Prudential Norms on Income Recognition, Asset Classification, and Provisioning
The Reserve Bank of India has issued guidelines for income recognition, asset classification, and provisioning pertaining to advances.
Income Recognition: Applies to all accounts, including government-guaranteed ones.
Asset Classification: Assets are classified into three categories:
– Substandard Assets
– Doubtful Assets
– Loss Assets
Provisioning Norms: Provisioning requirements vary based on the period the advance has remained in the ‘doubtful’ category.
– Provisioning requirement ranges from 20% to 100% of the outstanding amount.
– Incremental provisioning requirement applies to total credit exposures over and above standard asset provisioning.
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