Press Esc to close
Saturday 01 November 2014
News updated at 7:36 PM IST
Weather
Max: 25°C
Min : 19°C
In Bangalore
Partially cloudy

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
A view of the statue of Sardar Vallabhbhai Patel on the occasion of his birth anniversary...

A view of the statue of Sardar Vallabhbhai Patel on the occasion of his birth anniversary...

Congress President Sonia Gandhi and Rahul Gandhi paying tribute to former Prime Minister...

Congress President Sonia Gandhi and Rahul Gandhi paying tribute to former Prime Minister...

Artists perform during a function on the occasion of birth anniversary of Sardar...

Artists perform during a function on the occasion of birth anniversary of Sardar...

Members of Thamizhar Vazhvurimai Koottamaippu during a protest against Sri Lankan court's...

Members of Thamizhar Vazhvurimai Koottamaippu during a protest against Sri Lankan court's...

Indian cricket players during their practice session at barabati stadium in Cuttack...

Indian cricket players during their practice session at barabati stadium in Cuttack...

Delhi Police band performs at India Gate near Amar Jawan Jyoti to salute Sardar...

Delhi Police band performs at India Gate near Amar Jawan Jyoti to salute Sardar...

Army soldiers patrolling after an IED was recovered in a gas cylinder near the Circuit House...

Army soldiers patrolling after an IED was recovered in a gas cylinder near the Circuit House...

Tourist take pictures from a boat as people bath in the Ganges river in Varanasi...

Tourist take pictures from a boat as people bath in the Ganges river in Varanasi...

Devendra Fadnavis being sworn-in as the new Maharashtra Chief Minister by Governor...

Devendra Fadnavis being sworn-in as the new Maharashtra Chief Minister by Governor...

A camel herder sits as he feeds his camels at the annual cattle fair in Pushkar, in the Rajasthan...

A camel herder sits as he feeds his camels at the annual cattle fair in Pushkar, in the Rajasthan...

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