acf - modified

7/31/2019 ACF - Modified

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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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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.



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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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