The Reserve Bank of India has proposed a steep rise in the provisioning requirement for loan restructuring - to 5 per cent from April 1, against 2.75 per cent at present.The new norms would be applicable on fresh cases. For existing ones, the raise has been proposed in a phased manner.
In the draft guidelines on restructuring of advances by banks, the banking regulator has proposed to end the leeway given to banks on debt restructuring from April 1, 2015, as recommended by the B Mahapatra panel.
At present, banks can maintain the same asset classification status even after debt recast, though they have to make higher provisioning, of 2.75 per cent, compared to 15-20 per cent provisioning required for sub-standard assets.
According to RBI’s communication, from April 1, 2015, all loans that are restructured will be classified as NPAs.
However, for loans to infra projects, the asset classification benefit would continue beyond April 1, 2015, RBI said.
While the provisioning for fresh loan recast has been increased to 5 per cent, for existing restructured loans, banks have to increase provisioning to 3.75 per cent over the four quarters of 2013-14, and to 5 per cent over the four quarters of 2014-15.
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