L-10.RE word file

L-10.RE word file - CA(IBFS L-10 Regulatory Environment of...

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CA(IBFS) L-10: Regulatory Environment of Financial Services This lesson deals with: - 1.Prudential Norms for Income Recognition 2.Asset Classification and Provisioning Norms 3.Capital Adequacy and Concentration of Credit/Investments 4.RBI Guidelines for Finance Companies 5.Guidelines for Housing Finance Companies 1. Prudential Norms for Income Recognition : RBI, having considered it necessary in the public interest, and for the purpose of enabling it to regulate the credit system to the advantage of the country, issued directions relating to the prudential norms viz. Non- Banking Companies Prudential Norms (Reserve Bank) Directions, 1998. The policy of income recognition is based on record of recovery. Income from Non-Performing Assets (NPAs) may not be recognized merely on the basis of accrual. An asset becomes NPA when it ceases to yield income. The income from NPAs should be recognized only when it is actually received. NPA is an asset in respect of which income has remained unpaid and has become 1
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‘past due’. An amount is treated as ‘past due’ when it remains unpaid for 30 days beyond the due date. Interest on NPAs should not be booked as income if such interest has remained as outstanding for more than 6 months on and from March 31, 1995. The basis of treating a credit facility as NPA should be as given below:- (i) Term Loan beyond 1 year : If interest remains ‘past due’ for 6 months, a term loan is treated as NPA. Where the instrument is over due for more than 6 months, the entire outstanding loan, inclusive of unpaid interest, should also be treated as NPA. (ii) Lease Rentals/Hire Purchase Installments : Where Lease rentals and HP installments are ‘past due’ for 12 months, the entire dues from the lessee/hirer should be treated as NPA. (iii)
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L-10.RE word file - CA(IBFS L-10 Regulatory Environment of...

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