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Stating that the overall asset restructuring in the banking system has touched Rs 3.25 lakh crore as of June, RBI Executive Director B Mahapatra today said loan recast has gone “out of control” and all stakeholders need to tackle the problem jointly.
“Till March 2011, things were manageable. We had around Rs 1.1 lakh crore in recast loans, but now if you see, things are quite out of control. It has gone up to Rs 2.7 lakh crore. This is only CDR (corporate debt restructuring) and if you put both (CDR and bilateral restructuring cases between banks and companies) together, may be it might exceed Rs 3.25 lakh crore,” he said at the annual Bancon here.
Mahapatra said the Reserve Bank of India was willing to “tolerate a bit of restructuring,” but he exhorted banks to provide more against potential asset quality troubles and promoters to get more equity and personal guarantees.
“We’ll tolerate a bit of restructuring, we will give the regulatory forbearance, offer more time —— that is the loss or the sacrifice that we as regulators are willing to make. But you as bankers should also be willing to make more provisions...and the borrowers should also sacrifice, he should bring in more equity,” he said.
“It is a loss—sharing arrangement. In a system, when there is a problem, all the stakeholders should share the loss,” the executive director said.
Mahapatra pointed out that the RBI has increased the provisioning requirements for banks from 2 per cent earlier to up to 5 per cent in some cases.
Seeking to allay concerns, Mahapatra said things are not as bad as they are made out to be. He said the total stress in the system, including non-performing assets (NPAs) and restructured assets, is under 10 per cent, which is less than the 16 per cent level in the aftermath of the 1997 Asian financial crisis.
The situation is not “panicky,” he said.
Source: thehindubusinessline
“Till March 2011, things were manageable. We had around Rs 1.1 lakh crore in recast loans, but now if you see, things are quite out of control. It has gone up to Rs 2.7 lakh crore. This is only CDR (corporate debt restructuring) and if you put both (CDR and bilateral restructuring cases between banks and companies) together, may be it might exceed Rs 3.25 lakh crore,” he said at the annual Bancon here.
Mahapatra said the Reserve Bank of India was willing to “tolerate a bit of restructuring,” but he exhorted banks to provide more against potential asset quality troubles and promoters to get more equity and personal guarantees.
“We’ll tolerate a bit of restructuring, we will give the regulatory forbearance, offer more time —— that is the loss or the sacrifice that we as regulators are willing to make. But you as bankers should also be willing to make more provisions...and the borrowers should also sacrifice, he should bring in more equity,” he said.
“It is a loss—sharing arrangement. In a system, when there is a problem, all the stakeholders should share the loss,” the executive director said.
Mahapatra pointed out that the RBI has increased the provisioning requirements for banks from 2 per cent earlier to up to 5 per cent in some cases.
Seeking to allay concerns, Mahapatra said things are not as bad as they are made out to be. He said the total stress in the system, including non-performing assets (NPAs) and restructured assets, is under 10 per cent, which is less than the 16 per cent level in the aftermath of the 1997 Asian financial crisis.
The situation is not “panicky,” he said.
Source: thehindubusinessline
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