‘Banks see NPA-limiting schemes as methods of postponement of bad loan formation’

By: | Published: August 30, 2016 6:13 AM

Raghuram Rajan on Monday said some of the current difficulties in managing stressed assets despite schemes such as 5/25, SDR and S4A arise from lenders’ attitude towards these schemes as just a method of postponement of bad loan formation.

Some of the current difficulties come from an unrealistic application by banks of a scheme so as to postpone recognition of a loan turning NPA rather than because of a carefully-analysed move to effect management or capital structure change,” Raghuram Rajan said. (Reuters)Some of the current difficulties come from an unrealistic application by banks of a scheme so as to postpone recognition of a loan turning NPA rather than because of a carefully-analysed move to effect management or capital structure change,” Raghuram Rajan said. (Reuters)

Raghuram Rajan on Monday said some of the current difficulties in managing stressed assets despite schemes such as 5/25, SDR and S4A arise from lenders’ attitude towards these schemes as just a method of postponement of bad loan formation.

“Some of the current difficulties come from an unrealistic application by banks of a scheme so as to postpone recognition of a loan turning NPA rather than because of a carefully-analysed move to effect management or capital structure change,” he said, adding that the RBI will continue monitoring to see that schemes are used as warranted.

The governor said there should be more focus to improve the operational efficiency of stressed assets and creating the right capital structure so that all stakeholders can benefit.

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