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April 6, 2013

Accounting Entry for Recompense clause

As per para 3.7 of CDR master Circular
Recompense amount should be estimated at the time of approval of package and should form part of the same. Subsequently, actual recompense amount should be calculated every year and form part of mandatory disclosure as Contingent Liability in the audited financials of borrower companies.

As per para 18.1 of CDR master Circular 2012
Recompense means recouping, whether fully or partially, the sacrifice made by the lenders as also waivers/concessions/reliefs given by the CDR Lenders to the borrower pursuant to the approved CDR package.
Accounting Entry in the books of Bank’s
The total recompense amount should be debited to the "Advances under Collection A/C" with the corresponding credit to "Constituents Liability for Advances under Collection A/ C".

As and when payments are received from the company, those will be credited to Interest a/c with corresponding reduction of the figures under both "Advances under Collection" as well as "Constituents Liability for Advances under Collection” accounts

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