The Reserve Bank of India (RBI) has directed commercial banks to
accelerate provisioning requirement, from April 1, 2016 for the existing
stock of restructured loans that are showing signs of stress.
RBI has identified bank specific accounts in which respective lenders
have to make higher provisioning from April01,2016
These accounts were
restructured earlier. Banks have provided only 5 per cent for these
restructured loans, but now the central bank has directed them to
increase the provisioning by 2.5 % every quarter so that by March
31, 2017, provisioning reached the 15 % level — in line with
sub-standard accounts.
However, banks are not allowed to classify these
accounts as non-performing assets.
The RBI has given four quarter to banks, starting April 1, to
make full provisioning for the identified accounts, so that a bank is
not hit in one go.
The RBI’s move comes in the back drop of RBI Governor Raghuram
Rajan’s drive to clean up banks’ balance sheets by March 2017.
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