By Ankur Mishra

The Reserve Bank of India (RBI) on Friday provided relief to banks from providing an additional 20% for unresolved cases under its June 7 circular. The relief is only for cases in which 210 days resolution timeline, after signing inter-creditor agreement (ICA), has not expired as on March 1, 2020. Therefore, Friday’s measures will only benefit those cases where 210 days resolution timeline has not been breached.

However, for a majority of unresolved cases, the timeline of resolution had expired in January 2020. So, banks will have to make additional 20% provisioning in the March quarter for the cases where 210-day resolution period expired before March 1. According to the June 7, 2019, circular of the RBI, banks had to make additional 20% provisioning for the cases where resolution could not be reached over a period of 210 days, after signing the inter-creditor agreement.

In respect of accounts where the review period (30 days) was over, but the 180-day resolution period had not expired as on March 1, 2020, the timeline for resolution shall get extended by 90 days from the date on which the 180-day period was originally set to expire,” RBI said in a release.

After the announcement of June 7 circular in 2019, many banks signed inter-creditor agreements (ICA) in the month of June and July 2019. Accordingly, the 210 days timeline for majority of unresolved cases falls before March 1, 2020. “The requirement of making additional provisions shall be triggered as and when the extended resolution period expires,” RBI specified in the circular issued on Friday. As per sources, banks are facing provisioning pressure of at least Rs 25,000-30,000 crore in the March quarter as majority of cases will not be able to avail the relief from RBI. State Bank of India (SBI) alone may have to provide close to Rs 10,000 crore for unresolved cases, as per sources.

Indian Banks’ Association (IBA) had earlier approached RBI for the deferral of additional provisioning till June quarter for all the unresolved cases. FE reported earlier that the regulator had made clear that all the measures announced by it were strictly to provide COVID-19 relief, the source added. IBA is likely to review the matter in its meeting on Saturday. “Overall, majority of our requests have been taken care, will reach out to RBI again for remaining interpretation and needs,” a senior banker told FE.