Adoption of 90 days’ norm for recognition of loan impairment - Application of interest at monthly rests - RBI - Reserve Bank of India
Adoption of 90 days’ norm for recognition of loan
impairment - Application of interest at monthly rests
DBOD No. Dir. BC. 73/13.03.00/2001-02 March 9, 2002 All Commercial Banks Dear Sir, Adoption of 90 days’ norm for recognition of loan Please refer to paragraph 1.A.b of our circular DBOD.No.BP.BC. 116/21.04.048/00-01 dated May 2, 2001 wherein banks have been, inter-alia, advised that with a view to moving towards international best practices and ensure greater transparency in repayment of loans, banks should adopt 90 days’ norm for recognition of loan impairment from the year ending March 31, 2004. As a facilitating measure, banks should move over to charging of interest at monthly rests by April 1, 2002. In this connection, some of the banks have approached us for clarification on issues such as application of interest on agricultural advances at monthly intervals, options available for applying interest at longer rests etc. and requested us to issue detailed operational guidelines on documentation formalities. 2. As you may be aware, in terms of paragraph 1 of our Directive DBOD. No. Dir. BC. 106/13.03.00/2000-01 dated April 19, 2001 read with paragraph 1.1.1 and 1.1.2 of our Master Circular DBOD No. Dir. BC. 06/13.07.01/2001-02 dated August 9, 2001, banks should charge interest at specified rates on loans/advances/cash credits/overdrafts or any other financial accommodation granted/provided/renewed by them at quarterly or longer rests. The matter was therefore examined by us in consultation with Indian Banks’ Association (IBA). It has now been decided that in partial modification of paragraph 1 of our Directive DBOD.No. Dir.BC. 106/13.03.00/ 2000-01 dated April 19, 2001 and paragraph 1.1.1 and 1.1.2 of our Master Circular DBOD No. Dir. BC. 06/13.07.01/2001-02 dated August 9, 2001 and with effect from April 1, 2002, banks may move over to charging of interest on loans/advances at monthly rests subject to following conditions:
2. An amending Directive DBOD. No. Dir. BC. 72/13.03.00/2001-02 dated March 9, 2002 is enclosed. Yours faithfully, (M.R. Srinivasan) |