Nifty99000 100%

Sensex99000 100%

Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
RSS

News

Changed bad loan norm may bloat banking NPAs

Author: Debasis Mohapatra/Wednesday, February 14, 2018/Categories: Banking & Financial Services

Changed bad loan norm may bloat banking NPAs

Mumbai, Feb 14: New RBI guidelines on restructuring of defaulted bank loans along with imposition of stricter timeline is likely to push a flurry of accounts to the bankruptcy court for resolution in coming quarters.

According to analysts, around Rs 2 lakh crore of loan accounts may come to the bankruptcy court under the Insolvency and Bankruptcy Code due to the changed rules.

“Around 50 large borrowers have banking exposure of Rs 2,000 crore or more and will need resolution by September 1, 2018. The total borrowings of these companies stand at Rs 2.46 lakh crore of debt. If the resolution plan fails to get implemented by September 1, 2018; then banks will need to initiate proceedings under IBC against these borrowers,” the rating agency ICRA said in a report.

The Reserve Bank of India, on Monday evening, scrapped various loan restructuring programmes currently in use by banks for defaulted loans.   

In a notification, the central bank said that schemes such as Corporate Debt Restructuring, Sustainable Structuring of Stressed Assets, Strategic Debt Restructuring and Flexible Structuring of Existing Long Term Project Loans were abolished. It has also disbanded Joint Lenders Forum designed to resolve potential bad debts in the banking system.

RBI also said that the reporting requirement of defaulted accounts has also been changed. The new norm also specifies that in case of defaults amounting to more than Rs 5 crore, it has to be reported on a weekly basis. 

According to analysts, the changed norm is likely to further push the credit provisioning requirements of banks in the next financial year. “While in the short-term, this will increase the pain for the borrowers as well the lenders, however the early identification of stress and resolution will prevent future ever-greening of loans and ensure a good financial health for the banking system in the long-term,” ICRA said in a report.

Meanwhile, some analysts are also of the opinion that RBI could have been more accommodative in its provisioning norms.

RBI should have been more accommodative on provisioning as genuine business and economic cycles could lead to payment delays, said Manish Aggarwal, Partner & head resolutions - special situations group, KPMG India.

Print Rate this article:
5.0

Number of views (241)/Comments (0)

rajyashree guha

Debasis Mohapatra

Other posts by Debasis Mohapatra
Contact author

Leave a comment

Name:
Email:
Comment:
Add comment

Name:
Email:
Subject:
Message:
x

Videos

Ask the Finapolis.

I'm not a robot
 
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
 
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest
 
 

Categories

Disclaimer

The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free