Reserve Bank of India, vide its Circular dated 11th October, 2022, requires Commercial banks (excluding Regional Rural Banks (RRBs) to disclose details of divergence in asset classification and provisioning where such divergence assessed by the Reserve Bank of India (RBI) exceeds certain specified thresholds , in terms of paragraph C.4(e) of Annexure III to the Reserve Bank of India (Financial Statements-Presentation and Disclosures) Directions, 2021. Further it is decided to introduce similar disclosure requirements for Primary (Urban) Co-operative Banks (UCBs) and revise the specified thresholds for commercial banks to strengthen compliance with income recognition, asset classification and provisioning norms.
Banks shall make suitable disclosures in the manner specified in paragraph C.4(e) of Annex III to the afore-mentioned Directions for the financial statements for the year ending March 31, 2023, if either or both of the following conditions are satisfied:
- the additional provisioning for non-performing assets (NPAs) assessed by the RBI exceeds 10 per cent of the reported profit before provisions and contingencies for the reference period; and
- the additional Gross NPAs identified by the RBI exceed 10 per cent of the reported incremental Gross NPAs for the reference period.
Provided further that in the case of UCBs the threshold for reported incremental Gross NPAs specified in paragraph 2(b) above shall be 15 per cent, which shall be reduced progressively in a phased manner, after review.
The thresholds specified above shall be revised for disclosures in annual financial statements for the year ending March 31, 2024 as under:
| Ref. | Threshold linked to: | Commercial Banks (%) | UCBs (%) |
| 2(a) | Reported profit before provisions and contingencies | 5 | 5 |
| 2(b) | Reported incremental Gross NPA | 5 | 15* |
| *may be reduced subject to review |
These instruction are applicable to all commercial banks (excluding Regional Rural Banks) and all Primary (Urban) Co-operative Banks and shall come into effect for disclosures in the notes to the annual financial statements of the year ending March 31, 2023, and onwards.
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