Approved by the Resolution of Board of National Bank of Tajikistan of July 6, 2005 No. 176

The instruction No. 139 about procedure for forming and use of reserve on potential losses and fund of covering of possible losses for loans

I. General provisions

This instruction is developed according to article 5 and 74 of the Law of the Republic of Tajikistan "About National Bank of Tajikistan" and from Art. 30 of the Law of the Republic of Tajikistan "About banks and banking activity" for the purpose of strengthening of banking supervision.

Accomplishment of this Instruction for all banks and the non-bank financial organizations is obligatory.

1. This Instruction determines the mechanism of classification of loan portfolio and forming of fund of covering of possible losses for loans obligatory for all credit institutions (banks and the non-bank financial organizations) operating in the territory of the Republic of Tajikistan irrespective of forms of their property. Creation of fund of covering possible, losses according to loans is based on assessment of condition of the credits and their classification by sign of quality and repayment period, with determination of the credit risks influencing general condition of credit institution. Also forming of fund is required to reflect losses in the capital which the credit institution determined in the course of classification of loan portfolio.

Timely identification of overdue loans, is necessary for the Management of credit institution for taking measures to prevention of the related losses. Such assessment more promotes ensuring bank liquidity, protection of interests of its shareholders and clients.

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