Treatment of accounts restructured under CDR program: Classification and Provisioning
The criteria for classification of accounts will be on the basis of record of recovery as per the existing prudential norms. The asset classification will be as per the lender bank’s record of recovery and will be bank specific.
The auditor should examine whether the lender has applied the usual asset classification norms pending outcome of the account with the CDR Cell. The asset classification status should be restored to the position, which existed at the time of reference to the cell if the restructuring under the CDR system takes place.
The auditor should also verify whether that in case a standard asset has been restructured second or more time, it has been downgraded to “substandard” asset.
The auditor should also verify whether the proper disclosure in the Notes to Accounts in respect of CDR of SME undertaken by the bank during the year, as prescribed in the RBI’s circular, has been made.