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'Required provisioning for the NPA accounts referred for insolvency resolution is nothing unusually large'

Kolkata: Reserve Bank of India Deputy Governor N S Vishwanathan said on Friday that the required provisioning for the NPA accounts referred for insolvency resolution is "nothing unusually large".
"Normally, the cases that are referred to the Insolvency and Bankruptcy Code (IBC) are likely to be those that could not be restructured outside the IBC. The S4A which is one of the restructuring scheme has envisaged the minimum sustainable debt to be 50 per cent. It is therefore, only logical that provisions made for cases referred in the IBC should be at least 50 per cent. This is not to say that the reference to IBC would result in the recovery of less than 50 per cent. But the provisioning is for expected loss," he said while explaining the logic behind the provisioning requirement for the cases referred in the IBC.
While addressing a special session on "Regulations & Financial Stability" at the Merchant Chamber of Commerce & Industry, Viswanathan maintained that banks can write back in case the recovery is higher than the provisions made by them. However, he said whatever provisioning the banks are asking for now is nothing unusually large. He informed that in June 2017, there were 12 cases referred to IBC each at
different stage.
"I think the inadequacy of capital should not be the reason for under-provisioning," he added.
The RBI deputy governor also said that RBI is preparing a policy on cryptocurrency, a virtual money used as medium of exchange in many countries including India but is not legalised here. Cryptocurrencies like bitcoin use cryptography to secure transactions. He, however, refused to elaborate on the cryptocurrency when asked whether RBI would encourage the use of the same and said, "I can't comment on a policy which is still in the making," he said.
He stressed the need for captilasing the balance sheet of the banks in the wake of 'stressed assets' and said that higher provisioning should be made so that resiliency would be built to deal with stressed assets and improve banks' balance sheets.
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