The Reserve Bank of India (RBI) has informed banks that some of the modifications allowed to facilitate restructuring of non-performing assets(NPA) in view of the ongoing downturn in the Indian economy will be withdrawn from July 1 2009.

“The circulars dated December 8, 2008, January 2, 2009 and February 4, 2009 for restructuring of accounts will cease to operate from July 1, 2009. Thereafter, restructuring of all accounts will be governed only by the provisions of circulars dated August 27, 2008, November 3, 2008 and April 9, 2009.,’’ said RBI on Friday.

RBI has clarified that the cases where the accounts were standard as on September 1, 2008 but slipped to NPA category before 31st March 2009, these can be reported as standard as on March 31, 2009 only if the restructuring package is implemented before 31st March 2009

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“All those accounts in case of which the packages are in process or have been approved but are yet to be implemented fully will have to be reported as NPA as on March 31, 2009 if they have turned NPA in the normal course,’’ RBI said.

However, in any regulatory reporting made by the bank after the date of implementation of the package within the prescribed period, these accounts can be reported as standard assets with retrospective effect from the date when the reference was made to the credit debt restructuring (CDR)cell in respect of cases covered under the CDR Mechanism or when the restructuring application was received by the bank in non-CDR cases.

In this regard, it may be clarified that reporting with retrospective effect does not mean reopening the balance sheet which is already finalised; what it means is that in all subsequent reporting, the account will be reported as standard and any provisions made because of its interim slippage to NPA can be reversed.RBI has also asked banks to provide extra information about the application received up to March 31, 2009 for restructuring, in respect of accounts which were standard as on September 1, 2008.

The banks will also furnish proposals approved and implemented as on March 31, 2009 and thus became eligible for special regulatory treatment and classified as standard assets as on the date of the balance sheet along with . proposals under process/implementation which turned NPA as on March 31, 2009 but are expected to be classified as standard assets on full implementation of the package.

Meanwhile in another circular RBI has said for determining the amount of unsecured advances for reflecting in the published balance sheet, the rights, licenses, authorisations, etc., charged to the banks as collateral in respect of projects (including infrastructure projects) financed by them, should not be reckoned as tangible security. Hence such advances shall be reckoned as unsecured.

Banks should also disclose the total amount of advances for which intangible securities such as charge over the rights, licenses, authority, etc. has been taken as also the estimated value of such intangible collateral. The disclosure may be made under a separate head in “Notes to Accounts”. This would differentiate such loans from other entirely unsecured loans., RBI said.

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