Skip to main content

RBI Likely to Zero In on 50 More Stressed A/Cs

RBI Likely to Zero In on 50 More Stressed A/Cs
The Reserve Bank of India is likely to come up with a fresh list of around 50 loan accounts that are either under stress or close to being classified as nonperforming assets. The regulator may set a March 31 deadline for banks to find a resolution on these or commence bankruptcy proceedings against the borrowers, a finance ministry official said.
These accounts are in addition to the 41 that the central bank has already identified, including several against which banks have now started bankruptcy proceedings.
This new list of accounts had come up during discussions on the recapitalisation of state-run banks. These assets identified by the RBI have been accounted for in the ? 2.1-lakh crore bank recap ? plan announced last month, and so will not bloat the capital requirement of lenders beyond what has been estimated, the official said. But classifying the loans as NPA will dent the profitability of banks, as they must set aside more funds against such accounts
“We are in discussion with the Deadline to resolve 29 accounts identified earlier ends on Dec 13 Bankers say resolution only in few cases, requests extension These cases could go to NCLT soon RBI over the modalities of the recapitalisation scheme and this is also being looked at given that the provisioning requirements of banks may rise in these cases too,” the official said, speaking on the condition of anonymity.
The official didn’t give details of the accounts. The RBI didn’t respond to an email seeking comment.
PSU banks held .? 7.33 lakh crore of NPAs at the end of June. This is blocking their capital, hurting the ability to lend. Large provisioning against suspected accounts had also caused several lenders to report deep losses.
“The next list will be of those accounts where a majority of the lenders in a consortium have put them under the SMA-2 category,” a bank executive said. This classification implies a 60to 90-day delay in loan repayments.
Of the 41 accounts identified by the RBI, lenders have already classified most as bad loans and commenced steps for a time-bound resolution. In May, the RBI identified 12 stressed accounts, each having more than .? 5,000 crore of outstanding loans and together accounting for 25% of the total NPAs of banks for immediate referral for resolution under the bankruptcy law. In a June 15 circular, the central bank noted that for accounts identified for resolution under the insolvency law, lenders must make a minimum provision of 50% for the secured portion of the outstanding amount, plus an additional 100% on the unsecured part.
In August, it identified another 29 accounts that banks were asked to resolve by December 13, failing which those would have to be taken for insolvency proceedings.
“There has been little success on these accounts and now it looks that most of these will go to NCLT (where insolvency proceedings take place),” said a second senior bank executive, adding that most banks were making provisions towards such accounts.
The Economic Times, New Delhi, 17th November 2017

Comments

Popular posts from this blog

RBI minutes show MPC members flagged upside risks to inflation

RBI minutes show MPC members flagged upside risks to inflation Concerns about economic growth and easing inflation prompted five of the six monetary policy committee (MPC) members to call for a cut in the repo rate, but most warned that prices could start accelerating, show the minutes of the panel’s last meeting, released on Wednesday. The comments reflected a tone of caution and flagged upside risks to inflation from farm loan waivers, rise in food prices, especially vegetables, price revisions withheld ahead of the goods and services tax, implementation of house rent allowance under the 7th pay commission and fading of favourable base effect, among others. On 2 August, the panel chose to cut the repurchase rate—the rate at which the central bank infuses liquidity in the banking system—by 25 basis points to 6%. One basis point is one-hundredth of a percentage point. Pami Dua, professor at the Delhi School of Economics, wrote that her analysis showed “a fading economic growth outlook, as …

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

Differential Tax Levy under GST: Food Firms May De-Register Trademarks

Differential Tax Levy under GST:Food Firms May De-Register Trademarks The government’s decision to charge an enhanced tax rate on trademark food brands is leading several rice, wheat and cereal manufacturers to consider de-registering their product trademarks. Irked by the June 28 central government notification fixing a 5 per cent goods and services tax (GST) rate on food items packaged in unit containers and bearing registered brand names, the industry has made several representations to the government to reconsider the differential tax levy, which these players say is creating an unlevel playing field within these highly-competitive and low-margin industries. Sources say that the move has affected the packaged rice industry the hardest and allowed the un-registered market leaders, India Gate and Daawat, to gain advantage as compared to other registered brands such as Kohinoor and Lal Qilla. Smaller players are even more worried with this enhanced rate of tax (against the otherwise …