Dar Es Salaam, Tanz - SNHU Academic Archive - Southern New ...

94and provisioning for loans follow international standards and practice. The Managementof Risk Assets Regulations, 2001 came int o effect o n May 1, 2001 an d repealed "Th eGuidelines o n Managemen t o f Ris k Assets , Classificatio n of Loan s an d othe r Ris kAssets, Provisioning for Losses and Accrual of Interest" which were issued on October18, 1991 . The objective s o f thes e Regulation s ar e generall y t o provid e prudentia lguidance on management of risk assets and bases for providing for losses on loans andother risk assets, (Bikki Randhawa, Joselito Gallardo (2003).Following international practice, loa n accounts ar e periodically subjected t o aging andclassified with respect to the number of days that classified loans have been delinquen tin payment o f principal and/or interest. The typical account classifications according tonumber o f day s o f delinquency , an d th e correspondin g specifi c provision s tha t ar erequired to be made are shown in Table below.Table 17: Loan Classification and Provisioning Guidelines for Licensed BanksRisk Classification Days Delinquent /Non-PerformingPerforming Rate ofProvisioning(% of Loan Amount)Standard or current 0 to 30 days -Loans Especially Mentioned (not full y secured, 31 t o 60 days 5%etc.)Sub-standard 61 t o 90 days 25%Doubtful 91 t o 18 0 50%Loss Loss 181 day s or more 100 %Source: World Bank Financial Sector Report, 2001; and Bank of TanzaniaManagement of Risk Assets Regulations 2001from EOT website.All loan s that are past due and those classified as sub-standard, doubtfu l or total loss (i.e.that could never be paid), are required to be placed on non-accrual basis. The guidelines