Primary UCBs shall continue to make provisions on inter-bank exposures: RBI

Circular no. RBI/2022-23/70 DOR.MRG.REC.46/00-00-011/2022-23, Dated: 10.06.2022

Earlier the RBI had provided for conversion of outstanding uninsured deposits to credit of the institutional depositors into Perpetual Non-Cumulative Preference Shares (PNCPS)/Equity Warrants of USFB as on appointed date. Now, RBI has clarified that UCBs shall continue to make provisions on inter-bank until the actual allotment of PNCPS / Equity Warrants. As the actual receipt of PNCPS/ Equity Warrants in account of institutional depositors is yet to take place.

After the allotment of PNCPS / Equity Warrants, the provisions made on exposures arising from deposits shall be reversed only if such provisions are in excess of loss, if any, due to treatment of PNCPS and Equity Warrants.

Equity Warrants shall be valued at a price of ?1 per warrant. As and when the equity warrants are converted into equity shares, the valuation shall be done at market-determined prices. Thus, at present, no provisions need to be made on investment in Equity Warrants.

UCBs shall fully provide for their investments in PNCPS. UCBs are allowed to spread the provisions for their investments in PNCPS, net of extant provisions made on exposures arising from outstanding uninsured deposits, equally over two financial years such that the entire loss is fully provided for by March 31, 2024.

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