January 20, 2005

All State and District Central Co-operative Banks

Dear Sir,

Please refer to our circular RPCD.No.RF.BC. 89/07.37.02/98-99 dated April 09, 1999 on the above subject. At present, asset classification and provisioning requirements in respect of State Government guaranteed exposures are linked to invocation of the State Government guarantee.

2. The prudential norms pertaining to State Government guaranteed exposures, (i.e. advances and investments) have been reviewed and it has been decided to delink the requirement of invocation of State Government guarantee for asset classification and provisioning in respect thereof and subject them to the same norms as applicable to exposures not guaranteed by the State Governments.

3. However, with a view to enabling banks to have a smooth transition in the matter, the revised prudential norms in respect of State Government guaranteed exposures (i.e. both advances and investments) will be implemented in a phased manner as under:

4. Please acknowledge receipt to our concerned Regional Office.

Yours faithfully,