RBI Extends Time for NBFCs to Follow New NPA Upgradation Norms
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On Tuesday, the Reserve Bank of India (RBI) granted an extension of time till 30 September 2022 for Non-Banking Financial Companies (NBFCs) to follow the new NPA upgradation norms. Earlier, the RBI had given time till 31 March 2022 for upgrading NPAs only after the repayment of all arrears and principal dues.

RBI Norms on Upgrading Accounts Classified as NPAs

The new NPA norms stipulate that the loan accounts classified as NPAs can be upgraded as ‘standard’ assets only when borrowers pay the entire principal and interest arrears. It also stated that when borrowers have more than one credit facility from a lending institution, loan accounts will be upgraded from NPA to standard asset category only upon repayment of the entire principal and interest arrears relating to all the credit facilities.

Earlier, the RBI allowed the NBFCs to comply with the new NPA norms by 31 March 2022. However, on Tuesday, the RBI issued a circular with clarifications on the new NPA norms and provided time for the NBFCs to comply with the upgradation of accounts classified as NPAs till 30 September 2022. All other new NPA norms will be applicable as per the specified timeline, i.e. 31 March 2022.

Clarification on New NPA Norms

The RBI, on Tuesday, also provided clarification on the new NPA norms in its circular. The clarification provided that the definition of ‘out of order’ will apply to all loan products offered as an overdraft facility, including those that entail interest repayments as only credits and not meant for business purposes.

The RBI circular stated that the earlier 90 days period for determining the out of order status of a CC/OD account would include the day for which the day-end process is being run. The requirements related to reporting information to CRILC will continue to be governed in terms of extant instructions for respective entities. The circular also provided that there would be no interference with the guidelines on Ind-AS implementation by the NBFCs.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in

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