Provisioning Norms

1. Provisioning is made on all types of assets i.e. Standard, Sub standard, Doubtful and loss assets.
2. Standard Assets :
a. Direct advance to agriculture or Micro and Small Enterprise (Not medium) : 0.25%of outstanding;
b. Commercial Real Estate: 1%of outstanding;
c. Housing Loans with teaser interest rates: 2%of outstanding; All others: 0.4%of outstanding
d. The provisions on Standard Assets is shown as ‘Contingent Provisions against Standard Assets’ under ‘Other Liabilities and Provisions Others’ in Schedule 5 of the balance sheet.
3. Sub Standard Assets:
a. Secured sub standard: 15% of outstanding balance without considering securities available.
b. Unsecured sub standard: if the loan was unsecured from the beginning: 25%of outstanding balance.
c. If unsecured sub standard for infrastructure: 25%of outstanding balance.
d. Unsecured exposure means exposure where the realisable value of the security, as assessed by the bank/approved valuers/Reserve Bank’s inspecting officers, is not more than 10 percent, ab-initio, of the outstanding exposure.
4. Doubtful Assets:
1. Unsecured portion:100%
2. Secured portion: 25% to 100% depending on the period for which account is doubtful
Age of Doubtful Asset /br>Provision as % of secured portion
Doubtful up to 1 year D1 25% of RVS (Realisable value of security)
Doubtful for more than 1 year to 3 years D2 40% of RVS
Doubtful for more than 3 years; D3 100% of RVS
5. Loss Assets: 100%of the outstanding amount.
6. If loan is guaranteed by ECGC, CGFT or CGFLHS, provision not on guaranteed portion
7. Provision on advance against FD, NSC, LIP, KVP as per their asset classification.
8. Overall provisions: Provisioning coverage ratio, including floating provisions, should not be less than 70 per cent.
9. Provisioning coverage ratio is the ratio of provisioning to gross NPAs.
10. Provision on Standard account to be kept as part of Other Liabilities in Schedule-5 of bank’s
balance sheet.
11. Provision on Standard accounts to be done on Global balance and for NPA accounts on Gross Balance
12. For Doubtful accounts, provision to be done separately for secured portion and unsecured portion of total balance in the account.
13. In case of standard and sub standard assets, provision is on outstanding balance without bifurcating the balance into secured or unsecured.
14. Floating provisions can be deducted from Gross NPAs or treated as part of Tier Il capital but not both.

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