RBI extends timeline for NBFCS to meet new NPA upgradation norms

The Reserve Bank of India on Tuesday extended the timeline by six months for NBFCs to adhere new NPA recognition norms. Earlier the regulator had set March 31 deadline for non-bank lenders to upgrade the NPAs only after all arrears and principal dues are paid.

“NBFCs will have time till September 30, 2022 to put in place the necessary systems to implement this provision,” the regulator said.

The RBI also clarified that loans classified as NPA will be upgraded to standard category only if all dues are paid.

“In case of borrowers having more than one credit facility from a lending institution, loan accounts shall be upgraded from NPA to standard asset category only upon repayment of entire arrears of interest and principal pertaining to all the credit facilities,” the RBI said.

The new RBI rules require NBFCs to treat such accounts as NPA until the borrower updates the account by paying all the EMIs due.

The banking sector follows an automated system for tagging accounts as NPAs, under which the accounts are tagged as NPAs on the day the account becomes overdue for more than 90 days. However, in many NBFCs, this classification is made after the end of 90 or 180 days.

In general, many non-bank lenders upgrade NPAs as overdues in the accounts reduced to less than 90 days, while banks do not upgrade an NPA until all the overdue amounts are collected. With these changes, the norms have been made largely congruent between banks and NBFCs.

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