21

Rate of Provisioning
Category of Standard Asset
Tier II Tier I
Direct advances to Agriculture
and SME sectors
0.25 % 0.25%
Commercial Real Estate (CRE)
sector
1.00 % 1.00 %
All other loans and advances not
included in (a) and (b) above
0.40% 0.25%
(c) The provisions towards "standard assets" need not be netted
from gross advances but shown separately as "Contingent
Provision against Standard Assets" under "Other Funds and
Reserves" {item.2 (viii) of Capital and Liabilities}in the Balance
Sheet.
(d) If due to changes in the regulatory requirements on provisions
to be maintained by banks, the provisions held by banks exceed
what is required to be held by banks, such excess provisions
should not be reversed. In future, if by applying the revised
provisioning norms, any provisions are required over and above
the level of provisions currently held for the standard category
assets ; these should be duly provided for.
(e) In case banks are already maintaining excess provision than
what is required / prescribed by Statutory Auditor / RBI
Inspection for impaired credits under Bad and Doubtful Debt
Reserve, additional provision required for Standard Assets may
be segregated from Bad and Doubtful Debt Reserve and the
same may be parked under the head "Contingent Provisions
against Standard Assets" with the approval of their Board of
Directors. Shortfall if any, on this account may be made good in
the normal course.
(f) The above contingent provision will be eligible for inclusion in
Tier II capital.
(v) Higher Provisions
There is no objection if the banks create bad and doubtful debts
reserve beyond the specified limits on their own or if provided in the
respective State Co-operative Societies Acts.

22

5.2 Provisioning for Retirement Benefits

Banks may have retirement benefit schemes for their staff, viz. Provident
Fund, Gratuity and Pension. It is necessary that such liabilities are estimated
on actuarial basis and full provision should be made every year for the purpose
in their Profit and Loss Account.
However, consequent upon the enhancement in gratuity limits following the
amendment to Payment of Gratuity Act 1972, it has been decided that UCBs
may take the following course of action in the matter:
a. The expenditure, due to enhancement of ceiling of gratuity, if not fully
charged to the Profit and Loss Account during the financial year 2010-
11, be deferred over a period of five years beginning with the financial
year ended March 31, 2011 subject to charging to the Profit and Loss
Account a minimum of 1/5th of the total amount involved every year.
b. Such deferment of expenditure due to enhancement of gratuity, will not
be permitted in respect of amounts payable to the retired / separated
employees.
c. The expenditure so deferred, may be disclosed suitably in the Annual
Financial Statements.
d. In view of the exceptional nature of the event, the deferred expenditure
would not be reduced from Tier-I capital of UCBs.
5.3 Provisioning Norms for sale of financial assets to Securitisation
Companies (SC) / Reconstruction Companies (RC)
(a) If the sale to SC / RC is at a price below the net book value (NBV) (i.e. book
value less the provision held), the short fall should be written off / debited to
P&L A/c of that year, subject to the provisions of the co-operative societies
acts / rules / administrative guidelines in regard to write-off of debts.
(b) If the sale is for a value higher than the NBV, the excess provision will not be
reserved but will be utilised to meet the shortfall / loss on account of sale of
other assets to SC / RC.
5.4 Guidelines for Provisions in Specific Cases
(i) State Government guaranteed Advances
From the year ended March 31, 2006, State Government guaranteed
advance and investment in State Government guaranteed securities would
attract extant provisioning norms, if interest and / or principal or any other
amount due to the bank remains overdue for more than 90 days
irrespective of the fact whether the guarantee have been invoked or not.
(ii) Advances granted under Rehabilitation Packages approved by BIFR
/ Term Lending Institutions
23

(a) The existing credit facilities sanctioned to a unit under rehabilitation

package approved by BIFR / term lending institutions, should continue to
be classified as sub-standard or doubtful asset as the case may be.
(b) However, the additional facilities sanctioned as per package finalised
by BIFR and / or term lending institutions, the income recognition and
asset classification norms will become applicable after a period of one
year from the date of disbursement.
(c) In respect of additional credit facilities granted to SSI units which are
identified as sick 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.
(iii) Advances against fixed / term deposit, NSCs eligible for surrender, IVPs,
KVPs, and life policies are exempted from provisioning requirements.
(iv) Advances against gold ornaments, government securities and all other
kinds of securities are not exempted from provisioning requirements.
(v) Advances covered by ECGC Guarantee
(a) In the case of advances 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 `4 lakhs
ECGC Cover 50 per cent
Period for which the advance has remained
doubtful
More than 3
years
Value of security held (excludes worth of
borrower / guarantor)
`1.50 lakhs




