RBI revises norms for state govt-guaranteed securities
The Reserve Bank has reviewed the norms relating to state government-guaranteed exposures with a view to bring more discipline on part of state governments and greater transparency on balance sheets of term-lending and refinance institutions such ...
By PTI |
MUMBAI: The Reserve Bank has reviewed the norms relating to state government-guaranteed exposures with a view to bring more discipline on part of state governments and greater transparency on balance sheets of term-lending and refinance institutions such as NABARD and SIDBI.
The apex bank has decided to delink the requirement of invocation of guarantee for deciding the asset classification and provisioning requirements in respect of state government guaranteed exposures, an RBI notification said.
The bank said that from March 31 next year, state government guaranteed advances and investments in their securities would attract asset classification and provisioning norms if interest or principal due to the financial institution remains overdue for more than 90 days.
The changes in these provisioning norms were made on the recommendations of a Technical Group on Refinancing Institutions, also called the Muniappan Group.
This would lead to a greater transparency on the balance sheets of financial institutions such as NABARD, NHB, SIDBI, Exim Bank and IFCI Ltd, which presently link asset classification and provisioning norms of state government exposures to invocation of state government guarantee.
Further, in case of agricultural activity, the period of default would be related to agricultural cycle and not 90 days, the RBI said.
The apex bank also said credit facilities backed by central government guarantee, though overdue, may be treated as a non-performing asset (NPA) only when the government repudiates its guarantee when invoked.
Also, the exemption from classification of central government guaranteed advances as NPA is not for the purpose of recognition of income.
"This existing norm would continue," the apex bank said.
The apex bank has decided to delink the requirement of invocation of guarantee for deciding the asset classification and provisioning requirements in respect of state government guaranteed exposures, an RBI notification said.
The bank said that from March 31 next year, state government guaranteed advances and investments in their securities would attract asset classification and provisioning norms if interest or principal due to the financial institution remains overdue for more than 90 days.
The changes in these provisioning norms were made on the recommendations of a Technical Group on Refinancing Institutions, also called the Muniappan Group.
This would lead to a greater transparency on the balance sheets of financial institutions such as NABARD, NHB, SIDBI, Exim Bank and IFCI Ltd, which presently link asset classification and provisioning norms of state government exposures to invocation of state government guarantee.
Further, in case of agricultural activity, the period of default would be related to agricultural cycle and not 90 days, the RBI said.
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The apex bank also said credit facilities backed by central government guarantee, though overdue, may be treated as a non-performing asset (NPA) only when the government repudiates its guarantee when invoked.
Also, the exemption from classification of central government guaranteed advances as NPA is not for the purpose of recognition of income.
"This existing norm would continue," the apex bank said.
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