A loan can be reclassified to a higher category and the specific provision reversed if the arrears have been fully satisfied and the bank has sufficient information to indicate that the borrower is able to deliver on his contractual obligations going forward.

The reclassified loan should be initially assigned to the watch list category for a period of at least 12 months and be subject to close monitoring. The expectation is that banks will immediately downgrade the loan and raise appropriate provisions if early signs of deterioration reappear.

Where the bank has agreed to restructure a facility, the facility should only be upgraded after the new arrangement has been fully adhered to by the customer for at least 90 days and should remain on the watch list for at least a 12 months period.

After at least 90 days, the difference between the present value of the original facility and the present value of the restructured facility should be written off against the provision assigned. The remainder of the provision can then be released with the appropriate approval from the relevant internal credit committee.