RBI pulls up banks for delay in automation of NPA recognition process

Sets June deadline to conform to norms

The Reserve Bank of India (RBI) has pulled up banks for delay in automating the process of identifying non-performing assets (NPA), provisioning, and filing returns with banking regulator. It has asked the banks to comply with the guidelines by June 30, 2021.

Banks were advised in August 2011 to have an appropriate IT system for identification of NPAS and generation of related data/returns, both for regulatory reporting and banks' own MIS requirements.

In a communication to bank chief executives, the RBI said it was observed that process in many banks is not yet fully automated. Banks are still found to be resorting to manual identification of NPAS and over-riding the system-generated asset classification by manual intervention in a routine manner.

All accounts (borrowing), including temporary overdrafts (irrespective of size, sector, or types of limits), should be covered in the automated system within the new deadline. Banks’ investments shall also be covered under the system. Asset classification rules should be configured in the system, in compliance with the regulatory stipulations, the RBI said.

For process of calculating of provisions should also be System based as per preset rules for various categories of assets, value of security. Also in addition, income recognition and de-recognition of impaired assets (NPAS/NPIS) shall be system driven. The amount required to be reversed from the income account should be obtained from the system without any manual intervention.