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AKP Banking & Finance Digest- February 21, 2022

Updated: Feb 28

Read this week in our update- Reserve Bank of India (RBI) withdraws 100 circulars in the second tranche of its regulatory sweep. Clarifications on prudential norms on income recognition, asset classification, and provisioning pertaining to advances issued.

Highlights of the Week:
RRA recommends withdrawal of 100 circulars in the second tranche
RBI issues clarifications on prudential norms on income recognition, asset classification, and provisioning pertaining to advances
Shri Sanjay Malhotra nominated on RBI Central Board
RBI issues master circular on house finance

1. Finance Minister addresses the Central Board of Directors of RBI

RBI held the 593rd meeting of the Central Board of Directors (Board) under the chairmanship of Shri Shaktikanta Das, Governor, RBI. Smt. Nirmala Sitharaman, Union Minister of Finance and Corporate Affairs addressed the Board wherein the Finance Minister presented the rationale behind the Union Budget 2022-23 as well as the Government’s priorities. Further, the Board in its meeting reviewed the current economic situation along with global and domestic challenges to the Indian economy.[1]

2. RBI issues clarifications on prudential norms on income recognition, asset classification, and provisioning pertaining to advances

RBI has issued clarifications to the master circular on prudential norms on income recognition, asset classification, and provisioning pertaining to advances (IRACP norms) dated November 12, 2021 (Circular). The following are the clarifications that have been made with respect to the Circular:[2]

  • The definition of 'out of order' shall apply to all loan products offered as an overdraft facility, including those not intended for commercial purposes and/or those with interest repayments as the only credits;

  • The 'previous 90 days period' for determining a cash credit and overdraft (CC/OD) account's 'out of order' status shall include the day for which the day-end process is running;

  • If a borrower has more than one credit facility with a lending institution, the loan accounts shall only be upgraded from non-performing asset (NPA) to standard asset category when the entire arrears of interest and principal for all credit facilities have been paid;

  • The Circular has made no modifications to the requirements for reporting information to Central Repository of Information on Large Credits (CRILC), which shall continue to be governed by the existing instructions for each entity; and

  • The Circular does not interfere with the existing norms for NBFCs implementing Ind-AS.

According to paragraph 10 of the Circular, loan accounts designated as NPAs shall only be upgraded to a standard asset if the borrower pays all arears of interest and principal. Non-banking financial companies (NBFCs) have until September 30, 2022 to put in place the systems necessary to implement above clarification.


3. Shri Sanjay Malhotra nominated on RBI Central Board

RBI has notified Central Government’s nomination of Shri Sanjay Malhotra, Secretary, Department of Financial Services, Ministry of Finance, as a director on the Central Board of Directors of RBI that shall be effective from February 16, 2022.[3]

4. New Definition of Micro, Small and Medium Enterprises - Clarification

RBI has notified the amendment in Notification no. S.O. 2119 (E), according to which the existing Entrepreneurs Memorandum (EM) Part II and Udyog Aadhaar Memorandum (UAMs) of the MSMEs obtained till June 30, 2020, shall remain valid till March 31, 2022.[4]

5. RRA recommends withdrawal of 100 circulars in the second tranche

RBI has notified the withdrawal of 100 circulars as proposed by Regulations Review Authority (RRA) in the second tranche of recommendations. Further, RBI has notified the list of 65 regulatory returns which shall either be discontinued or merged with other returns or shall be converted into online returns. The exact date of discontinuation/merger and online filing of the returns shall be notified by RBI in due course. [5]

6. RBI issues master circular on housing finance

RBI has issued a master circular on housing finance consolidating all the existing instructions issued up to February 17, 2022. It shall be applicable to all scheduled commercial banks excluding regional rural banks (RRBs).[6]






[1] Press Release: 2021-2022/1713, Reserve Bank of India, February 14, 2022

[2] RBI/2021-2022/158 DOR.STR.REC.85/21.04.048/2021-22, Reserve Bank of India, February 15, 2022 [3] Press Release: 2021-2022/1730, Reserve Bank of India, February 16, 2022

[4] RBI/2021-2022/161 FIDD.MSME & NFS.BC.No.16/06.02.31/2021-22, Reserve Bank of India, February 18, 2022

[5] Press Release: 2021-2022/1738, Reserve Bank of India, February 18, 2022

[6] RBI/2021-22/171 DOR.CRE.REC.No.87/08.12.001/2021-22, Reserve Bank of India, February 18, 2022

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