The Reserve Bank of India (“RBI”), vide a notification dated April 1, 2019 (“Notification”), has made certain changes in respect of the provisions introduced pursuant to the notification DBR.BP.BC.No.63/21.04.018/2016-17 dated April 18, 2017, issued by RBI, requiring certain disclosures by banks in the notes to accounts to their financial statements, where divergence from prudential norms on income recognition, asset classification and provisioning exceeded certain thresholds.
The Notification prescribes that banks should disclose bad loan divergences if the additional provisioning for non-performing assets (“NPAs”) assessed by RBI exceeds 10% of the reported profit before provisions and contingencies for the reference period. Prior to the Notification, banks were required to disclose divergences if the provisioning had exceeded 15% of the net profit after tax.
The Notification has made no alteration to the provision requiring banks to disclose divergences if the additional gross NPAs identified by RBI exceed 15% of the published incremental gross NPAs for the reference period.
The Notification prescribes that banks will be required to comply with either or both of the aforesaid conditions for the purpose of disclosure.
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