Home >Industry >Banking >Calculation of provisioning needs to be system-based by 30 June, 2021: RBI tells banks
(Photo: Reuters)
(Photo: Reuters)

Calculation of provisioning needs to be system-based by 30 June, 2021: RBI tells banks

Calculation of provisioning requirement shall also be System-based as per pre-set rules for various categories of assets, states latest RBI directive for banks

Reserve Bank of India on Monday asked banks to upgrade systems by 30 June, 2021. The banking regulator told banks that calculation of provisioning needs to be system-based.

Here are a few highlights from RBI's latest directive to banks.

  • All borrowal accounts, including temporary overdrafts, irrespective of size, sector or types of limits, shall be covered in the automated IT-based system (System) for asset classification, upgradation, and provisioning processes. Banks’ investments shall also be covered under the System.
  • Asset classification rules shall be configured in the System, in compliance with the regulatory stipulations.
  • Calculation of provisioning requirement shall also be System-based as per pre-set rules for various categories of assets, value of security as captured in the System and any other regulatory stipulations issued from time to time on provisioning requirements.
  • In addition, income recognition/derecognition in case of impaired assets (NPAs/NPIs) shall be system driven and amount required to be reversed from the income account should be obtained from the System without any manual intervention.
  • The System shall handle both down-grade and upgrade of accounts through Straight Through Process (STP) without manual intervention.
  • The System based asset classification shall be an ongoing exercise for both down-gradation and up-gradation of accounts. Banks should ensure that the asset classification status is updated as part of day end process. Banks should also be able to generate classification status report at any given point of time with actual date of classification of assets as NPAs/NPIs.
  • Exceptions may be granted from System driven classification in certain circumstances, which are expected to be minimum and temporary. It may be emphasised that these exceptions are from automated classification and not from IRAC norms and shall be subject to the conditions as explained below.
  • Banks shall not resort to manual intervention / over-ride in the System based asset classification process. In any exceptional circumstance where manual intervention is required to override the System classification, it must have at least two level authorisation.
  • Banks shall maintain logs for all exceptions i.e. manual interventions / over-rides including, but not limited to, the date and time stamp; purpose/reason; user-IDs, name and designation of those making such manual intervention and necessary account details. These logs shall also be stored for a minimum period of three years and not be tampered with during the storage period. These logs shall be system generated.

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