24

Provision required to be made

Outstanding balance `4.00 lakhs
Less : Value of security held `1.50 lakhs
Unrealised balance `2.50 lakhs
Less : ECGC Cover (50% of
unrealisable balance)
`1.25 lakhs
Net unsecured balance `1.25 lakhs
Provision for unsecured portion
of advance
`1.25 lakhs (@ 100 per cent of
unsecured portion)
Provision for secured portion of
advance (as on March 31 2005)
`0.90 lakhs (@ 60 per cent of
secured portion of `1.50 lakh).
Total provision required to be
made
`2.15 lakhs (as on March 31,
2005).
(b) In case the banks are following more stringent method of
provisioning in respect of advances covered by the guarantees of ECGC,
as compared to the method given above, they may have the option to
continue to follow the same procedure.
6. Divergence in Asset Classification and Provisioning
(i) Banks should ensure scrupulous compliance with the instructions for
recognition of credit impairment and view aberrations by dealing officials
seriously.
(ii) Banks should establish appropriate internal systems to eliminate the
tendency to delay or postpone the identification of NPAs, especially in
respect of high value accounts. Banks should fix a minimum cut off point
to decide what would constitute a high value account depending upon
their respective levels. The cut off point should be valid for the entire year.
(iii) The responsibility and validation levels for ensuring proper asset
classification may be fixed by the banks.
(iv) Where there is wilful non-compliance by the officials responsible for
classification and is well documented, RBI would initiate deterrent action
including imposition of monetary penalties.
7. Clarification on certain frequently asked questions is given at Annex 5.
25

Annex - 1
Direct Finance to Agriculture
(vide para 2.1.2(iv))

1.1 Finance to Individual Farmers for Agriculture and Allied Activities (Dairy,
Fishery, Piggery, Poultry, Bee-keeping, etc.)
1.1.1 Short-term loans for raising crops, i.e. for crop loans. This will include traditional /
non-traditional plantations and horticulture
1.1.2 Advances up to `10 lakh against pledge / hypothecation of agricultural produce
(including warehouse receipts) for a period not exceeding 12 months, irrespective of
whether the farmers were given crop loans for raising the produce or not.
1.1.3 Working capital and term loans for financing production and investment
requirements for agriculture and allied activities.
1.1.4 Loans to small and marginal farmers for purchase of land for agricultural
purposes.
1.1.5 Loans to distressed farmers indebted to non-institutional lenders, against
appropriate collateral
1.1.6 Loans granted for pre-harvest and post-harvest activities such as spraying,
weeding, harvesting, grading, sorting, processing and transporting undertaken by
individuals, in rural areas
1.2 Finance to others [such as corporates, partnership firms and institutions] for
Agriculture and Allied Activities (dairy, fishery, piggery, poultry, bee-keeping,
etc.)
1.2.1 Loans granted for pre-harvest and post harvest activities such as spraying,
weeding, harvesting, grading, sorting and transporting.
1.2.2 Finance upto an aggregate amount of ` one crore per borrower for the purposes
listed at 1.1.1, 1.1.2, 1.1.3, and 1.2.1 above.
1.2.3 One-third of loans in excess of ` one crore in aggregate per borrower for
agriculture and allied activities.
-----------------------------------
26

Annex - 2
(vide para 2.2.10)

Proforma
Name of the Bank ________________________
Category Tier I / Tier II _____________________
Classification of Assets and Provisioning made
against Non-Performing Assets as on March 31, _______
(` in lakh)
Classification of
Assets
No.
of
A/C
s
Amou
nt
Outsta
-
nding
Perce
ntage
of
Col.3
to
total
loan
outst
a-
nding
Provisio
n
required
to be
made %
Amount
Existing
provisio
n at the
begin-
ning of
the year
Provisio
n-
ing
made
during
the year
under
report
Total
provi
s-
ions
as at
the
end
of the
year
Re-
mark
s
1 2 3 4 5 6 7 8 9 10
Total loans and
advances

Of which
A
.
Standard Assets
B
.
Non-performing
Assets

27

28

1
.
Sub-standard
Doubtful
Upto 1 year
a) Secured
i)
b)
Unsecur
ed

Above 1
year & upto
3 years

a) Secured
ii)
b)
Unsecur
ed

Above 3
years
Secured

a) Outstan
ding
stock of
NPAs
as on
March
31, .

2
.
iii)
b)
Advanc
es
classifie
d as

doubtful
more
than 3
years'
on or
after
April 1,

b)
Unsecur
ed

Total doubtful
assets (i+ii+iii)

a) Secured
b) Unsecured
3
.
Loss Assets
Gross NPAs (B1 +
B2 + B3)

Note : Please indicate the manner in which the provision (item 8) has been made /
proposed to be made out of the profit of the current year.


Position of Net Advances / Net NPAs
(` in lakh)
S
r.
N
o
.
Particulars
Current
Year
Previous
Year
1. Gross Advances
2. Gross NPAs
3. Gross NPAs as percentage to Gross Advances
4. Deductions
29

- Balance in interest suspense account / OIR*

- DICGC / ECGC claims received and held pending
adjustment

- Part payment of NPA accounts received and kept in
suspense account

Total Deductions
5. Total NPA provisions held (BDDR, Special BDDR Balance
after appropriation)

6. Net Advances (1-4-5)
7. Net NPAs (2-4-5)
8. Net NPAs as percentage of Net Advances
* i.e. accrued interest on NPA accounts if included (capitalised) in loans and
advances

CERTIFIED that the non-performing assets have been worked out as per RBI
instructions and provisions made accordingly.


