Disclosure Requirements on Advances Restructured by Banks and Financial Institutions

RBI/2012-13/409
DBOD.BP.BC.No.80/21.04.132/2012-13

January 31, 2013

All Scheduled Commercial Banks
(excluding RRBs)

Dear Sir,

Please refer to paragraph 16 of Master Circular on Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances dated July 2, 2012 in terms of which banks should disclose in their published Annual Balance Sheets, under "Notes on Accounts", information relating to number and amount of advances restructured, and the amount of diminution in the fair value of the restructured advances under the following categories:

i.  Standard Advances Restructured;

ii. Sub-Standard Advances Restructured; and

iii.  Doubtful Advances Restructured.

Under each of the category above, advances restructured under CDR Mechanism, SME Debt Restructuring Mechanism and other categories of restructuring are required to be shown separately.

2. The Working Group (WG) constituted by RBI to Review the existing Prudential Guidelines on Restructuring of Advances (Chairman: Shri B. Mahapatra) had recommended that once the higher provisions and risk weights (if applicable) on restructured advances (classified as standard either abinitio or on upgradation from NPA category) revert back to the normal level on account of satisfactory performance during the prescribed period, such advances should no longer be required to be disclosed by banks as restructured accounts in the “Notes on Accounts” in their Annual Balance Sheets. However, the provision for diminution in the fair value of restructured accounts on such restructured accounts should continue to be maintained by banks as per the existing instructions. The WG also recommended that banks may be required to disclose:

i.  details of accounts restructured on a cumulative basis excluding the standard restructured accounts which cease to attract higher provision and risk weight (if applicable);

ii.   provisions made on restructured accounts under various categories; and

iii.  details of movement of restructured accounts.

3. This recommendation has been accepted in view of the fact that in terms of present guidelines, banks are required to disclose annually all accounts restructured in their books on a cumulative basis even though many of them would have subsequently shown satisfactory performance over a sufficiently long period. As such the present position of disclosures do not take into account the fact that in many of these accounts the inherent weaknesses have disappeared and the accounts are in fact standard in all respects, but continue to be disclosed as restructured advances.

4. Accordingly, banks should henceforth disclose in their published Annual Balance Sheets, under "Notes on Accounts", information relating to number and amount of advances restructured, and the amount of diminution in the fair value of the restructured advances as per the format given in the Annex. Detailed instructions relating to the disclosure are also given in the Annex.

5. The above disclosure requirements will be effective from the financial year 2012-13.

Yours faithfully

(Deepak Singhal)

Chief General Manager-in-Charge

Encls: as above