Mortgage Guarantee Companies Prudential Norms
The Reserve Bank of India has issued directions for Mortgage Guarantee Companies, effective from February 15, 2008.
The directions apply to all Mortgage Guarantee Companies registered with the Reserve Bank of India.
Key Provisions
Definitions: The directions define key terms such as “Mortgage Guarantee”, “Mortgage Guarantee Company”, and “Remaining Maturity of the Instruments”.
Income Recognition: Income recognition and accounting standards are specified, including the rate of discount and provisioning requirements.
Asset Classification: Assets are classified into standard, sub-standard, doubtful, and loss categories, with provisioning requirements for each category.
Provisioning Requirements: Provisions for losses on invoked guarantees and Incurred But-Not-Reported (IBNR) losses are specified.
Disclosure: Mortgage Guarantee Companies are required to disclose certain information in their balance sheet.
Other Activities: The directions also cover other activities, such as the accounting year and period for which the asset has remained in doubtful category.
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