State Bank Learning Centre, Purnea

Disclaimer clause Readers are requested to go through the Banks circulars before any acts or taking any decisions.

Enhancement of Rates of Provisioning for Non-Performing Assets and Restructured Advances

As per Monetary Policy Statement for the year 2011-12 wherein it was proposed to enhance the provisioning requirements on certain categories of non-performing advances and restructured advances. Accordingly, the revised provisioning requirements for the following categories of nonperforming advances and restructured advances will be as under: 1. Sub-Standard Advances Advances classified as sub-standard will attract a provision of 15 per cent as against the existing 10 per cent. The unsecured exposures classified as sub-standard assets will attract an additional provision of 10 per cent, i.e., a total of 25 per cent as against the existing 20 per cent. However, unsecured exposures in respect of Infrastructure loan accounts classified as substandard, in case of which certain safeguards such as escrow accounts are available as indicated in RBI circular DBOD.No.BP.BC.96/08.12.014/2009-10 dated April 23, 2010, will attract an additional provision of 5 per cent only i.e. a total of 20 per cent as against the existing 15 per cent.

2. Doubtful Advances Doubtful Advances will continue to attract 100% provision to the extent the advance is not covered by the realisable value of the security to which the bank has a valid recourse and the realisable value is estimated on a realistic basis. However, in respect of the secured portion, following provisioning requirements will be applicable: i. The secured portion of advances which have remained in doubtful category up to one year will attract a provision of 25 per cent (as against the existing 20 per cent); ii. The secured portion of advances which have remained in doubtful category for more than one year but upto 3 years will attract a provision of 40 per cent (as against the existing 30 per cent); and iii. The secured portion of advances which have remained in doubtful category for more than 3 years will continue to attract a provision of 100%. Restructured Advances i. Restructured accounts classified as standard advances will attract a provision of 2 per cent in the first two years from the date of restructuring. In cases of moratorium on payment of interest/principal after restructuring, such advances will attract a provision of 2 per cent for the period covering moratorium and two years thereafter (as against existing provision of 0.25-1.00 per cent, depending upon the category of advances); and Restructured accounts classified as non-performing advances, when upgraded to standard category will attract a provision of 2 per cent in the first year from the date of upgradation (as against existing provision of 0.25-1.00 per cent, depending upon the category of advances).

ii.

4. All other instructions on provisioning will remain unchanged. The revised provisioning norms vis--vis the existing norms are also summarized below:

Page 1 of 4 Compiled By pronob Kumar Sarkar, Manager (Training)

State Bank Learning Centre, Purnea

Disclaimer clause Readers are requested to go through the Banks circulars before any acts or taking any decisions.

Rates of Provisioning for Non-Performing Assets and Restructured Advances Category of Advances Sub- standard Advances Secured Exposures Unsecured Exposures Unsecured Exposures in respect of Infrastructure loan accounts where certain safeguards such as escrow accounts are available. Doubtful Advances Unsecured Portion Doubtful Advances Secured Portion For Doubtful upto 1 year For Doubtful > 1 year and upto 3 years For Doubtful > 3 years Loss Advances Restructured accounts classified as standard advances in the first two years from the date of restructuring ; and in cases of moratorium on payment of interest/principal after restructuring period covering moratorium and two years thereafter. Restructured accounts earlier classified as NPA and later upgraded to standard category in the first year from the date of upgradation Existing Rate (%) 10 20 15 Revised Rate (%)

15 25 20

100 20 30 100 100

100 25 40 100 100

0.25 to 1.00 (depending upon the category of advance) 0.25 to 1.00 (depending upon the category of advance)

Increase in Housing Loan Limit under Priority Sector Please refer existing guideline on lending to Priority Sector, wherein loans up to Rs.20 lakh irrespective of location, to individuals for purchase / construction of dwelling unit per family, excluding loans granted by banks to their own employees are eligible for classification under priority sector. Pursuant to the announcement made by Union Finance Minister in paragraph 44 of the budget for the year 2011-12, it has been decided to increase the above limit from Rs.20 lakh to Rs.25 lakh. The above change will be applicable to housing loans sanctioned on or after April 1, 2011. Setting up of Central Electronic Registry under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 Pursuant to the announcement made by the Finance Minister in the budget speech for 2011 12, Government of India, Ministry of Finance notified the establishment of the Central Registry. The objective of setting up of Central Registry is to prevent frauds in loan cases involving multiple lending from different banks on the same immovable property. This Registry has become operational on March 31, 2011. The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), a Government Company licensed under section 25 of the Companies Act 1956 has been incorporated for the purpose of operating and maintaining the Central Registry under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

Page 2 of 4 Compiled By pronob Kumar Sarkar, Manager (Training)

State Bank Learning Centre, Purnea

Disclaimer clause Readers are requested to go through the Banks circulars before any acts or taking any decisions.

