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RBI to come up with new measures to tackle NPAs issue

07 Apr 2017 Evaluate

In order to tackle the bad loan menace, the Reserve Bank of India (RBI) has promised more new measures and said that even though there have been a few positives on the bad loans front the current level of dud loan resolution is untenable as there has been deterioration in non-performing assets (NPAs) situation. The RBI also said that a revised prompt corrective action framework will be introduced for banks in mid-April.

The central bank has introduced a slew of instruments to tackle the NPAs issue, which has crossed 9.5 percent of the system or Rs 14 trillion as of December 2016, including strategic debt restructuring, 5/25 restructuring, joint lenders’ forum, prompt corrective action (PCA) which will be out by end April. It has increased minimum capital requirement for asset reconstruction companies to Rs 100 crore from Rs 2 crore and announced that it will be tweaking the capital requirements for partial credit enhancement framework. It has also decided not to activate the counter cyclical capital buffer at this point of time.

The RBI’s deputy governor SS Mundra, who heads the banking department, has said that they are yet to get the final result of Q4 which has just ended, but based on the figures that were available for the December quarter, the various indicators of the stressed assets have further deteriorated during this period. He also said the positives achieved by the banks include a slowdown in the accretion of fresh NPAs and stable provision coverage ratios. He added that as resolution of the stress comes into the foreground there is a need to understand that there cannot be a ‘one size fits all’ approach and advocated adoption of various tools.

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