Answer-The Reserve Bank of India (RBI) has issued new norms for the uniform treatment of Bad and Doubtful D...

The RBIs revised norms stipulate that starting from FY25, provisions for NPAs must be recognized as expenses in the Profit Loss PL account in the period they are incurred. This marks a shift from previous practices where such provisions could be created from net profit rather than being directly charged to the PL account. These norms aim to ensure uniform treatment and prudential management of NPAs across different types of cooperative banks.

Question

The Reserve Bank of India (RB

I has issued new norms for the uniform treatment of Bad and Doubtful Debt Reserve (BDD
R for nonperforming assets (NPAs) across cooperative banks. Which of the following statements is true regarding these revised norms?

A Provisions for NPAs can be created by appropriating from net profit and do not need to be recognized as expenses in the Profit & Loss (P&L) account.

B From FY25, provisions for NPAs must be charged as an expense to the Profit & Loss (P&L) account in the period they are recognized.

C By March 31, 2025, provisions for NPAs must be identified and reported as a separate item in the balance sheet.

D The norms do not apply to Urban Cooperative Banks but only to State Cooperative Banks and Central Cooperative Banks.

E Provisions for NPAs can be directly netted off from Gross NPAs (GNPAs) without affecting the P&L account.

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