RBI declines additional provisioning relief to banks on unresolved cases via ICA

April 09, 2020 5:45 AM

The relaxation in additional provisioning was one of the five requests IBA had submitted to the regulator on March 20.

“Banks can still make individual representation to RBI for provisioning. However, the IBA will not pursue this matter further,” a senior banker told FE.“Banks can still make individual representation to RBI for provisioning. However, the IBA will not pursue this matter further,” a senior banker told FE.

By Ankur Mishra

The Reserve Bank of India (RBI) has refused to grant 20% additional provisioning relief to banks for the unresolved cases as per the June 7, 2019 circular of RBI, sources close to development told FE. Indian Banks’ Association (IBA) had earlier approached RBI for the deferral of additional provisioning till June quarter. The regulator has made clear that all the measures announced by it were strictly to provide Covid-19 relief, the source added. Banks are facing provisioning pressure of at least Rs 25,000-30,000 crore in the March quarter as most of the cases where inter-creditor agreements (ICA) were signed remain unresolved.

According to the June 7, 2019 circular of RBI, banks will have 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. State Bank of India alone may have to provision around Rs 13,000 crore for unresolved cases, as per sources.

“Banks can still make individual representation to RBI for provisioning. However, the IBA will not pursue this matter further,” a senior banker told FE. The relaxation in additional provisioning was one of the five requests IBA had submitted to the regulator on March 20.

“It is a huge disappointment from RBI to overlook demand on provisioning relief,” another banker who did not wish to be named told FE. “Covid-19 lockdown was also one of the reasons in few unresolved cases; therefore, RBI should have included it in its relief package,” he added.

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