Involved over guide identification of dangerous loans by some banks, the RBI on Monday requested lenders to introduce an automatic IT-based system for asset classification and provisioning.
In a round, the RBI stated in August 2011 banks have been suggested to place in place acceptable IT programs for identification of non-performing property (NPAs) and technology of associated knowledge and returns, each for regulatory reporting and financial institution’s personal administration data system (MIS) necessities.
It’s, nevertheless, noticed that the processes for NPA identification, revenue recognition, provisioning and technology of associated returns in lots of banks should not but totally automated, the RBI stated.
“Banks are nonetheless discovered to be resorting to guide identification of NPA and in addition over-riding the system generated asset classification by guide intervention in a routine method,” it added.
The RBI requested banks to place in place or improve their IT programs with a purpose to make sure the completeness and integrity of the automated asset classification, provisioning calculation and revenue recognition processes newest by June 30, 2021.
All borrowal accounts, together with momentary overdrafts, no matter dimension, sector or kinds of limits, must be lined within the automated IT-based system for asset classification, upgradation, and provisioning processes, it stated.
“Banks’ investments shall even be lined underneath the system,” it stated, including that asset classification guidelines must be configured within the system, in compliance with the regulatory stipulations.
Additional, calculation of provisioning requirement also needs to be system based mostly as per pre-set guidelines for varied classes of property, worth of safety as captured within the system and some other regulatory stipulations issued now and again on provisioning necessities.
“The System shall deal with each down-grade and improve of accounts via Straight Via Course of (STP) with out guide intervention,” RBI stated.
Exceptions could also be granted from system pushed classification in sure circumstances, that are anticipated to be minimal and momentary, topic to sure situations.
The RBI additional stated the adherence to the directions will probably be examined as a part of supervisory evaluation of the banks.
In case of non-compliance, appropriate supervisory or enforcement motion could be initiated towards the involved financial institution, it added.