As on March 31, 1998, the banking sector's outstanding non-food credit stood at Rs 3,09,328 crore. Considering the fact that, the banking sector's gross NPA stood at Rs 43,760 crore, banks would have required to make .25 per cent provisioning on their standard assets worth Rs 2,65,648 crore had the new norms been introduced now.

The State Bank of India, Allahabad Bank and private sector United Western Bank have already made .25 per cent provisioning for standard assets in fiscal 1998. SBI had provided Rs 150 crore towards this out of totalprovisions of Rs 1,100 crore in March 1998.

The Narasimhamam Committee had recommended that a general provision of 1 per cent on standard assets be introduced. The decision to further raise the provisioning requirements on standard assets would be announced in due course, the RBI said.

"Prominent listed banks which have been posting average profits will not be hit to a large extent. Banks like SBI, BoB and Corporation Bank will not be affected much. But banks like Punjab National Bank and Bank of India whose assets are always in doubt will show lesser earnings once they start providing," a banking analyst, who did not want to be named, said.

"I do not think our earning will be hit and we will be able to cope with the new provision," ICICI Bank senior executive vice-president PH Ravikumar said.

Describing the move to introduce provisions for standard assets as a good one, former chief economist at Asian Development Bank VV Desai said. "Every asset should be classified as it is the beginning of anawareness that every loan given involve the element of risk," he said. Analysts said that the move will help in cleaning up of banks' balance sheets and enhance the transparency of lending operations.