‘New recognition norms are a stepping stone to IndAS’

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Published: April 20, 2018 5:44:18 AM

The Reserve Bank of India’s (RBI) guidelines on reporting one-day default in large-ticket accounts will be a stepping stone under the Indian Accounting Standards (IndAS), Romesh Sobti, MD and CEO, IndusInd Bank, told reporters. Excerpts:

Reserve Bank of India,  IndusInd Bank, NCLT, npa accounts, Electrosteel, IndASThe issue is that if you are a well-run borrower, you’ll always pay on time.

The Reserve Bank of India’s (RBI) guidelines on reporting one-day default in large-ticket accounts will be a stepping stone under the Indian Accounting Standards (IndAS), Romesh Sobti, MD and CEO, IndusInd Bank, told reporters. Excerpts:

What do you think of some of the guidelines put out by the RBI on February 12?

The issue is that if you are a well-run borrower, you’ll always pay on time. There may be a technical issue and we may send a reminder that you are getting late. If you pay a day later, that is the resolution plan, but a resolution plan must be there. If there’s a one-day delay, the resolution plan is that you’ll pay tomorrow. Then you can’t do arbitrage that these banks are paid and these (others) are not paid. Everybody has to be paid, which is a good discipline. The recognition norms which these guys have been playing around and tinkering with will be gone. So I think the whole issue is about bringing the discipline. Overall, I feel that this is a good stepping stone to also the introduction of IndAS. IndAS does recognise SMA0, 1 and 2.

Do you think with the judicial activity around the NPA accounts, the NCLT is under pressure to manage the cases?

Our sense is the legislation is pretty well-drafted. The little bit of turbulence we are seeing now is that people who missed the bus one way or the other are appealing. That process is part of the norms. We are going through the initial implementation phase. The first resolution has happened. Somebody is going to take over Electrosteel. The others also are in the pipeline.

What would your guidance for credit costs be for the quarters ahead?

I think that every year we guide 50 basis points. We don’t guide for it, we aspire for 50 basis points. I think that looking at the fact that we are seeing a resurgence in the vehicle finance book, where I think the more you earn, the better you pay. We should see improvements, especially on the retail side of the business and we should see improvement in our credit costs. I would say that we should aspire for a credit cost in the mid-50s.

You have an exposure to one of the fraud-hit diamond accounts and the RBI has now banned LoUs. What will be the impact?

As far as the LoUs are concerned, we have no exposure. We have said that we have a two-digit legacy exposure to the smaller account, which we have treated as a fraud and provided for. Otherwise, the book is absolutely clean.

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