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1.2 Determining Provisioning Amounts and Collateral Value

C 28/2010 GUI

The circular specifies the following minimum provisions for all loans.

ClassificationCriteriaProvision
NormalAll information available assures repayment as agreedGeneral Provision.
Watch-listSome weakness in the borrower’s financial position and credit worthiness that requires more than normal attention.General Provision.
Sub -standard loansPayment of principal is in arrears beyond 90 days or some loss is possible due to adverse factors.Specific Provision Minimum 25% of the net exposure amount
Doubtful loansFull recovery seems doubtful based on the available information, leading to a loss or part of these loans.Specific Provision Minimum 50% of the net exposure amount
Loss loansPossibility of no recovery at all after the bank has exhausted all available courses of actionSpecific Provision Minimum 100% of the net exposure amount

 

It should be noted that for corporate and commercial loans doubtful and loss categories should be determined on a principle basis and not necessarily on a rule, such as number of days delinquent. Provisions for retail exposures should be fully rule based.