Demonetisation – Effect on Asset Classification
Consequent upon withdrawal of the legal tender status of the INR 500 and INR 1,000 notes w.e.f. November 8, 2016, the RBI had issued a notification dated November 21, 2016 providing an additional 60 days beyond what is applicable for the concerned regulated entity (RE) for recognition of a loan account as sub-standard in the following cases:
– Running working capital accounts (OD/CC)/crop loans, with any bank, the sanctioned limit whereof is Rs. 1 crore or less;
– Term loans, whether business or personal, secured or otherwise, the original sanctioned amount whereof is Rs. 1 crore or less, on the books of any bank or any NBFC, including NBFC (Micro Finance Institution). This shall include housing loans and agriculture loans;
– Loans sanctioned by banks to NBFC (MFI), NBFCs, Housing Finance Companies, and Primary Agriculture Credits and by State Cooperative Banks to District Control Co-operative Banks.
– The above guidelines will also be applicable to loans extended by DCCBs.
The above dispensation would be subject to following conditions:
– It would apply to dues payable between November 1, 2016 and December 31, 2016. It is also clarified that the aforesaid guideline is a short-term deferment of classification as substandard due to delay in payment of dues arising during the period specified above and does not result in restructuring of the loans.
– Dues payable before November 1 and after December 31, 2016, will be covered by the extant instruction for the respective RE with regard to recognition of NPAs.
– The additional time given shall only apply to defer the classification of an existing standard asset as substandard and not for delaying the migration of an account across sub-categories of NPA.
Vide Notification RBI/2016-17/198 DBR.No.BP.BC.49/21.04.048/2016-17 date December 28, 2016 RBI has decided to provide 30 days, in addition to the 60 days provided in notification dated November 21, 2016 in the following categories of loans:
– Running working capital accounts (OD/CC)/crop loans, with any bank, the sanction limit whereof is Rs. 1 crore or less;
– Term loans for business purpose, secured or otherwise, the original sanctioned amount whereof is Rs. 1 crore or less, on the books of any bank or any NBFC, including NBFC (MFI). This shall include agricultural loans;
– The limits at (a) and (b) above are mutually exclusive limits applicable to respective categories of loans. The above dispensation will apply to dues payable between November 1, 2016 and December 31, 2016.
– The additional time given shall only apply to defer the classification of an existing standard asset as substandard and not for delaying the migration of an account across sub-categories of NPA.