RBI: waiver amount to be treated as “performing assets”

The Reserve Bank of India (RBI) today issued norms for loan waiver announced by the government. RBI said the amount eligible for waiver under the government package announced for small and marginal farmers will be treated as “performing assets” by banks.

It will also be considered as claim on the government with zero risk weight for meeting capital adequacy norms.

The waiver amount must be transferred to a separate account, and can be considered as performing asset only if adequate condition is made for the loss in Present Value (PV) terms.

It is expected that around September government will be releasing the first tranche of the total repayment, estimated at Rs 60,000 crore.

In its late night communication to banks the central bank said the discount rate for arriving at the loss in PV terms should be taken as 9.56 per cent, which is the profit to maturity on 364-day Treasury Bills today.

RBI said those farmers who will be covered under the relief scheme will have to pay 75 per cent of the eligible amount as their share, while the government will be contributing the remaining amount. Such accounts will be treated as a performing account.