<p>Worried over rising non-performing assets (NPAs), the Reserve Bank today tightened rules for restructuring of most types of loans in line with global practices.<br /><br /></p>.<p>As per the latest RBI notification, provisioning on newly-restructured accounts has been raised to 5 per cent from June 1, 2013 from 2 per cent now. However, for old restructured accounts, it will be done in the phased manner.<br /><br />The Reserve Bank also said that existing “regulatory forbearance” will no longer be available from April 1, 2015.<br /><br />As per existing guidelines, an account after restructuring is not classified as NPAs. However, as per the new norms, restructured account would be treated as NPA.<br /><br />“This may be made applicable with immediate effect in cases of new restructuring but in a phased manner during a two year period for the existing standard restructured accounts,” it added.<br /><br />As a result, the banks will have to do higher provision which will have negative impact bottom lines.<br /><br />Banks are also advised that they should correctly capture the reduction in fair value of restructured accounts as it will have a bearing not only on the provisioning required to be made by them but also on the amount of sacrifice required from the promoters, it said.</p>
<p>Worried over rising non-performing assets (NPAs), the Reserve Bank today tightened rules for restructuring of most types of loans in line with global practices.<br /><br /></p>.<p>As per the latest RBI notification, provisioning on newly-restructured accounts has been raised to 5 per cent from June 1, 2013 from 2 per cent now. However, for old restructured accounts, it will be done in the phased manner.<br /><br />The Reserve Bank also said that existing “regulatory forbearance” will no longer be available from April 1, 2015.<br /><br />As per existing guidelines, an account after restructuring is not classified as NPAs. However, as per the new norms, restructured account would be treated as NPA.<br /><br />“This may be made applicable with immediate effect in cases of new restructuring but in a phased manner during a two year period for the existing standard restructured accounts,” it added.<br /><br />As a result, the banks will have to do higher provision which will have negative impact bottom lines.<br /><br />Banks are also advised that they should correctly capture the reduction in fair value of restructured accounts as it will have a bearing not only on the provisioning required to be made by them but also on the amount of sacrifice required from the promoters, it said.</p>