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  1. RBI requires bank provisions for fraudulent loans

RBI requires bank provisions for fraudulent loans

The Reserve Bank of India (RBI) on Monday allowed banks to adjust financial collateral eligible under Basel III capital regulations while providing for fraud accounts.

By: | Mumbai | Published: April 19, 2016 6:18 AM

The Reserve Bank of India (RBI) on Monday allowed banks to adjust financial collateral eligible under Basel III capital regulations while providing for fraud accounts.

The central bank said said in a notification that while banks should normally provide for the entire amount due to it or for which it is liable (including in case of deposit accounts) immediately upon a fraud being detected, capital charge for credit risk can be adjusted.

“However, to smoothen the effect of such provisioning on quarterly profit and loss, banks have the option to make the provisions over a period, not exceeding four quarters, commencing from the quarter in which the fraud has been detected,” it said.

It said where the bank chooses to provide for the fraud over two-four quarters and this results in the full provisioning being made in more than one financial year, lenders should debit ‘other reserves’ by the amount remaining un-provided at the end of the financial year by credit to provisions.

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