Press Esc to close
Tuesday 28 June 2016
News updated at 6:34 PM IST
Weather
Max: 27.2°C
Min : 20.8°C
In Bengaluru
Rain lightly

RBI launches discussion paper on NPAs

Mumbai, Dec 17, 2013 (PTI)
RBI launches discussion paper on NPAs. Reuters file image

To contain rising bad loans, the Reserve Bank today proposed a slew of measures, including incentives to lenders for coming together and tackling an account timely and penalising borrowers with higher interest rates in future for not cooperating for a resolution.

An RBI discussion paper, which is open for public comments till January 1, suggests an early formation of a lenders committee with timelines to agree to a plan for resolution and incentives for lenders to agree quickly to a plan through "better regulatory treatment" of stressed assets.

If bankers fail to reach a resolution plan, the assets inquestion will attract accelerated provisioning, it says.

The development comes amidst fear of bad loans hitting a record high of around Rs 2.9 trillion by the end of the fiscal or 4.5 per cent of the total banking assets. RBI Governor Raghuram Rajan had earlier expressed his resolve to correct imbalances in the system.

The paper 'Early recognition of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders: Framework for Revitalising Distressed Assets in the Economy', also suggests an improvement in the current restructuring process.

Proposals include an independent evaluation of large value restructuring with a focus on viable plans and fair sharing of losses between promoters and creditors.

Promoters refusing to cooperate with the lenders in resolution of the stress will find their future borrowings becoming more expensive, the paper suggests.

On the asset sales front, the RBI has shown readiness in allowing a lender to spread any loss over two years provided the loss is fully disclosed and allowing leverage buyouts by specialised entities.

It also suggests takeout financing/refinancing possible over a longer period and not construing it as restructuring.

Apart from the liberal attitude in allowing leveraged buyouts, it says sector specific companies and private equity firms will be "encouraged" to "play active role in stressed assets market".


Go to Top

Photo Gallery
People carry an effigy representing inflation devil on a camel-cart during a demonstration...

People carry an effigy representing inflation devil on a camel-cart during a demonstration...

A car wades through a water logged lane at Jayadev Bihar after heavy monsoon rains in Bhubaneswar...

A car wades through a water logged lane at Jayadev Bihar after heavy monsoon rains in Bhubaneswar...

A sadhu at a base camp for Amarnath Yatra ahead of their registration in Jammu...

A sadhu at a base camp for Amarnath Yatra ahead of their registration in Jammu...

The titular head of Wodeyar dynasty Yaduveer Krishnadatta Chamaraja Wodeyar and Trishika Kumari...

The titular head of Wodeyar dynasty Yaduveer Krishnadatta Chamaraja Wodeyar and Trishika Kumari...

A white tiger takes bath in a pond during a hot summer day at its enclosure in Kolkata Zoo...

A white tiger takes bath in a pond during a hot summer day at its enclosure in Kolkata Zoo...

An artiste gives finishing touches to an idol of Goddess Durga for upcoming Durga Puja...

An artiste gives finishing touches to an idol of Goddess Durga for upcoming Durga Puja...

Collapsed tents at BJP Awadh Kshetriya Booth Sammelan following the storm, in Barabanki...

Collapsed tents at BJP Awadh Kshetriya Booth Sammelan following the storm, in Barabanki...

Women Kabaddi players who will take part in the Women's Kabaddi Challenge, at a press conference...

Women Kabaddi players who will take part in the Women's Kabaddi Challenge, at a press conference...

People enjoy the rainy weather on a beach along the Arabian Sea in Mumbai...

People enjoy the rainy weather on a beach along the Arabian Sea in Mumbai...

The underconstruction Bogibeel Bridge over the mighty Brahmaputra River in Dibrugarh district....

The underconstruction Bogibeel Bridge over the mighty Brahmaputra River in Dibrugarh district....

Copyright 2014, The Printers (Mysore) Private Ltd., 75, M.G Road, Post Box 5331, Bengaluru - 560001
Tel: +91 (80) 25880000 Fax No. +91 (80) 25880523