1. India’s bad loans to top Rs 11 lakh crore soon?

India’s bad loans to top Rs 11 lakh crore soon?

But with the Reserve Bank of India (RBI) announcing a complete overhaul of the stressed assets resolution with a strict 180-day deadline, analysts are expecting a spike in the reported NPA levels for some of the large borrowers.

By: | Updated: February 15, 2018 3:02 PM
India’s bad loans to top Rs 11 lakh crore soon?

A little relief on India’s bad loans situation came last week when Reuters reported that it has shrunken from its record high of Rs 9.5 lakh crore to Rs 9.46 lakh crore in the quarter ending September 30, 2017, the first pull-up since the introduction of the Insolvency and Bankruptcy Code (IBC) and tighter norms.

But with the Reserve Bank of India (RBI) announcing a complete overhaul of the stressed assets resolution with a strict 180-day deadline, analysts are expecting a spike in the reported NPA levels for some of the large borrowers. ICRA in a report said that the total borrowing by 50 large borrowers have banking exposure of Rs 2,000 crore stands at Rs 2.46 lakh crore of debt, which will need resolutions by September 1, 2018.

While some these accounts are already classified as NPAs and may not add to the overall stock of NPAs, there is also a possibility of standard loans will get classified as NPAs if the restructuring of the loans takes place under the resolution process.

The RBI on Monday night announced an immediate overhaul of the NPA resolution subsuming several schemes such as JLF, SDR, CDR and announcing a uniform and strict norms in accordance with the IBC. Under the new NPA framework, lenders have been given 6 months time to declare an account as an NPA on the date of loan default, resolve it within six months, failing which, file an insolvency petition for resolution under the IBC.

Read More: Explained: RBI’s latest weapon to fight hidden big bad loans monster; here’s all you need to know

“This is expected to further spike up the credit provisioning requirements for banks during FY2019.” Analysts say it will lead to real-time recognition of NPAs, which were earlier kept technically hidden in the books. This phenomenon is known ‘evergreening’.

The RBI has already identified about 40 big accounts with 33% of total bad loans, of which 11 were sent to National Company Law Tribunal (NCLT) for immediate resolution, while 28 others were given six months time to resolve the debt, whereby the “resolution plans failed for most of the borrowers and were referred under IBC”.

CRISIL in September last year had estimated that the total bad loans in India’s banking system could be around Rs 11.5 lakh crore, or 14% of total advances and that only about 66% of them had been recognised by banks by March 31, 2017. The bad loans surged from 9.6% in March 2017 to 10.2% in September. The RBI has estimated NPAs to be at 12.2% of all loans.

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  1. Kushal Kumar
    Feb 16, 2018 at 1:45 pm
    the alert prediction of this Vedic astrology writer in article - “ Astrologically speaking , some highlights for India in coming year 2018” - published last year at theindiapost , simultaneously at wionews on 19 October , 2017. Just reproducing the text in the related prediction of the said article :-“ (1) Mid-March to 31 May 2018. ………….Chunk of industries may have tough time while looking for vitality. Those involved in decision making or governance of big enterprises or big organizations or think-tanks in the Govt , could be prone to errors or fault-lines or controversies giving rise to revision or amendment. … Some agreements with countries having economic or trading or commercial angle could pose issues causing concern and impeding economic growth”. Here , ‘giving rise to revision or amendment’ obviously means reform or necessary
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