RBI changes the reporting standard for restructured accounts
The Reserve Bank Thursday asked banks to give information on restructured advances in their annual balance sheets separately for both stressed and satisfactory performance account.
Mumbai: The Reserve Bank Thursday asked banks to give information on restructured advances in their annual balance sheets separately for both stressed and satisfactory performance account.
As per the present reporting practice, 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," RBI said in a notification.
"...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," it said.
As per the present guidelines, banks need to disclose information relating to restructured advances as per the Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances.
They have to disclose information about the number and amount of advances restructured and the amount of diminution in the fair value of the restructured advances under Standard Advances Restructured; Sub-Standard Advances Restructured; and Doubtful Advances Restructured categories.
Under these categories, advances restructured under CDR mechanism, SME Debt Restructuring and other categories of restructuring are required to be shown separately.
An RBI Working Group to review the existing Prudential Guidelines on Restructuring of Advances had recommended that restructured advances were no longer required to be disclosed as restructured accounts in the annual balance sheets once the higher provisions and risk weights on the restructured advances revert back to the normal level on account of satisfactory performance during the prescribed period.
However, the Working Group said the provision for diminution in the fair value of restructured accounts on such restructured accounts should continue to be maintained by banks.
It also recommended that banks should disclose details of accounts restructured on a cumulative basis excluding the standard restructured accounts which cease to attract higher provision and risk weight (if applicable), provisions made on restructured accounts under various categories and details of movement of restructured accounts.
RBI said that these disclosure requirements will be effective from the financial year 2012-13.