RBI reminded the banks that the processes for NPA identification, income recognition, provisioning and generation of related returns in many banks are not yet fully automated
“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,” RBI said in a notification.
The statement from RBI further added, “In order to ensure the completeness and integrity of the automated asset classification (classification of advances/investments as NPA/NPI and their up-gradation), provisioning calculation and income recognition processes, banks are advised to put in place/upgrade their systems to conform to the guidelines latest by June 30, 2021.”
As per the guidelines, all borrowal accounts, including temporary overdrafts, irrespective of size, sector or types of limits, shall be covered in the automated IT based system for asset classification, up-gradation, and provisioning processes.
RBI highlighted the need for periodic system audit, at least once in a year, by internal / external auditors, who are well-versed with the system audit, both on system parameters as also from the perspective of compliance to income recognition, asset classification and provisioning guidelines.
Stating that bank investments shall also be covered under the system, the notification added that asset classification rules shall be configured in the system, in compliance with the regulatory stipulations.