RBI asks banks to use automated IT-based system for asset classification

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RBI asks banks to use automated IT-based system for asset classification

Concerned over guide identification of dangerous loans by some banks, the RBI on Monday requested lenders to introduce an automated IT-based system for asset classification and provisioning.

In a round, the RBI mentioned in August 2011 banks had been suggested to put in place acceptable IT methods for identification of non-performing belongings (NPAs) and technology of associated knowledge and returns, each for regulatory reporting and financial institution’s personal administration info system (MIS) necessities.

It is, nonetheless, noticed that the processes for NPA identification, earnings recognition, provisioning and technology of associated returns in lots of banks aren’t but totally automated, the RBI mentioned.

“Banks are still found to be resorting to manual identification of NPA and also over-riding the system generated asset classification by manual intervention in a routine manner,” it added.

The RBI requested banks to put in place or improve their IT methods so as to make sure the completeness and integrity of the automated asset classification, provisioning calculation and earnings recognition processes newest by June 30, 2021.

All borrowal accounts, together with momentary overdrafts, regardless of dimension, sector or varieties of limits, ought to be coated within the automated IT-based system for asset classification, upgradation, and provisioning processes, it mentioned.

“Banks’ investments shall also be covered under the system,” it mentioned, including that asset classification guidelines ought to be configured within the system, in compliance with the regulatory stipulations.

Further, calculation of provisioning requirement must also be system based mostly as per pre-set guidelines for numerous classes of belongings, worth of safety as captured within the system and another regulatory stipulations issued from time to time on provisioning necessities.

“The System shall handle both down-grade and upgrade of accounts through Straight Through Process (STP) without manual intervention,” RBI mentioned.

Exceptions could also be granted from system pushed classification in sure circumstances, that are anticipated to be minimal and momentary, topic to sure situations.

The RBI additional mentioned the adherence to the directions can be examined as a part of supervisory evaluation of the banks.

In case of non-compliance, appropriate supervisory or enforcement motion can be initiated towards the involved financial institution, it added.

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