Chief Executive Officer Statutory Auditors
--------------------------------
30

Annex - 3
(Vide para 4.5.3(iii))

Illustrative Accounting Entries to be passed in respect
of Accrued Interest on both the Performing and Non-performing Advances
I. Accrued Interest on Performing Advances

i) It has been clarified in paragraph 4.5.2 and 4.5.3 (ii) of the Master Circular that
accrued interest in respect of performing advances may be charged to borrowal
accounts and taken to income account. Illustratively, if the accrued interest is
`10,000/- in respect of performing advances of a borrower 'X' (cash credit,
overdraft, loan account, etc.) the following entries can be passed in the Books of
Account.
(Dr) Borrower's account (CC, OD loan) `10,000.00
(Cr) Interest account `10,000.00

ii) In case the accrued interest of `10,000/- in respect of the borrowal account is not
actually realised and the account has become NPA as at the close of subsequent
year, interest accrued and credited to income account in the corresponding
previous year, should be reversed or provided for if the same is not realised by
passing the following entries :
(Dr) (P&L a/c) `10,000.00
(Cr) Overdue Interest Reserve Account `10,000.00
iii) In case accrued interest is realised subsequently, the following entries may be
passed:
(Dr) Cash / Bank account `10,000.00
(Cr) Borrower's Account (CC, OD, Loan) `10,000.00

(Dr) Overdue Interest Reserve Account `10,000.00
(Cr) Interest account `10,000.00


31

II. Accrued Interest on Non-Performing Advances

i) Accrued interest in respect of non-performing advances may be debited to
'Interest Receivable Account' and corresponding amount credited to 'Overdue
Interest Reserve Account'. For example, if the interest accrued in respect of
Cash Credit / OD / Loan etc. account of a borrower 'Y' is `20,000/- the
accounting entries may be passed as under :
(Dr) Interest Receivable Account `20,000.00
(Cr) Overdue Interest Reserve Account `20,000.00

ii) Subsequently, if interest is actually realised, the following accounting entries
may be passed :
(Dr) Cash / Bank Account `20,000.00
(Cr) Interest account `20,000.00

(Dr) Overdue Interest Reserve Account `20,000.00
(Cr) Interest Receivable Account `20,000.00

III. Accounting of Overdue Interest in Loan Ledgers & Balance Sheet
i) With a view to facilitating the banks to work out the amount of interest receivable
in respect of each non-performing borrowal account, banks can consider
opening a separate column in the individual ledger accounts of such borrowers
and interest receivable shown therein. This would enable the banks to
determine at a particular point of time, the amount of interest actually to be
recovered from the borrowers. Total of the amounts shown under the separate
columns in the loan ledgers would be interest receivable in respect of non-
performing advances and it would get reflected as such on the 'assets' side of
balance sheet with a corresponding item on the liabilities side of the balance
sheet as 'Overdue Interest Reserve'.
ii) Similarly, a separate column should be provided in the loan ledger in respect of
performing advances for showing accrued interest taken to income account on
31 March every year so that a watch can be kept on them. If the accrued
interest is not realised and the account becomes NPA in the subsequent year,
the amount has to be reversed or provided for
--------------------------------
32

Annex - 4
(Illustrative entries on the provisioning requirement for secured portion of assets
that are doubtful for more than three years D-III)
(vide para 5.1.2 (ii)(b)

Illustration 1
Existing Stock of Advances classified as 'doubtful more than 3 years' as on
March 31, 2010
The outstanding amount as on March 31, 2010: `25,000
Realisable value of security : `20,000
Period for which the advance has remained in 'doubtful' category as on March 31, 2010:
4 years (i.e. Doubtful more than 3 years)
Provisioning Requirement Tier -I banks
Provisions on
secured portion
Provisions on
unsecured portion As on....
% Amount % Amount
Total
(`)
March 31, 2011 60 12000 100 5000 17000
March 31, 2012 75 15000 100 5000 20000
March 31, 2013 100 20000 100 5000 25000


------------------------------






33

Annex - 5
(Clarification on certain frequently asked questions)
(vide para no 7)
1. Whether a working capital account will become an NPA if the stock statements
are not submitted regularly? What should be the period for which the stock
statements can be in arrears before the account is treated as an NPA?
Banks should ensure that drawings in the working capital accounts are covered by the
adequacy of current assets, since current assets are first appropriated in times of
distress. Considering the practical difficulties of large borrowers, stock statements relied
upon by the banks for determining drawing power should not be older than three
months. The outstanding in the account based on drawing power calculated from stock
statements older than three months would be deemed as irregular. A working capital
borrowal account will become NPA if such irregular drawings are permitted in the
account for a continuous period of 90 days (with effect from March 31, 2004).
2. Whether an account will become an NPA if the review / renewal of regular / ad-
hoc credit limits are not done when due? What should be periodicity of review /
renewal to decide the present status of an account?
Regular and ad-hoc credit limits need to be reviewed / regularised not later than three
months from the due date / date of ad-hoc sanction. In case of constraints such as non-
availability of financial statements and other data from the borrowers, the branch should
furnish evidence to show that renewal / review of credit limits is already on and would
be completed soon. In any case, delay beyond six months is not considered desirable
as a general discipline. Hence, an account where the regular / ad-hoc credit limits have
not been reviewed or have not been renewed within 180 days from the due date / date
of ad-hoc sanction will be treated as NPA, which period will be reduced to 90 days with
effect from March 31, 2004.
3. Regularisation of the account around the date of balance sheet - Whether it will
be in order to treat a borrowal account as 'standard', if it has been irregular for a
major part of the year, but has been regularised near the balance sheet date?
The asset classification of borrowal accounts where a solitary or a few credits are
recorded before the balance sheet date should be handled with care and without scope
for subjectivity. Where the account indicates inherent weakness on the basis of the data
available, the account should be deemed as a NPA. In other genuine cases, the banks
must furnish satisfactory evidence to the Statutory Auditors / Inspecting Officers about
the manner of regularisation of the account to eliminate doubts on their performing
status.
4. Classification of NPAs where there is a threat to recovery
How should the instructions on classification of NPAs straightaway as doubtful
or a loss asset be interpreted and what can be termed as a 'significant credit
impairment'?
34

