Govt to approach RBI with 1-day NPA issue

As number of projects in infrastructure, road rail, steel and power sectors are expected to go under insolvency due to the Reserve Bank of India’s one-day non-performing asset norms, the government may take up the issue with the central bank for relaxation of rules.

The RBI’s recent revised framework on NPAs requires banks to classify even a day’s delay (beyond 90 days) in paying loan installments as a default.

Of late, the Power ministry has been asking for relaxation in norms. The power sector is expected to be the worst hit due to the norms, as most of the projects are stressed in this sector majorly on lack of coal supply and inordinate delay in regulatory orders. The power projects which have been repaying their debt so far are also under the threat to be referred for insolvency proceedings.

Sources said the Finance Ministry may take up the issue of relaxation in NPA norms again with the RBI. If a loan is not repaid for more than 90 days, it is classified as ‘NPA’. According to RBI norms, if a resolution plan was not implemented within 180 days, bankruptcy process should be initiated. Banks have to make 50% provision for accounts that are referred for insolvency proceedings. And if an account of Rs 2,000 crore and above, fails to service its loans within 91 days, it would be considered a default and a resolution plan will have to be initiated.

Sources said the Finance Ministry had earlier approached the RBI for relaxation in norms, but so far there is no progress. Many experts have said that this may cripple businesses, as loans below Rs 2,000 crore could straight away become an NPA.