RBI board meet: Banks receiving more time to meet capital norms is ‘credit negative’; Moody’s explains why

The credit profiles of banks could be negatively affected on another decision to restructure stressed MSME loans worth Rs 25 crore, said in a statement.

The decision by the RBI board to increase timeline for banks to implement Basel 3 guidelines is ‘credit negative’ for government-owned banks, a global rating agency said. In addition, the credit profiles of banks could be negatively affected on another decision to restructure stressed MSME loans worth Rs 25 crore, Moody’s Investors Service said in a statement.

“While more details are awaited, this approach has the potential for negative implications for the credit profiles of Indian banks,” PTI reported citing Moody’s Investors Service Vice President (Financial Institutions Group) Srikanth Vadlamani said in a statement.

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On restructuring of stressed MSME loans, the US-based rating agency said the track record of such asset classification, when seen over the last few years in India, has shown that they have “largely been unsuccessful in addressing the underlying stress”.

Meanwhile, after an unprecedented power tussle over the last few weeks, government and RBI, in a 9-hour long board meeting on Monday, appeared to have reached a common ground on providing relief to MSMEs and easing lending restrictions on a few public sector banks. The marathon meeting between both parties ended on a conciliatory note, as sources told The Indian Express, with the RBI agreeing to form a panel on sharing of surplus capital and restructure loans of  small businesses up to Rs 25 crore. In addition, the central bank also announced that it would infuse Rs 8,000 crore into the system through OMOs on November 22.