Answer-Banks shall make provisions, with effect from the year ending March 31, 2003, on the net funded coun...

Question

Accepted Answer

Banks shall make provisions, with effect from the year ending March 31, 2003, on the net funded country exposures on a graded scale ranging from 0.25 to 100 percent   Banks are required to make provision for country risk in respect of a country where its net funded exposure is one per cent or more of its total assets.   The provision for country risk shall be in addition to the provisions required to be held according to the asset classification status of the asset. However, in the case of lsquoloss assetsrsquo and lsquodoubtful assetsrsquo, provision held, including provision held for country risk, may not exceed 100 of the outstanding       Risk category     ECGC   Classification     Provisioning Requirement per cent         Insignificant    A1    0.25         Low    A2    0.25         Moderate    B1    5                             High    B2    20         Very high    C1    25         Restricted    C2    100         Off-credit    D    100

Banks shall make provisions, with effect from the year

Solution

Relevant for Exams:

Risk category			ECGC Classification	Provisioning Requirement (per cent)
Insignificant			A1	0.25
Low			A2	0.25
Moderate			B1	5

	High	B2			20
	Very high	C1			25
	Restricted	C2			100
	Off-credit	D			100