RBI tightens provisioning rules for restructured loans

MUMBAI Thu Jan 31, 2013 11:21pm IST

Two men make phone calls while standing near a Reserve Bank of India (RBI) crest at the RBI headquarters in Mumbai January 29, 2013. REUTERS/Vivek Prakash

Two men make phone calls while standing near a Reserve Bank of India (RBI) crest at the RBI headquarters in Mumbai January 29, 2013.

Credit: Reuters/Vivek Prakash

Related Topics

MUMBAI (Reuters) - The Reserve Bank of India (RBI) tightened rules on Thursday governing how banks and other financial institutions provision for restructured loans, based on the recommendations of a panel.

The RBI said the amount lenders must set aside against potential losses on new loans would rise to 5 percent with effect from April 1, 2013. It had already increased the provisioning requirement to 2.75 percent last year.

The amount lenders must set aside for loans that have already been restructured will rise to 3.75 percent from March 31, 2014 and then to 5 percent with effect from March 31, 2015, the RBI said in a statement.

The central bank also said that with effect from April 1, 2015, restructured accounts would be immediately classified as sub-standard.

Non-performing assets that have been restructured will continue to have the same asset classification as prior to restructuring, it said.

The RBI set up a working group early in 2012 to review its guidelines on restructuring of loans by banks and financial institutions and suggest changes taking into account the best international practices and accounting standards.

It reported in July and the central bank first lifted provisioning amounts in line with its recommendations in November.

With economic growth in India slowing and some companies seeing pressure on their revenue and margins, there are rising concerns about asset quality at India's banks.

India's GDP growth is on track for its worst year in a decade, and recently the RBI lowered its growth forecast for the fiscal year ending in March to 5.5 percent from 5.8 percent earlier.

(Reporting by Shamik Paul; Editing by Catherine Evans)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Diwali Sales

Diwali Sales

Gold sales jump about 20 pct for Diwali - trade body  Full Article 

World Bank Rival

World Bank Rival

Three major nations absent as China launches W.Bank rival in Asia  Full Article 

Wal-Mart India

Wal-Mart India

Murali Lanka appointed as Wal-Mart India operations chief  Full Article 

Microsoft Earnings

Microsoft Earnings

Microsoft sales beat Street hopes, cloud profits up.  Full Article 

Special Report

Special Report

Why Madrid's poor fear Goldman Sachs and Blackstone  Full Article 

U.S. Economy

U.S. Economy

Spectre of no-inflation world looms over Fed's return to normal  Full Article 

Insider Trading

Insider Trading

Rengan Rajaratnam, SEC to settle civil insider trading charge.  Full Article 

Market Watch

Market Watch

Betting on the beaten up? Investors pin hopes on stocks in Europe, Japan.  Full Article 

India Insight

India Insight

Kalki Koechlin on her role as a disabled girl in “Margarita, With a Straw”  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage