New Delhi: The Reserve Bank of India's (RBI) recent notification on revenue recognition, asset categorization, and provisioning criteria for banks, nonbanking financial institutions, and all India financial institutions may result in a rapid increase in non-performing assets (NPAs), according to ICRA,

The central bank said on November 12 that special mention accounts and non-performing accounts should be classified on a day-end position basis and elevated from an NPA to a regular category only once all outstanding overdues are cleared.

These new norms will impact on earnings performance of such entities which would be visible over the next few quarters, if the forward flows into the NPA category are not contained, the ratings agency said. "Stricter NPA upgradation requirement is likely to push-up the NBFC and HFC (housing finance companies) NPAs of March 2022 by about 160-180 basis points and 60-80 basis points, respectively, over March 2021 levels," ICRA's Vice President, Financial Sector Ratings, A.M. Karthik said.

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