<p>The Reserve Bank of India (RBI), on Tuesday, raised the provisioning for restructured assets to 2.75 per cent, from the earlier 2 per cent, consequent to request for loan recasts hitting an all-time high and set to reach Rs 3.25 lakh crore in the current fiscal.<br /><br />“It has been decided to increase, with immediate effect, the provisioning for restructured standard accounts from the existing 2-2.75 per cent,” RBI said in its second quarter review of the monetary policy. <br /><br />Even as the detailed guidelines in this regard is to be issued shortly, the very announcement of the RBI move - expected to hit the bottomlines of banks by about 4 per cent as pointed out by analysts - led to battering of bank stocks. In fact, the BSE Bankex slid nearly 3 per cent, led by losses in PSU lenders like SBI, BoB, BoI, PNB, IOB among others, which lost nearly 3 per cent mid-session. <br /><br />Even private banks too were hit with HDFC, ICICI, Axis among others losing over 2 per cent. As per RBI data, the number of corporate debt restructuring (CDR) cases jumped to 392 as on March 2012 from 225 in March 2009, taking the amount at stake to Rs 2,06,493 crore from Rs 95,815 crore.</p>.<p><br />The current fiscal has seen further spurt in CDR cases with the first quarter alone seeing nearly 30 cases totalling worth over Rs 40,000 crore, while the second quarter also witnessed major spurt in CDR cases with all the state-run banks which have announced their Q2 earnings reporting massive spike in CDR assets.<br /><br />Analysts maintain that the RBI move will dearly impact banks, especially PSBs, which have witnessed an unprecedented rise in loan restructuring due to economic stress of their borrowers. Critics also dub it a ploy by banks to restructure loans, and not show them as bad assets, to protect bottomlines.<br /><br />CDR is a mechanism wherein multiple lenders to the same entity meet up to decide on the fate of accounts collectively and restructure loans. The RBI had constituted a working group chaired by its executive director B Mahapatra in April to look into the CDR mechanism.<br /><br /> It had submitted its recommendations and the RBI has invited comments on it. Based on the recommendations, draft guidelines on the subject will be issued by end 2013, it said, while pointing out that the increase in provision is an immediate measure.</p>
<p>The Reserve Bank of India (RBI), on Tuesday, raised the provisioning for restructured assets to 2.75 per cent, from the earlier 2 per cent, consequent to request for loan recasts hitting an all-time high and set to reach Rs 3.25 lakh crore in the current fiscal.<br /><br />“It has been decided to increase, with immediate effect, the provisioning for restructured standard accounts from the existing 2-2.75 per cent,” RBI said in its second quarter review of the monetary policy. <br /><br />Even as the detailed guidelines in this regard is to be issued shortly, the very announcement of the RBI move - expected to hit the bottomlines of banks by about 4 per cent as pointed out by analysts - led to battering of bank stocks. In fact, the BSE Bankex slid nearly 3 per cent, led by losses in PSU lenders like SBI, BoB, BoI, PNB, IOB among others, which lost nearly 3 per cent mid-session. <br /><br />Even private banks too were hit with HDFC, ICICI, Axis among others losing over 2 per cent. As per RBI data, the number of corporate debt restructuring (CDR) cases jumped to 392 as on March 2012 from 225 in March 2009, taking the amount at stake to Rs 2,06,493 crore from Rs 95,815 crore.</p>.<p><br />The current fiscal has seen further spurt in CDR cases with the first quarter alone seeing nearly 30 cases totalling worth over Rs 40,000 crore, while the second quarter also witnessed major spurt in CDR cases with all the state-run banks which have announced their Q2 earnings reporting massive spike in CDR assets.<br /><br />Analysts maintain that the RBI move will dearly impact banks, especially PSBs, which have witnessed an unprecedented rise in loan restructuring due to economic stress of their borrowers. Critics also dub it a ploy by banks to restructure loans, and not show them as bad assets, to protect bottomlines.<br /><br />CDR is a mechanism wherein multiple lenders to the same entity meet up to decide on the fate of accounts collectively and restructure loans. The RBI had constituted a working group chaired by its executive director B Mahapatra in April to look into the CDR mechanism.<br /><br /> It had submitted its recommendations and the RBI has invited comments on it. Based on the recommendations, draft guidelines on the subject will be issued by end 2013, it said, while pointing out that the increase in provision is an immediate measure.</p>
