The changes brought about by the RBI in the asset classification and provisioning norms could lead to a banking crisis, said DT Franco, General Secretary, All India Bank Officers’ Association.

Seeking withdrawal of the RBI circular, he said: “The research wing of AIBOC has proposed some suggestions to save the banking sector,” and termed the changes in the asset classification and provisioning norms as “unscientific” and “far beyond what the country can afford at this juncture.”

Listing the suggestions, Franco stressed the need for keeping the provision for standard assets under abeyance. The asset classification norms should take the security available into account. The accounts guaranteed under CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) have to be classified differently, and in the case of home loan mortgage, the NPA should be only to the extent of default and not the whole outstanding.

SME borrowers

Franco further pointed out that SME borrowers are in a piquant situation with the advent of GST and demonetisation. The provisioning period for NPA classification (on loans to SMEs up to ₹5 crore limit) should be extended to 180 days as against 90 days at present, after being identified as SMA (Special Mention Accounts); for loans to the social and downtrodden sector, the NPA recognition norms should be 365 days instead of 90 days.

The association has suggested the need for continuing with the loan restructuring scheme and change in the provisioning norms. “Provisioning for housing loans cannot be the same as that of an overdraft, or for loans covered under CGMTSE as that of other loans. Providing 50 per cent on the outstanding in the first year itself on accounts transferred to National Company Law Tribunal is totally irrational,” Franco said.

Parliament panel’s findings

AIBOA has appealed to the RBI and the government to implement the Parliament Standing Committee’s recommendations, particularly that on developing and strengthening the bond market to finance infrastructure projects and for making necessary structural changes including revival of development finance institutions for long-term finance.

The committee has recommended that there should be separate norms for NPA classification for infrastructure and non-infrastructure loans.