The Hindu Business Line : RBI rejects banks' plea on asset provisioning

New Delhi April 18 The Reserve Bank of India (RBI) has rejected the request of public sector banks (PSBs) to phase out the increased provisioning requirement on standard assets with respect to exposure to real estate, capital market, NBFCs and personal loans.

The central bank had, in the third quarter review of the Annual Credit and Monetary Policy, raised the provisioning requirement from one per cent to two per cent for standard assets in these sectors.

Indications are that this issue may come up for discussion during the Finance Minister, Mr P. Chidambaram's meeting with chief executives of PSBs on Thursday.

During their previous meeting with the Finance Minister on February 5, the PSB chiefs had suggested that the RBI should phase out the increased provisioning by considering 25 basis points in the quarter ending March 2007 and providing for the remaining 75 basis points during 2007-08.

They also urged the RBI to exclude hotels, hospitals and educational institutions from exposure to the real estate sector for the purpose of increased provisioning requirement.

Official sources said that the RBI has turned down both the requests, stating that granting of any relaxation would not serve the purpose of monetary policy intentions.

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