The Reserve Bank of India (RBI) has issued the date for completion of automation in inadequate loan recognition as well as the provisioning latest by 30 June 2021, saying banks must finish this by then.

As such, many banks do not have the full automation to perform processes like non-performing asset (NPA) identification, income recognition, provisioning and generation of related returns. This was an observation made by the central bank, following an issued notification on Monday.

It mentioned that banks have even now been found to be resorting to manual identification of NPAs, further overriding the system-generated asset classification by manual intervention in a routine manner.

“To ensure the completeness and integrity of the automated asset classification (classification of advances/investments as NPA/NPI and their upgradation), provisioning calculation, and income recognition processes, banks are advised to put in place/upgrade their systems to conform to the following guidelines latest by 30 June 2021,” said the notification.

RBI said that every account related to investment and borrowing, along with temporary overdrafts, regardless of size, sector or types of limits, shall be covered in the automated IT-based system for asset classification, upgrading and provisioning processes.

To accommodate impaired assets, both recognition and de-recognition of the income shall be system-driven, with the amount required to be reversed from the income account being obtained from the system without any manual intervention.

Every bank’s role is to monitor and ensure updation of asset classification status, day-end process, based on the notification. Following which, reports should be available for generation at any particular time containing the actual date of classification of assets as NPAs/NPIs.

The central bank noted that banks should not resort to manual intervention-based asset classification processes.