BANKING AFFAIRS

Detailed explanation-1: -1.2 Broadly, the policy of income recognition should be objective and based on record of recovery rather than on any subjective considerations. Likewise, the classification of assets of banks has to be done on the basis of objective criteria, which would ensure a uniform and consistent application of the norms.

Detailed explanation-2: -IRAC Prudential norms specify that an amount is to be treated as overdue if it is not paid on the due date fixed by the bank. Therefore, the exact due dates for repayment of a loan, frequency of repayment, breakup between principal and interest, examples of SMA/NPA classification dates, etc.

Detailed explanation-3: -i-IRAC is a web based solution for NPA management, based on rules and conditions, designed as per the regulatory norms of Income Recognition, Asset Classification and provisioning requirements.

Detailed explanation-4: -To implement these recommendations, the RBI in Oct 1998, initiated the second phase of financial sector reforms by raising the banks’ capital adequacy ratio by 1% and tightening the prudential norms for provisioning and asset classification in a phased manner on the lines of the Narasimham Committee-II report.