Sunday, June 19, 2016
IRAC and Provisioning -Spread Over of Shortfall on Sale of NPAs to SCs/RCs
Banks were allowed to spread over the shortfall in the value of sale over net book value (NBV), over a period of two years for NPAs sold up to 31/03/16.
It has now been decided to extend it for sale of NPAs up to 31/03/17. However, from 1/04/16 to 31/03/17, banks will be allowed to amortise the shortfall over a period of only four quarters from the quarter in which the sale took place.
Where a bank chooses to make the necessary provisions over more than one quarter and this results in the full provisioning remaining to be made, banks should debit 'other reserves' by the amount remaining un-provided. However, banks should proportionately reverse the debits to ‘other reserves’ and complete the provisioning by debiting profit and loss account, in the subsequent quarters of the next financial year.
Based on RBI circular dated 13/06/2016. For any further clarification please refer www.rbi.org.in ……….Poppy