During the bi-monthly policy announcement on April 1, RBI governor Raguram Rajan had proposed banks prescribe certain additional disclosure requirements in the financial statements by end-June 2014 as per the recommendations of the Nachiket Mor committee to actively manage their exposures to various sectors, including priority sector.
The RBI has been taking active steps for the early recognition of NPAs in the system and is also seeking to enhance transparency within banks to push for more prudent lending. The RBI also asked banks to classify accounts based on the number of days their interest payments are pending known as Special Mention Accounts (SMA).
According to RBI guidelines, the SMA classification is where repayment is overdue for up to 30 days, SMA-1 where repayments are overdue between 31 to 60 days, and SMA-2 where repayments are overdue between 61 and 90 days.
According to data from Capitaline, at the end of March 2014, loans of R2,50,715 crore were non-performing in the banking system. The central bank has also directed banks to provide credit information regarding their exposures above R5 crore to the Central Repository of Information on Large Credits (CRILIC). As soon as an account is classified under SMA-2, banks have to form a lenders committee called Joint Lenders Forum (JLF) to evaluate the asset and work towards early resolution of stress in the account.
On a rough reckoning, loans that are not being serviced on time at four public sector banks are estimated at around R66,000 crore. For example, at Bank of Baroda SMA-2 accounts are estimated at close to R18,000 crore, or 4.53%, of its total advances while at Bank of India (BoI), the exposure to SMA-2 accounts is approximately 5% of its total loan book or R18,000 crore.