Prudential Norms on Income Recognition, Asset Classification, and Provisioning
This Master Circular outlines the prudential guidelines for banks and financial institutions on income recognition, asset classification, and provisioning pertaining to advances.
Income Recognition: The circular emphasizes the importance of a robust income recognition policy, which applies to government-guaranteed accounts as well. It highlights the need for reversal of income, appropriation of recovery in NPAs, and interest application.
Asset Classification: The circular categorizes Non-Performing Assets (NPAs) into three categories: Sub-Standard, Doubtful, and Loss. It also defines ‘Out of Order’ and ‘Overdue’ status.
Provisioning: The circular outlines the provisioning requirements for NPAs, including the computation of NPA levels.
Restructuring of Advances: The circular provides guidelines for the restructuring of advances, including the framework for revitalizing distressed assets in the economy.
Annexes: The circular includes annexes that provide additional information and guidelines on the prudential norms.
The circular aims to ensure that banks and financial institutions maintain a robust risk management framework and adhere to prudent practices in income recognition, asset classification, and provisioning.
Chat with the Master Circular: