The Reserve Bank on Friday tightened the norms for recognition of dud assets and directed lenders not to standardise an NPA account after getting only interest payment as well as to mandatorily mention the due dates along with details of interest and principal amounts.

The monetary authority has from time to time been issuing new/revised norms on dud asset classification as system-wide NPAs began to balloon.

Issuing some clarifications to all the extant provisions and including the ones issued on October 1, 2021 on the prudential norms on income recognition, asset classification and provisioning pertaining to advances (IRACP), the RBI asked banks not to upgrade an NPA account after getting only interest dues paid.

Some lending institutions upgrade accounts classified as NPAs to standard accounts on payment of only interest overdue and partial overdue.

“To avoid any ambiguity in this regard, it is clarified that loan accounts classified as NPAs may be upgraded as a standard account only if the entire arrears of interest and principal are paid by the borrower,” the apex bank said in the revised notification this evening.

Lenders have also been asked to specifically mention in the loan agreements the exact due date of a loan and the breakup of the principal and interest, among others, instead of giving a description of the due dates, which leaves scope for interpretation.