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.