Page 54 - Banking Finance March 2022

RBI CIRCULAR

Rupee Interest Rate Derivatives (Reserve Prudential norms on Income Recognition,

Bank) Directions - Review Asset Classification and Provisioning
pertaining to Advances – Clarifications
RBI/2021-22/157
February 10, 2022 RBI/2021-2022/158
February 15, 2022
1. Please refer to Paragraph 5 of the Statement on
Developmental and Regulatory Policies, issued as a part 1. Please refer to the clarifications issued in respect of
of the sixth Bi-monthly Monetary Policy Statement for Prudential norms on Income Recognition, Asset
2021-22 dated February 10, 2022 regarding permitting Classification and Provisioning vide circular
banks in India to deal in foreign currency settled DOR.STR.REC.68/21.04.048/2021-22 dated November
Overnight Indexed Swaps (OIS). Attention is also invited 12, 2021 (‘Circular’).
to the Rupee Interest Rate Derivatives (Reserve Bank) 2. In view of several queries received seeking certain
Directions, 2019 dated June 26, 2019 (hereinafter, clarifications, it is advised as under:
Directions).
i. The definition of ‘out of order’, as clarified in the
2. Banks in India having Authorised Dealer Category-I (AD Circular, shall be applicable to all loan products
Cat-I) license under FEMA, 1999, shall be eligible to being offered as an overdraft facility, including those
offer Foreign Currency Settled OIS (FCS-OIS) based on not meant for business purposes and/or which entail
the Overnight Mumbai Interbank Outright Rate interest repayments as the only credits.
(MIBOR) benchmark published by Financial Benchmarks
ii. The ‘previous 90 days period’ for determination of
India Pvt. Ltd. (FBIL) to persons not resident in India as ‘out of order’ status of a CC/OD account shall be
well as to other AD Cat-I banks. Banks can undertake inclusive of the day for which the day-end process
these transactions through their branches in India, is being run.
through their International Financial Services Centre
(IFSC) Banking Units (IBUs) or through their foreign iii. In case of borrowers having more than one credit
branches (in case of foreign banks operating in India, facility from a lending institution, loan accounts shall
through any branch of the parent bank). Banks may be upgraded from NPA to standard asset category
undertake FCS-OIS transactions beyond onshore market only upon repayment of entire arrears of interest
hours. and principal pertaining to all the credit facilities.
iv. The circular does not make any changes to the
3. The instructions shall be applicable with immediate
effect. The updated Directions are attached. requirements related to reporting of information to
CRILC, which will continue to be governed in terms
4. The instructions contained in this circular have been of extant instructions for respective entities1.
issued in exercise of the powers conferred under
v. The circular does not, in any way, interfere with
section 45W of the Reserve Bank of India Act, 1934
the extant guidelines on implementation of Ind-AS
read with section 45U of the Act and of all the powers
by NBFCs.
enabling it in this behalf. A reference is also invited to
the Foreign Exchange Management (Permissible Capital 3. Paragraph 10 of the Circular stipulates that loan
Account Transactions) Regulations, 2000 (Notification accounts classified as NPAs may be upgraded as
No. FEMA 1/2000-RB dated May 03, 2000) and Foreign ‘standard’ asset only if entire arrears of interest and
Exchange Management (Debt Instruments) principal are paid by the borrower. NBFCs shall have
Regulations, 2019 (Notification No. FEMA 396/2019-RB time till September 30, 2022 to put in place the
dated October 17, 2019), as amended from time to necessary systems to implement this provision. All other
time. instructions of the Circular shall continue to be
applicable as per the timelines specified therein.
(Dimple Bhandia)
Chief General Manager (Manoranjan Mishra)
Chief General Manager

54 | 2022 | MARCH | BANKING FINANCE