Registered in the Ministry of Justice of the Kyrgyz Republic
April 7, 2006. Registration number 35-06
|
|
|
Approved by Resolution No. 5/6 of the National Bank of the Kyrgyz Republic Board as of March 2, 2006 |
PROCEDURE
for Application of the Special Classification to Loans Meeting Definite Criteria
(As amended by Resolutions of the NBKR Board No. 18/8 as of April 25, 2012, No. 19/7 as of May 18, 2012, No. 41/10 as of October 31, 2012, No. 45/16 as of November 27, 2013, No. 45/2 as of October 17, 2014, No. 22/7 as of April 15, 2015)
1. General Provisions
1.1. The procedure for application of the special classification to loans meeting definite criteria (hereinafter – the Procedure) has been developed based on the legislation of the Kyrgyz Republic in order to optimize the approaches to assessment of credit risks and expenses occurred in lending by the commercial banks and other financial and credit institutions licensed and regulated by the National Bank of the Kyrgyz Republic, including ones that carry out the activity under the Principles of Islamic Banking and Finance taking into account special terminology used by them in carrying out banking operations (hereinafter – the banks/FCI).
(As amended by Resolution No. 45/2 of the National Bank of the Kyrgyz Republic Board as of October 17, 2014)
1.2. The procedure determines minimum conditions and requirements, following which the banks/FCI use the special loan classification and make relevant contributions to the loan loss provisions (hereinafter – the LLP).
(As amended by Resolution No. 45/16 of the National Bank of the Kyrgyz Republic Board as of November 27, 2013)
2. Criteria Determining the Loans with regard to which the Special Classification can be Applied
2.1. The special classification can be applied with regard to the loans meeting simultaneously the following criteria:
- a loan amount (in the national or foreign currency at the discount rate of the NBKR at the disbursement date) shall not exceed KGS 150 k;
- a tenor of the loan shall not be over 12 months;
- a target purpose of the loan is development of the operating small business belonging to a borrower and providing regular income;
- debt repayment on the loan is made by regular (at least once a month) payments on the principal and the interests;
- the bank/FCI does not have evidence that the borrower to whom the loan has been disbursed has not fulfilled the liabilities to this bank/FCI or another lender;
- the borrower, as a rule, provides a security of the loan for 100% of the principal and the interests.
2.2. (Excluded as per Resolution No. 41/10 of the National Bank of the Kyrgyz Republic Board as of October 31, 2012)
2-1. Classification of Loans Disbursed to the Solidarity Group under the Surety of the Members of the Solidarity Group
(The section as amended by Resolution No. 41/10 of the National Bank of the Kyrgyz Republic Board as of October 31, 2012)
2-1.1. The special classification shall be used to the loans disbursed to the solidarity group under the surety of the members of the solidarity group.
2-1.2. If the borrower – an individual, including an individual entrepreneur without creation of a legal entity has, besides the loan received in this bank/FCI as a part of the solidarity group, any other individual loan or a loan disbursed within this or any other solidarity group in any other bank/FCI, all loans of the borrower – the individual, including the individual entrepreneur without creation of the legal entity received in this bank/FCI and subject to the special classification in accordance with this Procedure shall be classified as “Watch assets” if they do not have an overdue debt on the principal and the interests.
If the overdue debt has occurred on the principal and/or the interests of the loan received by the borrower – the individual, including the individual entrepreneur without creation of the legal entity in this bank/FCI and subject to the special classification, the classification shall be applied to it depending on the number of the overdue days in accordance with this Procedure.
(As amended by Resolution No. 22/7 of the National Bank of the Kyrgyz Republic Board as of April 15, 2015)
2-1.3. The loans disbursed to the solidarity group shall be recognized as doubtful, if there are grave internal problems in the solidarity group that can lead to dissolution of the group and non-fulfillment of the liabilities to return the loan. If the solidarity group is at the edge of dissolution or for any other reasons its members are not able to take solidary responsibility for the liabilities to the bank/FCI, the loan of this solidarity group shall be recognized as losses.
