Lenders will discuss the extension of forbearance on restructured loans in the next meeting of Indian Banks’ Association later this week. Bankers say if there is a consensus, the IBA would write to RBI requesting an extension of the March 2015 deadline.
RBI had allowed banks to treat restructured loans as standard and make 5% provisioning by March 2015. After the deadline, RBI had said, banks will have to classify their restructured loans as non-performing assets (NPAs) and will have to make 15% provisioning.
“We would request RBI to extend the deadline by a year till April 2016,” said a banker.
However, RBI in its Financial Stability Report in December had indicated that an early end to the regulatory forbearance may be the right step.
“While it may be somewhat legitimate to justify regulatory forbearance in times of major crisis, forbearance for extended periods and as a cover to compensate for lenders or borrowers’ inadequacies engenders moral hazard,” RBI has said in the Financial Stability Report.
Lenders believe that the end of forbearance at a time when credit growth is yet to pick up will put an additional burden of bad loans on the banks.
According to Capitaline data, Indian banks reported a 6.3% sequential rise in gross non-performing assets (GNPAs) in Q2 FY15. The data showed that the gross NPAs of 40 listed banks stood at Rs 2.72 lakh crore at the end of the September quarter.