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- The Reserve Bank of India (RBI) has said that banks should disclose Non performing assets(NPA) divergences if there is a more than 10% difference in their assessment of bad loans versus that of the regulator.
- The divergence in non-performing assets is the difference between the central bank’s assessment and the bank’s reported non-performing loans.
- Earlier,the banks were required to disclose additional provisioning requirements if divergences were found to be exceeding 15% of the published net profits after tax.
- However, the RBI did not change any rules that permit banks to reveal divergences if the additional gross non-performing asset (NPA) exceeded 15% of the reported incremental gross NPAs.
- Non-performing assets(NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.Banks are required to classify NPAs further into (a)Substandard assets: Assets which has remained NPA for a period less than or equal to 12 months, (b) Doubtful assets: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months and (c)Loss assets:Loss asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted, although there may be some salvage or recovery value.
