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IIBF ABM Module D: Unit 25 - RBI NPA Provisioning Norms
RBI Asset Classification & Provisioning Mastery
Master regulatory standards for Special Mention Accounts (SMA-0, 1, 2), Sub-Standard, Doubtful stages, and calculations for provisioning requirements.
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NPA Asset Staging & SMA Categories
Loans are classified by banks into Standard and Non-Performing Assets (NPA) based on the period of default. Under RBI guidelines, accounts showing early signs of stress are classified as Special Mention Accounts (SMA) to initiate recovery actions early:
| SMA Stage | Principal or Interest Overdue Period |
|---|---|
| SMA-0 | 1 to 30 Days overdue |
| SMA-1 | 31 to 60 Days overdue |
| SMA-2 | 61 to 90 Days overdue |
| NPA | Overdue for more than 90 Days |
RBI Provisioning Norms (Secured vs Unsecured)
Once an asset is classified as an NPA, the required provision depends on how long the account has remained an NPA and the value of tangible collateral security:
| NPA Category | Secured Value Provision Rate | Unsecured Value Provision Rate |
|---|---|---|
| Sub-Standard (NPA ≤ 12 Months) | 15% | 25% |
| Doubtful Stage 1 (D1: 12-24 Months) | 25% | 100% |
| Doubtful Stage 2 (D2: 24-48 Months) | 40% | 100% |
| Doubtful Stage 3 (D3: > 48 Months) | 100% | 100% |
| Loss Assets | 100% | 100% |
Formula for Provisioning:
$$\text{Total Provision} = (\text{Secured Value} \times \text{Provision Rate}) + (\text{Unsecured Shortfall} \times 100\%)$$
$$\text{Total Provision} = (\text{Secured Value} \times \text{Provision Rate}) + (\text{Unsecured Shortfall} \times 100\%)$$
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