Press Esc to close
Thursday 30 July 2015
News updated at 1:37 PM IST
Weather
Max: 19°C
Min : 32°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 worship a bull during Bendur festival in Sangli on Wednesday...

People worship a bull during Bendur festival in Sangli on Wednesday...

Fire brigade and NDRF personnel rescue a person stuck in the three floor Matru-Chhaya...

Fire brigade and NDRF personnel rescue a person stuck in the three floor Matru-Chhaya...

Students of Patna Women's College wear tiger masks to create awareness to save tigers...

Students of Patna Women's College wear tiger masks to create awareness to save tigers...

Monsoon clouds over the Royal Palace in Agartala on Wednesday...

Monsoon clouds over the Royal Palace in Agartala on Wednesday...

Police firing tear gas shells to disperse protesters at a mass protest rally on the second...

Police firing tear gas shells to disperse protesters at a mass protest rally on the second...

Tamil Nadu Governor K Rosaiah pays his last respects to the former president APJ Abdul...

Tamil Nadu Governor K Rosaiah pays his last respects to the former president APJ Abdul...

School students hold up a picture in tribute to former President APJ Abdul Kalam in Gurgaon...

School students hold up a picture in tribute to former President APJ Abdul Kalam in Gurgaon...

A Military Vehicle carrying the mortal remains of former President APJ Abdul Kalam...

A Military Vehicle carrying the mortal remains of former President APJ Abdul Kalam...

Tri-services personnel carry the mortal remains of former President APJ Abdul Kalam...

Tri-services personnel carry the mortal remains of former President APJ Abdul Kalam...

Soldiers escort a gun carriage carrying the body of former Indian President A. P. J. Abdul Kalam...

Soldiers escort a gun carriage carrying the body of former Indian President A. P. J. Abdul Kalam...

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