Master Circular- Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by FIs- Amendment - আৰবিআই - Reserve Bank of India
Master Circular- Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by FIs- Amendment
RBI/2015-16/283 January 07, 2016 All-India Term-Lending and Refinancing Institutions Dear Sir/ Madam Master Circular- Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by FIs- Amendment Please refer to Paragraph No.2.5.3.4 (iii) of Master Circular DBR.No.FID.FIC.3/01.02.00/2015-16 dated July 01, 2015 on Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by FIs. 2. The position has been reviewed with a view to aligning the asset classification norms applicable to All India Financial Institutions with those for banks. Accordingly, the Paragraph No.2.5.3.4 (iii) of the above Master Circular is amended as follows:-
Yours faithfully, (Rajinder Kumar) 1 The preference share are subordinate to bank loans and therefore it is possible that the borrowing company is generating enough surplus to service the bank loan, but not to pay dividend on the preference shares. In addition, the non-payment of dividend on preference shares does not expose the borrowing entity to the risk of initiation of bankruptcy proceedings by the holders of the preference shares. Therefore, it is not necessary to downgrade loans in a situation where the investments in the preference shares had become non-performing investments. However, the converse is not true. If a loan becomes non-performing, the investment in preference shares being subordinate to bank loans will have certainly turned non-performing. |