It may be noted that initially transactions relating to securitization and reconstruction of financial assets and those relating to mortgage by deposit of title deeds to secure any loan or advances granted by banks and financial institutions, as defined under the SARFAESI Act, are to be registered in the Central Registry. The records maintained by the Central Registry will be available for search by any lender or any other person desirous of dealing with the property. Availability of such records would prevent frauds involving multiple lending against the security of same property as well as fraudulent sale of property without disclosing the security interest over such property. It may be noted that under the provisions of Section 23 of the SARFAESI Act, particulars of any charge creating security interest over property is required to be filed with the Registry within 30 days from the date of creation.

Section 24 of the Banking Regulation Act, 1949- Maintenance of Statutory Liquidity Ratio (SLR) As announced in the Reserve Bank of India's Annual Monetary Policy Statement 2011-12 on May 03, 2011 Scheduled Commercial Banks (SCBs) may borrow overnight up to one per cent of their respective Net Demand and Time Liabilities (NDTL) under the Marginal Standing Facility (MSF)Scheme effective from the fortnight beginning on May 07, 2011.

Mobile Banking Transactions in India - Operative Guidelines for Banks As per Monetary Policy statement (2011-2012), and the existing operative guidelines on mobile banking for banks dated October 08, 2008 and our circular no. RBI/2009-10/273 DPSS.CO.No.1357/02.23.02/ 2009-10 dated December 24, 2009, on the subject. The users of mobile banking services and also the volume of such transactions have been steadily increasing since the introduction of this facility. As per the current instructions mobile banking transactions up to ` 1000/- are permitted without insisting on end-to-end encryption. Banks have been representing to the Reserve Bank to enhance the cap fixed for such transactions given the extensive use of this facility. It has, therefore, been decided to increase the limit of such transactions without end-to-end encryption to ` 5000/- with effect from the date of this circulari.e. May 4 2011. Banks may ensure to put in place adequate security measures and velocity limits based on their own risk perception.

The directive is issued under Section 18 of Payment and Settlement Systems Act, 2007, (Act 51 of 2007). Interest Rates on Savings Bank Deposits It has been decided by RBI to increase the interest rate on domestic and ordinary Non-Resident savings deposits as well as savings deposits under Non-Resident (External) Accounts Scheme by 0.5 percentage point from 3.5 per cent to 4.0 per cent per annum with immediate effect. Liquidity Adjustment Facility Repo and Reverse Repo Rates As announced in the Annual Monetary Policy 2011-12, it has been decided to increase the repo rate under the Liquidity Adjustment Facility (LAF) by 50 basis points from 6.75 per cent to 7.25 per cent with immediate effect. Further, as announced in the Policy, the reverse repo rate under the LAF, determined with a spread of 100 basis points below the repo rate, will stand at 6.25 per cent with immediate effect.
Page 3 of 4 Compiled By pronob Kumar Sarkar, Manager (Training)

State Bank Learning Centre, Purnea

Disclaimer clause Readers are requested to go through the Banks circulars before any acts or taking any decisions.

All other terms and conditions of the current LAF Scheme will remain unchanged. Reconciliation of failed transactions at ATMs Reserve Bank has been continuously monitoring the implementation of various directions by the banks. Based on a review of the developments and with a view to further improve the efficiency of operations, it has been decided as under : a. The time limit for resolution of customer complaints by the issuing banks shall stand reduced from 12 working days to 7 working days from the date of receipt of customer complaint. Accordingly, failure to recredit the customers account within 7 working days of receipt of the complaint shall entail payment of compensation to the customer @ Rs. 100/per day by the issuing bank. b. Any customer is entitled to receive such compensation for delay, only if a claim is lodged with the issuing bank within 30 days of the date of the transaction. c. The number of free transactions permitted per month at other bank ATMs to Savings Bank account holders shall be inclusive of all types of transactions, financial or non-financial. d. All disputes regarding ATM failed transactions shall be settled by the issuing bank and the acquiring bank through the ATM system provider only. No bilateral settlement arrangement outside the dispute resolution mechanism available with the system provider is permissible. This measure is intended to bring down the instances of disputes in payment of compensation between the issuing and acquiring banks. The directive is issued under section 18 of Payment and Settlement Systems Act 2007, (Act 51 of 2007).Non-adherence to the provisions of this circular shall attract penalty as prescribed under the Payment and Settlement Systems Act 2007 (Act 51 of 2007). This directive shall come into effect from July 01, 2011.

Page 4 of 4 Compiled By pronob Kumar Sarkar, Manager (Training)