The
following amendments are made in the said Rules:-
RULES-7
(Linkage between borrower’s equity and total borrowings
from NBFIs)
The
period of relaxation for renewing existing facilities, which
will expire on 30-06-1999 provided the borrower, injects additional
equity during the extended period.
RULE-8
(Maintenance of Current Ratio and Debt/Equity Ratio)
The
borrower were required to maintain current assets to current
liabilities ratio of 1:1 as from 30-06-1998 which period has
now been extended upto 30-06-1999 provided the differential
between required and existing ratios is made good during the
extended period i.e. upto 30th June, 1999.
RULE-14
(Provisioning for Non-performing Assets)
Following new Paras (iii), (iv) and (vi) may be added at the
end of the rule:-
III)
Subjective evaluation of performance and non-performing credit
portfolio for the a counting year ending June 1998 and onwards
shall be made for risk assessment both for adjustment by way
of down grading or upgrading the category of classification.
The evaluation shall be carried out on the basis of adequacy
of security inclusive of its realizable value, cash flow of
borrower, his operation in the account, documentation covering
advances and credit worthiness of the borrower etc. The assessment
will be made by NBFIs as follows.
a)
Where in a loan account which was lastly classified as loss,
doubtful or substandard, the borrower had been making regular
repayments during the following year and continues even upto
the time of finalization of annual accounts of the NBFIs it
may be put into upgraded category provided collaterals available
with the NBFIs are strong and/or of sufficient value to cover
the outstanding amount and cash flow position justifies.
b)
In case a classified account is upgraded and no regular repayment
was thereafter received for a consecutive period of six months
or was irregular preceding next balance sheet date of the
NBFIs, the account is reclassified according to aging criteria.
c)
Only the realizable value of assets duly mortgaged/pledged
against NBFIs loans and advances shall be considered while
evaluating the assets and d determining the category of classification.
The auditors/inspectors shall determine the realizable value
in accordance with the guidelines and criteria that may be
laid down by the State Bank from time to time. The same will
further be subject to check by the State Bank Inspectors.
iv)
In case of OAEM classification for the accounting year ending
June 1998 and onwards, no provision need be created and in
case of sub-standard classification, provision for the accounting
year ending June 1998 and onwards, will be created at 20%
of the difference resulting from outstanding balance of principal
less the amount of liquid assets realizable without recourse
to a court of law.
v)
Dedication of liquid assets from provisioning requirements
may also be allowed from advance classified as “Loss”
in line with other categories of classification. Further,
bank guarantees from reputable international banks and pledged
gold if any, may also be included in the definition of liquid
assts.
vi)
The existing statement Nos. 20, 20A, 20B and 20C prescribed
under Rule-15 have been revised accordingly form reporting
of each category of loan. Your are requested to furnish the
information for the accounting year ending June, 1998 and
onwards in the said preformed to the Banking Supervision Department-III.