Prudential norms on Income Recognition , Asset Classification and Provisioning pertaining to Advances

( Ref. RBI Circular – RBI/2021-22/117 DOR.No.STR.REC.64/21.04.048/2021-22 )

( Ref RBI Circular – RBI/2021-2022/125 DOR.STR.REC.68/21.04.048/2021-22 dated 12.11.2021 )

Henceforth, the exact due dates for repayment of a loan, frequency of repayment, breakup between principal and interest, examples
of SMA/NPA classification dates, etc. shall be clearly specified in the loan agreement and the borrower shall be apprised of the same
at the time of loan sanction and also at the time of subsequent changes, if any, to the sanction terms/loan agreement till full repayment
of the loan. In cases of loan facilities with moratorium on payment of principal and/or interest, the exact date of commencement of
repayment shall also be specified in the loan agreements. These instructions shall be complied with at the earliest, but not later than
December 31, 2021, in respect of fresh loans. In case of existing loans, however, compliance to these instructions shall necessarily be
ensured as and when such loans become due for renewal/review.
TERM LOAN
Interest and or Installment of principal remain overdue for period of more than 90 days in respect of Term Loan

CASH CREDIT/OVERDRAFT
a) A/c’s remain “Out of Order” in respect of an CC/OD Or
Out of Order:- If the Outstanding Balance is more than sanctioned Limit or Drawing power for more than 90 days Or
Either there is no credits are not enough to recover the interest.
b) CC/OD Limit renewed/reviewed within 90 days from due of renewal Or
c) If Stock statement which is Submitted in Bank by Customer is
 3 Months Old – Irregular A/c
 6 months Old or no fresh stock statement is received in last 6 Months is NPA.
Up gradation of accounts classified as NPAs
It has been observed that some lending institutions upgrade accounts classified as NPAs to ‘standard’ asset category upon payment of
only interest overdue, partial overdue, etc. In order to avoid any ambiguity in this regard, it is clarified that loan accounts classified as
NPAs may be upgraded as ‘standard’ asset only if entire arrears of interest and principal are paid by the borrower. With regard to up
gradation of accounts classified as NPA due to restructuring, non-achievement of date of commencement of commercial operations
(DCCO), etc., the instructions as specified for such cases shall continue to be applicable.

ASSET CLASSIFICATION /PROVISIONING NORMS

↓
↓ ↓
Standard Assets Non Performing Assets
↓ Above 90 Days
↓ ↓ From NPA date
Regular Stress / Irregular
↓
1. Loans other than revolving facilities ↓
↓ ↓ ↓ Sub Standard Doubtful Assets Loss Assets
SMA –O SMA –1 SMA –2
Up to 30 days More than 30 More than 60 NPA for 91 Days Up to 12 NPA for above 12 Non
Overdue days & up to days & up to 90 Months Months Recoverable
60 days days Secured 100 % for
Overdue Overdue
Co-Op Bank Secured &
↓ Up to 1 Year (D1) Unsecured
2. Cash Credit/Overdraft 10 % on Assets
↓ ↓ ↓ Total Outstanding 13Month to 24 Month
Outstanding SMA –1 SMA –2 Amount
balance remains
continuously in 25 % 20 %
excess of the More than 30 More than 60
sanctioned limit days & up to days & up to 90 Other Bank
or drawing 60 days days 1 to 3 years (D2)
power,
↓ ↓
whichever is Secured Unsecured*
lower, for a 15 % 25 % 25Month to 48Month
period of →
40 % 30 %

Above 3 years (D3)

49Months & above

100 %

Unsecured portion
100 %
 Standard Assets Minimum Provisioning
↓
Tier - I Tier - II
*Unsecured Loan:-
Direct Advances to Agriculture
If realisable value of securities at the time of sanction of loan
& Micro Small Enterprises 0.25 % 0.25 %
Was 10 % or less than 10 % of the loan amount sanctioned.
Sectors
CRE – Shop, Office etc. 1.00 % 1.00 %
CRE – Housing 0.75 % 0.75 %
All others & Medium
0.25 % 0.40 %
Enterprises

Teaser Rate Housing Loan 2.00 %

Housing Loan at Teaser Rate after 1 year
from the date on which the rates are 0.40 %
reset at higher rate

NPA EXAMPLE
If due date of a loan account is 31/03/2021,
If, Borrower fails to pay, then steps as follows:-

1 2
Full Dues are not received
before the Bank runs the day-
end process for this date, the
date of Overdue shall be
March 31, 2021.
If it continuous to remain
overdue, then this account
shall get tagged as SMA-1
upon running day-end
process on April 30, 2021.
i.e. upon completion of 30
days of being continuously
overdue. Accordingly, the
date of SMA-1 classification
for that account shall be
30.04.2021.
3 4
Similarly, if the account 30/06/2021 - NPA or Sub standard
continues to remain
30/06/2022 - NPA or Sub standard
overdue, it shall get tagged
as SMA-2 upon running
day-end process on May 30,
2021 and if continues to
remain overdue further, it
shall get classified as NPA
upon running day-end
process on June 29, 2021.

5 6 7
03/07/2025 - D3
01/07/2022 - D1 02/07/2023 - D2
01/07/2023 - D1 02/07/2025 - D2 &
then loss Asset

Consumer Education
With a view to increasing awareness among the borrowers, Banks shall place consumer education literature on their websites,
explaining with examples, the concepts of date of overdue, SMA and NPA classification and up gradation, with specific reference to
day-end process. Banks may also consider displaying such consumer education literature in their branches by means of posters and/or
other appropriate media. Further, it shall also be ensured that their front-line officers educate borrowers about all these concepts,
with respect to loan availed by them, at the earliest, but not later than March 31, 2022.
For more information please refer above RBI Circular.
JAIHIND