An NPA need not go through the various stages of classification in case of serious
credit impairment and such assets should be straightway classified as a doubtful / loss
asset as appropriate. Erosion in the value of security can be reckoned as significant
when the realizable value of the security is less than 50 per cent of the value assessed
by the bank or accepted by RBI at the time of last inspection, as the case may be. Such
NPAs may be straightaway classified under doubtful category and provisioning should
be made as applicable to doubtful assets.
5. Classification of credit facilities under consortium
In certain cases of consortium accounts, though the record of recovery in the
account with a member bank may suggest that the account is a NPA, the banks
submit that, at times, the borrower has deposited adequate funds with the
consortium leader / member of the consortium and the bank's share is due for
receipt. In such cases, will it be in order for the member bank to classify the
account as 'standard' in its books?
Asset classification of accounts under consortium should be based on the record of
recovery of the individual member banks and other aspects having a bearing on the
recoverability of the advances. Where the remittances by the borrower under
consortium lending arrangements are pooled with one bank and / or where the bank
receiving remittances is not parting with the share of other member banks, the account
will be treated as not serviced in the books of the other member banks, and therefore,
be treated as NPA. The banks participating in the consortium should, therefore, arrange
to get their share of recovery transferred from the lead bank or get an express consent
from the lead bank for the transfer of their share of recovery, to ensure proper asset
classification in their respective books.
6. Appropriation of recoveries - What is the practice to be adopted by banks
regarding appropriation of recoveries in NPA accounts?
In the absence of a clear agreement between the bank and the borrower for the
purpose, banks should adopt an accounting principle and exercise the right of
appropriation of recoveries in a uniform and consistent manner.
7. Activities allied to agriculture - Our existing guidelines stipulate that advances
granted for agricultural purposes may be treated as NPA if interest and / or
instalments towards repayment of principal remains unpaid for two harvest
seasons but for a period not exceeding two half years. Whether the same norm
can be extended to floriculture and allied agriculture activities like poultry, animal
husbandry, etc.?
As indicated in para 2.1.3, the norms for classifying direct agricultural advances (listed
in Annex 1), as NPAs have since been revised w.e.f. September 30, 2004.
8. Overdues in other credit facilities - There are instances where banks park the
dues from a borrower in respect of devolved letters of credit and invoked
guarantees in a separate account, irrespective of whether the borrower's credit
35

facilities are regular or not. How to determine when the account in which such
dues are parked has become an NPA?
A number of banks adopt the practice of parking the dues of the borrower in respect of
devolved letters of credit and invoked guarantees in a separate account which is not a
regular sanctioned facility. As a result these are not reflected in the principal operating
account of the borrower. This renders application of the prudential norms for
identification of NPAs difficult. It is, therefore, advised that if the debts arising out of
devolvement of letters of credit or invoked guarantees are parked in a separate account,
the balance outstanding in that account also should be treated as a part of the
borrower's principal operating account for the purpose of application of prudential norms
on income recognition, asset classification and provisioning.
9. Treatment of loss assets - An NPA account will be classified as a loss asset
only when there is no security in the account or where there is considerable
erosion in the realisable value of the security in the account. What can be termed
as a 'considerable' erosion for the account to be classified as a loss asset?
If the realisable value of the security, as assessed by the bank / approved valuers / RBI
is less than 10 per cent of the outstanding in the borrowal accounts, the existence of
security should be ignored and the asset should be straightaway classified as loss
asset. It may be either written off after obtaining necessary permission from the
competent authority as per the Co-operative Societies Act / Rules, or fully provided for
by the bank.
10. Valuation of Security - A major source of divergence in provisioning
requirement was the realisable value of the primary and collateral security. Can
uniform guidelines be prescribed for adoption in this area, at least for large value
accounts?
With a view to bringing down divergence arising out of difference in assessment of the
value of security it has been decided that in cases of NPAs with balance of `10 lakh and
above :
a) The current assets and their valuation are looked into at the time of Statutory Audit /
Concurrent audit. However, in order to enhance the reliability on stock valuations, stock
audit at annual intervals by external agencies could be considered in case of larger
advances. The cut off limit and the names of the external agencies may be finalised by
the Board.
b) 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.
------------------------------
36