2-1.4. The worst classification applied to the loans shall be applied to all loans of the borrower – the individual, including the individual entrepreneur without creation of the legal entity, received in this bank/FCI and subject to the special classification in accordance with this Procedure.
2-1.5. The loans disbursed to the members of the SG having the joint business shall be classified as “Watch assets” if there is no overdue debt on them.
If the overdue debt has occurred on the principal and/or the interests of the loan received in this bank/FCI by the members of the SG having the joint business, the classification shall be applied to them depending on the number of the overdue days in accordance with this Procedure. If the overdue debt of one of the SG members has occurred on the principal and/or the interests of the loan for over 30 days, the category of the classification assigned to the loan of this member of the SG in accordance with this Procedure shall be applied to all loans disbursed to the members of this SG.
(As amended by Resolution No. 45/16 of the National Bank of the Kyrgyz Republic Board as of November 27, 2013)
3. Special Loan Classification
3.1. When applying the special classification, the banks/FCI shall assess the quality of the loan based on the number of the overdue days of the scheduled payments on the principal and/or the interests as well as account the liabilities that can entail deterioration of the financial position and the borrower’s ability to repay the liabilities on the loan.
3.2. The following sizes of the contributions to the LLP are set for the loans to which the special classification is used depending on the number of the overdue days of the scheduled payments on the principal and/or the interests:
The special loan classification and relevant contributions to the LLP
|
Classification category |
Number of the overdue days of the scheduled payments |
LLP |
|
Satisfactory |
0 |
2% |
|
Watch |
1-29 |
10% |
|
Doubtful |
30-59 |
50% |
|
Losses |
60 and over |
100% |
4. Requirements to the Banks and Other Financial and Credit Institutions when Applying the Special Classification
4.1. The Management Board of the banks/FCI takes an overriding decision on application of the special loan classification in accordance with the requirements of this document.
4.2. The loans with regard to which the special classification is applied are classified in accordance with the set requirements until their full repayment.
4.3. The banks/FCI applying the special classification shall have relevant procedures approved by the Management Board of the bank/FCI that determine the internal control system ensuring:
- quality and reliability of the preliminary (prior to loan disbursement) assessment of the borrower’s creditworthiness that is based on assessment of his financial position, including an analysis of the business belonging to the borrower (the state of the funds and the terms of the business operations; cash flows of the business; the borrower’s ability to spend correctly the borrowed funds and to receive the expected (planned) income; sufficiency of the borrower’s income from business and from other sources to service the debt of the loan; presence of the debt to other lenders);
- timeliness and effectiveness of the further (after disbursement) monitoring of the borrower’s financial position and his business;
- timeliness and adequacy of the loan classification to which the special classification is applied and making relevant contributions to the LLP;
- preparing regular (at least monthly) reporting on classification of the loans to which the special classification is applied;
- meeting the requirements set by this Procedure to the banks/FCI when applying the special classification.
4.4. The classification of the loans to which the special classification is applied and relevant contributions on them to the LLP shall be made by the banks/FCI on a monthly basis.
4.5. In the events when several loans are disbursed to one person in this bank/FCI meeting the set criteria, the special classification can be applied if the total amount of all loans does not exceed the quantitative threshold specified in clause 2.1. At that, such loans shall be classified according to the worst classification categories that are applied to them.
(As amended by Resolution No. 19/7 of the National Bank of the Kyrgyz Republic Board as of May 18, 2012)
4.5-1. (Excluded as per Resolution No. 41/10 of the National Bank of the Kyrgyz Republic Board as of October 31, 2012)
4.6. When the loans meeting the set criteria are disbursed to the persons related to each other, the special classification is applied to those of them, the total amount of which does not exceed the quantitative threshold specified in clause 2.1.
4.7. The loans to which the special classification is applied, in the event of one prolongation of the loan including extension of the loan tenor and/or change of the scheduled payments regularity shall be classified as “Watch” and the LLP shall be created on them for 10% of the loan principal.
4.8. In the event of two and over prolongations of the loans to which the special classification is applied, they are classified as “losses” and the LLP for 100% of the loan principal is created on them.