Loan Impairment Norms Relaxed

Urban co-operative banks (UCBs) will raise a toast to the credit policy as the Reserve Bank of India (RBI) has exempted both gold loans and small loans up to Rs one lakh from the 90-days norm for recognition of loan impairment. Further, the central bank has substantially enhanced the limit on the ceiling on unsecured advances extended by them.

Commercial banks (including RRBs) and UCBs were advised to adopt the 90-days norm for recognition of loan impairment from the year ending March 31, 2004, with a view to moving towards international best practices and to ensure greater transparency.

However, in view of the difficulties expressed by the UCBs in adhering to the 90-days norm for recognition of loan impairment, the RBI said that small loans will continue to be governed by the 180-days norm for classification as non-performing assets.

 

Small advances up to Rs one lakh account for almost 50 per cent of an UCBs total advances portfolio.