Annex - 6
Prudential Guidelines on Restructuring of Advances
Key Concepts
i) Advances
The term 'Advances' will mean all kinds of credit facilities including cash credit,
overdrafts, term loans, bills discounted / purchased, receivables, etc. and investments
other than that in the nature of equity.
ii) Fully Secured
When the amounts due to a bank (present value of principal and interest receivable as
per restructured loan terms) are fully covered by the value of security, duly charged in
its favour in respect of those dues, the bank's dues are considered to be fully secured.
While assessing the realisable value of security, primary as well as collateral securities
would be reckoned, provided such securities are tangible securities and are not in
intangible form like guarantee etc., of the promoter / others. However, for this purpose
the bank guarantees, State Government Guarantees and Central Government
Guarantees will be treated on par with tangible security.
iii) Restructured Accounts
A restructured account is one where the bank, for economic or legal reasons relating to
the borrower's financial difficulty, grants to the borrower concessions that the bank
would not otherwise consider. Restructuring would normally involve modification of
terms of the advances / securities, which would generally include, among others,
alteration of repayment period / repayable amount / the amount of instalments / rate of
interest (due to reasons other than competitive reasons).
iv) Repeatedly Restructured Accounts
When a bank restructures an account a second (or more) time(s), the account will be
considered as a 'repeatedly restructured account'. However, if the second restructuring
takes place after the period up to which the concessions were extended under the terms
of the first restructuring, that account shall not be reckoned as a 'repeatedly restructured
account'.
v) SMEs
Small and Medium Enterprises is an undertaking defined in circular
UBD.PCB.Cir.No.35/09.09.001/06-07 dated April 18, 2007.


37

vi) Specified Period

Specified Period means a period of one year from the date when the first payment of
interest or installment of principal falls due under the terms of restructuring package.
vii) Satisfactory Performance
Satisfactory performance during the specified period means adherence to the following
conditions during that period.
Non-Agricultural Cash Credit Accounts
In the case of non-agricultural cash credit accounts, the account should not be out of
order any time during the specified period, for duration of more than 90 days / 180 days
as applicable to Tier I and Tier II UCBs respectively. In addition, there should not be any
overdues at the end of the specified period.
Non-Agricultural Term Loan Accounts
In the case of non-agricultural term loan accounts, no payment should remain overdue
for a period of more than 90 days. In addition there should not be any overdues at the
end of the specified period.
All Agricultural Accounts
In the case of agricultural accounts, at the end of the specified period the account
should be regular.
------------------------------
38

Annex - 7
Prudential Guidelines on Restructuring of Advances
Particulars of Accounts Restructured
(` in lakh)

Housing
Loans
SME Debt
Restructuring
Others
No. of Borrowers
Amount outstanding
Standard advances
restructured
Sacrifice (diminution in
the fair value)

No. of Borrowers
Amount outstanding
Sub standard
advances
restructured
Sacrifice (diminution in
the fair value)

No. of Borrowers
Amount outstanding
Doubtful advances
restructured
Sacrifice (diminution in
the fair value)

No. of Borrowers
Amount outstanding
Total
Sacrifice (diminution in
the fair value)


---------------------------------
39

Annex - 8
Prudential Guidelines on Restructuring of Advances
Asset Classification of Restructured Accounts under the Guidelines
Particulars Case 1 Case 2 Case 3 Case 4
Assumed due date of
payment
31.01.2007 31.01.2007
Assumed date of
restructuring
31.03.2007 31.03.2007 31.03.2007 31.03.2007
Period of delinquency as on
the date of restructuring
2 months 2 months 18 months 18 months
Asset Classification (AC)
before restructuring
'Standard' 'Standard' 'Doubtful -
less than
one year'
'Doubtful -
less than one
year'
I.
Date of NPA NA NA 31.12.05
(Assumed)
31.12.05
(Assumed)
Asset Classification (AC) on Restructuring
Assumed status of the
borrower
Eligible for
special
regulatory
treatment
Not eligible for
special
regulatory
treatment
Eligible for
special
regulatory
treatment
Not eligible
for special
regulatory
treatment
AC after restructuring 'Standard' Downgraded
to
'Substandard'
w.e.f 31.03.07
(i.e., on the
date of
restructuring)
'Doubtful -
less than
one year'
'Doubtful -
less than one
year'
II.
Assumed first payment due
under the revised terms
31.12.07 31.12.07 31.12.07 31.12.07
40

Asset Classification after Restructuring

The account performs satisfactorily as per restructured terms
(a) AC during the
specified one year
period (i.e., from
31.12.07 to
31.12.08)
No change
(i.e.,
remains
'Standard')
'Doubtful - less
than one year'
w.e.f. 31.03.08
(i.e. one year
after
classification
as
'Substandard')
No change
(i.e.,
remains
'Doubtful -
less than
one year')
'Doubtful -
one to three
years' w.e.f.
31.12.07
(i.e., one
year after
classification
as 'Doubtful
less than one
year')
A.
(b) AC after the
specified one year
period
Continues in
'Standard'
category
Upgraded to
'Standard'
category
Upgraded to
'Standard'
category
Upgraded to
'Standard'
category
If performance not satisfactory vis-a-vis restructured terms
(a) AC during the
specified one year
period (in case the
unsatisfactory
performance is
established before
completion of one
year period)
Treated as
substandard
w.e.f
30.4.2007
and
downgraded
to 'Doubtful
less than
one year'
with effect
from
30.04.08.
'Doubtful - less
than one year'
w.e.f. 31.03.08
(i.e. one year
after
classification
'Doubtful
one to three
years' w.e.f.
31.12.07
'Doubtful -
one to three
years' w.e.f.
31.12.07
(i.e., one
year after
classification
as 'Doubtful
less than one
year' (on
31.12.06)
III.
B.
(b) AC after the
specified one year
period, if the
unsatisfactory
performance
continues
Will migrate
to 'Doubtful -
one to three
years' w.e.f.
30.04.09
and
'Doubtful
more than
three years'
w.e.f.
30.04.2011.
Will migrate to
'Doubtful - one
to three years'
w.e.f. 31.03.09
and 'Doubtful
more than
three years'
w.e.f.
31.03.2011.
Will migrate
to 'Doubtful
- more than
three years'
w.e.f.
31.12.09
Will migrate
further to
'Doubtful
more than
three years'
w.e.f.
31.12.09

