Mumbai: The Reserve Bank of India (RBI) on Monday directed banks to complete the automation of bad loan recognition and asset classification by June 30, 2021.
In a notification, the RBI said that the processes for NPA identification, income recognition, provisioning and generation of related returns in many banks are not yet fully automated.
“Banks are still found to be resorting to manual identification of NPA and also over-riding the system generated asset classification by manual intervention in a routine manner,” it said.
“In order to ensure the completeness and integrity of the automated Asset Classification (classification of advances/investments as NPA/NPI and their upgradation), Provisioning calculation and Income Recognition processes, banks are advised to put in place/upgrade their systems to conform to the following guidelines latest by June 30, 2021,” the notification said.
As per the guidelines, all borrowal accounts, including temporary overdrafts, irrespective of size, sector or types of limits, shall be covered in the automated IT based system (system) for asset classification, upgradation, and provisioning processes. Bank investments shall also be covered under the system.
Further, asset classification rules shall be configured in the system, in compliance with the regulatory stipulations.