Effective from Jul 01 2021 - Jun 30 2021 To view other versions open the versions tab on the right
A finance company shall directly reduce the gross carrying amount of a financial asset when the company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof in a timely manner. Finance companies should ensure that they initiate timely collection efforts consistent with the requirements of their delinquency management and collections policy. Finance companies should follow through on their collection efforts, where required, until they have reasonably exhausted all options for collections and recovery. Finance companies should then initiate write off once it has exhausted all options for collections and recovery along with review by internal Auditor. While a write-off constitutes de-recognition of a financial asset for accounting purposes but it does not eliminate the finance company's right to continue its recovery proceedings against the collateral or the borrower.
Write offs should not be delayed in the hopes of an otherwise unknown reversal of fortune by the borrower. Even when there is a possibility of repayment/recovery in a later but uncertain time period, the uncertainty, timing, and amount preclude the finance company from maintaining the asset on its books and demand a proactive and timely de-recognition. Multiple exposures to the same counterparty should follow the same treatment for write off purposes at the counterparty level. Finance companies should adhere to the following time period rules for writing off retail and corporate (including micro, small and medium enterprises) exposures unless the finance company has a more conservative write-off policy.
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Unsecured exposures (including retail, micro and small enterprises and excluding mortgages) should be written off within 360 days once they are classified as stage 3 exposures.
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Secured exposures (including retail, micro and small enterprises and excluding mortgages) should be written off within 720 days once they are classified as stage 3 exposure.
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Mortgages (including retail, micro and small enterprises mortgages) and corporate exposures (including medium corporates as per MSME definition by SAMA) should be written off before 1,080 days from the date they are classified as stage 3 exposure.
In case, the above-mentioned time period of the write off is not followed, SAMA prior approval should be obtained on a case by case basis.
Reversal of write off should be treated in accordance with the requirements of Accounting Standard.
