In respect of securities included in any of the three categories where interest/ principal is in arrears, the banks should not reckon income on the securities and should also make appropriate provisions for the depreciation in the value of the investment. The banks should not set-off the depreciation requirement in respect of these non-performing securities against the appreciation in respect of other performing securities.
A non performing investment (NPI), similar to a non performing advance (NPA), is one where:
(a) Interest/ instalment (including maturity proceeds) is due and remains unpaid for more than 90 days. (b) The above would apply mutatis-mutandis to preference shares where the fixed dividend is not paid. (c) In the case of equity shares, in the event the investment in the shares of any company is valued at Re.1 per company on account of the nonavailability of the latest balance sheet, those equity shares would also be reckoned as NPI.
(d) If any credit facility availed by the issuer is NPA in the books of the bank, investment in any of the securities issued by the same issuer would also be treated as NPI and vice versa.
(e) The investments in debentures / bonds, which are deemed to be in the nature of advance would also be subjected to NPI norms as applicable to investments.
(f) In case of conversion of principal and / or interest into equity, debentures, bonds, etc., such instruments should be treated as NPA abinitio in the same asset classification category as the loan if the loan’s classification is substandard or doubtful on implementation of the restructuring package and provision should be made as per the norms