41

Annex - 9
Guidelines on Asset Classification of Projects under Implementation
Banks must fix a Date of Commencement of Commercial Operations (DCCO) for all
project loans at the time of sanction of the loan / financial closure* (in the case of
multiple banking or consortium arrangements). For the purpose of IRAC norms, all
project loans may be divided into the following two categories; (i) Project Loans for
infrastructure sector (ii) Project Loans for non-infrastructure sector.
* For greenfield projects, financial closure is defined as a legally binding commitment of equity holders
and debt financiers to provide or mobilise funding for the project. Such funding must account for a
significant part of the project cost which should not be less than 90 per cent of the total project cost
securing the construction of the facility.

1. Project Loans for Infrastructure Sector
1.1 A loan for an infrastructure project will be classified as NPA during any time
before commencement of commercial operations as per record of recovery
(90 days overdue), unless it is restructured and becomes eligible for
classification as 'standard asset' in terms of paras.1.3 to 1.5 below.
1.2 A loan for an infrastructure project will be classified as NPA if it fails to
commence commercial operations within two years from the original DCCO,
even if it is regular as per record of recovery, unless it is restructured and
becomes eligible for classification as 'standard asset' in terms of paras 1.3 to
1.5 below.
1.3 There may be occasions when completion of projects is delayed for legal and
other extraneous reasons like delays in Government approvals etc. All these
factors, which are beyond the control of the promoters, may lead to delay in
project implementation and involve restructuring / rescheduling of loans by
banks. If a project loan classified as 'standard asset' is restructured any time
during the period up to two years from the original date of commencement of
commercial operations (DCCO), in accordance with the instructions contained
in our circular UBD.PCB.BPD.No.53/13.05.000/2008-09 dated March 6, 2009
on prudential guidelines on restructuring of advances, it can be retained as a
standard asset if the fresh DCCO is fixed within the following limits, and
further provided the account continues to be serviced as per the restructured
terms :
42

a) Infrastructure Projects involving Court Cases

Up to another 2 years (beyond the existing extended period of 2 years i.e
total extension of 4 years), in case the reason for extension of date of
commencement of production is arbitration proceedings or a court case.
b) Infrastructure Projects delayed for other reasons beyond the
Control of Promoters
Up to another 1 year (beyond the existing extended period of 2 years i.e.
total extension of 3 years), in other than court cases.
The dispensation in para 1.3 is subject to the condition that the
application for restructuring should be received before the expiry of
period of two years from the original DCCO and when the account is still
standard as per record of recovery. The other conditions applicable would
be :
a. In cases where there is moratorium for payment of interest, banks
should not book income on accrual basis beyond two years from the
original DCCO, considering the high risk involved in such restructured
accounts.
b. Banks should maintain provisions on such accounts as long as these
are classified as standard assets as under :

Until two years from the original DCCO 0.40%
During the third and the fourth years after the
original DCCO.
1.00%

For the purpose of these guidelines, mere extension of DCCO will also be
treated as restructuring even if all other terms and conditions remain the
same.
2. Project Loans for Non-Infrastructure Sector
2.1 A loan for a non-infrastructure project will be classified as NPA during any
time before commencement of commercial operations as per record of
recovery (90 days overdue), unless it is restructured and becomes eligible for
classification as 'standard asset' in terms of paras 2.3 to 2.5 below.
43

2.2 A loan for a non-infrastructure project will be classified as NPA if it fails to

commence commercial operations within six months from the original DCCO,
even if it is regular as per record of recovery, unless it is restructured and
becomes eligible for classification as 'standard asset' in terms of paras 2.3 to
2.4 below.
2.3 In case of non-infrastructure projects, if the delay in commencement of
commercial operations extends beyond the period of six months from the
date of completion as determined at the time of financial closure, banks can
prescribe a fresh DCCO, and retain the "standard" classification by
undertaking restructuring of accounts in accordance with the provisions
contained in our circular dated March 6, 2009, provided the fresh DCCO does
not extend beyond a period of twelve months from the original DCCO. This
would among others also imply that the restructuring application is received
before the expiry of six months from the original DCCO, and when the
account is still "standard" as per the record of recovery.
The other conditions applicable would be :
a) In cases where there is moratorium for payment of interest, banks should
not book income on accrual basis beyond six months from the original
DCCO, considering the high risk involved in such restructured accounts.
b) Banks should maintain provisions on such accounts as long as these are
classified as standard assets as under :

Until the first six months from the original
DCCO
0.40%
During the next six months 1.00%

2.4 For this purpose, mere extension of DCCO will also be treated as
restructuring even if all other terms and conditions remain the same.
3. These guidelines will however not be applicable to restructuring of advances
referred to in para 7.1.3 of circular dated March 6, 2009 viz., commercial real
estate and housing loans.
4. Other Issues
4.1 All other aspects of restructuring of project loans before commencement of
commercial operations would be governed by the provisions of our circular
dated March 6, 2009. Restructuring of project loans after commencement of
commercial operations will also be governed by these instructions.
44

