RBI gets ready to train its guns on 50 more stressed accounts

November 17, 2017
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NEW DELHI: The Reserve Bank of India is likely to come up with a fresh list of around 50 loan accounts that are either under stress or close to being classified as nonperforming assets. The regulator may set a March 31 deadline for banks to find a resolution on these or commence bankruptcy proceedings against the borrowers, a finance ministry official said.

These accounts are in addition to the 41 that the central bank has already identified, including several against which banks have now started bankruptcy proceedings.

This new list of accounts had come up during discussions on the recapitalisation of state-run banks. These assets identified by the RBI have been accounted for in the Rs 2.1-lakh crore bank recap plan announced last month, and so will not bloat the capital requirement of lenders beyond what has been estimated, the official said. But classifying the loans as NPA will dent the profitability of banks, as they must set aside more funds against such accounts.

“We are in discussion with the RBI over the modalities of the recapitalisation scheme and this is also being looked at given that the provisioning requirements of banks may rise in these cases too,” the official said, speaking on the condition of anonymity.

The official didn’t give details of the accounts.

The RBI didn’t respond to an email seeking comment. State-run banks held Rs 7.33 lakh crore of NPAs at the end of June.

This is blocking their capital, hurting the ability to lend. Large provisioning against suspected accounts had also caused several lenders to report deep losses.

“The next list will be of those accounts where a majority of the lenders in a consortium have put them under the SMA-2 category,” a bank executive said. This classification implies a 60- to 90-day delay in loan repayments.

Of the 41 accounts identified by the RBI, lenders have already classified most as bad loans and commenced steps for a time-bound resolution.

In May, the RBI identified 12 stressed accounts, each having more than Rs 5,000 crore of outstanding loans and together accounting for 25% of the total NPAs of banks for immediate referral for resolution under the bankruptcy law. In a June 15 circular, the central bank noted that for accounts identified for resolution under the insolvency law, lenders must make a minimum provision of 50% for the secured portion of the outstanding amount, plus an additional 100% on the unsecured part.

In August, it identified another 29 accounts that banks were asked to resolve by December 13, failing which those would have to be taken for insolvency proceedings.

“There has been little success on these accounts and now it looks that most of these will go to the National Company Law Tribunal (where insolvency proceedings take place),” said a second senior bank executive, adding that most banks were making provisions towards such accounts.

In a recent report, ratings firm ICRA said the surge in credit provisioning had hit capital ratios for public sector banks.