RBI ups buffer provisioning for bank NPAs from 33% to 50%
31 March 2015 11:23 PM GMT
The RBI on Monday allowed banks to utilise up to 50 per cent of their provisioning buffer towards making specific provisions for bad loans or non-performing assets, as against the earlier 33 per cent.
“...it has now been decided, as a counter cyclical measure, to allow banks to utilise up to 50 per cent of countercyclical provisioning buffer/floating provisions held by them as at the end of December 31, 2014, for making specific provisions for non-performing assets,” RBI said in a notification issued on Monday.
Earlier, banks were allowed to use 33 per cent or one-third of their provisioning buffer for specific provisions for bad loans or non-performing assets. “Utilisation of countercyclical provisioning buffer/ floating provisions under this measure would be over and above the utilisation of countercyclical provisioning buffer/ floating provisions as permitted...on Framework for Revitalising Distressed Assets in the Economy - Refinancing of Project Loans, Sale of NPA and Other Regulatory Measures,” RBI added.
As per the provisioning under Framework for Revitalising Distressed Assets in the Economy, banks are allowed to sell their NPAs to other banks or NBFCs other than asset reconstruction companies without any initial holding period. Further, banks are directed to use their buffer for provisions toward bad loans with prior approval from RBI.
Banks are allowed to utilise this buffer for additional provisions for financial distress, prompt steps to resolve it, and fair recovery for lenders and investors.
“...it has now been decided, as a counter cyclical measure, to allow banks to utilise up to 50 per cent of countercyclical provisioning buffer/floating provisions held by them as at the end of December 31, 2014, for making specific provisions for non-performing assets,” RBI said in a notification issued on Monday.
Earlier, banks were allowed to use 33 per cent or one-third of their provisioning buffer for specific provisions for bad loans or non-performing assets. “Utilisation of countercyclical provisioning buffer/ floating provisions under this measure would be over and above the utilisation of countercyclical provisioning buffer/ floating provisions as permitted...on Framework for Revitalising Distressed Assets in the Economy - Refinancing of Project Loans, Sale of NPA and Other Regulatory Measures,” RBI added.
As per the provisioning under Framework for Revitalising Distressed Assets in the Economy, banks are allowed to sell their NPAs to other banks or NBFCs other than asset reconstruction companies without any initial holding period. Further, banks are directed to use their buffer for provisions toward bad loans with prior approval from RBI.
Banks are allowed to utilise this buffer for additional provisions for financial distress, prompt steps to resolve it, and fair recovery for lenders and investors.
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