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RBI promises more effective steps to tackle NPA pain

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The Reserve Bank of India (RBI) on Thursday said even though there had beenafew positives on the bad loans front, the current level of dud loan resolution was untenable as there had been a deterioration in non performing assets (NPA), and promised new measures to tackle the pain. “The present level of NPA resolution is  untenable,” Governor Urjit Patel said while addressing the media after announcing the first bimonthly policy for financial year 201718.
Deputy Governor S S Mundra, who heads the banking department, chipped in saying “we are yet to get the final result of Q4 which has just ended.
But based on the figures that were available for the December quarter, the various indicators of the stressed assets have further deteriorated during this period.” He  said the positives achieved by the banks includeaslowdown in the accretion of fresh NPAs and stable provision coverage ratios.
The former commercial banker cautioned that the current situation will put pressure on capital for the banks, especially for the staterun ones.
As resolution of the stress comes into the foreground, Mundra said there wasaneed to understand that there cannot bea “one size fits all” approach and advocated  adoption of various tools.
He reiterated RBI was also in talks with the government on how to improve the existing frameworks, and the discussions were centred on how to act faster on joint  lenders´ forum decisions, enhance the number and role of oversight committees, or whether to look at sector or sizespecific problems while tackling resolution.
RBI has introduced a slew of instruments to tackle the NPA menace, which had crossed 9.5 per cent of the system or Rs 14 lakh crore as of December 2016, including strategic debt restructuring, 5/25 restructuring, joint lenders´ forum and Prompt Corrective Action (PCA), which will be out by end April.
Even as speculation rages if RBI will introduce a new instrument or tweak an existing one, Mundra said there can bea “relook” at the existing instruments.
“The message that we are trying to give is that all these instruments are meant for resolution inaserious sense and not for postponement of the problem.
That will be the focus going forward,” he said.
In the policy document, RBI also saidarevised PCA framework will be introduced for banks in mid April.
RBI also increased minimum capital requirement for asset reconstruction companies to Rs 100 crore from Rs 2 crore earlier.
RBI also announced it will be tweaking the capital requirements for partial credit enhancement framework.
It has also decided not to activate the counter cyclical capital buffer at this point of time.
The Business Standard New Delhi, 07th April 2017

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