acf - modified
TRANSCRIPT
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Purpose for Urgent need for this
meeting The mistakes identified in the reporting ofACF is causing serious concern in the
provision requirement which has directimpact on the NET PROFIT.
The Statutory Central Auditors have
expressed strong desire on preparation ofFlawless ACF as on March 2012.
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ASSET CLASSIFICATION MIGRATION NORMS
DA 1
12 Months in SS /
More than 12 months from date of NPA
Less than 24 months from date of NPA
DA 2 1
More than 12 Months in DA 1/
More than 24 Months from date of NPALess than 36 months from date of NPA
DA 2 2
More than 24 Months in DA
[DA 1 - 12 m + DA 2 1 - 12 m] /
More than 36 Months from date of NPALess than 48 months from date of NPA
DA 3
More than 36 Months in DA
[DA 1 - 12 m + DA 2 1 - 12 m + DA 2 2 12m] /
More than 48 Months from date of NPA
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ASSET CLASSIFICATION AS ON 31.03.2012
SS/DA/Loss
Date of NPAFalling
Between
CLASSIFIED AS NPA for a period
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PROVISIONING NORMS FOR SUBSTANDARD ASSETS
SECUREDat the time of sanction of advance(Security Value Cannot be 0 in thecase of a secured advance)
15% of outstandingValue of security / ECGC / CGTSI
coverage value will not be deducted tofind unsecured portion. But must beentered to reckon provisionrequirement when the accountmigrates to DA
ABINITIO UNSECUREDUnsecured exposure is defined as anexposure where the realisable value ofthe security as assessed bybank/approved valuers/RBI is notmore than 10%, ab-initio, of theoutstanding exposure
15% + additional 10% = 25%ECGC / CGTSI coverage value will notbe deducted to find unsecured portion.But must be entered to reckonprovision requirement when theaccount migrates to DA
Unsecured in respect ofinfrastructure loan
To avail of this benefit of lowerprovisioning, the banks should havein place an appropriate mechanismto escrow the cash flows and also
have a clear and legal first claim onthese cash flows
20%
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ASSET CLASSIFICATION
ACF 2 - DoubtfulAssets
Period for which theadvance has remainedin Doubtful category
Up to 1 yr
1 to 3 years
More than 3 years
Provision Requirement
100 % of security short fall
plus
25% of secured portion
40% of secured portion
100% of secured portion.
(i.e.all D3 accounts
Provisionat 100% of the O/S)
LOSS ASSETS - PROVISION IS 100% of outstanding
Total provision required Cannot and shall not exceed the total outstanding for which
provision is compiled
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COMMON ERRORS OBSERVED WHILE COMPILINGACF BY BRANCHES
Appropriate software version as advised (latest) by ITD to be used ACF certified by SCA / Concurrent Auditors are different from whatis submitted through Stand alone package Advised through various circulars to take print out of standalone package for
certification
ACF not verified by Branches / ROs
All required details to be entered when the a/c classified as NPA Incomplete details at first entry will affect provision during aging
process
Security details Necessitates correct valuation and correct Entry Except ab-initio cases there can not be 0 security value in SS
Many accounts security column left blank attracting 100% provision
More than one account of same borrower
either security value entered against one account other accounts leftunsecured
Total security value entered against all accounts inflating security value
Our share alone to be entered in consortium accounts
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COMMON ERRORS OBSERVED WHILE COMPILINGACF BY BRANCHES
Difference between deduction column & ECGC/CGTSI Coverage Under deduction column, amount already received pending
appropriation reduces NET Balance in NPA
In case of FITL NPA the IRRD (2311) to be entered in deduction columnas no separate provision is required
In few cases the deduction is more than balance outstanding
Under Coverage only the portion guaranteed to that extent noprovision required under D1 & D2
Normally entire outstanding will not be covered by ECGC/CGTSI In few cases Coverage is more than balance outstanding
Infrastructure - There is a provision to selectYin the ACF 1 provided if it
is unsecured infrastructure advances to provide @ 20%. The condition isTo avail of this benefit of lower provisioning, the banks should have inplace an appropriate mechanism to escrow the cash flows and also have aclear and legal first claim on these cash flows Even a/cs with less thanRs.1 lac o/s are markedYthus attracting critical observations from SCAs
Please ensure MOCs for the previous quarters are incorporated bybranches.
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Branches to strictly follow the Significant Accounting Policy of
the bank:
Recovery in NPA a/cs other than Suit filed and OTS/OCS
cases should be appropriated ONLY TOWARDS INTEREST
and to reduce the NPA Balance ONLY AFTER all unserviced
interest is realised.
Similarly Auditors Observed non reversal of unserviced
interest / debiting interest in the account already classified as
NPA which are against IRAC norms.
COMMON ERRORS OBSERVED WHILE COMPILINGACF BY BRANCHES
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OBJECTIVE OF THIS ACF MEET
Rework December 2011 ACF after rectifying all theerrors in branch ACF and advise the impact on provisionrequirement
Branches to incorporate the corrections both in Masterand Stand alone package to avoid repetition of suchmistakes in March 2012
Branches to verify their ACF (NPA & Provision) to ensurecorrectness counterchecked by ROs
Ensure ACF prepared for Feb 2012 with all rectificationswhich should be the base for March 2012 except forchanges in March 2012
Ensure that all eligible accounts are rescheduled as perCentral Office guidelines.
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