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16 August 2012 latest rate of provision for standard assets for banking business

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17 August 2012 AS PER RBI CIRCULAR DATED 01-07-2012
FOR COMMERCIAL BANKS :
Standard assets

(i) The provisioning requirements for all types of standard assets stands as below. Banks should make general provision for standard assets at the following rates for the funded outstanding on global loan portfolio basis:

direct advances to agricultural and Small and Micro Enterprises (SMEs) sectors at 0.25 per cent;

advances to Commercial Real Estate (CRE) Sector at 1.00 per cent;

housing loans extended at teaser rates and restructured advances as as indicated in Para 5.9.13 and 5.9.14 respectively

all other loans and advances not included in (a) (b) and (c) above at 0.40 per cent

(ii) The provisions on standard assets should not be reckoned for arriving at net NPAs.

(iii) The provisions towards Standard Assets need not be netted from gross advances but shown separately as 'Contingent Provisions against Standard Assets' under 'Other Liabilities and Provisions Others' in Schedule 5 of the balance sheet.

(iv) It is clarified that the Medium Enterprises will attract 0.40% standard asset provisioning. The definition of the terms Micro Enterprises, Small Enterprises, and Medium Enterprises shall be in terms of Master Circular RPCD.SME&NFS.BC.No. 9/06.02.31/2011-12 dated July 1, 2011 on Lending to Micro, Small & Medium Enterprises (MSME) Sector.

(v) While the provisions on individual portfolios are required to be calculated at the rates applicable to them, the excess or shortfall in the provisioning, vis-a-vis the position as on any previous date, should be determined on an aggregate basis. If the provisions required to be held on an aggregate basis are less than the provisions held as on November 15, 2008, the provisions rendered surplus should not be reversed to Profit and Loss account; but should continue to be maintained at the level existed as on November 15, 2008. In case of shortfall determined on aggregate basis, the balance should be provided for by debit to Profit and Loss account.

FOR COOP BANKS :

Provision on Standard Assets

(a) From the year ended March 31, 2000, the banks should make a general provision of a minimum of 0.25 per cent on standard assets.

(b) However, Tier II banks (as defined in Circular dated May 6, 2009) will be subjected to higher provisioning norms on standard assets as under :

The general provisioning requirement for all types of 'standard advances' shall be 0.40 per cent. However, direct advances to agricultural and SME sectors which are standard assets, would attract a uniform provisioning requirement of 0.25 per cent of the funded outstanding on a portfolio basis, as hitherto.

Further, with effect from Dec 8, 2009, all UCBs (Both Tier I & Tier II) are required to make a provision of 1.00 percent in respect of advances to Commercial Real Estate Sector classified as 'standard assets'.

The standard asset provisioning requirements for all UCBs are summarized as under :

Category of Standard Asset
Rate of Provisioning

Tier II
Tier I

Direct advances to Agriculture and SME sectors
0.25 %
0.25%

Commercial Real Estate (CRE) sector
1.00 %
1.00 %

All other loans and advances not included in (a) and (b) above
0.40%
0.25%

(c) The provisions towards "standard assets" need not be netted from gross advances but shown separately as "Contingent Provision against Standard Assets" under "Other Funds and Reserves" {item.2 (viii) of Capital and Liabilities} in the Balance Sheet.

(d) If due to changes in the regulatory requirements on provisions to be maintained by banks, the provisions held by banks exceed what is required to be held by banks, such excess provisions should not be reversed. In future, if by applying the revised provisioning norms, any provisions are required over and above the level of provisions currently held for the standard category assets ; these should be duly provided for.

(e) In case banks are already maintaining excess provision than what is required / prescribed by Statutory Auditor / RBI Inspection for impaired credits under Bad and Doubtful Debt Reserve, additional provision required for Standard Assets may be segregated from Bad and Doubtful Debt Reserve and the same may be parked under the head "Contingent Provisions against Standard Assets" with the approval of their Board of Directors. Shortfall if any, on this account may be made good in the normal course.

(f) The above contingent provision will be eligible for inclusion in Tier II capital.