Money & Banking

Bankers seek clarification on RBI’s norms for debt reclassification

Mumbai | Updated on May 15, 2018 Published on May 15, 2018

Bankers are hoping the Reserve Bank of India will provide some procedural clarity on its recent guidelines for early recognition of stressed assets.

High on the agenda is to move the one-day non-performing asset classification guideline to at least 30 days as well as a methodology to convene some kind of a joint lenders forum.

Sources said the Indian Banks’ Association has been writing to the RBI for clarification on a number of procedural issues, even as lenders have realised that the norms will not be diluted.

“We are no longer looking for a review, but banks need clarity from the RBI on various issues on the Feburary 12 circular,” said a person familiar with the development, adding that they are hopeful the central bank will revert by the month-end.

Foreign banks

Bankers are also awaiting clarity on applicability of the circular to loans given by foreign banks to Indian entities. They are also looking for directions on bad loans of less than ₹2,000 crore and those given to small and medium enterprises.

The RBI had notified a revised resolution framework for stressed assets on February 12, under which banks will have to disclose defaults even if the payment is overdue by one day. It had also discontinued restructuring schemes, such as corporate debt restructuring (CDR), strategic debt restructuring (SDR) and scheme for sustainable structuring of stressed assets (S4A), which would in effect trigger a resolution process.

Earlier, the IBA had written to the RBI calling for a relaxation of the circular, as it could affect loan accounts, and the one-day classification norm could lead to a further rise in bad loans.

However, last month, the RBI Deputy Governor NS Vishwanathan had strongly defended the new framework and had said it would prevent mistakes of the past.

“Data shows that a large number of borrowers, even some highly-rated ones, have failed on the one-day default norm. This has got to change. If borrowers fail to pay on the due date because of a cash flow problem, banks should see that as an early warning indicator warranting immediate action,” he had noted on April 18.

Published on May 15, 2018
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