RBI has been decided to implement system-based asset classification in urban co-operative banks (UCBs). Further, system-based asset classification has been defined as an asset classification (downgrading as well as upgrading) carried out by the CBS / computerized systems of the bank in an automated manner on an ongoing basis, based on the relevant RBI instructions/guidelines.
Thereafter, RBI instructs UCBs with the total assets of ₹2000 crore or above as on March 31, 2020 is required to implement system-based asset classification with effect from June 30, 2021. Furthermore, UCBs with the total assets of ₹1000 crore or above but less than ₹2000 crore as on March 31, 2020 and having self-assessed themselves as being under Level III or Level IV is required to implement system-based asset classification with effect from September 30, 2021.
RBI clarifies that UCBs which meet the above criteria as at the end of the current or subsequent financial years should implement system-based asset classification within a period of six months from the end of the financial year concerned.
Please find the link below of the Master Circular dated July 01, 2015 for containing consolidated instructions on income recognition, asset classification, provisioning and other related matters.