4.2 Any change in the repayment schedule of a project loan caused due to an
increase in the project outlay on account of increase in scope and size of the
project, would not be treated as restructuring if :
i) The increase in scope and size of the project takes place before
commencement of commercial operations of the existing project.
ii) The rise in cost excluding any cost-overrun in respect of the original
project is 25% or more of the original outlay.
iii) The bank re-assesses the viability of the project before approving the
enhancement of scope and fixing a fresh DCCP.
iv) On re-rating, (if already rated) the new rating is not below the previous
rating by more than one notch.
Definition of 'Infrastructure Lending'
Any credit facility in whatever form extended by lenders (i.e. banks, FIs or NBFCs) to
an infrastructure facility as specified below falls within the definition of "infrastructure
lending". In other words, a credit facility provided to a borrower company engaged in
developing or operating and maintaining, or developing, operating and maintaining
any infrastructure facility that is a project in any of the following sectors, or any
infrastructure facility of a similar nature
a road, including toll road, a bridge or a rail system; a highway project including other
activities being an integral part of the highway project; a port, airport, inland waterway
or inland port; a water supply project, irrigation project, water treatment system,
sanitation and sewerage system or solid waste management system;
telecommunication services whether basic or cellular, including radio paging,
domestic satellite service (i.e., a satellite owned and operated by an Indian company
for providing telecommunication service), network of trunking, broadband network and
internet services; An industrial park or Special Economic Zone generation or
generation and distribution of power; transmission or distribution of power by laying a
network of new transmission or distribution lines; construction relating to projects
involving agro-processing and supply of inputs to agriculture; construction for
preservation and storage of processed agro-products, perishable goods such as
fruits, vegetables and flowers including testing facilities for quality ; construction of
educational institutions and hospitals; laying down and / or maintenance of gas, crude
oil and petroleum pipelines, any other infrastructure facility of similar nature.
-------------------------------
45

Appendix
A. List of Circulars as of June 30, 2011 consolidated in the Master Circular
Sr.
No.
Circular No. Date Subject
1 UBD.BPD.(PCB).CIR.No.49/09.14.00
0/2010-11
24.05.2011 Enhancement in Gratuity Limits -
Prudential Regulatory Treatment
2 UBD.BPD.Cir.No.59/09.14.000/2009-
10
23.04.2010 IRAC norms for Projects under
implementation
3 UBD.BPD.Cir.No.29/09.11.600/2009-
10
08.12.2009 Review of Monetary Policy -
Provisioning requirement
4 UBD.CO.LS.Cir.No.66/07.01.000/200
8-09
06.05.2009 Annual Policy Statement for
2009-10-Extension of area of
operation - Liberalisation
5 UBD.PCB.BPD.53/13.05.000/2008-
09
06.03.2009 Prudential Guidelines on
Restructuring of Advances
6 UBD.PCB.Cir.No.29/09.11.600/2008-
09
01.12.2008 Provisioning for Standard Assets
and Risk Weights for exposures
7 UBD.PCB.Cir.No.47/09.11.600/07-08 26.05.2008 Provisioning Requirement for
Standard Assets
8 UBD.PCB.Cir.No.38/09.14.000/2007-
08
02.04.2008 Income Recognition, Asset
Classification & Provisioning
Norms
9 UBD.(PCB).Cir.No.35/09.20.001/07-
08
07.03.2008 Classification of UCBs for
Regulatory Purposes
10 UBD.PCB.Cir.No.38/9.14.000/06-07 30.04.2007 Annual Policy Statement for the
year 2007-08-Income
recognition, asset classification
and provisioning norms
11 UBD.PCB.Cir.No.30/9.11.600/06-07 19.02.2007 3rdQuarter Review of Annual
Statement on Monetary Policy for
2006-07-Provisioning for
Standard Assets
46

12 UBD.PCB.Cir.57/09.11.600/05-06 15.06.2006 Annual Policy Statement for the

Year 2006-07-additional
provisioning requirements for
standard assets.
13 UBD.PCB.Cir.20/09.11.600/05-06 24.11.2005 Mid Term Review of Annual
Policy Statement for the year
2005-06-additional provisioning
for standard assets
14 UBD.PCB.Cir.1/09.140.00/05-06 04.07.2005 Income recognition and asset
classification norms
15 UBD.PCB.Cir.42/09.140.00/04-05 30.03.2005 Prudential Norm- IRAC and other
related matters-procedure for
accounting of accrued interest
16 UBD.PCB.Cir.26/09.140.00/04-05 01.11.2004 Prudential Norms-State Govt
Guaranteed Exposures.
17 UBD.PCB.Cir.21/12.05.05/04-05 27.09.2004 Annual Policy Statement for the
Year 2004-05 additional
provisioning requirements for
NPAs.
18 UBD.PCB.cir.22/12.05.05/04-05 27.09.2004 Income recognition, asset
classification, provisioning-
adoption of 90 days norms
19 UBD.PCB.Cir.17/13.04.00/04-05 04.09.2004 Income recognition, asset
classification, provisioning-
adoption of 90 days norms
20 UBD.PCB.Cir.9/13.04.00/04-05 04.08.2004 Income recognition, asset
classification, provisioning-
adoption of 90 days norms
21 UBD.PCB.Cir.No.55/12.05.05/ 30.06.2004 Annual Policy Statement for the
year 2004-05. Additional
Provisioning requirement for
NPAs.
22 UBD.PCB.Cir.No.53/13.05.03/ 30.06.2004 Annual Policy Statement for the
year 2004-05. Prudential Norms
47

