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IREDA feels the pinch of RBI tightening NPA provisioning norms

Twesh Mishra/KR Srivats New Delhi | Updated on November 21, 2018 Published on November 21, 2018

The Indian Renewable Energy Development Agency (IREDA) expects worsening of its asset quality with the Reserve Bank of India’s recent move to level the playing field on NPA recognition between State-owned NBFCs and private-owned ones.

It may be recalled that the central bank had earlier this year tightened the NPA recognition norms for banks and also brought NBFCs on par with them. It did not stop with that, but also ensured that state-owned NBFCs do not enjoy any advantage vis-a-vis private sector NBFCs as regards NPA recognition norms.

After the February 12 RBI circular, banks are mandated to categorise accounts that do not service their debt beyond 90 days as NPAs.

“Till now PSU NBFCs like the Indian Renewable Energy Development Agency (IREDA) were allowed to categorise accounts that do not service their debt for up to 180 days as NPAs. This relaxation has been withdrawn and now the RBI has stepped in to mandate NPA provisions on par with banks,” a official aware of the decision told BusinessLine.

IREDA will now categorise accounts that do not service their debt for up to 120 days as NPAs…this could bump up NPAs by 0.5 per cent to 1 per cent for IREDA when September numbers are out, the official added.

“Other PSU NBFCs in the power sector, namely the Power Finance Corporation and Rural Electrification Corporation categorise an account as NPA for a 90-day default. These are listed PSUs that declare quarterly results. IREDA is not listed and results are declared for a half yearly period. The RBI circular for NBFCs came in April and for the half yearly period ending September 2018, IREDA is adopting the 120-day default window. From next year, IREDA will adopt the 90-day window too,” another official said.

According to Brickwork Ratings, IREDA’s loan book portfolio stood at ₹15,820 crore during 2017-2018. Of this, gross NPA as a percentage of advances stood at 6.30 per cent while net NPA was 3.84 per cent.

Published on November 21, 2018
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