Money & Banking

FIDC seeks relaxation on IRACP norms

Our Bureau | | Updated on: Dec 03, 2021
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The Council requested new norms for SMA and NPA classification to be aligned with date of effect of Scale Based Regulations

Finance Industry Development Council has urged the Reserve Bank of India to exempt small loans up to ₹2 crore given by non-banking finance companies from the new norms for SMA reporting and NPA classification.

It has also requested that the new norms for SMA and NPA classification may be aligned with the date of effect of Scale Based Regulations from October 1, 2022 for NBFCs in all layers.

“This line of approach will give adequate time to the NBFCs to implement changes in the IT systems,” said FIDC, which is a representative body of assets and loan financing NBFCs.

“We also request RBI to clarify that the circular aims at ensuring uniformity in the implementation of IRACP norms across all lending institutions and therefore, does not impact accounting under IND-AS, which all NBFCs have adopted,” FIDC said, noting that in an event where provisions under IND-AS fall short of provisions required under IRACP, the NBFC is anyway required to create an impairment reserve and therefore, adequacy of provisions under IRACP will always be ensured.

RBI’s clarifications

The RBI had on November 12 issued clarifications on prudential norms on income recognition, asset classification and provisioning (IRACP) pertaining to advances.

FIDC noted that the RBI has prescribed the date of SMA/NPA classification of borrower accounts applicable to all loans, including retail loans, irrespective of size of exposure of the lending institution, and shall reflect the asset classification status of an account at the day-end of that calendar date. Further, the upgradation of accounts classified as NPA needs to be done only when the entire arrears of interest and principal is paid by the borrower.

“We are constrained to point out that the aforesaid prescriptions have caused serious issues...We urge upon RBI to take into account the environment in which their borrowers operate and the availability of resources with the NBFCs to continue to subscribe to the economic development of the country,” it said.

Published on December 03, 2021

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