for Agricultural Advances

23 UBD.PCB.No.49/12.05.03/2003-04 01.06.2004 Income recognition, asset
classification, provisioning norms
24 UBD.CIR.48/13.04.00/2002-03 22.05.2003 IRAC - 90 days norm for
recognition of loan impairment -
exemptions
25 UBD.BSD-I.No.15/12.05.05/2002-03 11.09.2002 Income recognition, asset
classification, provisioning and
other related matters
26 UBD.BSD.I.15/12.05.05/2002-03 11.09.2002 Income recognition, asset
classification, provisioning - 12
months norms
27 UBD.BSD.I.PCB.No.44/12.05.05/ 21.05.2002 Classification of Agricultural
Advances
28 UBD.BSD.I.PCB.22/12.05.05/2001-
02
12.11.2001 Treatment of restructured
accounts
29 UBD.No.BSD.I.PCB13/12.05.05/200
102
06.10.2001 Divergence in asset classification
and provisioning
30 UBD.No.BSD.I.PCB.12/12.05.05/01-
02
.5.10.2001 Income Recognition and asset
classification - Adoption of 90
days norm
31 UBD.No.BSD.I.16/12.05.05/2000-
2001
8.12.2000 Income Recognition and asset
classification, provisioning and
related matters - "Past Due"
concept.
32 UBD.No.BSD.I.PCB/14/12.05.05/ 20.11.2000 Income recognition, Asset
Classification and Provisioning
33 UBD.CO.BSD-I.PCB.34/12.05.05/99-
2000
24.05.2000 Income Recognition, Asset
Classification, Provisioning and
Valuation of Investments
34 UBD.No.BSD.PCB./25/12.05.05/99-
00
28.02.2000 Income Recognition, Asset
Classification, Provisioning and
48

other related matters

35 UBD.No.BSD.I/22/12.05.00/99-2000 08.02.2000 IRAC - Agricultural loans affected
by natural calamities
36 UBD.No.BSD.I/11/12.05.00/1999-
2000
12.10.1999 Clarification on classification of
gold loans into Non-performing
Assets
37 UBD.No.BSD.I/2/12.05.05/1999-
2000
28.07.1999 Income Recognition, Asset
Classification and Provisioning -
Concept of Commencement of
Commercial Production
38 UBD.No.BSD-I.29/12.05.05/98-99 23.04.1999 Income recognition asset
classification and other related
matters
39 UBD.No.BSD-I.2/12.05.01/98-99 17.07.1998 Prudential norms for Income
Recognition, Asset classification
and provisioning - Agricultural
Advances
40 UBD.No.I&L.(PCBs)42/12.05.00/ 20.03.1997 Prudential norms - Income
Recognition, Asset Classification,
Provisioning and other related
matters.
41 UBD.No.I&L.(PCBs)68/12.05.00/ 10.06.1996 Income Recognition, assets
classification, provisioning and
other related matters
Clarifications
42 UBD.No.I&L.(PCB)61/12.05.00/94-95 06.06.1995 Income recognition, asset
classification, provisioning and
other related matters Valuation of
investment and others
43 UBD.No.I&L(PCB)46/12.05.00/94-95 28.02.1995 IRAC and other related matters -
Procedure for accounting
accrued interest
44 UBD.I&L(PCB)37/12.05.00/94-95 09.01.1995 Income recognition, assets
classification, provisioning and
49

other related matters

45 UBD.No.I&L.86/12.05.00/93-94 28.06.1994 IRAC, provisioning and other
related matters
46 UBD.No.I&L.63/12.05.00/93-94 01.03.1994 Income recognition, assets
classification, provisioning and
other related matters
47 UBD.No.48/12.05.00/93-94 14.01.1994 IRAC, provisioning and other
related matters
48 UBD.No.45/12.05.00/93-94 24.12.1993 IRAC and other related matters
clarification regarding credit
facilities backed by Government
Guarantees
49 UBD.I&L.71/J .1/92-93 17.06.1993 IRAC, Povisioning and other
related matters - clarification
50 UBD.No.I&L.63J -I/92-93 16.04.1993 IRAC, provisioning and other
related matters
51 UBD.No.I&L.38/J .1-92/93 09.02.1993 IRAC, provisioning and other
related matters
52 UBD.No.I&L 51/J .1-90/91 23.02.1991 Classification of Non-Performing
Loans
B. List of Other Circulars from which instructions have also been consolidated
in the Master Circular
No. Circular No. Date Subject
1. UBD.No.DS.PCB.Cir.3/13.04.00/2002-03 20.07.2002 Charging of interest at
monthly rests
2. UBD.No.POT.PCB.CIR.No.45/09.116.00/2000-
01
25.04.2001 Application of CRAR
Norms to PCBs
3. UBD.No.DS.PCB.20/13.04.00/97-98 10.11.1997 Compounding of
Interest on Agri
Advance

50