RBI/2016-17/283
DBR.BP.BC.No.63/21.04.018/2016-17
April
18, 2017
All Commercial Banks
(Excluding Regional Rural Banks)
Madam/Dear Sir,
Disclosure in the “Notes to
Accounts” to the Financial Statements- Divergence in the asset
classification and provisioning
Please refer to paragraph 22 of
the Fourth Bi-monthly Monetary Policy Statement, 2015-16 announced on
September 29, 2015 on the captioned subject (extract enclosed).
2. The Reserve Bank of India
(RBI) assesses compliance by banks with extant prudential norms on income
recognition, asset classification and provisioning (IRACP) as part of its
supervisory processes. There have been instances of material divergences in
banks’ asset classification and provisioning from the RBI norms, thereby
leading to the published financial statements not depicting a true and fair
view of the financial position of the bank.
3. In order to ensure greater
transparency and promote better discipline with respect to compliance with
IRACP norms, it has been decided that banks shall make suitable disclosures
as per Annex, wherever either (a) the additional provisioning
requirements assessed by RBI exceed 15 percent of the published net profits
after tax for the reference period or (b) the additional Gross NPAs
identified by RBI exceed 15 percent of the published incremental Gross NPAs1 for
the reference period, or both.
4. The disclosures, as above,
shall be made in the Notes to Accounts in the ensuing Annual Financial
Statements published immediately following communication of such divergence
by RBI to the bank.
5. The disclosures in the Notes
to Accounts to the Annual Financial Statements may be included under the
sub-head Asset Quality (Non-Performing Assets) as referred to in paragraph
3.4 of Master Circular - Disclosure in Financial Statements - Notes to
Accounts Ref. DBR.BP.BC No.23 /21.04.018/2015-16 dated July 1, 2015.
6. The first such disclosure
with respect to the divergences observed by RBI for the financial year
2015-16 shall be made in the Notes to Accounts of Financial Statements for
the year ended March 31, 2017.
7. These instructions are issued
under the provisions of Section 35A of the Banking Regulation Act, 1949. It
may be noted that any contravention / non-compliance of the above
instructions shall attract penalties under the Act, ibid.
Yours faithfully,
(S.S.Barik)
Chief General Manager-in-Charge
Annex
Divergence
in Asset Classification and Provisioning for NPAs – (ref DBR.BP.BC.No.
63/21.04.018/2016-17 dated April 18, 2017)
(Rs
in thousands)
|
Sr.
|
Particulars
|
Amount
|
1.
|
Gross NPAs as on March 31,
20XX* as reported by the bank
|
|
2.
|
Gross NPAs as on March 31,
20XX as assessed by RBI
|
|
3.
|
Divergence in Gross NPAs (2-1)
|
|
4.
|
Net NPAs as on March 31, 20XX
as reported by the bank
|
|
5.
|
Net NPAs as on March 31, 20XX
as assessed by RBI
|
|
6.
|
Divergence in Net NPAs (5-4)
|
|
7.
|
Provisions for NPAs as on
March 31, 20XX as reported by the bank
|
|
8.
|
Provisions for NPAs as on
March 31, 20XX as assessed by RBI
|
|
9.
|
Divergence in provisioning
(8-7)
|
|
10.
|
Reported Net Profit after Tax
(PAT) for the year ended March 31, 20XX
|
|
11.
|
Adjusted (notional) Net Profit
after Tax (PAT) for the year ended March 31, 20XX after taking into
account the divergence in provisioning
|
|
* March 31, 20XX is the close
of the reference period in respect of which divergences were assessed
|
Extract
of Fourth Bi-monthly Monetary Policy Statement, 2015-16 dated September 29,
2015
22. As a part of its supervisory
process, the Reserve Bank assesses compliance by banks with extant
prudential norms on income recognition, asset classification and
provisioning (IRACP). There have been divergences between banks and the
supervisor as regards asset classification and provisioning. In order to
bring in greater transparency, better discipline with respect to compliance
with IRACP norms as well as to involve other stakeholders, the Reserve Bank
will mandate disclosures in the notes to accounts to the financial
statements of banks where such divergences exceed a specified threshold.
Instructions in this regard are being issued separately.
1 Published
incremental Gross NPAs shall be as per para 3.4.1 (ii) (b) of the Master
Circular reference no DBR.BP.BC
No.23/21.04.018/2015-16 dated July 1, 2015 on Disclosure in Financial Statements –
‘Notes to Accounts’.
|