RBI issues guidelines for banks to have automated Income recognition, asset classification & Provisioning processes by 30th June 2021. RBI states that Banks are still resorting to manual identification of NPA and also over-riding the system generated asset classification by manual intervention in a routine manner.
RBI directs that all the borrowal accounts, including temporary overdrafts, irrespective of size, sector or types of limits, should be covered in the automated IT based system (System) for asset classification, upgradation, and provisioning processes. In addition, banks’ investments should be mentioned under the System.
RBI also directs that income recognition/derecognition in case of impaired assets (NPAs/NPIs) should be system driven and amount required to be reversed from the income account should be obtained from the System without any manual intervention. Further, RBI instructs that the system should handle both down-grade and upgrade of accounts through Straight Through Process (STP) without manual intervention.
RBI also highlights incases where a separate application outside the CBS is used as the as the System for NPA/NPI identification and/or classification, the System should have access to the required data from the CBS and/or other relevant applications of the bank and the borrower/investment accounts shall be updated back into the CBS automatically, wherever applicable, through STP.
RBI specifically mentions about the baseline requirements for the NPA classification solution. The guidelines mentions about the data inputs, user access management, straight through processing (STP), Back-end Data Access Restriction, Audit Logs, System Generated NPAs and Test Environment.