Personal Finance

Ø Every ARC shall, after taking into account the degree of well-defined credit weaknesses and extent of dependence on collateral security for realisation, classify the assets (held in its own books) into Standard Assets and NPAs.

Ø Assets acquired by ARCs for the purpose of asset reconstruction may be treated as standard assets during the planning period, if any.

Sub-Standard asset for a period not exceeding twelve months from the date it was classified as NPA;

Doubtful Asset if the asset remains a sub-standard asset for a period exceeding twelve months;

b. the asset is adversely affected by a potential threat of non-recoverability due to either erosion in the value of security or non-availability of security;

c. the asset has been identified as loss asset by the ARC or its internal or external auditor; or

d. the financial asset including SRs is not realized within the total time frame specified in the plan for realization formulated by the ARC and the ARC or Trust continues to hold those assets.

Ø Where the terms of agreement regarding interest and / or principal relating to standard asset have been renegotiated or rescheduled by a ARC (otherwise than during planning period) the asset concerned shall be classified as sub-standard asset with effect from the date of renegotiation / reschedulement or continue to remain as a doubtful asset as the case be.

Ø The asset may be upgraded as a standard asset only after satisfactory performance for a period of twelve months as per the renegotiated / rescheduled terms.

Asset Category	Provision Required
Sub-Standard Assets	A general provision of 10% of the outstanding
Doubtful Assets	(i)	100% provision to the extent the asset is not covered by the estimated realisable value of security;
	(ii)	In addition to item (i) above, 50% of the remaining outstanding.
Loss Assets	The entire asset shall be written off. If for any reason, the asset is retained in the books, 100% thereof shall be provided for.

Ø Yield on SRs should be recognised only after the full redemption of the entire principal amount of SRs. This will be effective for contracts executed from the date of the Circular DNBS(PD)CC.No. 38/26.03.001/2013-14 dated April 23, 2014.

Ø Upside income should be recognized only after full redemption of SRs. This will be effective for contracts executed from the date of the Circular DNBS(PD)CC.No. 38/26.03.001/2013-14 dated April 23, 2014.

Ø Management fees should be calculated and charged as a percentage of the NAV at the lower end of the range of the NAV specified by the Credit Rating Agency (CRA) provided they are not more than the acquisition value of the underlying asset. However, management fees are to be reckoned as a percentage of the actual outstanding value of SRs, before the availability of the NAV of SRs. Management fees may be recognized on an accrual basis. Management fees recognized during the planning period must be realized within 180 days from the date of expiry of the planning period. Management fees recognized after the planning period should be realized within 180 days from the date of recognition. Unrealized management fees should be reversed thereafter. Any unrealized management fees will be reversed if before the prescribed time for realization, the NAV of the SRs fall below 50% of the face value.

Ø The income recognition on all other items shall be based on recognised accounting principles

Ø All the Accounting Standards and Guidance Notes issued by the ICAI shall be followed in so far as they are not inconsistent with the guidelines and directions contained herein;

Ø Interest and any other charges in respect of all the NPAs shall be recognised only when they are actually realised. Any such unrealised income recognised by a ARC before the asset became non-performing and remaining unrealised shall be derecognised.