Accelerated Provision Norms
In cases where banks fail to report SMA status of the accounts to CRILC or resort to methods with the intent to conceal the actual status of the accounts or evergreen the account, banks will be subjected to accelerated provisioning for these accounts and/or other supervisory actions as deemed appropriate by RBI. The current provisioning requirement and the revised accelerated provisioning in respect of such non performing accounts are provided in para 31.1 of Master Circular no. RBI/2015-16/101 DBR.No.BP.BC.2/21.04.048/2015-16 dated July 1, 2015.
Further, any of the lenders who have agreed to the restructuring decision under the CAP by JLF and is a signatory to the ICA and DCA, but changes their stance later on, or delays/refuses to implement the package, will also be subjected to accelerated provisioning requirement as indicated at para 31.1 of the aforementioned Master Circular, on their exposure to this borrower i.e., if it is classified as an NPA. If the account is standard in those lenders’ books, the provisioning requirement would be 5%.
Presently, asset classification is based on record of recovery at individual banks and provisioning is based on asset classification status at the level of each bank. However, if lead bank or the bank with second largest AE as per Reserve bank of India circular no. DBOD.BP.BC.No.45/21.04.132/2014-15 dated October 21, 2014 fail to convene the JLF or fail to agree upon a common CAP within the stipulated time frame, the account will be subjected to accelerated provisioning as indicated at para 31.1 of the aforementioned Master Circular , if it is classified as an NPA. If the account is standard in those lenders’ books, the provisioning requirement would be 5%.
If an escrow maintaining bank under JLF/CDR mechanism does not appropriate proceeds of repayment by the borrower among the lenders as per agreed terms resulting into down gradation of asset classification of the account in books of other lenders, the account with the escrow maintaining bank will attract the asset classification which is lowest among the lending member banks but will also be subjected to corresponding accelerated provision instead of normal provision. Further, such accelerated provision will be applicable for a period of one year from the effective date of provisioning or till rectification of the error, whichever is later.