The Hindu Business Line : Banks seek six more months for NPA recast

In the pre-Credit Policy meeting with the Reserve Bank of India officials, banks called for extending the deadline for restructuring of bad loans to December 31. The original deadline was June 30.

According to Dr K. Ramakrishnan, Chief Executive, Indian Banks’ Association, banks were finding it difficult to complete the restructuring process, since they had to process all proposals received till March-end. Loans in the case of consortium lending were particularly difficult. Hence, banks have asked the RBI to give them time till December 31 to complete the restructuring process, he said.

Last year, the RBI had issued prudential guidelines on restructuring of advances to help the industry overcome spill-over effects of the global downturn. The spill-over effects started affecting the economy particularly from September 2008 creating stress for the otherwise viable units/ activities.

According to the guidelines, special regulatory treatment was extended to commercial real estate exposures restructured for the first time as well as to exposures (other than commercial real estate, capital markets and personal/ consumer loans) which were viable but were facing temporary cash flow problems and needed a second restructuring.

Bank chiefs who attended the meeting also apprised the RBI that credit growth is slack. However, sectors such as housing were seeing some disbursals. Funds are being availed of by some mid-corporates for capex and credit offtake is expected to pick up over the next two quarters, Dr Ramakrishnan said.

Bankers are confident that the 20 per cent credit growth, as visualised by the RBI in the annual monetary policy, will be achieved by the end of the fiscal.

Bankers also asked the RBI to re-look at some of the provisioning norms. For instance, banks have asked for differential provisioning across various segments depending on the security, instead of a standard provisioning.

In the case of infrastructure projects too, banks have asked for relaxation of some provisioning norms in case the project is not ready on the date of completion. Also, if the special purpose vehicle of a particular company defaults in a payment, then the whole corporate should not be treated as an NPA, Dr Ramakrishnan said. On the interest rate front, the RBI has taken note of the periodic rate cuts announced by some banks.

Rates may harden

Speaking to presspersons after the meeting, Mr O.P. Bhatt, Chairman, State Bank of India, said, “At the moment, the interest rate scenario is soft. May be for some industry players, softening could take place... small room is there. Six months down the line, when credit growth picks up and all the (government) borrowing takes place, it could stabilise there or harden.”

The RBI also assured bank chiefs that the additional government borrowing will not put any constraints on liquidity, Dr Ramakrishnan said.