RBI Tweaks NPA Divergence Disclosure Norms

The Reserve Bank of India on Monday asked banks to disclose bad loan divergences in their financial statements if the additional provisioning exceeds 10 percent of profit before provision and contingencies.

In a notification, the RBI said it is observed that some banks, on account of low or negative net profit after tax, are required to disclose divergences even where the additional provisioning assessed by the RBI is small, which is contrary to the regulatory intent that only material divergences should be disclosed.

Therefore, it has been decided that henceforth, banks should disclose divergences, if "the additional provisioning for NPAs assessed by the RBI exceeds 10 percent of the reported profit before provisions and contingencies for the reference period".

Earlier, banks were to make suitable disclosures if the additional provisioning requirements assessed by the RBI exceeded 15 percent of the published net profits after tax for the reference period.

The RBI further said disclosure has also to be made if additional gross non-performing assets identified by the central bank exceed 15 percent of the published incremental gross NPAs for the reference period.

In another notification regarding large exposures framework, the RBI said non-centrally cleared derivatives exposures will be outside the purview of exposure limits till April 1, 2020.

However, banks must compute these exposures separately and report to the Department of Banking Regulation quarterly, it said.