The Case Study - Seylan Bank

Seylan Bank PLC Annual Report 2009 179Notes to the Consolidated Financial Statements19.e Basis for ProvisioningAs detailed in Note 19.b, Bank makes general provision for the potential losses (not specifically identified) inthe performing portfolio of loans and advances and lease receivables, other than credit facilities secured bycash deposits, Gold or Government Securities with the Bank. Bank has made a cumulative general provisionof Rs. 509.176 Mn. (2008 - Rs. 756.617 Mn.) to meet the regulatory requirement. The total general provisionof Rs. 509.176 Mn. is 0.59% (2008 - 0.68%) of the total performing and overdue loans and the advances netof interest in suspense as at the Balance Sheet date.19.e.1 Non-Performing Lending PortfolioLoans, advances and leases are classified as non-performing as detailed in Note 19.f.1. The criteria used forthe classification of lending portfolio of the Bank as non-performing is set out below. This is in accordancewith the direction issued by the Central Bank of Sri Lanka on 8th May 2008, on ‘Classification of Loans andAdvances, Income Recognition and Provisioning’.Categorisation of Non-Performing Lending PortfolioType of Facility Determinant Overdue/SpecialMentionSubstandard Doubtful LossOverdraftsCredit facilitiesrepayablein monthlyinstalmentsOther creditfacilitiesCredit CardsExceeds thesanctioned limitfor a continuousperiod ofPrincipal and/orinterest due andunpaidPayments are inarrears from thedue dateMinimumpayments are inarrears from thedue date90 days or morebut less than 180days3 instalmentsor more butless than 6instalments90 days or morebut less than 180days90 days or morebut less than 120days180 days or morebut less than 360days6 instalmentsor more butless than 12instalments180 days or morebut less than 360days120 days or morebut less than 180days360 days or morebut less than 540days12 instalmentsor more butless than 18instalments360 days or morebut less than 540days180 days or morebut less than 240days540 days or more18 instalments ormore540 days or more240 days or moreProvision for loan losses are made on the basis of continuous review of all advances to the customers inaccordance with the Sri Lanka Accounting Standard 23 - ‘Revenue Recognition and Disclosure in FinancialStatements of Banks’, and the direction issued by the Central Bank of Sri Lanka, which has been disclosed inthe Financial Statements of the Bank after considering the values of the collateral, obtained against therespective non-performing loans and advances.Valuation of collateral is performed based on the direction issued by the Central Bank of Sri Lanka asexplained in Note 19.e.2.